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“Exchange, exchange.” Under the blazing sun, dozens of money changers are selling American currency on Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the October 26 congressional elections in a country accustomed to saving in the US dollar.

“The best time for purchasing is currently,” states a arbolito, declining to give her identity. “[The dollar] went down slightly but it’s deceptive – it will rebound.”

Like her, economic experts from all backgrounds expect a devaluation of the Argentine peso once the voting is over. President Javier Milei has placed a limit on the currency to tame triple-digit price increases and currently it is artificially high and reserves are depleted, causing Argentina’s economy sluggish as buyers turn to cheap imports.

Fertile Ground

Argentina is a very special case. Argentina has frequently been racked by sovereign defaults and financial turmoil and its voters have been receptive for decades to left-leaning populist movements, such as the influential Peronist movement, and currently Milei’s conservative populism.

The president is a textbook populist: captivating, iconoclastic, promising muscular measures to reclaim command of the economy from traditional elites on behalf of ordinary citizens.

These key characteristics are shared by his political partner to the north, as well as the UK politician, who presents himself as a beer-drinking champion of the common man even though he is a privately educated former stockbroker.

Until recent months, the president’s strategy – including extensive privatisations and severe public spending cuts – had earned praise from the IMF for contributing to control inflation in check. The programme shares similarities with the policies of his political hero the former UK prime minister, who also saw rising prices as a dragon to be defeated, regardless of the consequences.

But financial markets started to doubt in the government’s agenda lately after a poor performance in provincial elections and a series of graft allegations. Solely massive economic support by the US has prevented what looked set to become a major monetary collapse.

Inconsistencies

The vote for Brexit in 2016 arguably had similar reasoning, and its leader, Boris Johnson, dismissed doubts about economic detail with confident resolve to implement the “will of the people” in the face of the establishment’s horror.

The Reform leader to date committed few policies in writing except for proposals for large-scale removals, that he later seemed to adjust spontaneously. He aims to curb the Bank of England, possibly replacing its head, Andrew Bailey, with scepticism toward traditional institutions being a key part of the populist package.

His tax and spending policies appear to be unsettled: wary of being accused of planning a Liz Truss-style splurge, he recently dropped a pledge for large tax reductions. His second-in-command, Richard Tice, stated they would focus instead on public spending cuts.

The opposition aims this stance will allow it to depict the populist as planning to reintroduce austerity – an argument Rachel Reeves has made repeatedly, contrasting it with her strategy of increasing public investment.

Jo Michell says there exist inconsistencies within the populist platform, as it stands. “The party are bankrolled by affluent backers calling for lower taxes and deregulation, yet also talking a lot about the grievances of ordinary workers and the loss of industrial jobs,” he says. “There’s a tension there among rich backers seeking radical free-market policies, and this story of restoring UK employment and reindustrialisation.”

Holding on to Power

In truth, research indicates neither left nor right populists tend to fare well when confronting real-world challenges (although each charismatic individual claims to offer distinct solutions).

Recent research from a leading journal analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found typically, after 15 years, GDP per capita is often 10% lower in countries run by populist rulers than in comparable countries with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions typically occur together with populist rule,” argue the paper’s authors.

Another intriguing finding of the research, though, is despite their economic costs, these leaders are often effective at holding on to power, remaining in power for eight years, compared with four for their more moderate equivalents.

Put simply, it is not clear whether even if their plans crash, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their attraction reaches beyond everyday financial matters.

But back in Buenos Aires, whether Milei’s populist project collapses or is sustained through foreign assistance, the Argentine people have already paid a heavy price.