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“Dollars, dollars.” Under the scorching heat, dozens of money changers are selling American currency along Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), they are thriving before the October 26 midterm elections in a nation accustomed to saving in the greenback.

“The optimal moment to buy is now,” states a arbolito, declining to give her name. “[The dollar] went down slightly but it’s deceptive – it’ll rise again.”

Like her, economic experts across the spectrum anticipate a depreciation of the Argentine peso once the voting is over. President Javier Milei has placed a limit on the currency to tame soaring inflation and currently it is overvalued and reserves are exhausted, causing Argentina’s economy stagnant as consumers turn to cheap imports.

Ideal Conditions

The nation represents a unique situation. Argentina has been repeatedly hit by sovereign defaults and financial turmoil and its voters have been susceptible for decades to left-leaning populist movements, in the form of the influential Peronist movement, and currently the president’s conservative populism.

The president epitomizes populist leadership: charismatic, unconventional, promising forceful measures to wrestle back command of economic management from the establishment on behalf of ordinary citizens.

These key characteristics are also seen in his ally in the United States, and by Nigel Farage, 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 deep budget reductions – had earned praise from international lenders for helping to control inflation under control. This plan has something in common with that of his political hero the former UK prime minister, who similarly viewed inflation as a dragon to be defeated, regardless of the consequences.

But investors started to doubt in Milei’s radical project in recent months after a poor performance in provincial elections and a series of corruption scandals. Solely massive financial intervention from abroad has averted what looked set to become a major monetary collapse.

Contradictions

The vote for Brexit several years ago arguably had some of the same logic, and its leader, Boris Johnson, swept away doubts about economic detail with confident resolve to enact public demand despite the establishment’s horror.

The Reform leader to date committed few policies in writing except for a call for large-scale removals, which he subsequently appeared to revise on the hoof. He aims to curb the central bank, possibly ditching its governor, the incumbent, with distrust toward traditional institutions as a central element of populist rhetoric.

His fiscal plans seem unsettled: concerned about being accused of proposing a Liz Truss-style splurge, he lately dropped a promise to make significant tax cuts. His Reform party deputy, the party chairman, said they would focus instead on public spending cuts.

Labour aims this stance will allow it to portray the populist as intending to bring back austerity – a point the chancellor has emphasized often, comparing it unfavorably to her approach of increasing government spending.

Jo Michell says there exist inconsistencies within the populist platform, as it stands. “Reform are bankrolled by very wealthy people demanding lower taxes and deregulation, yet also emphasizing the complaints of working people and the loss of industrial jobs,” he says. “There’s a tension here between wealthy supporters seeking Thatcherism on steroids, and this narrative of bringing back UK employment and industrial revival.”

Maintaining Control

Realistically, the evidence indicates neither left nor right populists often perform poorly when faced with real-world challenges (although each charismatic individual promises distinct solutions).

A recent paper in the American Economic Review analysed the outcomes of 51 populist presidents and prime ministers, over more than a century. The study revealed that on average, over the long term, gross domestic product per head tends to be 10% lower in countries governed by populist rulers compared to comparable countries with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the erosion of institutions usually go hand in hand under populist governments,” contend the researchers.

Another intriguing finding from the study, however, is even with their negative impacts, these leaders tend to be good at holding on to power, lasting on average eight years, compared with four for mainstream politicians.

In other words, it remains uncertain whether even if their policies fail, populists face immediate consequences in elections. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond everyday financial matters.

But returning to Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support through foreign assistance, the Argentine people are already bearing a heavy price.