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“Cambio, cambio.” Beneath the blazing sun, dozens of money changers are selling US dollars along Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the 26 October midterm elections in a nation long used to saving in the US dollar.

“The best time to buy is currently,” states one arbolito, declining to give her identity. “[The dollar] dropped slightly but it’s deceptive – it’ll rise again.”

Similar to her, economists from all backgrounds expect a depreciation of the Argentine peso after the election concludes. President Javier Milei has imposed a cap on the currency to tame soaring price increases and currently it remains overvalued and foreign reserves are depleted, causing the national economy sluggish as consumers turn to cheap imports.

Ideal Conditions

The nation is a very special case. The country has frequently been hit by sovereign defaults and financial turmoil and its voters have been susceptible for decades to leftwing populism, such as the powerful Peronist movement, and now the president’s conservative populism.

The president epitomizes populist leadership: captivating, unconventional, promising forceful policies to reclaim control of the economy from traditional elites on behalf of ordinary citizens.

These defining traits are also seen in 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 public school-educated ex-finance professional.

Up until lately, Milei’s approach – including extensive privatisations and severe budget reductions – had won plaudits from international lenders for contributing to bring price rises under control. The programme shares similarities with that 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 investors started to doubt in Milei’s radical project in recent months after a shaky result in local polls and a series of corruption scandals. Solely large-scale economic support from abroad has prevented what seemed destined to be a major monetary collapse.

Inconsistencies

The vote for Brexit in 2016 arguably had some of the same logic, and its leader, Boris Johnson, swept away doubts regarding fiscal impacts with a bullish determination to enact public demand despite the establishment’s horror.

Farage has so far outlined limited plans to paper except for proposals for large-scale removals, that he later appeared to revise on the hoof. He aims to rein in the Bank of England, possibly replacing its head, Andrew Bailey, with scepticism of a stodgy establishment as a central element of the populist package.

His fiscal plans seem unsettled: wary of facing criticism for proposing a Liz Truss-style splurge, he lately dropped a promise to make significant tax cuts. His Reform party deputy, Richard Tice, stated they would concentrate instead on reductions in government expenditure.

The opposition hopes this position will allow it to portray the populist as planning to reintroduce austerity – a point the chancellor has emphasized often, contrasting it with her approach of increasing government spending.

Jo Michell says there are contradictions within the populist platform, as it stands. “Reform is funded by very wealthy people calling for tax cuts and deregulation, but also talking a lot about the complaints of ordinary workers and the loss in manufacturing employment,” he explains. “There’s a tension here among wealthy supporters who want radical free-market policies, and this narrative of bringing back UK employment and industrial revival.”

Holding on to Power

In truth, the evidence indicates populists of any stripe tend to fare well when faced with practical difficulties (although each charismatic individual claims to offer distinct solutions).

Recent research in the American Economic Review examined the performance of dozens of populist leaders, over more than a century. The study revealed typically, over the long term, gross domestic product per head tends to be 10% lower in countries run by populist leaders than in similar economies under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance typically go hand in hand with populist rule,” argue the paper’s authors.

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 a considerable time, versus shorter tenures for mainstream politicians.

Put simply, it remains uncertain whether even if their policies fail, such leaders face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their attraction extends past mundane economics.

But back in Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support by external aid, the Argentine people are already bearing significant costs.