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“Cambio, cambio.” Beneath the blazing sun, dozens of currency traders are hawking US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the October 26 congressional elections in a country long used to holding the US dollar.

“The best time for purchasing is currently,” says one arbolito, refusing to provide her name. “[The dollar] went down a little but it’s deceptive – it’ll rise again.”

Similar to her, economists from all backgrounds anticipate a depreciation of the national currency after the voting is over. The president has placed a limit on the peso to tame triple-digit inflation and now it remains artificially high and reserves are exhausted, causing Argentina’s economy stagnant as buyers opt for low-cost foreign goods.

Fertile Ground

Argentina is a very special case. Argentina has been repeatedly hit by sovereign defaults and economic crises and its voters have been susceptible for decades to leftwing populism, such as the influential Peronism, and now Milei’s conservative populism.

Milei epitomizes populist leadership: charismatic, unconventional, vowing muscular measures to reclaim control of economic management from traditional elites on behalf of the people.

These defining traits are also seen in his ally to the north, as well as the UK politician, who presents himself as a pint-swilling champion of the common man even though he is a public school-educated former stockbroker.

Up until lately, Milei’s approach – involving extensive privatisations and deep public spending cuts – had won plaudits from international lenders for contributing to bring inflation in check. This plan shares similarities with that of his political hero the former UK prime minister, who also saw inflation as a dragon to be slain, regardless of the consequences.

But financial markets began losing confidence in the government’s agenda lately after a shaky result in provincial elections and multiple corruption scandals. Only massive economic support by the US has averted what seemed destined to be a major monetary collapse.

Inconsistencies

The vote for Brexit in 2016 likely contained some of the same logic, and its leader, the former prime minister, dismissed concerns about economic detail with a bullish determination to implement the “will of the people” in the face of the establishment’s horror.

The Reform leader to date outlined limited plans in writing aside from a call for large-scale removals, that he later seemed to adjust on the hoof. He wants to rein in the Bank of England, perhaps even replacing its head, the incumbent, with scepticism toward traditional institutions as a central element of populist rhetoric.

His fiscal plans seem unsettled: concerned about facing criticism for planning a Liz Truss-style splurge, he lately dropped a pledge for significant tax cuts. His Reform party deputy, the party chairman, stated they would focus instead on public spending cuts.

The opposition hopes this position will allow it to depict the populist as intending to bring back austerity – a point the chancellor has emphasized often, contrasting it with her strategy of increasing government spending.

Jo Michell says there exist inconsistencies within the populist platform, such as it is. “The party are bankrolled by very wealthy people calling for tax cuts and reduced rules, but also talking a lot about the grievances of working people and the loss in manufacturing employment,” he says. “There’s a tension there among rich backers seeking radical free-market policies, and this narrative of restoring British jobs and reindustrialisation.”

Maintaining Control

In truth, research suggests neither left nor right populists tend to fare well when confronting practical difficulties (although each charismatic individual claims to offer distinct solutions).

A recent paper in the American Economic Review analysed the performance of 51 populist presidents and prime ministers, over more than a century. It found that on average, over the long term, GDP per capita is often a tenth less in countries run by populist rulers than in comparable countries with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions usually go hand in hand with populist rule,” argue the researchers.

Another intriguing finding from the study, however, is despite their economic costs, populist figures are often effective at retaining office, lasting on average eight years, versus four for their more moderate equivalents.

Put simply, it is not clear whether even if their policies fail, such leaders face immediate consequences at the ballot box. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond everyday financial matters.

Yet returning to Buenos Aires, whether Milei’s populist project collapses or is kept on life support through foreign assistance, the Argentine people have already paid a heavy price.