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“Cambio, cambio.” Under the blazing sun, scores of money changers are hawking American currency on Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming ahead of the October 26 congressional elections in a country long used to saving in the greenback.

“The best time to buy is currently,” states a arbolito, refusing to provide her identity. “[The dollar] dropped a little but it is a fake-out – it’ll rise again.”

Similar to her, economists across the spectrum anticipate a depreciation of the Argentine peso once the election concludes. President Javier Milei has imposed a limit on the peso to tame triple-digit inflation and currently it is artificially high and reserves are exhausted, causing the national economy stagnant as buyers turn to cheap imports.

Fertile Ground

The nation represents a unique situation. The country has been repeatedly racked by sovereign defaults and economic crises and the electorate have been susceptible for decades to left-leaning populist movements, in the form of the powerful Peronist movement, and now Milei’s rightwing version.

Milei epitomizes populist leadership: captivating, iconoclastic, vowing muscular policies to reclaim command of the economy from the establishment for the benefit 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 pint-swilling people’s champion despite being a public school-educated ex-finance professional.

Up until lately, Milei’s approach – involving extensive privatisations and deep budget reductions – had earned praise from the IMF for helping to bring price rises in check. This plan has something in common with that of his political hero Margaret Thatcher, who also saw inflation as a dragon to be defeated, regardless of the consequences.

But investors started to doubt in Milei’s radical project lately following a poor performance in local polls and multiple corruption scandals. Only large-scale financial intervention by the US has prevented what seemed destined to be a full-blown currency crisis.

Contradictions

The vote for Brexit in 2016 likely contained similar reasoning, and its leader, Boris Johnson, dismissed doubts regarding fiscal impacts with confident resolve to implement public demand in the face of the establishment’s horror.

Farage to date committed few policies to paper aside from a call for mass deportations, that he later seemed to adjust spontaneously. He aims to curb the Bank of England, perhaps even ditching its governor, Andrew Bailey, with scepticism toward traditional institutions as a central element of populist rhetoric.

His tax and spending policies appear to be unsettled: wary of facing criticism for proposing a Liz Truss-style splurge, he recently dropped a promise to make large tax reductions. His Reform party deputy, the party chairman, said they would concentrate instead on public spending cuts.

The opposition aims this stance will allow it to depict the populist as planning to reintroduce fiscal tightening – a point the chancellor has made repeatedly, contrasting it with her strategy of boosting public investment.

An economics professor notes there are contradictions within the populist platform, as it stands. “The party are bankrolled by affluent backers demanding tax cuts and reduced rules, but also talking a lot about the grievances of working people and the loss of industrial jobs,” he says. “There’s a tension here among rich backers seeking Thatcherism on steroids, and this story of bringing back 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 (though of course every populist leader promises something unique).

A recent paper from a leading journal examined the outcomes of dozens of populist leaders, from 1900 to 2020. It found typically, over the long term, gross domestic product per head is often 10% lower in countries run by populist rulers than in similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the erosion of institutions usually occur together with populist rule,” contend the paper’s authors.

A further interesting result of the research, however, is even with their negative impacts, populist figures are often effective at holding on to power, lasting on average a considerable time, versus four for their more moderate equivalents.

In other words, it is not clear that even when their plans crash, populists face immediate consequences at the ballot box. Like the Brexiters’ promise to “take back control”, their attraction extends past everyday financial matters.

Yet back in Buenos Aires, regardless of if Milei’s populist project fails or is kept on life support through foreign assistance, Argentina’s citizens have already paid a heavy price.