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“Dollars, dollars.” Under the scorching heat, dozens of money changers are selling American currency along Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), they are thriving ahead of the October 26 congressional elections in a country long used to holding the greenback.

“The optimal moment for purchasing is now,” states one arbolito, declining to give her identity. “[The dollar] went down a little but it is a fake-out – it’ll rise again.”

Similar to her, economic experts from all backgrounds expect a depreciation of the Argentine peso once the election is over. President Javier Milei has placed a limit on the peso to tame triple-digit price increases and now it remains overvalued and reserves are exhausted, causing Argentina’s economy stagnant as consumers turn to cheap imports.

Fertile Ground

The nation is a very special case. The country has frequently been hit by debt defaults and economic crises and the electorate have been receptive over the years to leftwing populism, such as the powerful Peronist movement, and currently Milei’s conservative populism.

Milei epitomizes populist leadership: captivating, unconventional, vowing forceful measures to reclaim control of the economy from the establishment for the benefit of the people.

These defining traits are shared by his political partner in the United States, and by the UK politician, who styles himself as a beer-drinking champion of the common man even though he is a privately educated former stockbroker.

Up until lately, Milei’s approach – including widespread sell-offs and severe public spending cuts – had won plaudits from the IMF for helping to control price rises under control. This plan has something in common with the policies of his political hero the former UK prime minister, who also saw rising prices as a monster to be defeated, regardless of the consequences.

But investors started to doubt in the government’s agenda lately following a shaky result in provincial elections and a series of corruption scandals. Only massive economic support from abroad has prevented what seemed destined to be a full-blown currency crisis.

Contradictions

The vote for Brexit in 2016 likely contained some of the same logic, and its leader, Boris Johnson, dismissed concerns about economic detail with confident resolve to enact public demand despite elite opposition.

Farage has so far committed few policies to paper except for a call for large-scale removals, that he later appeared to revise spontaneously. He wants to curb the Bank of England, possibly replacing its head, Andrew Bailey, with distrust of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies appear to be unsettled: concerned about being accused of proposing reckless spending, he recently dropped a pledge to make large tax cuts. His second-in-command, Richard Tice, stated they would focus instead on public spending cuts.

Labour hopes this stance will enable it to depict the populist as planning to bring back austerity – an argument the chancellor has emphasized often, contrasting it with her strategy of boosting public investment.

An economics professor notes there exist inconsistencies within the populist platform, as it stands. “Reform is funded by affluent backers calling for tax cuts and deregulation, yet also talking a lot about the complaints of ordinary workers and the loss of industrial jobs,” he explains. “There is a conflict here among wealthy supporters seeking radical free-market policies, and this narrative of bringing back British jobs and industrial revival.”

Holding on to Power

Realistically, the evidence suggests neither left nor right populists often perform poorly when confronting real-world challenges (though of course each charismatic individual claims to offer something unique).

Recent research in the American Economic Review examined the outcomes of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, after 15 years, GDP per capita tends to be a tenth less in nations governed by populist rulers compared to comparable countries with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the decay of governance usually go hand in hand with populist rule,” argue the researchers.

Another intriguing finding of the research, though, is even with their negative impacts, these leaders tend to be good at retaining office, remaining in power for a considerable time, versus four for their more moderate equivalents.

In other words, it remains uncertain whether even if their policies fail, populists face immediate consequences in elections. Similar to pledges made to regain sovereignty, their appeal extends past mundane economics.

Yet returning to Buenos Aires, whether Milei’s populist project collapses or is sustained by external aid, the Argentine people have already paid significant costs.