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“Dollars, dollars.” Under the blazing sun, scores of currency traders are selling US dollars on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the 26 October midterm elections in a nation long used to holding the greenback.

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

Like her, economists across the spectrum expect a devaluation of the Argentine peso after the election concludes. The president has imposed a cap on the peso to control triple-digit price increases and now it is artificially high and reserves are depleted, leaving Argentina’s economy stagnant as buyers opt for low-cost foreign goods.

Fertile Ground

The nation represents a unique situation. Argentina has frequently been hit by debt defaults and economic crises and its voters have been susceptible over the years to left-leaning populist movements, such as the powerful Peronist movement, and currently Milei’s conservative populism.

The president epitomizes populist leadership: captivating, iconoclastic, vowing muscular measures to wrestle back command of economic management from the establishment on behalf of ordinary citizens.

These defining traits are also seen in his ally to the north, and by Nigel Farage, who presents himself as a beer-drinking people’s champion despite being a privately educated ex-finance professional.

Until recent months, Milei’s approach – involving widespread sell-offs and deep budget reductions – had earned praise from the IMF for contributing to control price rises under control. The programme shares similarities with the policies of his political hero Margaret Thatcher, who similarly viewed rising prices as a monster to be defeated, no matter the cost.

But financial markets started to doubt in Milei’s radical project in recent months following a poor performance in provincial elections and a series of corruption scandals. Solely massive financial intervention from abroad has prevented what seemed destined to be a full-blown currency crisis.

Contradictions

The vote for Brexit in 2016 arguably had some of the same logic, and its figurehead, the former prime minister, swept away doubts regarding fiscal impacts with confident resolve to implement the “will of the people” in the face of elite opposition.

The Reform leader has so far outlined limited plans in writing aside from proposals for mass deportations, which he subsequently appeared to revise on the hoof. He aims to curb the Bank of England, perhaps even replacing its head, the incumbent, with scepticism toward traditional institutions being a key part of populist rhetoric.

His fiscal plans appear to be unsettled: wary of being accused of planning a Liz Truss-style splurge, he recently abandoned a promise to make significant tax reductions. His Reform party deputy, the party chairman, said they would focus instead on reductions in government expenditure.

Labour hopes this stance will allow it to depict the populist as planning to bring back austerity – a point the chancellor has emphasized often, contrasting it with her approach of boosting government spending.

Jo Michell notes there are contradictions within the populist platform, such as it is. “Reform are bankrolled by very wealthy people calling for tax cuts and deregulation, but also talking a lot about the grievances of working people and the decline in manufacturing employment,” he explains. “There is a conflict here between wealthy supporters seeking radical free-market policies, and this story of restoring UK employment and reindustrialisation.”

Maintaining Control

In truth, the evidence indicates populists of any stripe tend to fare well when confronting practical difficulties (although every populist leader promises something unique).

Recent research in the American Economic Review examined the performance 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 leaders than in similar economies under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions typically occur together under populist governments,” contend the researchers.

Another intriguing finding of the research, however, is despite their economic costs, these leaders are often effective at retaining office, remaining in power for eight years, versus four for mainstream politicians.

Put simply, it remains uncertain whether even if their policies fail, such leaders face immediate consequences in elections. Like the Brexiters’ promise to “take back control”, their attraction extends past everyday financial matters.

But returning to Buenos Aires, whether the government’s agenda collapses or is kept on life support by external aid, the Argentine people are already bearing a heavy price.