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“Cambio, cambio.” Under the scorching heat, dozens of currency traders are offering US dollars along Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the 26 October congressional elections in a nation long used to holding the US dollar.

“The best time for purchasing is now,” states one arbolito, refusing to provide her identity. “[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. President Javier Milei has imposed a limit on the currency to tame triple-digit inflation and now 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 been repeatedly hit by debt defaults and financial turmoil and the electorate have been receptive over the years to left-leaning populist movements, such as the powerful Peronist movement, and currently Milei’s rightwing version.

The president epitomizes populist leadership: charismatic, unconventional, promising forceful policies to reclaim control of economic management from the establishment for the benefit of the people.

These key characteristics are shared by 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 ex-finance professional.

Up until lately, the president’s strategy – involving widespread sell-offs and severe public spending cuts – had won plaudits from the IMF for contributing to control inflation under control. This plan has something in common with the policies of his political hero the former UK prime minister, who similarly viewed rising prices as a dragon to be defeated, no matter the cost.

However financial markets began losing confidence in the government’s agenda in recent months after a poor performance in provincial elections and a series of graft allegations. Only massive economic support by the US has prevented what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The 2016 referendum several years ago arguably had similar reasoning, and its figurehead, Boris Johnson, swept away concerns about economic detail with a bullish determination to enact the “will of the people” despite elite opposition.

The Reform leader has so far committed few policies to paper except for a call for large-scale removals, which he subsequently seemed to adjust spontaneously. He aims to rein in the Bank of England, perhaps even replacing its head, the incumbent, with scepticism toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies appear to be unsettled: wary of facing criticism for planning a Liz Truss-style splurge, he recently abandoned a pledge to make large tax reductions. His Reform party deputy, Richard Tice, stated they would concentrate instead on public spending cuts.

Labour aims this position will allow it to portray the populist as planning to reintroduce fiscal tightening – an argument Rachel Reeves has emphasized often, contrasting it with her approach of boosting public investment.

Jo Michell says there exist inconsistencies within the populist platform, as it stands. “The party are bankrolled by very wealthy people demanding tax cuts and reduced rules, but also emphasizing the complaints of ordinary workers and the decline in manufacturing employment,” he says. “There is a conflict here between wealthy supporters seeking Thatcherism on steroids, and this story of bringing back British jobs and industrial revival.”

Maintaining Control

Realistically, research indicates populists of any stripe often perform poorly when faced with real-world challenges (though of course every populist leader promises something unique).

Recent research in the American Economic Review examined the outcomes of 51 populist presidents and prime ministers, over more than a century. It found that on average, over the long term, gross domestic product per head tends to be a tenth less in nations governed by populist leaders than in similar economies under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the decay of governance typically go hand in hand under populist governments,” contend the researchers.

Another intriguing finding of the research, however, is despite their economic costs, populist figures tend to be good at retaining office, lasting on average eight years, versus four for mainstream politicians.

In other words, it remains uncertain that even when their plans crash, populists face immediate consequences at the ballot box. Similar to pledges made to “take back control”, their attraction extends past everyday financial matters.

Yet returning to Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support through foreign assistance, Argentina’s citizens have already paid significant costs.