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“Cambio, cambio.” Under the scorching heat, scores of money changers are hawking American currency along Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the October 26 midterm elections in a country long used to holding the greenback.

“The best time for purchasing is now,” says a arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it is a fake-out – it’ll rise again.”

Like her, economic experts across the spectrum expect a devaluation of the national currency once the voting is over. President Javier Milei has placed a cap on the currency to tame triple-digit price increases and currently it is overvalued and reserves are depleted, leaving Argentina’s economy stagnant as buyers turn to low-cost foreign goods.

Fertile Ground

Argentina is a very special case. Argentina has frequently been hit by sovereign defaults and financial turmoil and its voters have been susceptible for decades to leftwing populism, such as the powerful Peronist movement, and currently Milei’s rightwing version.

Milei is a textbook populist: charismatic, unconventional, promising forceful measures to wrestle back command of economic management from traditional elites for the benefit of ordinary citizens.

These key characteristics are also seen in his ally to the north, and by the UK politician, who presents himself as a pint-swilling people’s champion even though he is a public school-educated former stockbroker.

Until recent months, the president’s strategy – including extensive privatisations and deep public spending cuts – had earned praise from international lenders for contributing to bring price rises in check. The programme has something in common with the policies of his political hero the former UK prime minister, who similarly viewed inflation as a dragon to be slain, regardless of the consequences.

But investors began losing confidence in the government’s agenda lately after a poor performance in local polls and a series of corruption scandals. Only massive economic support from abroad has averted what looked set to become a full-blown currency crisis.

Contradictions

The vote for Brexit in 2016 likely contained some of the same logic, and its figurehead, the former prime minister, dismissed concerns about economic detail with a bullish determination to enact the “will of the people” despite elite opposition.

The Reform leader has so far outlined limited plans to paper except for proposals for mass deportations, that he later appeared to revise spontaneously. He wants to curb the Bank of England, possibly replacing its head, Andrew Bailey, with distrust toward traditional institutions as a central element of the populist package.

His fiscal plans seem unsettled: concerned about being accused of planning reckless spending, he lately abandoned a promise to make large tax cuts. His second-in-command, the party chairman, said they would focus instead on public spending cuts.

The opposition hopes this stance will enable it to portray the populist as intending to bring back fiscal tightening – a point the chancellor has made repeatedly, 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 affluent backers calling for lower taxes and reduced rules, yet also talking a lot about the grievances of ordinary workers and the loss in manufacturing employment,” he says. “There is a conflict there between rich backers who want radical free-market policies, and this narrative of bringing back 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 examined the performance of dozens of populist leaders, over more than a century. It found typically, after 15 years, gross domestic product per head is often 10% lower in countries run by populist rulers than in comparable countries under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance typically occur together under populist governments,” argue the paper’s authors.

Another intriguing finding from the study, though, is that despite their economic costs, populist figures tend to be good at holding on to power, remaining in power for eight years, compared with four for their more moderate equivalents.

Put simply, it remains uncertain whether even if their plans crash, such leaders face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their appeal extends past everyday financial matters.

Yet returning to Buenos Aires, whether Milei’s populist project collapses or is sustained through foreign assistance, Argentina’s citizens have already paid significant costs.