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“Exchange, exchange.” Under the blazing sun, scores of money changers are selling US dollars along Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving ahead of the 26 October midterm elections in a country accustomed to holding the US dollar.

“The best time to buy is now,” says a arbolito, refusing to provide her name. “[The dollar] went down slightly but it’s deceptive – it’ll rise again.”

Like her, economists across the spectrum expect a depreciation of the national currency once the election concludes. President Javier Milei has placed a cap on the currency to control triple-digit inflation and now it is artificially high and foreign reserves are exhausted, causing the national economy stagnant as buyers opt for cheap imports.

Ideal Conditions

The nation is a very special case. The country has been repeatedly racked by sovereign defaults and economic crises and the electorate have been receptive over the years to left-leaning populist movements, in the form of the powerful Peronism, and now the president’s conservative populism.

Milei is a textbook populist: captivating, iconoclastic, vowing forceful measures to reclaim command of economic management from the establishment on behalf of ordinary citizens.

These key characteristics are also seen in his political partner to the north, and by the UK politician, who presents himself as a pint-swilling champion of the common man despite being a privately educated former stockbroker.

Until recent months, the president’s strategy – involving extensive privatisations and severe budget reductions – had earned praise from international lenders for contributing to control inflation in check. The programme shares similarities with that of Milei’s idol Margaret Thatcher, who also saw rising prices as a dragon to be defeated, no matter the cost.

But investors began losing confidence in Milei’s radical project in recent months following a shaky result in provincial elections and a series of corruption scandals. Only massive financial intervention by the US has prevented what looked set to become a major monetary collapse.

Inconsistencies

The vote for Brexit in 2016 likely contained some of the same logic, and its leader, the former prime minister, swept away doubts about economic detail with confident resolve to implement the “will of the people” in the face of the establishment’s horror.

The Reform leader to date outlined limited plans to paper except for a call for large-scale removals, which he subsequently seemed to adjust spontaneously. He aims to curb the central bank, perhaps even replacing its head, the incumbent, with distrust of a stodgy establishment being a key part of the populist package.

His fiscal plans seem in flux: concerned about being accused of planning reckless spending, he lately dropped a pledge for significant tax cuts. His second-in-command, the party chairman, said they would concentrate instead on reductions in government expenditure.

The opposition hopes this position will allow it to depict the populist as intending to reintroduce fiscal tightening – a point Rachel Reeves has emphasized often, comparing it unfavorably to her approach of boosting public investment.

Jo Michell notes there are contradictions within the populist platform, as it stands. “The party is funded by very wealthy people calling for lower taxes and deregulation, but also talking a lot about the complaints of ordinary workers and the loss in manufacturing employment,” he explains. “There’s a tension there between rich backers who want Thatcherism on steroids, and this story of bringing back British jobs and industrial revival.”

Maintaining Control

Realistically, the evidence suggests neither left nor right populists tend to fare well when confronting real-world challenges (though of course every populist leader claims to offer something unique).

A recent paper in the American Economic Review analysed the outcomes of 51 populist presidents and prime ministers, over more than a century. The study revealed that on average, after 15 years, GDP per capita tends to be 10% lower in countries governed by populist leaders compared to comparable countries with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions usually occur together with populist rule,” argue the researchers.

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

Put simply, it is not clear that even when their policies fail, such leaders face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their appeal reaches beyond everyday financial matters.

But back in Buenos Aires, whether the government’s agenda collapses or is kept on life support through foreign assistance, Argentina’s citizens are already bearing a heavy price.