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“Dollars, dollars.” Under the blazing sun, scores of money changers are selling US dollars on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the 26 October midterm elections in a nation long used to saving in the US dollar.

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

Like her, economic experts from all backgrounds expect a devaluation of the Argentine peso once the election concludes. President Javier Milei has imposed a cap on the currency to tame triple-digit price increases and now it is artificially high and reserves are depleted, leaving the national economy stagnant as buyers opt for cheap imports.

Ideal Conditions

Argentina represents a unique situation. Argentina has been repeatedly racked by debt defaults and economic crises and its voters have been receptive over the years to left-leaning populist movements, such as the powerful Peronism, and currently Milei’s conservative populism.

The president epitomizes populist leadership: captivating, unconventional, vowing forceful measures to wrestle back command of economic management from traditional elites on behalf of the people.

These defining traits are shared by his political partner in the United States, and by the UK politician, who presents himself as a beer-drinking people’s champion even though he is a privately educated ex-finance professional.

Until recent months, the president’s strategy – including widespread sell-offs and severe public spending cuts – had won plaudits from the IMF for contributing to bring price rises under control. The programme shares similarities with that of his political hero the former UK prime minister, who also saw inflation as a monster to be slain, no matter the cost.

However investors started to doubt in Milei’s radical project lately after a poor performance in provincial elections and a series of graft allegations. Only large-scale economic support from abroad has prevented what looked set to become a major monetary collapse.

Contradictions

The 2016 referendum in 2016 likely contained some of the same logic, and its figurehead, the former prime minister, swept away concerns about economic detail with confident resolve to enact public demand despite the establishment’s horror.

The Reform leader to date committed few policies to paper except for proposals for mass deportations, that he later appeared to revise on the hoof. He wants to curb the Bank of England, possibly ditching its governor, Andrew Bailey, with scepticism toward traditional institutions being a key part of the populist package.

His tax and spending policies appear to be in flux: concerned about being accused of proposing a Liz Truss-style splurge, he recently dropped a promise to make large tax reductions. His second-in-command, the party chairman, stated they would focus instead on public spending cuts.

The opposition aims this stance will allow it to depict Farage as planning to bring back fiscal tightening – a point Rachel Reeves has emphasized often, contrasting it with her approach of boosting government spending.

An economics professor says there are contradictions within the populist platform, such as it is. “Reform are bankrolled by very wealthy people calling for tax cuts and reduced rules, yet also emphasizing the grievances of working people and the loss in manufacturing employment,” he says. “There’s a tension there among wealthy supporters seeking Thatcherism on steroids, and this story of restoring British jobs and industrial revival.”

Maintaining Control

In truth, the evidence indicates populists of any stripe often perform poorly when faced with real-world challenges (though of course each charismatic individual promises distinct solutions).

Recent research from a leading journal analysed the outcomes of dozens of populist leaders, over more than a century. It found that on average, over the long term, gross domestic product per head is often a tenth less in countries run by populist leaders compared to similar economies under conventional leadership.

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

Another intriguing finding from the study, however, is that even with their negative impacts, these leaders are often effective at retaining office, remaining in power for a considerable time, compared with shorter tenures for mainstream politicians.

Put simply, it is not clear whether even if their policies fail, such leaders immediately pay the price in elections. Like the Brexiters’ promise to “take back control”, their appeal extends past mundane economics.

But back in Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support through foreign assistance, the Argentine people are already bearing significant costs.