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“Exchange, exchange.” Beneath the scorching heat, dozens of currency traders are hawking American currency on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming before the 26 October midterm elections in a nation long used to saving in the US dollar.

“The optimal moment to buy is now,” states a arbolito, declining to give her name. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Like her, economists from all backgrounds anticipate a devaluation of the national currency once the election is over. The president has imposed a cap on the currency to control triple-digit price increases and currently it is artificially high and foreign reserves are depleted, causing Argentina’s economy sluggish as buyers turn to cheap imports.

Fertile Ground

The nation represents a unique situation. Argentina has frequently been hit by debt defaults and economic crises and the electorate have been susceptible over the years to leftwing populism, such as the powerful Peronism, and now Milei’s rightwing version.

The president epitomizes populist leadership: charismatic, unconventional, promising forceful measures to wrestle back control of economic management from the establishment for the benefit of ordinary citizens.

These defining traits are also seen in his political partner to the north, as well as the UK politician, who presents himself as a pint-swilling people’s champion despite being a public school-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 control inflation in check. This plan has something in common with the policies of his political hero Margaret Thatcher, who similarly viewed rising prices as a monster to be slain, no matter the cost.

However financial markets started to doubt in the government’s agenda in recent months after a shaky result in local polls and multiple corruption scandals. Only large-scale financial intervention from abroad has prevented what seemed destined to be a major currency crisis.

Contradictions

The vote for Brexit several years ago likely contained similar reasoning, and its leader, Boris Johnson, swept away concerns regarding fiscal impacts with a bullish determination to enact the “will of the people” in the face of elite opposition.

The Reform leader has so far outlined limited plans in writing except for proposals for large-scale removals, which he subsequently appeared to revise spontaneously. He wants to rein in the central bank, perhaps even ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment being a key part of populist rhetoric.

His fiscal plans seem in flux: concerned about facing criticism for proposing a Liz Truss-style splurge, he recently dropped a pledge to make significant tax reductions. His second-in-command, the party chairman, said they would concentrate instead on reductions in government expenditure.

Labour hopes this stance will allow it to portray the populist as intending to reintroduce austerity – a point Rachel Reeves has made repeatedly, contrasting it with her strategy of boosting public investment.

An economics professor says there are contradictions within the populist platform, such as it is. “Reform is funded by very wealthy people calling for tax cuts and reduced rules, yet also emphasizing the complaints of working people and the loss of industrial jobs,” he explains. “There is a conflict here between rich backers seeking radical free-market policies, and this narrative of restoring UK employment and reindustrialisation.”

Holding on to Power

Realistically, the evidence suggests neither left nor right populists often perform poorly when confronting real-world challenges (though of course each charismatic individual promises distinct solutions).

A recent paper in the American Economic Review examined the outcomes of dozens of populist leaders, over more than a century. It found that on average, after 15 years, gross domestic product per head tends to be a tenth less in nations run by populist leaders than in similar economies under conventional leadership.

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

A further interesting result of the research, however, is even with their negative impacts, populist figures tend to be good at holding on to power, lasting on average a considerable time, versus four for their more moderate equivalents.

In other words, it remains uncertain whether even if their plans crash, populists face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their attraction reaches beyond everyday financial matters.

But returning to Buenos Aires, whether Milei’s populist project collapses or is sustained through foreign assistance, the Argentine people have already paid significant costs.