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“Cambio, cambio.” Under the blazing sun, dozens of money changers are selling US dollars on Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the October 26 congressional elections in a country accustomed to saving in the US dollar.

“The optimal moment for purchasing is currently,” states a arbolito, declining to give her name. “[The dollar] dropped slightly but it is a fake-out – it will rebound.”

Like her, economists from all backgrounds expect a depreciation of the Argentine peso once the election is over. The president has imposed a limit on the peso to tame soaring price increases and currently it is artificially high and foreign reserves are exhausted, causing Argentina’s economy stagnant as consumers opt for cheap imports.

Fertile Ground

Argentina represents a unique situation. Argentina has been repeatedly racked by debt defaults and economic crises and the electorate have been receptive over the years to leftwing populism, in the form of the influential Peronist movement, and now the president’s rightwing version.

The president is a textbook populist: charismatic, unconventional, vowing muscular measures to wrestle back control of economic management from traditional elites for the benefit of the people.

These key characteristics are also seen in his political partner to the north, and by the UK politician, who presents himself as a beer-drinking champion of the common man despite being a privately educated ex-finance professional.

Until recent months, Milei’s approach – involving widespread sell-offs and deep public spending cuts – had earned praise from the IMF for contributing to bring inflation under control. The programme has something in common with the policies of his political hero Margaret Thatcher, who similarly viewed inflation as a monster to be defeated, regardless of the consequences.

But investors began losing confidence in Milei’s radical project lately following a poor performance in local polls and multiple corruption scandals. Only massive economic support by the US has averted what looked set to become a full-blown monetary collapse.

Contradictions

The 2016 referendum several years ago arguably had similar reasoning, and its leader, Boris Johnson, dismissed doubts regarding fiscal impacts with a bullish determination to implement public demand in the face of the establishment’s horror.

The Reform leader to date committed few policies in writing aside from a call for large-scale removals, that he later seemed to adjust spontaneously. He wants to curb the Bank of England, possibly ditching its governor, the incumbent, with distrust of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans appear to be in flux: concerned about facing criticism for proposing a Liz Truss-style splurge, he recently dropped a promise for significant tax reductions. His second-in-command, Richard Tice, stated they would concentrate instead on reductions in government expenditure.

Labour aims this position will enable it to portray Farage as planning to reintroduce fiscal tightening – an argument the chancellor has made repeatedly, comparing it unfavorably to her approach of increasing public investment.

Jo Michell says there exist inconsistencies within the populist platform, such as it is. “The party is funded by affluent backers calling for tax cuts and reduced rules, yet also talking a lot about the complaints of working people 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 UK employment and reindustrialisation.”

Maintaining Control

In truth, the evidence indicates populists of any stripe often perform poorly when confronting practical difficulties (although every populist leader promises something unique).

Recent research in the American Economic Review examined the performance 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 is often a tenth less in countries run by populist rulers compared to similar economies with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the decay of governance usually go hand in hand under populist governments,” contend the paper’s authors.

Another intriguing finding from the study, however, is despite their economic costs, populist figures are often effective at holding on to power, lasting on average eight years, versus four for mainstream politicians.

In other words, it is not clear whether even if their policies fail, populists immediately pay the price in elections. Similar to pledges made to regain sovereignty, their attraction reaches beyond mundane economics.

Yet back in Buenos Aires, regardless of if the government’s agenda collapses or is kept on life support by external aid, the Argentine people have already paid significant costs.