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“Cambio, cambio.” Under the scorching heat, dozens of money changers are hawking US dollars on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the 26 October congressional elections in a nation long used to holding the US dollar.

“The optimal moment for purchasing is now,” states one arbolito, refusing to provide her name. “[The dollar] dropped a little but it’s deceptive – it’ll rise again.”

Similar to her, economists from all backgrounds anticipate a devaluation of the national currency after the voting is over. The president has imposed a cap on the currency to tame triple-digit price increases and currently it is overvalued and reserves are depleted, leaving the national economy sluggish as consumers opt for low-cost foreign goods.

Ideal Conditions

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

The president epitomizes populist leadership: charismatic, iconoclastic, promising muscular measures to reclaim control of economic management from the establishment on behalf of the people.

These defining traits are also seen in his ally in the United States, as well as the UK politician, who styles himself as a beer-drinking champion of the common man despite being a public school-educated ex-finance professional.

Up until lately, Milei’s approach – involving widespread sell-offs and severe budget reductions – had won plaudits from international lenders for helping to bring price rises under control. The programme has something in common with that of Milei’s idol Margaret Thatcher, who also saw rising prices as a dragon to be defeated, no matter the cost.

However investors started to doubt in the government’s agenda in recent months after a poor performance in provincial elections and multiple corruption scandals. Only large-scale financial intervention from abroad has prevented what seemed destined to be a full-blown monetary collapse.

Contradictions

The vote for Brexit in 2016 likely contained some of the same logic, and its leader, Boris Johnson, swept away concerns regarding fiscal impacts with confident resolve to implement public demand despite elite opposition.

The Reform leader has so far outlined limited plans in writing except for a call for mass deportations, that he later seemed to adjust on the hoof. He aims to curb the Bank of England, perhaps even replacing its head, the incumbent, with distrust of a stodgy establishment as a central element of the populist package.

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

Labour hopes this stance will allow it to depict the populist as planning to reintroduce austerity – an argument the chancellor has made repeatedly, contrasting it with her approach of increasing public investment.

Jo Michell says there are contradictions within the populist platform, as it stands. “The party is funded by affluent backers demanding lower taxes and deregulation, yet also talking a lot about the grievances of ordinary workers and the decline of industrial jobs,” he says. “There’s a tension here between wealthy supporters who want Thatcherism on steroids, and this story of restoring British jobs and industrial revival.”

Holding on to Power

In truth, research suggests populists of any stripe often perform poorly when faced with real-world challenges (though of course each charismatic individual promises something unique).

A recent paper from a leading journal examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, over the long term, GDP per capita is often 10% lower in countries governed by populist rulers than in comparable countries under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually occur together under populist governments,” contend the researchers.

Another intriguing finding of the research, though, is that even with their negative impacts, populist figures tend to be good at retaining office, remaining in power for eight years, compared with shorter tenures for mainstream politicians.

In other words, it is not clear that even when their plans crash, such leaders immediately pay the price in elections. Similar to pledges made to “take back control”, their attraction extends past everyday financial matters.

Yet back in Buenos Aires, whether Milei’s populist project fails or is kept on life support by external aid, the Argentine people have already paid a heavy price.