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“Cambio, cambio.” Beneath the scorching heat, dozens of currency traders are offering American currency along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), their business is booming ahead of the 26 October congressional elections in a nation accustomed to holding the greenback.

“The optimal moment for purchasing is currently,” states one arbolito, declining to give her identity. “[The dollar] went down a little but it’s deceptive – it will rebound.”

Similar to her, economic experts from all backgrounds anticipate a devaluation of the Argentine peso once the election is over. The president has imposed a cap on the peso to control triple-digit price increases and now it is overvalued and reserves are exhausted, leaving Argentina’s economy sluggish as consumers turn to cheap imports.

Fertile Ground

Argentina represents a unique situation. The country 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 influential Peronism, and currently the president’s conservative populism.

Milei epitomizes populist leadership: captivating, iconoclastic, promising forceful measures to reclaim command of economic management from traditional elites for the benefit of ordinary citizens.

These defining traits are shared by his ally to the north, and by the UK politician, who styles himself as a pint-swilling people’s champion even though he is a public school-educated ex-finance professional.

Up until lately, Milei’s approach – involving widespread sell-offs and deep public spending cuts – had earned praise from the IMF for contributing to control price rises in check. The programme shares similarities with that of his political hero Margaret Thatcher, who similarly viewed rising prices as a dragon to be defeated, no matter the cost.

However investors began losing confidence in Milei’s radical project in recent months after a poor performance in local polls and a series of corruption scandals. Solely massive financial intervention from abroad has averted what looked set to become a major monetary collapse.

Inconsistencies

The 2016 referendum several years ago likely contained some of the same logic, and its figurehead, the former prime minister, swept away concerns about economic detail with a bullish determination to implement the “will of the people” in the face of elite opposition.

The Reform leader to date outlined limited plans to paper aside from a call for mass deportations, that he later appeared to revise on the hoof. He wants to rein in the Bank of England, perhaps even replacing its head, Andrew Bailey, with distrust toward traditional institutions as a central element of the populist package.

His tax and spending policies seem unsettled: concerned about facing criticism for planning a Liz Truss-style splurge, he lately dropped a promise for large tax cuts. His Reform party deputy, the party chairman, said they would concentrate instead on public spending cuts.

Labour aims this stance will allow it to portray the populist as planning to bring back fiscal tightening – an argument Rachel Reeves has emphasized often, contrasting it with her approach of boosting government spending.

Jo Michell notes there exist inconsistencies within the populist platform, as it stands. “Reform is funded by very wealthy people demanding lower taxes and reduced rules, but also talking a lot about the grievances of working people and the loss of industrial jobs,” he says. “There’s a tension there among rich backers seeking radical free-market policies, and this story of bringing back British jobs and reindustrialisation.”

Holding on to Power

In truth, the evidence suggests neither left nor right populists tend to fare well when faced with practical difficulties (although every populist leader claims to offer something unique).

Recent research in the American Economic Review analysed the performance of dozens of populist leaders, over more than a century. The study revealed that on average, over the long term, gross domestic product per head tends to be 10% lower in countries run by populist leaders compared to comparable countries under conventional leadership.

“Financial decline, weakening economic fundamentals and the erosion of institutions typically go hand in hand under populist governments,” contend the researchers.

A further interesting result from the study, though, is that even with their negative impacts, populist figures are often effective at holding on to power, lasting on average eight years, versus four for mainstream politicians.

Put simply, it remains uncertain that even when their policies fail, such leaders immediately pay the price in elections. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond everyday financial matters.

Yet back in Buenos Aires, whether the government’s agenda fails or is sustained by external aid, the Argentine people are already bearing a heavy price.