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“Dollars, dollars.” Beneath the scorching heat, dozens of currency traders are selling US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the October 26 congressional elections in a nation long used to saving in the greenback.

“The best time to buy is now,” states a arbolito, declining to give her name. “[The dollar] dropped slightly but it is a fake-out – it’ll rise again.”

Like her, economic experts from all backgrounds anticipate a devaluation of the Argentine peso after the voting is over. The president has imposed a cap on the currency to control triple-digit inflation and now it remains overvalued and reserves are depleted, causing the national economy sluggish as buyers opt for low-cost foreign goods.

Fertile Ground

The nation represents a unique situation. The country has frequently been hit by sovereign defaults and economic crises and the electorate have been susceptible over the years to leftwing populism, in the form of the influential Peronism, and currently the president’s rightwing version.

Milei epitomizes populist leadership: captivating, unconventional, promising muscular measures to wrestle back control of economic management from traditional elites on behalf of the people.

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.

Until recent months, Milei’s approach – involving widespread sell-offs and severe public spending cuts – had earned praise from international lenders for helping to bring inflation under control. The programme shares similarities with that of his political hero the former UK prime minister, who also saw rising prices as a monster to be defeated, regardless of the consequences.

But financial markets began losing confidence in Milei’s radical project in recent months after a shaky result in provincial elections and multiple graft allegations. Only massive financial intervention 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 figurehead, Boris Johnson, dismissed concerns regarding fiscal impacts with confident resolve to enact the “will of the people” despite the establishment’s horror.

The Reform leader to date committed few policies in writing aside from proposals for large-scale removals, that he later appeared to revise spontaneously. He aims to rein in the Bank of England, possibly ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment being a key part 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 abandoned a promise for significant tax cuts. His Reform party deputy, Richard Tice, said they would concentrate instead on public spending cuts.

Labour aims this position will allow it to depict the populist as planning to reintroduce austerity – an argument the chancellor has made repeatedly, comparing it unfavorably to her strategy of increasing government spending.

Jo Michell says there exist inconsistencies within the populist platform, as it stands. “The party are bankrolled by affluent backers calling for lower taxes and reduced rules, yet also emphasizing the complaints of ordinary workers and the loss of industrial jobs,” he explains. “There’s a tension there among rich backers seeking Thatcherism on steroids, and this narrative of restoring UK employment and industrial revival.”

Maintaining Control

In truth, research suggests populists of any stripe often perform poorly when confronting real-world challenges (although every populist leader claims to offer distinct solutions).

Recent research from a leading journal examined the outcomes of 51 populist presidents and prime ministers, over more than a century. It found that on average, after 15 years, gross domestic product per head is often 10% lower in countries governed by populist rulers compared to similar economies under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the decay of governance typically occur together under populist governments,” argue the researchers.

A further interesting result from the study, however, is even with their negative impacts, populist figures are often effective at retaining office, remaining in power for eight years, compared with shorter tenures for their more moderate equivalents.

Put simply, it remains uncertain whether even if their policies fail, such leaders face immediate consequences in elections. Similar to pledges made to regain sovereignty, their attraction reaches beyond mundane economics.

But back in Buenos Aires, regardless of if the government’s agenda fails or is sustained through foreign assistance, the Argentine people are already bearing a heavy price.