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“Exchange, exchange.” Under the scorching heat, scores of money changers are hawking American currency along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the 26 October midterm elections in a country long used to saving in the US dollar.

“The best time for purchasing is currently,” states a arbolito, declining to give her name. “[The dollar] dropped slightly but it’s deceptive – it’ll rise again.”

Like her, economists across the spectrum anticipate a depreciation of the national currency after the election concludes. The president has imposed a limit on the peso to tame triple-digit inflation and now it remains overvalued and reserves are depleted, causing Argentina’s economy stagnant as buyers opt for cheap imports.

Ideal Conditions

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

Milei epitomizes populist leadership: charismatic, iconoclastic, promising muscular policies to wrestle back command of the economy from traditional elites on behalf of the people.

These defining traits are also seen in his ally to the north, and by the UK politician, who presents himself as a beer-drinking champion of the common man even though he is a privately educated former stockbroker.

Until recent months, Milei’s approach – including widespread sell-offs and deep public spending cuts – had won plaudits from the IMF for helping to control inflation in check. This plan has something in common with that of Milei’s idol Margaret Thatcher, who similarly viewed inflation as a monster to be defeated, no matter the cost.

However investors started to doubt in Milei’s radical project lately following a poor performance in local polls and a series of corruption scandals. Solely massive financial intervention by the US has averted what looked set to become a full-blown currency crisis.

Contradictions

The vote for Brexit several years ago likely contained similar reasoning, and its figurehead, the former prime minister, dismissed concerns regarding fiscal impacts with a bullish determination to enact public demand despite elite opposition.

The Reform leader has so far committed few policies to paper aside from a call for large-scale removals, that he later seemed to adjust on the hoof. He aims to rein in the Bank of England, perhaps even ditching its governor, Andrew Bailey, with distrust of a stodgy establishment being a key part of the populist package.

His fiscal plans seem in flux: wary of facing criticism for planning reckless spending, he recently abandoned a pledge to make large tax reductions. His second-in-command, Richard Tice, 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 – an argument the chancellor has emphasized often, comparing it unfavorably to her strategy of boosting public investment.

Jo Michell says there exist inconsistencies within the populist platform, as it stands. “The party is funded by affluent backers demanding lower taxes and reduced rules, but also emphasizing the grievances of working people and the loss in manufacturing employment,” he says. “There’s a tension there among wealthy supporters seeking Thatcherism on steroids, and this story of bringing back UK employment and industrial revival.”

Maintaining Control

Realistically, the evidence indicates neither left nor right populists often perform poorly when confronting practical difficulties (though of course every populist leader claims to offer 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 typically, after 15 years, GDP per capita tends to be 10% lower in nations governed by populist leaders than in comparable countries under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance typically go hand in hand with populist rule,” argue the researchers.

Another intriguing finding from the study, though, is that even with their negative impacts, these leaders are often effective at holding on to power, remaining in power for eight years, versus shorter tenures for mainstream politicians.

In other words, it is not clear that even when their policies fail, populists face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their appeal reaches beyond mundane economics.

But returning to Buenos Aires, regardless of if Milei’s populist project fails or is kept on life support by external aid, Argentina’s citizens have already paid significant costs.