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“Cambio, cambio.” Beneath the scorching heat, scores of currency traders are offering American currency along Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“little trees”), they are thriving ahead of the 26 October congressional elections in a country long used to saving in the US dollar.

“The best time for purchasing is currently,” states one arbolito, declining to give her name. “[The dollar] went down slightly but it’s deceptive – it will rebound.”

Like her, economists across the spectrum anticipate a devaluation of the national currency once the voting is over. President Javier Milei has placed a limit on the currency to control triple-digit price increases and currently it remains overvalued and foreign reserves are depleted, leaving Argentina’s economy stagnant as consumers turn to cheap imports.

Ideal Conditions

Argentina represents a unique situation. The country has been repeatedly hit by sovereign defaults and financial turmoil and its voters have been receptive for decades to left-leaning populist movements, such as the influential Peronist movement, and currently the president’s conservative populism.

Milei is a textbook populist: captivating, unconventional, promising forceful policies to wrestle back control of the economy from traditional elites for the benefit of ordinary citizens.

These key characteristics are also seen in his political partner in the United States, as well as the UK politician, who presents himself as a pint-swilling champion of the common man even though he is a privately educated ex-finance professional.

Up until lately, Milei’s approach – including extensive privatisations and severe budget reductions – had earned praise from the IMF for contributing to bring inflation in check. This plan shares similarities with that of his political hero the former UK prime minister, who also saw inflation as a monster to be defeated, regardless of the consequences.

However investors started to doubt in the government’s agenda in recent months following a shaky result in provincial elections and a series of graft allegations. Solely large-scale economic support from abroad has prevented what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The 2016 referendum several years ago arguably had similar reasoning, and its leader, the former prime minister, dismissed doubts regarding fiscal impacts with confident resolve to enact public demand in the face of elite opposition.

The Reform leader to date outlined limited plans to paper aside from proposals 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, Andrew Bailey, with scepticism of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies appear to be unsettled: wary of facing criticism for proposing reckless spending, he lately abandoned a pledge to make large tax reductions. His Reform party deputy, the party chairman, stated they would concentrate instead on public spending cuts.

The opposition aims this position will allow it to depict Farage as planning to bring back austerity – a point the chancellor has emphasized often, contrasting it with her strategy of boosting government spending.

An economics professor says there are contradictions within the populist platform, as it stands. “The party is funded by affluent backers demanding tax cuts and deregulation, yet also emphasizing the grievances of ordinary workers and the loss of industrial jobs,” he says. “There’s a tension here among wealthy supporters who want Thatcherism on steroids, and this story of bringing back UK employment and industrial revival.”

Holding on to Power

Realistically, research indicates neither left nor right populists tend to fare well when faced with real-world challenges (although every populist leader promises distinct solutions).

A recent paper from a leading journal analysed the outcomes of dozens of populist leaders, from 1900 to 2020. The study revealed typically, after 15 years, GDP per capita is often a tenth less in countries governed by populist rulers than in similar economies with more mainstream regimes.

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

A further interesting result from the study, however, is even with their negative impacts, these leaders tend to be good at holding on to power, lasting on average eight years, compared with four for their more moderate equivalents.

Put simply, it is not clear whether even if their plans crash, populists immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal extends past mundane economics.

But returning to Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support by external aid, the Argentine people have already paid a heavy price.