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“Cambio, cambio.” Under the scorching heat, scores of money changers are selling American currency on Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the October 26 congressional elections in a nation accustomed to saving in the greenback.

“The optimal moment to buy is currently,” says one arbolito, declining to give her identity. “[The dollar] dropped a little but it’s deceptive – it’ll rise again.”

Similar to her, economic experts across the spectrum anticipate a devaluation of the Argentine peso after the election is over. President Javier Milei has imposed a limit on the currency to tame triple-digit price increases and now it remains overvalued and foreign reserves are exhausted, causing the national economy sluggish as buyers turn to cheap imports.

Ideal Conditions

Argentina represents a unique situation. The country has been repeatedly racked by debt defaults and financial turmoil and its voters have been susceptible over the years to left-leaning populist movements, in the form of the influential Peronist movement, and currently Milei’s rightwing version.

Milei epitomizes populist leadership: captivating, unconventional, vowing forceful policies to wrestle back control of economic management from the establishment on behalf of the people.

These key characteristics are also seen in his political partner to the north, and by the UK politician, who styles himself as a pint-swilling champion of the common man even though he is a privately educated ex-finance professional.

Up until lately, the president’s strategy – involving widespread sell-offs and deep budget reductions – had won plaudits from international lenders for contributing to bring price rises in check. The programme shares similarities with that of his political hero Margaret Thatcher, who also saw inflation as a monster to be slain, 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. Solely massive financial intervention by the US has averted what looked set to become a full-blown monetary collapse.

Inconsistencies

The vote for Brexit several years ago likely contained some of the same logic, and its figurehead, Boris Johnson, dismissed concerns regarding fiscal impacts with a bullish determination to enact the “will of the people” in the face of the establishment’s horror.

The Reform leader has so far outlined limited plans to paper except for proposals for large-scale removals, that he later seemed to adjust on the hoof. He aims to curb the central bank, possibly replacing its head, the incumbent, with distrust of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans appear to be unsettled: concerned about facing criticism for planning a Liz Truss-style splurge, he lately abandoned a promise to make large tax cuts. His Reform party deputy, Richard Tice, said they would concentrate instead on reductions in government expenditure.

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

Jo Michell says there are contradictions within the populist platform, such as it is. “Reform are bankrolled by very wealthy people calling for tax cuts and reduced rules, yet also talking a lot about the complaints of working people and the loss in manufacturing employment,” he says. “There is a conflict there among wealthy supporters who want radical free-market policies, and this story of restoring British jobs and industrial revival.”

Maintaining Control

In truth, 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 in the American Economic Review examined the performance of dozens of populist leaders, over more than a century. The study revealed typically, over the long term, GDP per capita is often 10% lower in countries run by populist rulers 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 paper’s authors.

A further interesting result of the research, though, is that despite their economic costs, populist figures tend to be good at retaining office, lasting on average eight years, versus four for mainstream politicians.

In other words, it remains uncertain that even when their policies fail, populists immediately pay the price in elections. Similar to pledges made to “take back control”, their appeal reaches beyond mundane economics.

But returning to Buenos Aires, whether Milei’s populist project fails or is kept on life support through foreign assistance, the Argentine people are already bearing significant costs.