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“Cambio, cambio.” Under the blazing sun, dozens of currency traders are selling US dollars along Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the October 26 midterm elections in a country accustomed to saving in the US dollar.

“The best time for purchasing is now,” states a arbolito, declining to give her identity. “[The dollar] went down a little but it is a fake-out – it will rebound.”

Similar to her, economists from all backgrounds expect a devaluation of the Argentine peso once the election is over. President Javier Milei has placed a limit on the peso to control triple-digit price increases and currently it remains artificially high and foreign reserves are depleted, leaving the national economy stagnant as buyers turn to low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. Argentina has been repeatedly racked by sovereign defaults and financial turmoil and its voters have been receptive for decades to leftwing populism, such as the influential Peronist movement, and currently the president’s rightwing version.

Milei is a textbook populist: charismatic, iconoclastic, vowing forceful policies to wrestle back command of the economy from the establishment for the benefit of the people.

These key characteristics are shared by his ally in the United States, as well as the UK politician, who styles himself as a beer-drinking champion of the common man even though he is a public school-educated former stockbroker.

Until recent months, the president’s strategy – involving extensive privatisations and deep public spending cuts – had earned praise from international lenders for helping to control price rises in check. The programme has something in common with the policies of his political hero Margaret Thatcher, who similarly viewed rising prices as a monster to be slain, no matter the cost.

However financial markets started to doubt in the government’s agenda in recent months following a poor performance in provincial elections and a series of graft allegations. Only large-scale financial intervention by the US has prevented what looked set to become a major currency crisis.

Inconsistencies

The 2016 referendum several years ago likely contained similar reasoning, and its figurehead, Boris Johnson, dismissed doubts regarding fiscal impacts with a bullish determination to implement the “will of the people” despite the establishment’s horror.

The Reform leader has so far outlined limited plans to paper except for proposals for large-scale removals, which he subsequently appeared to revise on the hoof. He aims to curb the Bank of England, possibly replacing its head, Andrew Bailey, with scepticism of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies seem in flux: concerned about being accused of planning a Liz Truss-style splurge, he lately dropped a pledge to make significant tax reductions. His second-in-command, Richard Tice, said they would focus instead on public spending cuts.

The opposition 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 approach of increasing government spending.

Jo Michell notes there are contradictions within the populist platform, such as it is. “Reform are bankrolled by very wealthy people calling for lower taxes and deregulation, yet also talking a lot about the grievances of working people and the decline in manufacturing employment,” he says. “There is a conflict there between rich backers seeking Thatcherism on steroids, and this story of restoring British jobs and industrial revival.”

Maintaining Control

Realistically, the evidence indicates populists of any stripe often perform poorly when faced with practical difficulties (although each charismatic individual claims to offer distinct solutions).

Recent research from a leading journal examined the performance 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 run by populist rulers compared to similar economies with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance typically go hand in hand with populist rule,” contend the paper’s authors.

Another intriguing finding from the study, however, is even with their negative impacts, these leaders are often effective at retaining office, remaining in power for a considerable time, compared with shorter tenures for mainstream politicians.

Put simply, it is not clear whether even if their plans crash, such leaders immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their appeal extends past mundane economics.

Yet returning to Buenos Aires, whether Milei’s populist project fails or is kept on life support by external aid, Argentina’s citizens are already bearing significant costs.