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“Cambio, cambio.” Under the scorching heat, scores of money changers are hawking US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the 26 October midterm elections in a nation accustomed to saving in the greenback.

“The optimal moment to buy is currently,” says a arbolito, refusing to provide her identity. “[The dollar] went down a little but it’s deceptive – it’ll rise again.”

Similar to her, economic experts from all backgrounds expect a devaluation of the national currency after the voting concludes. President Javier Milei has imposed a limit on the currency to tame soaring inflation and now it remains overvalued and foreign reserves are exhausted, causing the national economy stagnant as buyers turn to low-cost foreign goods.

Fertile Ground

The nation represents a unique situation. Argentina has frequently been racked by debt defaults and financial turmoil and the electorate have been receptive for decades 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 policies to wrestle back control of economic management from the establishment on behalf of ordinary citizens.

These defining traits are also seen in his ally in the United States, as well as Nigel Farage, 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 extensive privatisations and deep public spending cuts – had won plaudits from international lenders for contributing to bring inflation in check. This plan has something in common with that of Milei’s idol the former UK prime minister, who also saw rising prices as a dragon to be slain, regardless of the consequences.

But financial markets began losing confidence in the government’s agenda lately after a poor performance in local polls and multiple corruption scandals. Only massive financial intervention by the US has averted what seemed destined to be a major monetary collapse.

Contradictions

The vote for Brexit in 2016 arguably had some of the same logic, and its figurehead, Boris Johnson, swept away concerns about economic detail with confident resolve to implement the “will of the people” despite elite opposition.

The Reform leader to date outlined limited plans in writing aside from a call for mass deportations, that he later appeared to revise spontaneously. He aims to rein in the Bank of England, perhaps even ditching its governor, Andrew Bailey, with distrust of a stodgy establishment as a central element of the populist package.

His fiscal plans appear to be unsettled: wary of facing criticism for planning a Liz Truss-style splurge, he recently dropped a pledge to make significant tax reductions. His Reform party deputy, the party chairman, said they would concentrate instead on reductions in government expenditure.

The opposition hopes this stance will enable it to portray the populist as intending to reintroduce austerity – a point Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of increasing public investment.

An economics professor says there exist inconsistencies within the populist platform, as it stands. “The party is funded by very wealthy people calling for lower taxes and deregulation, yet also emphasizing the grievances of ordinary workers and the decline of industrial jobs,” he explains. “There is a conflict there between rich backers who want Thatcherism on steroids, and this narrative of restoring UK employment and reindustrialisation.”

Maintaining Control

In truth, research indicates neither left nor right populists tend to fare well when confronting real-world challenges (though of course each charismatic individual claims to offer distinct solutions).

A recent paper in the American Economic Review analysed the performance of dozens of populist leaders, from 1900 to 2020. It found that on average, over the long term, GDP per capita tends to be 10% lower in countries governed by populist leaders than in similar economies under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions usually occur together under populist governments,” argue the paper’s authors.

A further interesting result of the research, though, is that despite their economic costs, these leaders are often effective at holding on to power, remaining in power for a considerable time, versus shorter tenures for mainstream politicians.

In other words, it remains uncertain whether even if their plans crash, populists face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their attraction extends past mundane economics.

But returning to Buenos Aires, whether Milei’s populist project fails or is kept on life support by external aid, Argentina’s citizens have already paid a heavy price.