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“Cambio, cambio.” Beneath the blazing sun, scores of currency traders are offering US dollars along Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), they are thriving before the October 26 midterm elections in a nation long used to saving in the greenback.

“The optimal moment for purchasing is currently,” says one arbolito, declining to give her identity. “[The dollar] went down slightly but it is a fake-out – it’ll rise again.”

Similar to her, economic experts across the spectrum anticipate a devaluation of the national currency after the voting is over. President Javier Milei has imposed a limit on the currency to tame triple-digit inflation and currently it remains artificially high and reserves are exhausted, leaving the national economy stagnant as consumers turn to low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. Argentina has been repeatedly hit by sovereign defaults and economic crises and the electorate have been receptive over the years to leftwing populism, in the form of the powerful Peronism, and now the president’s conservative populism.

Milei epitomizes populist leadership: charismatic, unconventional, vowing forceful policies to wrestle back control of the economy from the establishment 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 people’s champion even though he is a public school-educated former stockbroker.

Up until lately, Milei’s approach – involving extensive privatisations and severe budget reductions – had won plaudits from the IMF for helping to bring inflation in check. This plan has something in common with that of his political hero the former UK prime minister, who similarly viewed rising prices as a monster to be defeated, no matter the cost.

But financial markets began losing confidence in the government’s agenda lately following a poor performance in provincial elections and a series of graft allegations. Only large-scale financial intervention from abroad has prevented what seemed destined to be a full-blown monetary collapse.

Contradictions

The 2016 referendum in 2016 likely contained some of the same logic, and its leader, the former prime minister, dismissed doubts about economic detail with confident resolve to enact the “will of the people” in the face of elite opposition.

The Reform leader to date outlined limited plans in writing except for a call for mass deportations, that he later seemed to adjust spontaneously. He aims to curb the central bank, possibly replacing its head, Andrew Bailey, with distrust toward traditional institutions as a central element 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 cuts. His second-in-command, Richard Tice, said they would concentrate instead on reductions in government expenditure.

The opposition aims this position will allow it to depict Farage as intending to reintroduce austerity – a point the chancellor has made repeatedly, contrasting it with her strategy of increasing public investment.

An economics professor notes there exist inconsistencies within the populist platform, such as it is. “Reform are bankrolled by affluent backers calling for lower taxes and deregulation, yet also emphasizing the complaints of ordinary workers and the loss in manufacturing employment,” he explains. “There is a conflict there among rich backers seeking Thatcherism on steroids, and this narrative of bringing back UK employment and reindustrialisation.”

Maintaining Control

Realistically, the evidence 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 51 populist presidents and prime ministers, over more than a century. It found that on average, after 15 years, GDP per capita tends to be 10% lower in nations run by populist leaders compared to comparable countries with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions typically go hand in hand under populist governments,” argue the paper’s authors.

A further interesting result from the study, though, is despite their economic costs, these leaders tend to be good at retaining office, remaining in power for eight years, versus four for their more moderate equivalents.

Put simply, it remains uncertain that even when their plans crash, populists immediately pay the price in elections. Similar to pledges made to regain sovereignty, their appeal reaches beyond mundane economics.

But returning to Buenos Aires, regardless of if the government’s agenda fails or is kept on life support through foreign assistance, Argentina’s citizens have already paid a heavy price.