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“Cambio, cambio.” Beneath the blazing sun, dozens of currency traders are offering US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the 26 October congressional elections in a country accustomed to saving in the US dollar.

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

Like her, economic experts across the spectrum expect a devaluation of the national currency once the election is over. The president has imposed a cap on the peso to control triple-digit inflation and now it remains artificially high and reserves are exhausted, causing the national economy stagnant as buyers opt for low-cost foreign goods.

Ideal Conditions

The nation represents a unique situation. Argentina has frequently been hit by debt defaults and economic crises and the electorate have been receptive for decades to left-leaning populist movements, such as the influential Peronism, and currently the president’s conservative populism.

Milei epitomizes populist leadership: captivating, unconventional, vowing muscular policies to reclaim control of the economy from traditional elites for the benefit of ordinary citizens.

These defining traits are also seen in his political partner in the United States, as well as the UK politician, who styles himself as a pint-swilling people’s champion despite being a public school-educated former stockbroker.

Up until lately, Milei’s approach – involving widespread sell-offs and deep public spending cuts – had won plaudits from international lenders for contributing to bring inflation under control. The programme 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 defeated, no matter the cost.

But investors started to doubt in Milei’s radical project in recent months after a shaky result in local polls and a series of graft allegations. Only large-scale economic support from abroad has averted what seemed destined to be a major monetary collapse.

Inconsistencies

The 2016 referendum in 2016 likely contained similar reasoning, and its leader, Boris Johnson, dismissed concerns regarding fiscal impacts with a bullish determination to implement public demand in the face of elite opposition.

The Reform leader has so far outlined limited plans in writing except for a call for mass deportations, that he later seemed to adjust spontaneously. He wants to rein in the central bank, perhaps even replacing its head, the incumbent, with distrust toward traditional institutions being a key part of populist rhetoric.

His fiscal plans appear to be in flux: wary of being accused of planning a Liz Truss-style splurge, he recently abandoned a pledge for large tax reductions. His Reform party deputy, the party chairman, said they would concentrate instead on public spending cuts.

The opposition hopes this stance will enable it to depict the populist as planning to reintroduce austerity – a point Rachel Reeves has made repeatedly, comparing it unfavorably to her strategy of boosting public investment.

An economics professor says there exist inconsistencies within the populist platform, such as it is. “Reform is funded by very wealthy people calling for tax cuts and deregulation, yet also emphasizing the grievances of working people and the decline of industrial jobs,” he says. “There’s a tension here among wealthy supporters who want radical free-market policies, and this narrative of bringing back UK employment and industrial revival.”

Holding on to Power

In truth, research suggests neither left nor right populists tend to fare well when faced with practical difficulties (although every populist leader claims to offer distinct solutions).

Recent research in the American Economic Review analysed the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed that on average, over the long term, GDP per capita tends to be 10% lower in nations governed by populist leaders than in similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance typically occur together under populist governments,” contend the researchers.

Another intriguing finding from the study, though, is even with their negative impacts, these leaders are often effective at holding on to power, remaining in power for eight years, compared with shorter tenures for their more moderate equivalents.

Put simply, it is not clear whether even if their plans crash, such leaders face immediate consequences in elections. Like the Brexiters’ promise to “take back control”, their attraction reaches beyond mundane economics.

Yet returning to Buenos Aires, whether the government’s agenda collapses or is sustained through foreign assistance, the Argentine people have already paid a heavy price.