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“Cambio, cambio.” Under the scorching heat, scores of currency traders are hawking American currency along Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming ahead of the October 26 midterm elections in a country long used to holding the greenback.

“The best time for purchasing is now,” says a arbolito, declining to give her identity. “[The dollar] dropped slightly but it is a fake-out – it’ll rise again.”

Like her, economists across the spectrum expect a devaluation of the Argentine peso once the election concludes. President Javier Milei has imposed a cap on the peso to tame triple-digit inflation and currently it is artificially high and foreign reserves are depleted, leaving the national economy stagnant as buyers turn to cheap imports.

Ideal Conditions

Argentina represents a unique situation. Argentina has frequently been hit by sovereign defaults and economic crises and its voters have been receptive over the years to leftwing populism, such as the powerful Peronist movement, and now Milei’s rightwing version.

The president epitomizes populist leadership: captivating, unconventional, vowing muscular policies to wrestle back command of the economy from traditional elites on behalf of the people.

These key characteristics are shared by his political partner in the United States, as well as the UK politician, who presents himself as a beer-drinking people’s champion even though he is a privately educated ex-finance professional.

Up until lately, Milei’s approach – including widespread sell-offs and severe budget reductions – had earned praise from the IMF for helping to control inflation under control. The programme shares similarities with that of Milei’s idol Margaret Thatcher, who similarly viewed rising prices as a dragon to be slain, regardless of the consequences.

But financial markets started to doubt in Milei’s radical project lately after a shaky result in provincial elections and multiple corruption scandals. Solely massive economic support by the US has prevented what looked set to become a major currency crisis.

Inconsistencies

The vote for Brexit several years ago arguably had similar reasoning, and its figurehead, Boris Johnson, dismissed doubts regarding fiscal impacts with confident resolve to implement the “will of the people” in the face of the establishment’s horror.

The Reform leader has so far outlined limited plans to paper aside from a call for mass deportations, that he later appeared to revise on the hoof. He wants to curb the Bank of England, perhaps even ditching its governor, the incumbent, with distrust toward traditional institutions being a key part of the populist package.

His fiscal plans seem in flux: concerned about being accused of planning a Liz Truss-style splurge, he lately abandoned a pledge for large tax reductions. His Reform party deputy, Richard Tice, stated they would concentrate instead on reductions in government expenditure.

The opposition aims this position will enable it to portray the populist as intending to bring back fiscal tightening – a point Rachel Reeves has made repeatedly, contrasting it with her approach of increasing government spending.

An economics professor says there are contradictions within the populist platform, as it stands. “The party are bankrolled by affluent backers demanding tax cuts and reduced rules, yet also talking a lot about the grievances of ordinary workers and the loss in manufacturing employment,” he says. “There is a conflict here between wealthy supporters seeking Thatcherism on steroids, and this narrative of bringing back British jobs and industrial revival.”

Maintaining Control

In truth, research indicates populists of any stripe tend to fare well when confronting practical difficulties (though of course every populist leader promises 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 a tenth less in nations run by populist leaders than in similar economies under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions typically go hand in hand under populist governments,” contend the paper’s authors.

Another intriguing finding of the research, though, is that despite their economic costs, these leaders are often effective at holding on to power, remaining in power for eight years, versus shorter tenures for mainstream politicians.

In other words, it is not clear that even when their policies fail, populists face immediate consequences at the ballot box. Similar to pledges made to “take back control”, their appeal reaches beyond mundane economics.

Yet back in Buenos Aires, whether Milei’s populist project fails or is sustained by external aid, the Argentine people have already paid a heavy price.