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“Cambio, cambio.” Under the blazing sun, dozens of currency traders are hawking US dollars along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the October 26 midterm elections in a country long used to holding the greenback.

“The best time to buy is now,” states one arbolito, declining to give her name. “[The dollar] went down a little but it’s deceptive – it’ll rise again.”

Similar to her, economic experts across the spectrum anticipate a depreciation of the Argentine peso after the election concludes. President Javier Milei has imposed a limit on the peso to tame soaring inflation and now it remains overvalued and reserves are depleted, leaving Argentina’s economy sluggish as consumers opt for cheap imports.

Fertile Ground

Argentina is a very special case. The country has frequently been hit by debt defaults and financial turmoil and its voters have been susceptible for decades to leftwing populism, such as the powerful Peronist movement, and now Milei’s rightwing version.

Milei is a textbook populist: captivating, unconventional, vowing forceful measures to wrestle back control of the economy from the establishment on behalf of ordinary citizens.

These key characteristics are shared by his ally to the north, as well as the UK politician, who styles himself as a beer-drinking champion of the common man despite being a privately educated former stockbroker.

Up until lately, the president’s strategy – involving widespread sell-offs and severe budget reductions – had won plaudits from the IMF for contributing to control inflation under control. The programme shares similarities 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.

However financial markets began losing confidence in Milei’s radical project lately following a poor performance in provincial elections and a series of corruption scandals. Only massive financial intervention from abroad has averted what looked set to become a full-blown monetary collapse.

Contradictions

The vote for Brexit in 2016 arguably had some of the same logic, and its figurehead, the former prime minister, swept away doubts about economic detail with a bullish determination to implement the “will of the people” despite elite opposition.

The Reform leader has so far outlined limited plans to paper except for a call for mass deportations, that he later appeared to revise spontaneously. He aims to curb the central bank, perhaps even ditching its governor, Andrew Bailey, with distrust of a stodgy establishment being a key part of the populist package.

His fiscal plans seem in flux: wary of being accused of planning a Liz Truss-style splurge, he lately abandoned a pledge to make large tax cuts. His second-in-command, the party chairman, stated they would focus instead on reductions in government expenditure.

The opposition aims this stance will allow it to depict the populist as intending to reintroduce fiscal tightening – an argument the chancellor has made repeatedly, contrasting it with her approach of boosting public investment.

Jo Michell says there exist inconsistencies within the populist platform, such as it is. “Reform is funded by affluent backers demanding lower taxes and deregulation, yet also emphasizing the grievances of ordinary workers and the decline in manufacturing employment,” he explains. “There is a conflict here between wealthy supporters seeking radical free-market policies, and this story of bringing back British jobs and reindustrialisation.”

Maintaining Control

In truth, research indicates neither left nor right populists tend to fare well when faced with real-world challenges (though of course every populist leader promises distinct solutions).

A recent paper in the American Economic Review analysed the outcomes of dozens of populist leaders, from 1900 to 2020. It found that on average, after 15 years, gross domestic product per head tends to be 10% lower in nations run by populist rulers than in comparable countries under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance usually occur together with populist rule,” contend the paper’s authors.

Another intriguing finding from the study, however, is that despite their economic costs, these leaders are often effective at retaining office, lasting on average a considerable time, compared with four for mainstream politicians.

In other words, it is not clear that even when their policies fail, populists immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their attraction reaches beyond everyday financial matters.

Yet returning to Buenos Aires, regardless of if the government’s agenda collapses or is kept on life support by external aid, the Argentine people have already paid a heavy price.