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

“The best time to buy is currently,” states one arbolito, refusing to provide her identity. “[The dollar] went down a little but it’s deceptive – it will rebound.”

Like her, economists across the spectrum expect a devaluation of the national currency after the election is over. President Javier Milei has imposed a limit on the currency to tame soaring inflation and now it remains overvalued and reserves are depleted, causing the national economy stagnant as buyers opt for cheap imports.

Ideal Conditions

The nation is a very special case. Argentina has frequently been hit by sovereign defaults and economic crises and its voters have been susceptible for decades to leftwing populism, in the form of the powerful Peronism, and now the president’s rightwing version.

Milei epitomizes populist leadership: charismatic, iconoclastic, vowing forceful policies to wrestle back control of economic management from traditional elites for the benefit of the people.

These key characteristics are also seen in his political partner 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 public school-educated ex-finance professional.

Up until lately, Milei’s approach – including widespread sell-offs and severe public spending cuts – had earned praise from the IMF for contributing to bring inflation under control. This plan shares similarities with the policies of Milei’s idol Margaret Thatcher, who also saw rising prices as a monster to be defeated, no matter the cost.

However investors started to doubt in Milei’s radical project lately following a shaky result in provincial elections and a series of graft allegations. Only large-scale economic support from abroad has averted what seemed destined to be a major currency crisis.

Inconsistencies

The 2016 referendum in 2016 arguably had similar reasoning, and its figurehead, the former prime minister, dismissed concerns about economic detail with a bullish determination to implement the “will of the people” despite elite opposition.

The Reform leader has so far committed few policies in writing except for proposals for large-scale removals, which he subsequently appeared to revise on the hoof. He aims to rein in the central bank, possibly 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 facing criticism for proposing reckless spending, he lately dropped a pledge to make large tax reductions. His Reform party deputy, the party chairman, said they would concentrate instead on public spending cuts.

Labour aims this position will allow it to portray the populist as planning to bring back austerity – a point Rachel Reeves has emphasized often, contrasting it with her approach of boosting public investment.

An economics professor notes there exist inconsistencies within the populist platform, such as it is. “The party are bankrolled by very wealthy people demanding lower taxes and deregulation, but also emphasizing the complaints of ordinary workers and the loss of industrial jobs,” he says. “There’s a tension here between wealthy supporters seeking Thatcherism on steroids, and this story of restoring British jobs and reindustrialisation.”

Maintaining Control

In truth, the evidence indicates neither left nor right populists often perform poorly when confronting practical difficulties (though of course every populist leader claims to offer 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 typically, over the long term, gross domestic product per head tends to be 10% lower in nations governed by populist leaders than in comparable countries under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions usually occur together under populist governments,” contend the researchers.

A further interesting result from the study, though, is that even with their negative impacts, these leaders tend to be good at retaining office, lasting on average a considerable time, compared with four for their more moderate equivalents.

In other words, it is not clear that even when their policies fail, populists face immediate consequences in elections. Similar to pledges made to regain sovereignty, their attraction reaches beyond everyday financial matters.

Yet returning to Buenos Aires, whether the government’s agenda collapses or is kept on life support by external aid, Argentina’s citizens have already paid a heavy price.