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“Exchange, exchange.” Under the scorching heat, dozens of money changers are offering American currency along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), they are thriving ahead of the 26 October congressional elections in a country accustomed to holding the US dollar.

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

Like her, economists across the spectrum expect a depreciation of the national currency once the election is over. President Javier Milei has imposed a cap on the currency to tame soaring price increases and now it remains overvalued and reserves are depleted, causing Argentina’s economy stagnant as buyers turn to cheap imports.

Ideal Conditions

Argentina represents a unique situation. The country has been repeatedly racked by sovereign defaults and financial turmoil and the electorate have been receptive over the years to leftwing populism, such as the influential Peronism, and now the president’s rightwing version.

Milei epitomizes populist leadership: charismatic, iconoclastic, promising forceful measures to reclaim control of economic management from the establishment on behalf of ordinary citizens.

These key characteristics are also seen in his ally to the north, and by the UK politician, who styles himself as a beer-drinking people’s champion even though he is a public school-educated former stockbroker.

Until recent months, Milei’s approach – including widespread sell-offs and severe public spending cuts – had earned praise from the IMF for helping to control inflation under control. The programme shares similarities with the policies of Milei’s idol Margaret Thatcher, who similarly viewed inflation as a monster to be slain, regardless of the consequences.

But investors started to doubt in the government’s agenda in recent months after a poor performance in local polls and a series of corruption scandals. Only massive financial intervention from abroad has prevented what looked set to become a major currency crisis.

Inconsistencies

The 2016 referendum in 2016 arguably had similar reasoning, and its leader, the former prime minister, dismissed doubts regarding fiscal impacts with a bullish determination to enact public demand in the face of elite opposition.

The Reform leader to date outlined limited plans to paper aside from a call for large-scale removals, that he later seemed to adjust spontaneously. He aims to rein in the central bank, perhaps even ditching its governor, the incumbent, with distrust of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans seem unsettled: concerned about facing criticism for proposing reckless spending, he recently dropped a pledge to make large tax reductions. His second-in-command, Richard Tice, stated they would focus instead on reductions in government expenditure.

The opposition hopes this stance will enable it to depict Farage as intending to reintroduce fiscal tightening – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her strategy of increasing government spending.

Jo Michell notes there are contradictions within the populist platform, such as it is. “The party are bankrolled by very wealthy people demanding tax cuts and reduced rules, but also talking a lot about the grievances of ordinary workers and the loss of industrial jobs,” he explains. “There is a conflict there between rich backers who want Thatcherism on steroids, and this narrative of bringing back UK employment and industrial revival.”

Holding on to Power

In truth, the evidence indicates populists of any stripe tend to fare well when confronting practical difficulties (although each charismatic individual promises distinct solutions).

A recent paper from a leading journal examined the outcomes of dozens of populist leaders, over more than a century. It found typically, over the long term, GDP per capita tends to be a tenth less in nations run by populist leaders than in comparable countries with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions typically occur together under populist governments,” contend the researchers.

A further interesting result from the study, though, is that despite their economic costs, populist figures are often effective at retaining office, remaining in power for eight years, compared with four for mainstream politicians.

In other words, it remains uncertain that even when their policies fail, populists face immediate consequences in elections. Similar to pledges made to “take back control”, their appeal extends past mundane economics.

But back in Buenos Aires, regardless of if Milei’s populist project fails or is sustained by external aid, the Argentine people are already bearing significant costs.