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“Cambio, cambio.” Under the scorching heat, scores of money changers are offering US dollars on Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming ahead of the 26 October midterm elections in a nation long used to holding the US dollar.

“The optimal moment to buy is currently,” says one arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Like her, economic experts across the spectrum expect a depreciation of the national currency after the election is over. The president has imposed a cap on the currency to control soaring price increases and now it is overvalued and reserves are depleted, leaving Argentina’s economy sluggish as buyers opt for cheap imports.

Fertile Ground

Argentina represents a unique situation. Argentina has been repeatedly racked by sovereign defaults and economic crises and the electorate have been susceptible over the years to leftwing populism, in the form of the influential Peronist movement, and now the president’s conservative populism.

Milei is a textbook populist: captivating, iconoclastic, promising muscular policies to reclaim control of the economy from the establishment on behalf of ordinary citizens.

These key characteristics are also seen in his ally in the United States, as well as the UK politician, who styles himself as a beer-drinking champion of the common man despite being a public school-educated ex-finance professional.

Up until lately, Milei’s approach – involving extensive privatisations and severe public spending cuts – had won plaudits from international lenders for helping to bring inflation in check. This plan shares similarities with the policies of his political hero Margaret Thatcher, who also saw inflation as a dragon to be defeated, no matter the cost.

However financial markets started to doubt in the government’s agenda in recent months following a shaky result in provincial elections and multiple corruption scandals. Solely large-scale economic support by the US has prevented what looked set to become a major currency crisis.

Inconsistencies

The 2016 referendum in 2016 likely contained some of the same logic, and its leader, Boris Johnson, swept away doubts regarding fiscal impacts with a bullish determination to implement public demand despite elite opposition.

The Reform leader to date committed few policies in writing aside from a call for mass deportations, which he subsequently seemed to adjust on the hoof. He aims to curb the central bank, possibly ditching its governor, Andrew Bailey, with scepticism toward traditional institutions as a central element of the populist package.

His fiscal plans seem in flux: concerned about facing criticism for proposing a Liz Truss-style splurge, he recently dropped a pledge to make large tax reductions. His second-in-command, the party chairman, said they would concentrate instead on reductions in government expenditure.

The opposition aims this stance will allow it to portray the populist as intending to reintroduce fiscal tightening – a point Rachel Reeves has emphasized often, 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. “The party is funded by affluent backers calling for lower taxes and deregulation, but also emphasizing the grievances of working people and the loss in manufacturing employment,” he explains. “There’s a tension here between wealthy supporters seeking radical free-market policies, and this narrative of restoring UK employment and industrial revival.”

Holding on to Power

In truth, research indicates populists of any stripe tend to fare well when faced with practical difficulties (though of course each charismatic individual claims to offer distinct solutions).

A recent paper in the American Economic Review analysed the performance of dozens of populist leaders, from 1900 to 2020. It found that on average, after 15 years, GDP per capita is often a tenth less in nations governed by populist rulers than in comparable countries with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually occur together under populist governments,” contend the paper’s authors.

A further interesting result from the study, however, is even with their negative impacts, these leaders are often effective at retaining office, lasting on average eight years, compared with shorter tenures for mainstream politicians.

In other words, it remains uncertain that even when their policies fail, such leaders face immediate consequences in elections. Similar to pledges made to regain sovereignty, their attraction extends past mundane economics.

But back in Buenos Aires, regardless of if Milei’s populist project collapses or is sustained by external aid, Argentina’s citizens are already bearing a heavy price.