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“Cambio, cambio.” Beneath the scorching heat, dozens of money changers are offering American currency along Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving ahead of the October 26 congressional elections in a nation accustomed to holding the greenback.

“The optimal moment for purchasing is currently,” states a arbolito, refusing to provide her identity. “[The dollar] dropped a little but it is a fake-out – it will rebound.”

Like her, economic experts from all backgrounds expect a depreciation of the national currency once the voting is over. The president has placed a limit on the currency to tame triple-digit inflation and now it is overvalued and foreign reserves are depleted, leaving Argentina’s economy sluggish as consumers opt for cheap imports.

Fertile Ground

The nation represents a unique situation. The country has been repeatedly hit by debt defaults and financial turmoil and its voters have been susceptible for decades to left-leaning populist movements, such as the powerful Peronism, and currently the president’s conservative populism.

The president is a textbook populist: charismatic, unconventional, vowing muscular policies to wrestle back control of economic management from traditional elites on behalf of the people.

These key characteristics are also seen in his political partner to the north, and by the UK politician, who presents himself as a pint-swilling people’s champion even though he is a public school-educated ex-finance professional.

Up until lately, the president’s strategy – involving widespread sell-offs and deep public spending cuts – had earned praise from the IMF for contributing to bring price rises under control. This plan has something in common with the policies of his political hero Margaret Thatcher, who also saw inflation as a dragon to be slain, no matter the cost.

However financial markets began losing confidence in the government’s agenda lately following a shaky result in local polls and multiple corruption scandals. Solely large-scale economic support by the US has prevented what seemed destined to be a major currency crisis.

Contradictions

The vote for Brexit several years ago arguably had similar reasoning, and its figurehead, the former prime minister, swept away doubts regarding fiscal impacts with confident resolve to enact public demand despite the establishment’s horror.

Farage to date outlined limited plans in writing except for a call for large-scale removals, which he subsequently seemed to adjust spontaneously. He wants to curb the central bank, possibly ditching its governor, the incumbent, with distrust toward traditional institutions as a central element of populist rhetoric.

His fiscal plans appear to be unsettled: concerned about being accused of planning a Liz Truss-style splurge, he lately dropped a promise to make large tax reductions. His second-in-command, Richard Tice, said they would focus instead on public spending cuts.

The opposition hopes this stance will allow it to portray the populist as intending to bring back fiscal tightening – an argument the chancellor has emphasized often, comparing it unfavorably to her approach of boosting government spending.

An economics professor notes there are contradictions within the populist platform, as it stands. “Reform is funded by affluent backers calling for lower taxes and deregulation, yet also talking a lot about the grievances of ordinary workers and the loss of industrial jobs,” he says. “There’s a tension there between rich backers who want radical free-market policies, and this narrative of restoring UK employment and reindustrialisation.”

Maintaining Control

In truth, research indicates neither left nor right populists tend to fare well when confronting practical difficulties (though of course each charismatic individual promises something unique).

Recent research from a leading journal examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, after 15 years, gross domestic product per head is often a tenth less in nations run by populist leaders than in similar economies with more mainstream regimes.

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

A further interesting result from the study, however, is despite their economic costs, populist figures are often effective at retaining office, remaining in power for a considerable time, compared with four for their more moderate equivalents.

Put simply, it is not clear that even when their policies fail, populists immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their attraction extends past everyday financial matters.

But returning to Buenos Aires, whether Milei’s populist project fails or is kept on life support by external aid, Argentina’s citizens have already paid significant costs.