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“Cambio, cambio.” Under the blazing sun, dozens of currency traders are selling American currency along Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the 26 October congressional elections in a nation accustomed to holding the US dollar.

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

Similar to her, economists across the spectrum expect a depreciation of the national currency after the election is over. President Javier Milei has imposed a limit on the currency to tame triple-digit inflation and now it remains artificially high and reserves are depleted, causing the national economy sluggish as buyers turn to cheap imports.

Ideal Conditions

Argentina is a very special case. The country has been repeatedly racked by debt defaults and financial turmoil and its voters have been susceptible over the years to leftwing populism, in the form of the influential Peronist movement, and currently Milei’s conservative populism.

The president is a textbook populist: captivating, iconoclastic, vowing muscular measures to wrestle back command of the economy from traditional elites on behalf of the people.

These key characteristics are shared by 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 privately educated former stockbroker.

Until recent months, Milei’s approach – involving widespread sell-offs and severe public spending cuts – had won plaudits from international lenders for helping to bring inflation in check. The programme shares similarities with the policies of Milei’s idol Margaret Thatcher, who similarly viewed rising prices as a monster to be defeated, regardless of the consequences.

But investors started to doubt in Milei’s radical project lately following a shaky result in provincial elections and a series of corruption scandals. Solely large-scale financial intervention by the US has averted what seemed destined to be a major monetary collapse.

Inconsistencies

The 2016 referendum in 2016 arguably had some of the same logic, and its leader, Boris Johnson, swept away doubts regarding fiscal impacts with a bullish determination to enact the “will of the people” despite the establishment’s horror.

The Reform leader has so far committed few policies to paper except for proposals for large-scale removals, which he subsequently appeared to revise on the hoof. He aims to curb the central bank, perhaps even replacing its head, the incumbent, with scepticism of a stodgy establishment being a key part of populist rhetoric.

His tax and spending policies appear to be unsettled: concerned about facing criticism for proposing a Liz Truss-style splurge, he recently abandoned a pledge for significant tax cuts. His Reform party deputy, the party chairman, stated they would concentrate instead on reductions in government expenditure.

Labour aims this position will allow it to portray the populist as planning to reintroduce austerity – an argument the chancellor has made repeatedly, contrasting it with her strategy of increasing public investment.

An economics professor says there are contradictions within the populist platform, as it stands. “The party are bankrolled by affluent backers calling for tax cuts and deregulation, yet also talking a lot about the complaints of ordinary workers and the loss in manufacturing employment,” he says. “There is a conflict there among wealthy supporters seeking Thatcherism on steroids, and this story of restoring British jobs and industrial revival.”

Maintaining Control

Realistically, research suggests neither left nor right populists often perform poorly when confronting practical difficulties (although each charismatic individual claims to offer distinct solutions).

Recent research in the American Economic Review examined the outcomes of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, over the long term, GDP per capita is often a tenth less in nations governed by populist leaders compared to similar economies with more mainstream regimes.

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

A further interesting result of the research, though, is even with their negative impacts, these leaders tend to be good at retaining office, remaining in power for eight years, versus four for mainstream politicians.

In other words, it is not clear whether even if their policies fail, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to “take back control”, their appeal extends past mundane economics.

Yet returning to Buenos Aires, regardless of if the government’s agenda fails or is sustained by external aid, the Argentine people are already bearing a heavy price.