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“Exchange, exchange.” Beneath the scorching heat, dozens of money changers are selling American currency on 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 greenback.

“The optimal moment to buy is now,” says one arbolito, declining to give her identity. “[The dollar] dropped slightly but it is a fake-out – it will rebound.”

Similar to her, economic experts across the spectrum anticipate a depreciation of the national currency after the voting concludes. The president has placed a cap on the currency to tame soaring inflation and now it remains overvalued and reserves are depleted, causing Argentina’s economy stagnant as buyers turn to cheap imports.

Ideal Conditions

The nation is a very special case. The country has been repeatedly racked by debt defaults and financial turmoil and the electorate have been susceptible for decades to left-leaning populist movements, such as the powerful Peronism, and now Milei’s rightwing version.

Milei epitomizes populist leadership: captivating, unconventional, vowing muscular policies to reclaim control of the economy from the establishment on behalf of the people.

These defining traits are also seen in his ally to the north, and by the UK politician, who styles himself as a beer-drinking champion of the common man despite being a privately educated ex-finance professional.

Until recent months, Milei’s approach – including widespread sell-offs and deep public spending cuts – had won plaudits from international lenders for helping to control price rises under control. This plan has something in common with the policies of his political hero the former UK prime minister, who similarly viewed rising prices as a monster to be defeated, no matter the cost.

But investors started to doubt in the government’s agenda lately following a shaky result in provincial elections and multiple corruption scandals. Solely large-scale economic support by the US has averted what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The 2016 referendum several years ago likely contained some of the same logic, and its figurehead, the former prime minister, dismissed concerns about economic detail with confident resolve to implement the “will of the people” despite the establishment’s horror.

The Reform leader has so far outlined limited plans in writing aside from a call for large-scale removals, that he later appeared to revise spontaneously. He wants to curb the Bank of England, possibly replacing its head, the incumbent, with distrust toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies seem in flux: concerned about facing criticism for planning a Liz Truss-style splurge, he lately dropped a promise to make significant tax reductions. His second-in-command, Richard Tice, said they would focus instead on public spending cuts.

The opposition hopes this position will enable it to depict the populist as intending to bring back austerity – a point the chancellor has emphasized often, contrasting it with her strategy of boosting public investment.

An economics professor notes there exist inconsistencies within the populist platform, as it stands. “The party is funded by very wealthy people demanding tax cuts and deregulation, yet also emphasizing the grievances of ordinary workers and the loss of industrial jobs,” he explains. “There is a conflict there between wealthy supporters who want Thatcherism on steroids, and this narrative of bringing back UK employment and reindustrialisation.”

Holding on to Power

Realistically, the evidence suggests populists of any stripe tend to fare well when confronting practical difficulties (though of course every populist leader claims to offer distinct solutions).

A recent paper from a leading journal examined the outcomes of dozens of populist leaders, over more than a century. The study revealed typically, over the long term, gross domestic product per head tends to be 10% lower in countries run by populist rulers than in similar economies under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the decay of governance typically go hand in hand under populist governments,” argue the paper’s authors.

A further interesting result from the study, though, is that even with their negative impacts, populist figures are often effective at holding on to power, remaining in power for a considerable time, compared with four for mainstream politicians.

In other words, it remains uncertain whether even if their plans crash, populists face immediate consequences in elections. Like the Brexiters’ promise to “take back control”, their appeal extends past mundane economics.

Yet back in Buenos Aires, whether the government’s agenda collapses or is kept on life support through foreign assistance, Argentina’s citizens have already paid a heavy price.