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“Cambio, cambio.” Under the blazing sun, dozens of currency traders are hawking US dollars along Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the 26 October congressional elections in a country long used to holding the US dollar.

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

Similar to her, economic experts across the spectrum anticipate a devaluation of the national currency once the voting is over. President Javier Milei has placed a cap on the peso to control soaring price increases and currently it is artificially high and reserves are depleted, causing the national economy stagnant as buyers opt for cheap imports.

Ideal Conditions

Argentina represents a unique situation. Argentina has frequently been hit by sovereign defaults and economic crises and the electorate have been susceptible for decades to leftwing populism, such as the powerful Peronist movement, and now the president’s rightwing version.

Milei epitomizes populist leadership: charismatic, iconoclastic, promising forceful policies to reclaim command of economic management from traditional elites for the benefit of ordinary citizens.

These defining traits are also seen in his ally to the north, as well as the UK politician, who styles himself as a beer-drinking people’s champion despite being a public school-educated former stockbroker.

Until recent months, the president’s strategy – including extensive privatisations and severe public spending cuts – had won plaudits from international lenders for helping to control inflation in check. The programme shares similarities with that of Milei’s idol Margaret Thatcher, who also saw inflation as a monster to be defeated, no matter the cost.

However financial markets began losing confidence in the government’s agenda in recent months after a poor performance in provincial elections and multiple graft allegations. Solely large-scale economic support from abroad has prevented what looked set to become a full-blown monetary collapse.

Contradictions

The 2016 referendum in 2016 arguably had some of the same logic, and its figurehead, the former prime minister, dismissed concerns 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 outlined limited plans 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, perhaps even replacing its head, Andrew Bailey, with scepticism of a stodgy establishment as a central element of the populist package.

His tax and spending policies seem unsettled: wary of being accused of planning a Liz Truss-style splurge, he recently abandoned a pledge to make significant tax reductions. His Reform party deputy, Richard Tice, said they would concentrate instead on reductions in government expenditure.

The opposition aims this position will allow it to depict the populist as planning to bring back austerity – a point Rachel Reeves has emphasized often, contrasting it with her strategy of boosting public investment.

Jo Michell says there are contradictions within the populist platform, as it stands. “Reform is funded by affluent backers demanding tax cuts and deregulation, yet also talking a lot about the grievances of working people and the decline in manufacturing employment,” he says. “There’s a tension there between rich backers seeking Thatcherism on steroids, and this narrative of bringing back British jobs and reindustrialisation.”

Holding on to Power

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

Recent research in the American Economic Review examined the performance of dozens of populist leaders, over more than a century. It found that on average, over the long term, gross domestic product per head tends to be 10% lower in nations run by populist rulers than in comparable countries with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the erosion of institutions typically go hand in hand under populist governments,” argue the researchers.

A further interesting result from the study, however, is even with their negative impacts, populist figures tend to be good at retaining office, lasting on average eight years, versus shorter tenures for their more moderate equivalents.

In other words, it is not clear that even when their policies fail, such leaders immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their appeal reaches beyond mundane economics.

But returning to Buenos Aires, whether Milei’s populist project collapses or is sustained through foreign assistance, Argentina’s citizens are already bearing a heavy price.