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“Cambio, cambio.” Beneath the scorching heat, scores of money changers are hawking American currency on Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), they are thriving ahead of the October 26 midterm elections in a country long used to saving in the greenback.

“The best time for purchasing is currently,” says a arbolito, refusing to provide her identity. “[The dollar] went down slightly but it’s deceptive – it’ll rise again.”

Like her, economic experts across the spectrum expect a devaluation of the Argentine peso after the election concludes. The president has placed a cap on the currency to control soaring price increases and currently it is artificially high and foreign reserves are exhausted, leaving Argentina’s economy stagnant as buyers opt for cheap imports.

Ideal Conditions

Argentina is a very special case. The country has been repeatedly hit by sovereign defaults and economic crises and the electorate have been receptive for decades to leftwing populism, such as the influential Peronism, and currently the president’s rightwing version.

Milei epitomizes populist leadership: charismatic, unconventional, vowing muscular measures to reclaim command of economic management from traditional elites for the benefit of ordinary citizens.

These defining traits are shared by his political partner to the north, as well as Nigel Farage, who presents himself as a beer-drinking people’s champion despite being a public school-educated former stockbroker.

Until recent months, Milei’s approach – involving extensive privatisations and severe budget reductions – had earned praise from the IMF for contributing to bring inflation in check. This plan shares similarities with that of his political hero the former UK prime minister, who similarly viewed rising prices as a dragon to be slain, no matter the cost.

However investors began losing confidence in the government’s agenda in recent months after a shaky result in local polls and a series of corruption scandals. Only large-scale economic support from abroad has prevented what seemed destined to be a major currency crisis.

Inconsistencies

The 2016 referendum several years ago likely contained similar reasoning, and its leader, the former prime minister, swept away doubts regarding fiscal impacts with confident resolve to enact public demand despite elite opposition.

The Reform leader to date committed few policies to paper except for proposals for large-scale removals, that he later appeared to revise spontaneously. He wants to rein in the central bank, perhaps even ditching its governor, the incumbent, with distrust of a stodgy establishment as a central element of the populist package.

His tax and spending policies seem in flux: concerned about facing criticism for proposing a Liz Truss-style splurge, he recently abandoned a promise to make significant tax cuts. His Reform party deputy, the party chairman, stated they would concentrate instead on public spending cuts.

Labour hopes this stance will enable it to portray the populist as planning to bring back austerity – a point Rachel Reeves has emphasized often, contrasting it with her approach of increasing public investment.

An economics professor says there exist inconsistencies 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 complaints of working people and the loss in manufacturing employment,” he explains. “There’s a tension here among rich backers seeking radical free-market policies, and this story of restoring British jobs and reindustrialisation.”

Maintaining Control

Realistically, research indicates neither left nor right populists tend to fare well when confronting practical difficulties (though of course every populist leader promises distinct solutions).

A recent paper in the American Economic Review examined the outcomes of 51 populist presidents and prime ministers, over more than a century. It found typically, after 15 years, gross domestic product per head tends to be a tenth less in nations governed by populist leaders compared to similar economies under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the decay of governance usually go hand in hand under populist governments,” contend the researchers.

A further interesting result from the study, though, is that even with their negative impacts, these leaders are often effective at holding on to power, lasting on average a considerable time, versus four for mainstream politicians.

Put simply, it remains uncertain whether even if their policies fail, populists immediately pay the price in elections. Like the Brexiters’ promise to regain sovereignty, their attraction reaches beyond everyday financial matters.

But returning to Buenos Aires, regardless of if the government’s agenda collapses or is kept on life support through foreign assistance, the Argentine people have already paid significant costs.