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“Cambio, cambio.” Beneath the scorching heat, scores of money changers are selling American currency on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving ahead of the 26 October congressional elections in a country long used to holding the greenback.

“The optimal moment to buy is currently,” says a arbolito, refusing to provide her identity. “[The dollar] went down a little but it is a fake-out – it’ll rise again.”

Like her, economists across the spectrum anticipate a depreciation of the Argentine peso after the election concludes. The president has placed a limit on the currency to control triple-digit inflation and currently it is overvalued and foreign reserves are exhausted, leaving the national economy stagnant as buyers turn to cheap imports.

Ideal Conditions

Argentina is a very special case. The country has frequently been hit by sovereign defaults and economic crises and the electorate have been receptive over the years to left-leaning populist movements, in the form of the powerful Peronist movement, and now the president’s conservative populism.

The president is a textbook populist: captivating, unconventional, vowing forceful measures to reclaim command of the economy from the establishment for the benefit of the people.

These defining traits are shared by his political partner in the United States, and by the UK politician, who presents himself as a pint-swilling champion of the common man even though he is a privately educated former stockbroker.

Until recent months, the president’s strategy – involving extensive privatisations and deep public spending cuts – had earned praise from the IMF for helping to bring inflation under control. The programme shares similarities with that of Milei’s idol the former UK prime minister, who similarly viewed rising prices as a dragon to be slain, no matter the cost.

But investors started to doubt in the government’s agenda lately following a poor performance in local polls and multiple graft allegations. Only large-scale economic support by the US has averted what seemed destined to be a major currency crisis.

Inconsistencies

The vote for Brexit several years ago arguably had some of the same logic, and its leader, the former prime minister, swept away concerns regarding fiscal impacts with confident resolve to implement public demand despite the establishment’s horror.

The Reform leader to date outlined limited plans in writing except for proposals for large-scale removals, which he subsequently appeared to revise spontaneously. He wants to curb the central bank, possibly ditching its governor, Andrew Bailey, with distrust of a stodgy establishment as a central element of the populist package.

His tax and spending policies appear to be in flux: wary of facing criticism for proposing reckless spending, he recently abandoned a pledge to make significant tax reductions. His Reform party deputy, the party chairman, stated they would focus instead on public spending cuts.

The opposition aims this position will enable it to depict the populist as planning to reintroduce fiscal tightening – a point the chancellor has emphasized often, contrasting it with her approach of increasing government spending.

Jo Michell notes there are contradictions within the populist platform, such as it is. “The party is funded by affluent backers calling for lower taxes and reduced rules, but also emphasizing the grievances of ordinary workers and the decline in manufacturing employment,” he says. “There is a conflict there among wealthy supporters seeking Thatcherism on steroids, and this story of bringing back UK employment and industrial revival.”

Holding on to Power

In truth, research suggests populists of any stripe often perform poorly when confronting practical difficulties (although every populist leader promises distinct solutions).

Recent research in the American Economic Review examined the outcomes of dozens of populist leaders, over more than a century. It found typically, after 15 years, GDP per capita tends to be a tenth less in nations governed by populist rulers than in similar economies with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions typically occur together with populist rule,” contend the researchers.

A further interesting result of the research, though, is despite their economic costs, these leaders tend to be good at retaining office, remaining in power for a considerable time, compared with four for mainstream politicians.

Put simply, it remains uncertain whether even if their policies fail, populists immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their attraction reaches beyond everyday financial matters.

Yet back in Buenos Aires, whether the government’s agenda collapses or is sustained by external aid, Argentina’s citizens are already bearing a heavy price.