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“Cambio, cambio.” Under the scorching heat, scores of money changers are hawking American currency along Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming ahead of the October 26 midterm elections in a nation long used to holding the US dollar.

“The optimal moment to buy is now,” says a arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it’s deceptive – it’ll rise again.”

Similar to her, economic experts across the spectrum anticipate a depreciation of the Argentine peso after the election is over. The president has imposed a cap on the peso to control triple-digit inflation and currently it remains overvalued and foreign reserves are exhausted, causing the national economy stagnant as buyers turn to low-cost foreign goods.

Fertile Ground

The nation is a very special case. Argentina has been repeatedly hit by debt defaults and financial turmoil and its voters have been susceptible for decades to left-leaning populist movements, such as the influential Peronist movement, and now the president’s rightwing version.

The president epitomizes populist leadership: captivating, unconventional, promising forceful policies to reclaim control of economic management from traditional elites for the benefit of ordinary citizens.

These key characteristics are also seen in his ally in the United States, and by Nigel Farage, who presents himself as a pint-swilling champion of the common man despite being a public school-educated former stockbroker.

Until recent months, Milei’s approach – involving widespread sell-offs and severe budget reductions – had earned praise from the IMF for helping to bring inflation in check. The programme shares similarities 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.

However financial markets started to doubt in the government’s agenda in recent months following a poor performance in provincial elections and multiple corruption scandals. Only large-scale financial intervention by the US has averted what looked set to become a full-blown monetary collapse.

Inconsistencies

The 2016 referendum in 2016 arguably had similar reasoning, and its leader, the former prime minister, swept away concerns regarding fiscal impacts with a bullish determination to implement public demand despite elite opposition.

The Reform leader to date committed few policies in writing aside from proposals for large-scale removals, which he subsequently appeared to revise on the hoof. He wants to rein in the Bank of England, possibly replacing its head, Andrew Bailey, with scepticism toward traditional institutions being a key part of the populist package.

His tax and spending policies appear to be in flux: concerned about facing criticism for proposing reckless spending, he lately abandoned a pledge for significant tax cuts. His Reform party deputy, the party chairman, stated they would concentrate instead on public spending cuts.

Labour hopes this stance will allow it to portray the populist as planning to reintroduce austerity – a point the chancellor has emphasized often, comparing it unfavorably to her approach of increasing public investment.

Jo Michell says there are contradictions within the populist platform, such as it is. “The party is funded by affluent backers calling for lower taxes and deregulation, but also talking a lot about the grievances of ordinary workers and the loss of industrial jobs,” he explains. “There’s a tension there between rich backers who want Thatcherism on steroids, and this narrative of restoring UK employment and industrial revival.”

Maintaining Control

Realistically, research suggests populists of any stripe often perform poorly when faced with real-world challenges (though of course every populist leader promises something unique).

A recent paper from a leading journal examined the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, over the long term, gross domestic product per head tends to be a tenth less in countries governed by populist leaders than in comparable countries under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions typically go hand in hand under populist governments,” argue the paper’s authors.

A further interesting result from the study, however, is even with their negative impacts, these leaders tend to be good at retaining office, lasting on average a considerable time, compared with shorter tenures for mainstream politicians.

Put simply, it remains uncertain whether even if their plans crash, such leaders face immediate consequences in elections. Similar to pledges made to “take back control”, their attraction extends past mundane economics.

Yet back in Buenos Aires, regardless of if Milei’s populist project collapses or is sustained through foreign assistance, Argentina’s citizens have already paid a heavy price.