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“Cambio, cambio.” Under the scorching heat, scores of money changers are selling 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 nation accustomed to holding the US dollar.

“The optimal moment to buy is now,” says a arbolito, declining to give her name. “[The dollar] dropped a little but it is a fake-out – it’ll rise again.”

Like her, economic experts from all backgrounds expect a depreciation of the national currency after the election is over. The president has placed a limit on the peso to control triple-digit inflation and now it remains overvalued and foreign reserves are depleted, causing the national economy stagnant as consumers opt for low-cost foreign goods.

Fertile Ground

The nation is a very special case. The country has frequently been racked by debt defaults and economic crises and the electorate have been susceptible for decades to leftwing populism, in the form of the powerful Peronism, and currently Milei’s rightwing version.

Milei is a textbook populist: charismatic, unconventional, vowing forceful policies to wrestle back control of the economy from the establishment for the benefit of the people.

These defining traits are also seen in his political partner to the north, and by the UK politician, who presents himself as a pint-swilling champion of the common man even though he is a privately educated ex-finance professional.

Until recent months, Milei’s approach – including extensive privatisations and deep public spending cuts – had won plaudits from the IMF for contributing to control inflation under control. This plan shares similarities with that of Milei’s idol the former UK prime minister, who similarly viewed rising prices as a dragon to be defeated, no matter the cost.

But investors started to doubt in the government’s agenda lately following a shaky result in local polls and a series of corruption scandals. Only massive economic support by the US has prevented what looked set to become a major monetary collapse.

Contradictions

The 2016 referendum several years ago likely contained similar reasoning, and its figurehead, Boris Johnson, dismissed concerns about economic detail with a bullish determination to implement public demand despite the establishment’s horror.

The Reform leader has so far outlined limited plans to paper except for a call for mass deportations, that he later appeared to revise spontaneously. He wants to curb the central bank, possibly replacing its head, the incumbent, with scepticism of a stodgy establishment as a central element of the populist package.

His tax and spending policies seem in flux: wary of facing criticism for planning reckless spending, he lately abandoned a pledge for large tax reductions. His Reform party deputy, the party chairman, stated they would focus instead on reductions in government expenditure.

Labour hopes this position will allow it to depict the populist as planning to bring back fiscal tightening – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of increasing government spending.

An economics professor 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 emphasizing the complaints of working people and the decline in manufacturing employment,” he explains. “There’s a tension there among rich backers who want Thatcherism on steroids, and this narrative of bringing back UK employment and reindustrialisation.”

Maintaining Control

Realistically, the evidence indicates neither left nor right populists tend to fare well when confronting practical difficulties (though of course each charismatic individual claims to offer distinct solutions).

A recent paper from a leading journal analysed the performance of 51 populist presidents and prime ministers, over more than a century. It found typically, after 15 years, GDP per capita is often 10% lower in countries governed by populist leaders compared to comparable countries under conventional leadership.

“Financial decline, weakening economic fundamentals and the erosion of institutions typically occur together with populist rule,” contend the researchers.

Another intriguing finding of the research, however, is despite their economic costs, these leaders are often effective at retaining office, lasting on average a considerable time, versus four for their more moderate equivalents.

In other words, it remains uncertain that even when their plans crash, populists face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their appeal extends past everyday financial matters.

Yet returning to Buenos Aires, whether the government’s agenda fails or is kept on life support through foreign assistance, the Argentine people have already paid significant costs.