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“Cambio, cambio.” Under the blazing sun, scores of money changers are offering American currency along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming before the October 26 congressional elections in a country accustomed to holding the US dollar.

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

Similar to her, economic experts from all backgrounds anticipate a devaluation of the Argentine peso once the election is over. The president has imposed a cap on the peso to tame soaring inflation and now it remains overvalued and reserves are depleted, leaving Argentina’s economy stagnant as consumers turn to low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. Argentina has been repeatedly hit by debt defaults and economic crises and its voters have been receptive for decades to left-leaning populist movements, such as the powerful Peronism, and currently Milei’s rightwing version.

Milei is a textbook populist: charismatic, iconoclastic, vowing forceful measures to reclaim control of economic management from the establishment on behalf of the people.

These defining traits are shared by his ally to the north, as well as the UK politician, who styles himself as a pint-swilling champion of the common man despite being a privately educated ex-finance professional.

Up until lately, Milei’s approach – involving 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 the former UK prime minister, who also saw rising prices as a dragon to be defeated, no matter the cost.

However financial markets began losing confidence in the government’s agenda lately after a shaky result in provincial elections and a series of corruption scandals. Solely large-scale financial intervention from abroad has prevented what looked set to become a major currency crisis.

Contradictions

The 2016 referendum in 2016 likely contained some of the same logic, and its leader, the former prime minister, dismissed doubts regarding fiscal impacts with a bullish determination to implement the “will of the people” in the face of elite opposition.

The Reform leader has so far outlined limited plans to paper aside from a call for mass deportations, that he later appeared to revise on the hoof. He wants to curb the Bank of England, possibly ditching its governor, the incumbent, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His tax and spending policies appear to be in flux: concerned about being accused of proposing a Liz Truss-style splurge, he recently dropped a pledge for large tax cuts. His Reform party deputy, Richard Tice, said they would focus instead on public spending cuts.

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

Jo Michell notes there exist inconsistencies within the populist platform, such as it is. “Reform is funded by affluent backers calling for tax cuts and deregulation, yet also emphasizing the grievances of ordinary workers and the loss of industrial jobs,” he says. “There’s a tension there among rich backers seeking radical free-market policies, and this narrative of bringing back UK employment and reindustrialisation.”

Holding on to Power

In truth, research suggests populists of any stripe tend to fare well when confronting real-world challenges (though of course every populist leader claims to offer distinct solutions).

A recent paper in the American Economic Review examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed typically, over the long term, gross domestic product per head tends to be a tenth less in nations run by populist leaders compared to similar economies with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions typically occur together under populist governments,” contend the researchers.

Another intriguing finding of the research, however, is despite their economic costs, these leaders tend to be good at retaining office, lasting on average a considerable time, compared with shorter tenures for their more moderate equivalents.

Put simply, it remains uncertain that even when their policies fail, populists face immediate consequences at the ballot box. Like the Brexiters’ promise to regain sovereignty, their attraction reaches beyond everyday financial matters.

Yet returning to Buenos Aires, regardless of if the government’s agenda fails or is kept on life support by external aid, the Argentine people have already paid a heavy price.