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“Cambio, cambio.” Beneath the scorching heat, scores of currency traders are selling American currency on Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the October 26 congressional elections in a country accustomed to saving in the US dollar.

“The optimal moment to buy is currently,” states a arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it is a fake-out – it will rebound.”

Similar to her, economists from all backgrounds expect a devaluation of the national currency after the voting concludes. The president has imposed a limit on the peso to control triple-digit price increases and currently it is overvalued and reserves are depleted, causing the national economy stagnant as consumers turn to low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. The country has frequently been hit by sovereign defaults and financial turmoil and its voters have been receptive over the years to left-leaning populist movements, in the form of the influential Peronist movement, and currently the president’s rightwing version.

Milei epitomizes populist leadership: captivating, unconventional, promising forceful measures to wrestle back control of economic management from the establishment on behalf of ordinary citizens.

These key characteristics are also seen in his political partner in the United States, as well as the UK politician, who presents himself as a beer-drinking people’s champion despite being a privately educated former stockbroker.

Until recent months, the president’s strategy – involving widespread sell-offs and severe public spending cuts – had earned praise from international lenders for helping to control inflation under control. This plan has something in common with the policies of Milei’s idol the former UK prime minister, who similarly viewed inflation as a dragon to be slain, no matter the cost.

But financial markets began losing confidence in the government’s agenda in recent months after a shaky result in local polls and a series of graft allegations. Only large-scale financial intervention by the US has averted what looked set to become a full-blown currency crisis.

Contradictions

The 2016 referendum several years ago likely contained similar reasoning, and its figurehead, the former prime minister, swept away doubts about economic detail with confident resolve to enact public demand in the face of elite opposition.

The Reform leader to date committed few policies in writing except for a call for mass deportations, which he subsequently appeared to revise spontaneously. He wants to rein in the central bank, perhaps even ditching its governor, the incumbent, with scepticism of a stodgy establishment being a key part of the populist package.

His tax and spending policies appear to be in flux: concerned about being accused of planning reckless spending, he lately dropped a promise for significant tax reductions. His Reform party deputy, Richard Tice, said they would concentrate instead on public spending cuts.

Labour hopes this stance will enable it to depict the populist as planning to bring back fiscal tightening – an argument the chancellor has made repeatedly, comparing it unfavorably to her approach of increasing public investment.

Jo Michell notes there exist inconsistencies within the populist platform, as it stands. “The party are bankrolled by affluent backers demanding 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 between wealthy supporters who want Thatcherism on steroids, and this story of restoring UK employment and industrial revival.”

Maintaining Control

Realistically, the evidence suggests populists of any stripe tend to fare well when confronting real-world challenges (although each charismatic individual 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 that on average, after 15 years, gross domestic product per head tends to be a tenth less in nations run by populist rulers than in comparable countries with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the decay of governance typically go hand in hand under populist governments,” argue the paper’s authors.

Another intriguing finding from the study, however, is even with their negative impacts, populist figures tend to be good at holding on to power, remaining in power for a considerable time, compared with shorter tenures for their more moderate equivalents.

In other words, it is not clear that even when their plans crash, populists immediately pay the price in elections. Like the Brexiters’ promise to “take back control”, their attraction extends past everyday financial matters.

Yet back in Buenos Aires, regardless of if Milei’s populist project collapses or is sustained through foreign assistance, the Argentine people are already bearing significant costs.