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“Cambio, cambio.” Beneath the scorching heat, scores of currency traders are hawking US dollars on Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), they are thriving ahead of the 26 October congressional elections in a country accustomed to holding the greenback.

“The best time to buy is now,” says a arbolito, declining to give her identity. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Like her, economists from all backgrounds anticipate a depreciation of the national currency once the election concludes. President Javier Milei has imposed a limit on the peso to tame triple-digit price increases and now it remains artificially high and foreign reserves are exhausted, causing the national economy stagnant as buyers turn to cheap imports.

Fertile Ground

Argentina represents a unique situation. Argentina has frequently been hit by sovereign defaults and economic crises and its voters have been susceptible for decades to left-leaning populist movements, in the form of the influential Peronist movement, and currently the president’s rightwing version.

Milei epitomizes populist leadership: charismatic, unconventional, promising forceful policies to reclaim command of economic management from the establishment on behalf of the people.

These key characteristics are also seen in his ally in the United States, as well as Nigel Farage, who styles himself as a pint-swilling champion of the common man even though he is a public school-educated former stockbroker.

Until recent months, the president’s strategy – involving widespread sell-offs and deep public spending cuts – had won plaudits from the IMF for helping to bring price rises in check. The programme shares similarities with that of Milei’s idol the former UK prime minister, who also saw inflation as a monster to be defeated, regardless of the consequences.

But investors started to doubt in Milei’s radical project in recent months following a poor performance in provincial elections and a series of graft allegations. Solely massive financial intervention from abroad has prevented what seemed destined to be a major monetary collapse.

Inconsistencies

The 2016 referendum several years ago arguably had similar reasoning, and its figurehead, the former prime minister, swept away concerns about economic detail with a bullish determination to implement public demand in the face of elite opposition.

The Reform leader to date committed few policies to paper except for proposals for mass deportations, which he subsequently appeared to revise spontaneously. He aims to curb the Bank of England, possibly ditching its governor, Andrew Bailey, with distrust toward traditional institutions as a central element of populist rhetoric.

His tax and spending policies appear to be in flux: concerned about being accused of proposing reckless spending, he recently abandoned a promise for significant tax cuts. His second-in-command, Richard Tice, stated they would focus instead on reductions in government expenditure.

The opposition aims this stance will enable it to depict the populist as planning to reintroduce austerity – an argument the chancellor has emphasized often, comparing it unfavorably to her approach of increasing public investment.

Jo Michell says there exist inconsistencies within the populist platform, such as it is. “Reform is funded by very wealthy people demanding tax cuts and deregulation, yet also emphasizing the complaints of ordinary workers and the decline of industrial jobs,” he says. “There’s a tension there among rich backers who want radical free-market policies, and this story of bringing back British jobs and reindustrialisation.”

Maintaining Control

Realistically, research indicates neither left nor right populists often perform poorly when confronting practical difficulties (though of course each charismatic individual promises distinct solutions).

A recent paper from a leading journal analysed the performance of dozens of populist leaders, over more than a century. It found that on average, after 15 years, GDP per capita tends to be a tenth less in countries governed by populist rulers compared to similar economies with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the decay of governance typically occur together with populist rule,” contend the paper’s authors.

Another intriguing finding from the study, however, is despite their economic costs, populist figures tend to be good at retaining office, lasting on average eight years, compared with shorter tenures for their more moderate equivalents.

In other words, it remains uncertain whether even if their plans crash, populists immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their attraction reaches beyond mundane economics.

Yet returning to Buenos Aires, whether Milei’s populist project fails or is sustained by external aid, the Argentine people have already paid significant costs.