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“Cambio, cambio.” Beneath the blazing sun, dozens of money changers are hawking American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), they are thriving before the 26 October congressional elections in a country long used to saving in the greenback.

“The optimal moment for purchasing is now,” states a arbolito, declining to give her identity. “[The dollar] dropped a little but it is a fake-out – it will rebound.”

Similar to her, economic experts across the spectrum anticipate a depreciation of the national currency after the election concludes. The president has imposed a cap on the currency to tame soaring inflation and currently it remains overvalued and reserves are depleted, leaving the national economy stagnant as consumers turn to low-cost foreign goods.

Fertile Ground

The nation represents a unique situation. Argentina has been repeatedly hit by sovereign defaults and economic crises and its voters have been receptive over the years to left-leaning populist movements, such as the influential Peronist movement, and currently the president’s conservative populism.

The president is a textbook populist: charismatic, iconoclastic, promising forceful policies to wrestle back command of the economy from the establishment for the benefit of ordinary citizens.

These defining traits are also seen in his ally in the United States, and by Nigel Farage, who presents himself as a pint-swilling people’s champion despite being a privately educated ex-finance professional.

Up until lately, the president’s strategy – including extensive privatisations and deep public spending cuts – had earned praise from international lenders for helping to bring inflation in check. This plan shares similarities with the policies of his political hero the former UK prime minister, who also saw inflation as a monster to be defeated, regardless of the consequences.

However financial markets started to doubt in the government’s agenda in recent months following a poor performance in provincial elections and a series of corruption scandals. Only massive economic support from abroad has averted what seemed destined to be a full-blown monetary collapse.

Contradictions

The vote for Brexit in 2016 arguably had similar reasoning, and its figurehead, the former prime minister, swept away concerns regarding fiscal impacts with a bullish determination to implement public demand in the face of elite opposition.

The Reform leader to date committed few policies to paper aside from a call for mass deportations, which he subsequently appeared to revise on the hoof. He aims to curb the Bank of England, perhaps even replacing its head, the incumbent, with scepticism toward traditional institutions as a central element of populist rhetoric.

His fiscal plans seem unsettled: wary of being accused of planning reckless spending, he lately abandoned a pledge to make large tax cuts. His second-in-command, the party chairman, stated they would focus instead on reductions in government expenditure.

Labour aims this position will enable it to depict Farage as intending to reintroduce fiscal tightening – an argument the chancellor has made repeatedly, contrasting it with her strategy of boosting public investment.

An economics professor notes there are contradictions within the populist platform, as it stands. “The party is funded by affluent backers demanding tax cuts and reduced rules, but also emphasizing the complaints of working people and the loss in manufacturing employment,” he says. “There’s a tension there between wealthy supporters who want Thatcherism on steroids, and this narrative of bringing back British jobs and industrial revival.”

Maintaining Control

In truth, research indicates populists of any stripe tend to fare well when faced with practical difficulties (though of course every populist leader claims to offer distinct solutions).

Recent research in the American Economic Review examined the performance of dozens of populist leaders, over more than a century. The study revealed typically, after 15 years, GDP per capita tends to be 10% lower in countries governed by populist rulers compared to comparable countries 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 from the study, though, is despite their economic costs, these leaders are often effective at retaining office, remaining in power for a considerable time, compared with four for their more moderate equivalents.

In other words, it is not clear whether even if their policies fail, such leaders immediately pay the price in elections. Like the Brexiters’ promise to regain sovereignty, their attraction extends past mundane economics.

But back in Buenos Aires, whether Milei’s populist project fails or is kept on life support through foreign assistance, Argentina’s citizens are already bearing a heavy price.