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“Cambio, cambio.” Under the blazing sun, dozens of currency traders are offering American currency along Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the October 26 midterm elections in a nation accustomed to saving in the greenback.

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

Similar to her, economists across the spectrum anticipate a depreciation of the national currency after the election is over. The president has imposed a cap on the currency to tame soaring price increases and currently it remains overvalued and reserves are exhausted, leaving the national economy sluggish as consumers turn to low-cost foreign goods.

Fertile Ground

Argentina represents a unique situation. Argentina has been repeatedly hit by sovereign defaults and financial turmoil and its voters have been susceptible over the years to left-leaning populist movements, in the form of the influential Peronist movement, and currently the president’s rightwing version.

The president is a textbook populist: charismatic, unconventional, vowing forceful policies to wrestle back command of the economy from traditional elites for the benefit of ordinary citizens.

These key characteristics are also seen in his political partner in the United States, as well as Nigel Farage, who styles himself as a pint-swilling people’s champion despite being a public school-educated former stockbroker.

Until recent months, the president’s strategy – including extensive privatisations and severe budget reductions – had won plaudits from international lenders for contributing to bring price rises in check. This plan has something in common with the policies of his political hero Margaret Thatcher, who similarly viewed inflation as a monster to be slain, no matter the cost.

But financial markets started to doubt in Milei’s radical project in recent months after a shaky result in provincial elections and multiple corruption scandals. Solely large-scale financial intervention by the US has prevented what seemed destined to be a major currency crisis.

Contradictions

The 2016 referendum in 2016 likely contained similar reasoning, and its leader, the former prime minister, swept away concerns about economic detail with confident resolve to implement public demand despite elite opposition.

The Reform leader to date committed few policies to paper except for proposals for mass deportations, that he later appeared to revise spontaneously. He aims to curb the central bank, perhaps even ditching its governor, the incumbent, with scepticism toward traditional institutions being a key part of populist rhetoric.

His fiscal plans appear to be unsettled: wary of facing criticism for planning reckless spending, he lately abandoned a promise for significant tax cuts. His second-in-command, the party chairman, stated they would focus instead on reductions in government expenditure.

The opposition hopes this position will enable it to depict Farage as intending to bring back austerity – a point the chancellor has emphasized often, contrasting it with her strategy of boosting government spending.

Jo Michell notes there are contradictions within the populist platform, such as it is. “The party are bankrolled by very wealthy people calling for lower taxes and reduced rules, yet also emphasizing the grievances of ordinary workers and the loss of industrial jobs,” he says. “There’s a tension there between wealthy supporters seeking Thatcherism on steroids, and this story of restoring UK employment and industrial revival.”

Holding on to Power

In truth, the evidence indicates neither left nor right populists 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 analysed the outcomes of dozens of populist leaders, over more than a century. It found that on average, over the long term, gross domestic product per head is often a tenth less in countries governed by populist rulers than in similar economies with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions typically go hand in hand under populist governments,” argue the researchers.

Another intriguing finding from the study, though, is that despite their economic costs, these leaders are often effective at retaining office, lasting on average eight years, compared with four for mainstream politicians.

In other words, it is not clear that even when their plans crash, populists face immediate consequences in elections. Similar to pledges made to “take back control”, their appeal extends past everyday financial matters.

But returning to Buenos Aires, whether Milei’s populist project collapses or is sustained by external aid, Argentina’s citizens have already paid a heavy price.