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“Exchange, exchange.” Under the scorching heat, scores of money changers are hawking American currency on Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), they are thriving before the October 26 congressional elections in a nation accustomed to holding the greenback.

“The best time to buy is now,” states a arbolito, declining to give 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 once the voting concludes. President Javier Milei has imposed a cap on the peso to control triple-digit inflation and now it remains overvalued and reserves are depleted, causing the national economy sluggish as buyers turn to cheap imports.

Ideal Conditions

Argentina represents a unique situation. The country has been repeatedly hit by debt defaults and financial turmoil and the electorate have been susceptible over the years to leftwing populism, in the form of the influential Peronism, and now the president’s conservative populism.

The president epitomizes populist leadership: captivating, unconventional, vowing forceful measures to wrestle back control of the economy from the establishment for the benefit of the people.

These defining traits are also seen in his ally in the United States, and by Nigel Farage, who styles himself as a beer-drinking champion of the common man even though he is a privately educated ex-finance professional.

Until recent months, the president’s strategy – involving widespread sell-offs and severe budget reductions – had won plaudits from international lenders for helping to bring price rises under control. This plan has something in common with that of his political hero the former UK prime minister, who similarly viewed inflation as a dragon to be defeated, no matter the cost.

However investors started to doubt in Milei’s radical project in recent months after a shaky result in local polls and multiple corruption scandals. Solely massive financial intervention by the US has averted what looked set to become a major monetary collapse.

Inconsistencies

The 2016 referendum 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 the “will of the people” in the face of the establishment’s horror.

The Reform leader to date outlined limited plans in writing aside from a call for large-scale removals, which he subsequently appeared to revise on the hoof. He wants to curb the Bank of England, perhaps even ditching its governor, Andrew Bailey, with scepticism toward traditional institutions being a key part of the populist package.

His fiscal plans seem in flux: wary of facing criticism for proposing a Liz Truss-style splurge, he lately abandoned a pledge to make significant tax reductions. His second-in-command, Richard Tice, stated they would focus instead on public spending cuts.

The opposition aims this stance will allow it to portray the populist as intending to reintroduce austerity – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of increasing public investment.

An economics professor notes there are contradictions within the populist platform, such as it is. “Reform is funded by affluent backers calling for tax cuts and reduced rules, but also talking a lot about the grievances of working people and the loss of industrial jobs,” he explains. “There is a conflict there between rich backers seeking Thatcherism on steroids, and this story of bringing back British jobs and industrial revival.”

Holding on to Power

Realistically, the evidence suggests neither left nor right populists often perform poorly when confronting real-world challenges (though of course each charismatic individual promises distinct solutions).

Recent research in the American Economic Review analysed the performance of dozens of populist leaders, over more than a century. The study revealed that on average, over the long term, gross domestic product per head tends to be 10% lower in countries governed by populist rulers compared to similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance usually occur together under populist governments,” contend the paper’s authors.

A further interesting result of the research, though, is despite their economic costs, populist figures tend to be good at retaining office, lasting on average eight years, versus shorter tenures for their more moderate equivalents.

Put simply, it remains uncertain that even when their plans crash, populists face immediate consequences in elections. Similar to pledges made to regain sovereignty, their appeal reaches beyond mundane economics.

But back in Buenos Aires, whether the government’s agenda collapses or is sustained by external aid, Argentina’s citizens are already bearing a heavy price.