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“Cambio, cambio.” Under the scorching heat, dozens of money changers are hawking American currency along Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the October 26 congressional elections in a nation accustomed to saving in the US dollar.

“The best time to buy is now,” says 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 from all backgrounds anticipate a depreciation of the national currency after the election is over. The president has imposed a limit on the currency to tame triple-digit price increases and now it is overvalued and foreign reserves are exhausted, leaving Argentina’s economy sluggish as consumers turn to cheap imports.

Ideal Conditions

Argentina is a very special case. The country has been repeatedly hit by sovereign defaults and financial turmoil and the electorate have been susceptible for decades to leftwing populism, such as the powerful Peronist movement, and currently the president’s conservative populism.

The president epitomizes populist leadership: captivating, unconventional, vowing forceful measures to reclaim command of economic management from traditional elites for the benefit of ordinary citizens.

These defining traits are also seen in his ally in the United States, and by the UK politician, who styles himself as a pint-swilling champion of the common man even though he is a privately educated former stockbroker.

Until recent months, the president’s strategy – including extensive privatisations and severe budget reductions – had earned praise from international lenders for contributing to bring price rises under control. This plan has something in common with the policies of Milei’s idol the former UK prime minister, who also saw inflation as a monster to be defeated, regardless of the consequences.

However investors started to doubt in the government’s agenda in recent months following a shaky result in provincial elections and a series of graft allegations. Solely massive financial intervention by the US has averted what seemed destined to be a full-blown monetary collapse.

Contradictions

The vote for Brexit several years ago arguably had similar reasoning, and its leader, Boris Johnson, dismissed doubts about economic detail with a bullish determination to enact public demand in the face of the establishment’s horror.

The Reform leader has so far committed few policies to paper except for proposals for mass deportations, which he subsequently appeared to revise on the hoof. He aims to curb the Bank of England, perhaps even ditching its governor, the incumbent, with scepticism toward traditional institutions being a key part of the populist package.

His fiscal plans appear to be in flux: concerned about being accused of planning a Liz Truss-style splurge, he recently abandoned a promise for large tax reductions. His Reform party deputy, the party chairman, stated they would concentrate instead on reductions in government expenditure.

The opposition aims this position will allow it to portray the populist as intending to bring back fiscal tightening – a point Rachel Reeves has emphasized often, comparing it unfavorably to her approach of boosting government spending.

Jo Michell notes there exist inconsistencies within the populist platform, such as it is. “The party is funded by very wealthy people calling for lower taxes and reduced rules, yet also emphasizing the complaints of working people and the loss of industrial jobs,” he says. “There’s a tension there among wealthy supporters who want Thatcherism on steroids, and this story of restoring British jobs and reindustrialisation.”

Holding on to Power

In truth, the evidence indicates neither left nor right populists tend to fare well when faced with practical difficulties (though of course each charismatic individual promises something unique).

A recent paper from a leading journal analysed the performance of dozens of populist leaders, from 1900 to 2020. It found that on average, over the long term, gross domestic product per head tends to be a tenth less in nations run by populist rulers compared to comparable countries under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the decay of governance typically occur together under populist governments,” contend the researchers.

Another intriguing finding from the study, however, is despite their economic costs, these leaders are often effective at holding on to power, remaining in power for eight years, versus shorter tenures for mainstream politicians.

In other words, it remains uncertain that even when their plans crash, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their attraction reaches beyond everyday financial matters.

Yet returning to Buenos Aires, whether the government’s agenda fails or is kept on life support through foreign assistance, the Argentine people are already bearing a heavy price.