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“Cambio, cambio.” Beneath the scorching heat, scores of currency traders are hawking US dollars on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the 26 October congressional elections in a country accustomed to saving in the US dollar.

“The best time for purchasing is now,” says one arbolito, refusing to provide her identity. “[The dollar] went down a little but it’s deceptive – it will rebound.”

Like her, economic experts across the spectrum expect a depreciation of the national currency once the voting is over. The president has imposed a cap on the currency to control triple-digit inflation and now it remains artificially high and reserves are exhausted, causing Argentina’s economy stagnant 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 its voters have been susceptible over the years to leftwing populism, in the form of the influential Peronist movement, and now the president’s conservative populism.

Milei is a textbook populist: captivating, iconoclastic, vowing muscular policies to wrestle back command of the economy from the establishment for the benefit of ordinary citizens.

These key characteristics are shared by his ally in the United States, and by Nigel Farage, who styles himself as a beer-drinking champion of the common man despite being a privately educated ex-finance professional.

Until recent months, the president’s strategy – involving extensive privatisations and deep public spending cuts – had won plaudits from international lenders for helping to control price rises in check. The programme has something in common with that of Milei’s idol the former UK prime minister, who also saw rising prices as a dragon 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 corruption scandals. Only large-scale financial intervention from abroad has averted what looked set to become a major currency crisis.

Inconsistencies

The vote for Brexit several years ago likely contained similar reasoning, and its leader, the former prime minister, dismissed doubts regarding fiscal impacts with confident resolve to enact public demand in the face of the establishment’s horror.

The Reform leader has so far outlined limited plans to paper except for proposals for large-scale removals, that he later seemed to adjust on the hoof. He aims to rein in the central bank, perhaps even ditching its governor, Andrew Bailey, with scepticism toward traditional institutions as a central element of the populist package.

His tax and spending policies seem unsettled: wary of being accused of proposing reckless spending, he recently abandoned a pledge to make significant tax cuts. His second-in-command, the party chairman, stated they would concentrate instead on public spending cuts.

Labour aims this stance will allow it to depict the populist as intending to reintroduce austerity – an argument the chancellor has made repeatedly, contrasting it with her strategy of boosting government spending.

An economics professor notes there are contradictions within the populist platform, such as it is. “The party are bankrolled by very wealthy people calling for tax cuts and deregulation, yet also emphasizing the grievances of ordinary workers and the loss in manufacturing employment,” he explains. “There is a conflict here between wealthy supporters seeking radical free-market policies, and this story of bringing back British jobs and industrial revival.”

Maintaining Control

In truth, the evidence indicates neither left nor right populists tend to fare well when faced with real-world challenges (although each charismatic individual claims to offer something unique).

Recent research in the American Economic Review examined the performance of dozens of populist leaders, over more than a century. It found typically, over the long term, gross domestic product per head tends to be a tenth less in countries governed by populist leaders than in comparable countries under conventional leadership.

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

A further interesting result from the study, however, is despite their economic costs, these leaders tend to be good 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 policies fail, populists immediately pay the price in elections. Similar to pledges made to regain sovereignty, their attraction extends past mundane economics.

Yet returning to Buenos Aires, regardless of if the government’s agenda fails or is kept on life support through foreign assistance, the Argentine people have already paid a heavy price.