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“Cambio, cambio.” Under the blazing sun, scores of money changers are offering American currency on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the 26 October midterm elections in a country long used to holding the US dollar.

“The optimal moment to buy is now,” says one arbolito, declining to give her name. “[The dollar] went down a little but it’s deceptive – it’ll rise again.”

Like her, economic experts from all backgrounds anticipate a depreciation of the Argentine peso after the voting concludes. The president has imposed a cap on the currency to control soaring inflation and currently it is artificially high and foreign reserves are depleted, leaving the national economy sluggish as buyers turn to low-cost foreign goods.

Ideal Conditions

The nation is a very special case. Argentina has frequently been racked by debt defaults and financial turmoil and its voters have been receptive over the years to leftwing populism, such as the influential Peronism, and now Milei’s rightwing version.

Milei is a textbook populist: charismatic, iconoclastic, vowing forceful policies to wrestle back control of the economy from the establishment on behalf of ordinary citizens.

These defining traits are also seen in his political partner in the United States, as well as the UK politician, who presents himself as a pint-swilling people’s champion even though he is a privately educated former stockbroker.

Until recent months, the president’s strategy – involving extensive privatisations and severe budget reductions – had earned praise from international lenders for contributing to control inflation in check. The programme shares similarities with that of his political hero the former UK prime minister, who also saw rising prices as a dragon to be defeated, no matter the cost.

However investors started to doubt in Milei’s radical project in recent months following a poor performance in provincial elections and multiple graft allegations. Solely large-scale financial intervention by the US has prevented what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The 2016 referendum several years ago arguably had some of the same logic, and its figurehead, the former prime minister, swept away concerns about economic detail with confident resolve to implement public demand despite the establishment’s horror.

The Reform leader to date outlined limited plans in writing except for proposals for mass deportations, that he later appeared to revise spontaneously. He wants to curb the Bank of England, possibly replacing its head, the incumbent, with scepticism toward traditional institutions as a central element of populist rhetoric.

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

The opposition hopes this stance will allow it to portray the populist as planning to bring back fiscal tightening – a point Rachel Reeves has emphasized often, contrasting it with her approach of increasing government spending.

An economics professor says there are contradictions within the populist platform, such as it is. “The party are bankrolled by very wealthy people calling for tax cuts and reduced rules, yet also talking a lot about the grievances of working people and the loss in manufacturing employment,” he explains. “There’s a tension there among wealthy supporters who want Thatcherism on steroids, and this story of bringing back British jobs and industrial revival.”

Holding on to Power

In truth, the evidence indicates populists of any stripe often perform poorly when faced with real-world challenges (though of course each charismatic individual promises something unique).

A recent paper from a leading journal examined the performance of 51 populist presidents and prime ministers, over more than a century. The study revealed that on average, over the long term, GDP per capita tends to be 10% lower in countries run by populist rulers compared to similar economies with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance usually go hand in hand under populist governments,” argue the researchers.

Another intriguing finding of the research, however, is that even with their negative impacts, these leaders are often effective at holding on to power, remaining in power for a considerable time, versus four for mainstream politicians.

Put simply, it is not clear that even when their plans crash, populists face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their appeal extends past mundane economics.

Yet returning to Buenos Aires, regardless of if the government’s agenda collapses or is kept on life support through foreign assistance, Argentina’s citizens are already bearing significant costs.