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“Exchange, exchange.” Beneath the scorching heat, scores of money changers are hawking American currency along Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the 26 October midterm elections in a country accustomed to holding the US dollar.

“The optimal moment to buy is currently,” states a arbolito, declining to give her identity. “[The dollar] dropped slightly but it’s deceptive – it’ll rise again.”

Like her, economists across the spectrum anticipate a devaluation of the Argentine peso once the election is over. The president has imposed a cap on the peso to tame soaring price increases and now it is artificially high and foreign reserves are depleted, causing Argentina’s economy sluggish as buyers opt for cheap imports.

Ideal Conditions

Argentina is a very special case. The country has frequently been racked by sovereign defaults and economic crises and its voters have been susceptible over the years to left-leaning populist movements, such as the influential Peronism, and now the president’s rightwing version.

The president epitomizes populist leadership: charismatic, iconoclastic, vowing forceful policies to wrestle back command of the economy from traditional elites on behalf of ordinary citizens.

These defining traits are also seen in his political partner to the north, as well as the UK politician, who presents himself as a beer-drinking people’s champion despite being a privately educated former stockbroker.

Up until lately, the president’s strategy – including widespread sell-offs and severe budget reductions – had won plaudits from international lenders for helping to bring price rises under control. The programme has something in common with the policies of Milei’s idol Margaret Thatcher, who also saw inflation as a dragon to be slain, regardless of the consequences.

But financial markets began losing confidence in Milei’s radical project lately after a poor performance in local polls and multiple corruption scandals. Solely large-scale economic support from abroad has prevented what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The 2016 referendum in 2016 arguably had similar reasoning, and its leader, the former prime minister, dismissed doubts regarding fiscal impacts with confident resolve to implement the “will of the people” despite the establishment’s horror.

The Reform leader to date outlined limited plans in writing except for proposals for large-scale removals, that he later seemed to adjust on the hoof. He aims to rein in the Bank of England, possibly ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment being a key part of the populist package.

His tax and spending policies appear to be unsettled: wary of being accused of planning a Liz Truss-style splurge, he lately abandoned a pledge for large tax reductions. His Reform party deputy, the party chairman, stated they would focus 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 the chancellor has made repeatedly, comparing it unfavorably to her approach of increasing government spending.

An economics professor says there are contradictions within the populist platform, such as it is. “Reform is funded by affluent backers demanding tax cuts and reduced rules, but also emphasizing the grievances of ordinary workers and the loss of industrial jobs,” he says. “There is a conflict here among wealthy supporters seeking Thatcherism on steroids, and this story of bringing back UK employment and industrial revival.”

Holding on to Power

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

Recent research from a leading journal analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed typically, over the long term, gross domestic product per head tends to be a tenth less in nations run by populist leaders than in similar economies with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the decay of governance typically occur together under populist governments,” argue the paper’s authors.

A further interesting result from the study, however, is that despite their economic costs, these leaders tend to be good at retaining office, remaining in power for eight years, compared with shorter tenures for their more moderate equivalents.

Put simply, it remains uncertain that even when their plans crash, populists immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their appeal extends past mundane economics.

But returning to Buenos Aires, whether Milei’s populist project fails or is kept on life support through foreign assistance, Argentina’s citizens have already paid significant costs.