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“Exchange, exchange.” Beneath the blazing sun, dozens of money changers are hawking US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving ahead of the October 26 congressional elections in a nation long used to holding the US dollar.

“The best time to buy is now,” states one arbolito, declining to give her name. “[The dollar] went down slightly but it’s deceptive – it’ll rise again.”

Similar to her, economists across the spectrum expect a depreciation of the national currency once the election concludes. The president has imposed a cap on the peso to tame soaring price increases and currently it is overvalued and reserves are exhausted, causing the national economy sluggish as consumers opt for low-cost foreign goods.

Fertile Ground

Argentina is a very special case. Argentina has been repeatedly hit by sovereign defaults and economic crises and the electorate have been receptive over the years to leftwing populism, in the form of the influential Peronism, and currently the president’s rightwing version.

Milei is a textbook populist: charismatic, iconoclastic, vowing muscular policies to reclaim control of economic management from the establishment for the benefit of ordinary citizens.

These key characteristics are also seen in his political partner to the north, as well as Nigel Farage, who presents himself as a pint-swilling people’s champion despite being a public school-educated ex-finance professional.

Up until lately, the president’s strategy – including extensive privatisations and severe public spending cuts – had won plaudits from international lenders for helping to bring inflation under control. This plan shares similarities with that of his political hero Margaret Thatcher, who similarly viewed inflation as a monster to be slain, regardless of the consequences.

But financial markets began losing confidence in the government’s agenda lately following a shaky result in provincial elections and multiple graft allegations. Only massive financial intervention by the US has prevented what looked set to become a major currency crisis.

Inconsistencies

The 2016 referendum several years ago arguably had similar reasoning, and its leader, the former prime minister, dismissed concerns regarding fiscal impacts with a bullish determination to enact the “will of the people” despite elite opposition.

The Reform leader to date outlined limited plans in writing aside from proposals for large-scale removals, which he subsequently seemed to adjust on the hoof. He wants to curb the central bank, perhaps even ditching its governor, the incumbent, with scepticism toward traditional institutions being a key part of populist rhetoric.

His tax and spending policies appear to be unsettled: concerned about being accused of proposing reckless spending, he recently abandoned a pledge to make large tax reductions. His Reform party deputy, the party chairman, said they would focus instead on public spending cuts.

The opposition hopes this position will enable it to portray the populist as planning to bring back austerity – a point the chancellor has made repeatedly, comparing it unfavorably to her approach of boosting public investment.

Jo Michell notes there exist inconsistencies within the populist platform, as it stands. “The party is funded by affluent backers demanding lower taxes and deregulation, but also talking a lot about the grievances of working people and the decline in manufacturing employment,” he says. “There is a conflict there among rich backers seeking Thatcherism on steroids, and this narrative of bringing back UK employment and reindustrialisation.”

Maintaining Control

In truth, the evidence suggests populists of any stripe tend to fare well when confronting practical difficulties (though of course each charismatic individual promises something unique).

A recent paper from a leading journal examined the outcomes of dozens of populist leaders, over more than a century. The study revealed that on average, after 15 years, GDP per capita is often 10% lower in nations governed by populist rulers than in comparable countries under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions usually occur together under populist governments,” argue the researchers.

A further interesting result from the study, though, is that even with their negative impacts, populist figures are often effective at retaining office, lasting on average eight years, versus four for mainstream politicians.

In other words, it remains uncertain whether even if their policies fail, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond everyday financial matters.

Yet returning to Buenos Aires, whether Milei’s populist project collapses or is kept on life support through foreign assistance, Argentina’s citizens are already bearing a heavy price.