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“Cambio, cambio.” Beneath the blazing sun, dozens of money changers are selling US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), their business is booming before the October 26 congressional elections in a nation accustomed to holding the US dollar.

“The best time for purchasing is currently,” states a arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it’s deceptive – it’ll rise again.”

Similar to her, economists across the spectrum anticipate a depreciation of the Argentine peso after the voting is over. The president has imposed a limit on the peso to tame soaring price increases and now it remains overvalued and foreign reserves are depleted, leaving Argentina’s economy stagnant as consumers turn to low-cost foreign goods.

Ideal Conditions

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

Milei epitomizes populist leadership: captivating, iconoclastic, vowing forceful measures to wrestle back control of economic management from the establishment for the benefit of ordinary citizens.

These defining traits are also seen in his political partner in the United States, and by the UK politician, who presents himself as a beer-drinking champion of the common man even though he is a public school-educated ex-finance professional.

Up until lately, Milei’s approach – including extensive privatisations and deep public spending cuts – had earned praise from international lenders for contributing to bring price rises under control. The programme 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, no matter the cost.

However financial markets began losing confidence in the government’s agenda in recent months after a poor performance in provincial elections and multiple corruption scandals. Only massive economic support by the US has prevented what seemed destined to be a full-blown monetary collapse.

Contradictions

The 2016 referendum in 2016 likely contained some of the same logic, and its leader, the former prime minister, dismissed concerns regarding fiscal impacts with confident resolve to enact public demand despite the establishment’s horror.

The Reform leader to date committed few policies in writing aside from proposals for mass deportations, that he later seemed to adjust spontaneously. He aims to curb the Bank of England, possibly ditching its governor, Andrew Bailey, with scepticism toward traditional institutions being a key part of the populist package.

His fiscal plans seem in flux: wary of being accused of planning reckless spending, he recently abandoned a pledge for significant tax cuts. His second-in-command, the party chairman, said they would focus instead on public spending cuts.

Labour hopes this position will allow it to portray the populist as planning to reintroduce austerity – an argument Rachel Reeves has emphasized often, contrasting it with her approach of boosting public investment.

An economics professor says there are contradictions within the populist platform, such as it is. “The party are bankrolled by affluent backers calling for lower taxes and reduced rules, but also talking a lot about the complaints of working people and the loss in manufacturing employment,” he says. “There is a conflict here between wealthy supporters seeking radical free-market policies, and this narrative of restoring UK employment and industrial revival.”

Holding on to Power

Realistically, the evidence suggests populists of any stripe tend to fare well when confronting real-world challenges (although each charismatic individual promises distinct solutions).

Recent research from a leading journal analysed the outcomes 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 is often a tenth less in nations run by populist rulers than in similar economies with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the erosion of institutions typically go hand in hand under populist governments,” argue the researchers.

A further interesting result from the study, though, 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 is not clear whether even if their plans crash, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their attraction reaches beyond mundane economics.

But returning to Buenos Aires, whether the government’s agenda collapses or is sustained through foreign assistance, the Argentine people have already paid significant costs.