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“Cambio, cambio.” Beneath the blazing sun, dozens of currency traders are selling American currency on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the October 26 midterm elections in a country long used to saving in the greenback.

“The optimal moment to buy is now,” says a arbolito, refusing to provide her name. “[The dollar] went down a little but it is a fake-out – it’ll rise again.”

Similar to her, economists from all backgrounds anticipate a devaluation of the Argentine peso after the voting is over. President Javier Milei has placed a limit on the peso to tame triple-digit price increases and currently it remains artificially high and foreign reserves are exhausted, causing the national economy sluggish as buyers turn to low-cost foreign goods.

Fertile Ground

Argentina represents a unique situation. Argentina has frequently been hit by sovereign defaults and economic crises and its voters have been susceptible over the years to leftwing populism, such as the powerful Peronism, and currently the president’s rightwing version.

The president is a textbook populist: charismatic, iconoclastic, promising forceful policies to wrestle back control of economic management from traditional elites for the benefit of ordinary citizens.

These key characteristics are also seen in his ally to the north, and by the UK politician, who styles himself as a pint-swilling people’s champion even though he is a privately educated former stockbroker.

Up until lately, Milei’s approach – involving extensive privatisations and deep budget reductions – had won plaudits from the IMF for contributing to control inflation under control. The programme shares similarities with that of Milei’s idol the former UK prime minister, who similarly viewed rising prices as a monster to be defeated, regardless of the consequences.

However investors started to doubt in the government’s agenda lately following a shaky result in provincial elections and a series of corruption scandals. Only large-scale economic support by the US has prevented what seemed destined to be a major currency crisis.

Contradictions

The 2016 referendum several years ago likely contained some of the same logic, and its figurehead, Boris Johnson, dismissed doubts about economic detail with confident resolve to implement the “will of the people” despite elite opposition.

The Reform leader has so far committed few policies in writing aside from a call for large-scale removals, that he later appeared to revise on the hoof. He wants to curb the central bank, possibly replacing its head, the incumbent, with distrust of a stodgy establishment being a key part of populist rhetoric.

His fiscal plans seem unsettled: wary of facing criticism for proposing reckless spending, he lately dropped a pledge to make significant tax cuts. His Reform party deputy, Richard Tice, said they would concentrate instead on reductions in government expenditure.

The opposition aims this position will enable it to portray the populist as intending to bring back austerity – an argument Rachel Reeves has made repeatedly, contrasting it with her approach of boosting public investment.

Jo Michell notes there are contradictions within the populist platform, such as it is. “The party is funded by affluent backers demanding lower taxes and reduced rules, yet also talking a lot about the complaints of working people and the decline of industrial jobs,” he says. “There’s a tension here between wealthy supporters seeking Thatcherism on steroids, and this story of bringing back British jobs and industrial revival.”

Maintaining Control

Realistically, research suggests neither left nor right populists often perform poorly when faced with real-world challenges (although each charismatic individual claims to offer something unique).

A recent paper from a leading journal examined the performance of dozens of populist leaders, over more than a century. The study revealed typically, after 15 years, GDP per capita tends to be 10% lower in countries governed by populist leaders compared to similar economies with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the decay of governance usually go hand in hand with populist rule,” argue the researchers.

A further interesting result of the research, though, is even with their negative impacts, populist figures tend to be good at retaining office, lasting on average eight years, compared with shorter tenures for mainstream politicians.

Put simply, it remains uncertain that even when their plans crash, populists face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond everyday financial matters.

Yet back in Buenos Aires, whether the government’s agenda fails or is kept on life support through foreign assistance, the Argentine people have already paid a heavy price.