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“Exchange, exchange.” Beneath the blazing sun, scores of money changers are offering US dollars on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the 26 October midterm elections in a country long used to saving in the US dollar.

“The optimal moment for purchasing is currently,” says one arbolito, refusing to provide her name. “[The dollar] went down slightly but it is a fake-out – it’ll rise again.”

Similar to her, economists from all backgrounds expect a devaluation of the Argentine peso after the election is over. The president has placed a limit on the currency to control soaring inflation and now it is overvalued and reserves are depleted, leaving Argentina’s economy sluggish as buyers turn to cheap imports.

Ideal Conditions

The nation represents a unique situation. The country has been repeatedly racked by debt defaults and financial turmoil and its voters have been susceptible for decades to left-leaning populist movements, in the form of the powerful Peronist movement, and currently Milei’s rightwing version.

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

These key characteristics are shared by his political partner in the United States, as well as the UK politician, who presents himself as a beer-drinking champion of the common man despite being a privately educated ex-finance professional.

Up until lately, the president’s strategy – including widespread sell-offs and deep public spending cuts – had won plaudits from international lenders for helping to control inflation under control. The programme has something in common with the policies of his political hero the former UK prime minister, who also saw rising prices as a monster to be defeated, regardless of the consequences.

But investors started to doubt in the government’s agenda lately after a shaky result in provincial elections and a series of graft allegations. Only large-scale economic support by the US has prevented what looked set to become a major currency crisis.

Contradictions

The 2016 referendum in 2016 likely contained similar reasoning, and its leader, the former prime minister, swept away doubts regarding fiscal impacts with a bullish determination to enact the “will of the people” in the face of the establishment’s horror.

The Reform leader has so far outlined limited plans in writing except for a call for large-scale removals, that he later seemed to adjust spontaneously. He wants to curb the central bank, possibly replacing its head, Andrew Bailey, with distrust toward traditional institutions being a key part of the populist package.

His tax and spending policies appear to be in flux: concerned about facing criticism for proposing reckless spending, he recently dropped a promise for significant tax cuts. His Reform party deputy, Richard Tice, stated they would focus instead on public spending cuts.

Labour aims this stance will allow it to portray the populist as intending to reintroduce austerity – a point the chancellor has emphasized often, comparing it unfavorably to her approach of boosting public investment.

An economics professor says there exist inconsistencies within the populist platform, such as it is. “Reform are bankrolled by affluent backers demanding tax cuts and deregulation, but also emphasizing the grievances of working people and the loss in manufacturing employment,” he explains. “There’s a tension there between wealthy supporters who want radical free-market policies, and this story of restoring UK employment and industrial revival.”

Maintaining Control

In truth, the evidence suggests neither left nor right populists tend to fare well when faced with practical difficulties (though of course each charismatic individual claims to offer distinct solutions).

A recent paper in the American Economic Review analysed the outcomes of dozens of populist leaders, over more than a century. It found that on average, over the long term, gross domestic product per head is often 10% lower in nations run by populist leaders compared to comparable countries under conventional leadership.

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

A further interesting result of the research, though, is that even with their negative impacts, these leaders are often effective at retaining office, remaining in power for a considerable time, compared with shorter tenures for mainstream politicians.

Put simply, it remains uncertain whether even if their policies fail, such leaders immediately pay the price in elections. Similar to pledges made to regain sovereignty, their appeal reaches beyond mundane economics.

But back in Buenos Aires, whether the government’s agenda fails or is sustained through foreign assistance, the Argentine people are already bearing a heavy price.