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“Cambio, cambio.” Beneath the scorching heat, scores of money changers are hawking American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), they are thriving ahead of the October 26 congressional elections in a country long used to holding the US dollar.

“The optimal moment for purchasing is currently,” says a arbolito, refusing to provide her identity. “[The dollar] went down slightly but it’s deceptive – it will rebound.”

Like her, economists from all backgrounds expect a devaluation of the Argentine peso once the election concludes. President Javier Milei has imposed a limit on the currency to tame soaring price increases and currently it is overvalued and reserves are exhausted, leaving the national economy stagnant as consumers turn to low-cost foreign goods.

Ideal Conditions

The nation represents a unique situation. The country has been repeatedly hit by debt defaults and financial turmoil and the electorate have been susceptible over the years to left-leaning populist movements, in the form of the influential Peronism, and now Milei’s conservative populism.

Milei is a textbook populist: captivating, iconoclastic, promising muscular measures to wrestle back control of the economy from the establishment on behalf of the people.

These key characteristics are shared by his political partner in the United States, and by Nigel Farage, who styles himself as a beer-drinking champion of the common man even though he is a privately educated former stockbroker.

Up until lately, the president’s strategy – including extensive privatisations and deep public spending cuts – had won plaudits from the IMF for helping to control price rises in check. The programme has something in common with the policies of his political hero the former UK prime minister, who similarly viewed rising prices as a dragon to be defeated, regardless of the consequences.

However investors started to doubt in Milei’s radical project lately after a poor performance in provincial elections and multiple graft allegations. Solely large-scale economic support from abroad has averted what looked set to become a full-blown monetary collapse.

Contradictions

The 2016 referendum in 2016 arguably had some of the same logic, and its figurehead, Boris Johnson, dismissed doubts regarding fiscal impacts with confident resolve to implement public demand despite elite opposition.

The Reform leader has so far committed few policies in writing except for a call for large-scale removals, which he subsequently seemed to adjust spontaneously. He aims to rein in the central bank, perhaps even replacing its head, the incumbent, with scepticism toward traditional institutions as a central element of populist rhetoric.

His fiscal plans appear to be unsettled: wary of facing criticism for proposing reckless spending, he lately abandoned a pledge to make significant tax cuts. His Reform party deputy, Richard Tice, said they would focus instead on public spending cuts.

Labour aims this position will enable it to portray Farage as intending to reintroduce fiscal tightening – a point Rachel Reeves has emphasized often, contrasting it with her approach of boosting public investment.

An economics professor notes there are contradictions within the populist platform, such as it is. “The party are bankrolled by very wealthy people calling for lower taxes and reduced rules, yet also emphasizing the grievances of ordinary workers and the loss in manufacturing employment,” he explains. “There is a conflict there among rich backers who want Thatcherism on steroids, and this narrative of bringing back British jobs and reindustrialisation.”

Holding on to Power

Realistically, the evidence suggests populists of any stripe often perform poorly when faced with real-world challenges (although every populist leader claims to offer distinct solutions).

Recent research in the American Economic Review examined the performance of 51 populist presidents and prime ministers, over more than a century. The study revealed typically, over the long term, GDP per capita tends to be a tenth less in nations run by populist leaders than in similar economies under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions typically go hand in hand with populist rule,” contend the researchers.

Another intriguing finding of the research, however, is that even with their negative impacts, these leaders are often effective at retaining office, lasting on average a considerable time, versus four for their more moderate equivalents.

Put simply, it remains uncertain that even when their policies fail, such leaders immediately pay the price in elections. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond mundane economics.

Yet back in Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support through foreign assistance, Argentina’s citizens are already bearing significant costs.