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“Cambio, cambio.” Under the scorching heat, dozens of money changers are selling American currency along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), they are thriving ahead of the 26 October congressional elections in a country accustomed to holding the US dollar.

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

Similar to her, economic experts from all backgrounds anticipate a depreciation of the Argentine peso after the voting concludes. President Javier Milei has placed a cap on the peso to tame soaring price increases and currently it remains overvalued and reserves are depleted, leaving Argentina’s economy sluggish as buyers opt for cheap imports.

Ideal Conditions

The nation represents a unique situation. The country has frequently been racked by sovereign defaults and economic crises and the electorate have been susceptible over the years to leftwing populism, in the form of the influential Peronism, and currently Milei’s rightwing version.

The president epitomizes populist leadership: charismatic, iconoclastic, promising forceful measures to reclaim command of economic management from the establishment for the benefit of ordinary citizens.

These defining traits are also seen in his political partner to the north, as well as Nigel Farage, who styles himself as a pint-swilling champion of the common man despite being a public school-educated former stockbroker.

Up until lately, Milei’s approach – including extensive privatisations and severe budget reductions – had earned praise from the IMF for contributing to bring inflation under control. The programme has something in common with the policies of Milei’s idol the former UK prime minister, who also saw rising prices as a monster to be slain, regardless of the consequences.

But financial markets began losing confidence in Milei’s radical project in recent months following a shaky result in local polls and a series of corruption scandals. Solely massive economic support by the US has prevented what seemed destined to be a major currency crisis.

Inconsistencies

The vote for Brexit several years ago arguably had some of the same logic, 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.

Farage to date committed few policies in writing except for proposals for large-scale removals, that he later seemed to adjust on the hoof. He aims to curb the central bank, possibly replacing its head, Andrew Bailey, with distrust toward traditional institutions as a central element of the populist package.

His fiscal plans seem in flux: concerned about being accused of proposing a Liz Truss-style splurge, he lately abandoned a pledge for large tax reductions. His Reform party deputy, the party chairman, said they would focus instead on reductions in government expenditure.

The opposition hopes this position will allow it to portray the populist as planning to reintroduce fiscal tightening – a point the chancellor has emphasized often, comparing it unfavorably to her approach of boosting public investment.

An economics professor notes there are contradictions in Farage’s economic programme, as it stands. “Reform are bankrolled by affluent backers calling for tax cuts and reduced rules, but also talking a lot about the grievances of ordinary workers and the decline of industrial jobs,” he says. “There’s a tension there between rich backers seeking radical free-market policies, and this story of bringing back British jobs and industrial revival.”

Holding on to Power

Realistically, research suggests populists of any stripe often perform poorly when faced with practical difficulties (though of course every populist leader claims to offer something unique).

A recent paper in the American Economic Review analysed the outcomes of dozens of populist leaders, over more than a century. The study revealed that on average, over the long term, GDP per capita is often 10% lower in countries run by populist leaders compared to comparable countries with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the decay of governance typically occur together with populist rule,” contend the researchers.

Another intriguing finding from the study, though, is that despite their economic costs, populist figures are often effective at holding on to power, lasting on average a considerable time, compared with four for their more moderate equivalents.

Put simply, it remains uncertain whether even if their plans crash, such leaders face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their attraction reaches beyond everyday financial matters.

But back in Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support through foreign assistance, Argentina’s citizens have already paid a heavy price.