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“Exchange, exchange.” Under the blazing sun, dozens of money changers are selling US dollars on Florida Street, a bustling shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the October 26 congressional elections in a country long used to saving in the US dollar.

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

Like her, economists across the spectrum anticipate a depreciation of the national currency once the election concludes. President Javier Milei has imposed a cap on the currency to control soaring price increases and now it is overvalued and foreign reserves are exhausted, leaving Argentina’s economy sluggish as buyers turn to low-cost foreign goods.

Fertile Ground

The nation represents a unique situation. The country has frequently been racked by sovereign defaults and economic crises and its voters have been receptive over the years to leftwing populism, such as the influential Peronism, and now the president’s conservative populism.

Milei is a textbook populist: charismatic, iconoclastic, vowing muscular policies to wrestle back command of economic management from the establishment for the benefit of ordinary citizens.

These key characteristics are also seen in his ally to the north, as well as Nigel Farage, who presents himself as a beer-drinking champion of the common man despite being a public school-educated ex-finance professional.

Until recent months, 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. This plan shares similarities with the policies of Milei’s idol the former UK prime minister, who also saw rising prices as a dragon to be defeated, no matter the cost.

But financial markets started to doubt in Milei’s radical project lately following a shaky result in provincial elections and a series of corruption scandals. Solely large-scale financial intervention from abroad has prevented what looked set to become a full-blown monetary collapse.

Inconsistencies

The 2016 referendum several years ago likely contained some of the same logic, and its figurehead, the former prime minister, dismissed concerns regarding fiscal impacts with a bullish determination to enact public demand in the face of elite opposition.

The Reform leader to date committed few policies in writing aside from a call for mass deportations, that he later appeared to revise on the hoof. He wants to rein in the central bank, perhaps even replacing its head, the incumbent, with distrust toward traditional institutions as a central element of the populist package.

His fiscal plans appear to be unsettled: concerned about facing criticism for planning a Liz Truss-style splurge, he recently dropped a promise for significant tax cuts. His Reform party deputy, Richard Tice, stated they would focus instead on reductions in government expenditure.

Labour aims this stance will allow it to depict the populist as intending to reintroduce fiscal tightening – a point the chancellor has emphasized often, comparing it unfavorably to her strategy of boosting government spending.

An economics professor notes there exist inconsistencies in Farage’s economic programme, such as it is. “Reform is funded by affluent backers demanding lower taxes and deregulation, yet also emphasizing the grievances of working people and the loss of industrial jobs,” he says. “There’s a tension here among wealthy supporters who want Thatcherism on steroids, and this story of restoring British jobs and industrial revival.”

Holding on to Power

Realistically, the evidence suggests populists of any stripe often perform poorly when faced with practical difficulties (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, after 15 years, GDP per capita tends to be a tenth less in nations run by populist rulers than in comparable countries with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance typically go hand in hand under populist governments,” contend the researchers.

A further interesting result of the research, however, is despite their economic costs, populist figures are often effective at holding on to power, lasting on average a considerable time, compared with shorter tenures for mainstream politicians.

In other words, it is not clear that even when their policies fail, such leaders face immediate consequences in elections. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond everyday financial matters.

But returning to Buenos Aires, whether Milei’s populist project fails or is sustained by external aid, Argentina’s citizens are already bearing a heavy price.