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“Cambio, cambio.” Beneath the scorching heat, scores of money changers are offering American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving ahead of the October 26 congressional elections in a country accustomed to saving in the greenback.

“The optimal moment to buy is now,” says a arbolito, declining to give her identity. “[The dollar] dropped a little but it is a fake-out – it will rebound.”

Like her, economic experts from all backgrounds expect a devaluation of the Argentine peso once the election is over. President Javier Milei has placed a limit on the peso to control soaring price increases and currently it remains overvalued and foreign reserves are exhausted, causing Argentina’s economy stagnant as buyers turn to low-cost foreign goods.

Fertile Ground

The nation is a very special case. Argentina has been repeatedly hit by debt defaults and economic crises and its voters have been receptive over the years to left-leaning populist movements, in the form of the powerful Peronist movement, and now Milei’s conservative populism.

The president epitomizes populist leadership: captivating, unconventional, promising muscular policies to wrestle back command of economic management from traditional elites on behalf of the people.

These key characteristics are also seen in his political partner in the United States, as well as Nigel Farage, who styles himself as a pint-swilling people’s champion even though he is a public school-educated ex-finance professional.

Up until lately, Milei’s approach – involving widespread sell-offs and deep public spending cuts – had earned praise from the IMF for helping to control price rises in check. The programme shares similarities with the policies of Milei’s idol Margaret Thatcher, who also saw rising prices as a dragon to be defeated, no matter the cost.

However financial markets began losing confidence in the government’s agenda in recent months following a poor performance in local polls and multiple corruption scandals. Solely massive financial intervention from abroad has prevented what seemed destined to be a major monetary collapse.

Contradictions

The 2016 referendum in 2016 likely contained some of the same logic, and its figurehead, the former prime minister, swept away doubts regarding fiscal impacts with confident resolve to implement the “will of the people” despite the establishment’s horror.

The Reform leader has so far committed few policies in writing aside from a call for mass deportations, which he subsequently appeared to revise on the hoof. He wants to curb the Bank of England, perhaps even ditching its governor, the incumbent, with distrust of a stodgy establishment as a central element of the populist package.

His fiscal plans appear to be unsettled: wary of facing criticism for planning a Liz Truss-style splurge, he recently dropped a pledge to make large tax reductions. His second-in-command, Richard Tice, stated they would focus instead on reductions in government expenditure.

Labour aims this position will allow it to depict Farage as intending to reintroduce austerity – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of boosting public investment.

Jo Michell says there exist inconsistencies within the populist platform, such as it is. “Reform are bankrolled by very wealthy people calling for lower taxes and reduced rules, yet also talking a lot about the grievances of ordinary workers and the loss in manufacturing employment,” he says. “There is a conflict here between wealthy supporters seeking Thatcherism on steroids, and this narrative of restoring UK employment and reindustrialisation.”

Holding on to Power

Realistically, the evidence indicates populists of any stripe often perform poorly when faced with practical difficulties (although each charismatic individual claims to offer something unique).

Recent research in the American Economic Review analysed the performance of 51 populist presidents and prime ministers, over more than a century. The study revealed that on average, after 15 years, gross domestic product per head is often 10% lower in countries governed by populist leaders than in comparable countries with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the decay of governance usually occur together under populist governments,” argue 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, lasting on average eight years, compared with shorter tenures for mainstream politicians.

In other words, it remains uncertain whether even if their plans crash, such leaders face immediate consequences at the ballot box. Similar to pledges made to “take back control”, their appeal reaches beyond mundane economics.

Yet returning to Buenos Aires, regardless of if Milei’s populist project fails or is sustained through foreign assistance, Argentina’s citizens are already bearing a heavy price.