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“Cambio, cambio.” Under the blazing sun, dozens of money changers are hawking American currency along Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), they are thriving ahead of the October 26 congressional elections in a nation long used to holding the US dollar.

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

Similar to her, economists from all backgrounds expect a devaluation of the Argentine peso once the voting concludes. President Javier Milei has imposed a cap on the peso to control triple-digit price increases and now it is artificially high and foreign reserves are exhausted, leaving the national economy stagnant as buyers opt for low-cost foreign goods.

Fertile Ground

Argentina is a very special case. The country has frequently been racked by sovereign defaults and financial turmoil and the electorate have been receptive over the years to leftwing populism, in the form of the influential Peronist movement, and currently Milei’s conservative populism.

The president epitomizes populist leadership: captivating, iconoclastic, promising muscular policies to reclaim command of the economy from the establishment for the benefit of the people.

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

Until recent months, Milei’s approach – including widespread sell-offs and severe public spending cuts – had won plaudits from the IMF for helping to bring inflation in check. This plan shares similarities with that of his political hero the former UK prime minister, who similarly viewed inflation as a monster to be defeated, no matter the cost.

But financial markets started to doubt in Milei’s radical project in recent months after a poor performance in provincial elections and a series of corruption scandals. Solely large-scale financial intervention by the US has averted what seemed destined to be a full-blown currency crisis.

Contradictions

The 2016 referendum several years ago likely contained some of the same logic, and its leader, the former prime minister, swept away concerns regarding fiscal impacts with confident resolve to implement public demand despite elite opposition.

The Reform leader has so far outlined limited plans in writing except for a call for large-scale removals, which he subsequently seemed to adjust spontaneously. He aims to curb the Bank of England, possibly replacing its head, Andrew Bailey, with distrust toward traditional institutions as a central element of the populist package.

His fiscal plans seem unsettled: concerned about facing criticism for proposing a Liz Truss-style splurge, he lately dropped a promise to make large tax reductions. His Reform party deputy, Richard Tice, stated they would focus instead on public spending cuts.

The opposition aims this position will allow it to portray Farage as intending to bring back fiscal tightening – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of increasing public investment.

Jo Michell says there are contradictions within the populist platform, such as it is. “Reform is funded by affluent backers calling for tax cuts and deregulation, yet also talking a lot about the grievances of ordinary workers and the decline in manufacturing employment,” he says. “There is a conflict there among wealthy supporters who want radical free-market policies, and this story of bringing back UK employment and reindustrialisation.”

Maintaining Control

Realistically, research indicates neither left nor right populists tend to fare well when faced with practical difficulties (though of course each charismatic individual promises something unique).

A recent paper in the American Economic Review analysed 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 compared to comparable countries with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the decay of governance typically occur together with populist rule,” contend the researchers.

A further interesting result of the research, however, is that even with their negative impacts, populist figures are often effective at holding on to power, remaining in power for a considerable time, versus four for mainstream politicians.

Put simply, it remains uncertain whether even if their policies fail, populists face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their appeal reaches beyond mundane economics.

Yet returning to Buenos Aires, regardless of if the government’s agenda collapses or is kept on life support through foreign assistance, the Argentine people have already paid significant costs.