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

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

Similar to her, economic experts from all backgrounds expect a depreciation of the Argentine peso once the election concludes. The president has imposed a cap on the currency to tame soaring inflation and currently it remains overvalued and reserves are depleted, causing the national economy sluggish as consumers opt for low-cost foreign goods.

Fertile Ground

Argentina is a very special case. The country has frequently been hit by debt defaults and economic crises and its voters have been susceptible over the years to left-leaning populist movements, in the form of the influential Peronist movement, and currently the president’s rightwing version.

The president epitomizes populist leadership: charismatic, unconventional, promising forceful policies to reclaim control of the economy from traditional elites for the benefit of the people.

These key characteristics are also seen in his ally in the United States, and by Nigel Farage, who styles himself as a beer-drinking champion of the common man despite being a public school-educated ex-finance professional.

Until recent months, Milei’s approach – including widespread sell-offs and severe budget reductions – had earned praise from international lenders for helping to bring price rises under control. This plan shares similarities with the policies of his political hero the former UK prime minister, who similarly viewed rising prices as a monster to be slain, regardless of the consequences.

However financial markets began losing confidence in Milei’s radical project lately after a shaky result in provincial elections and multiple graft allegations. Solely massive financial intervention from abroad has averted what looked set to become a full-blown currency crisis.

Contradictions

The vote for Brexit several years ago arguably had some of the same logic, and its leader, Boris Johnson, swept away doubts about economic detail with confident resolve to enact public demand despite elite opposition.

Farage has so far committed few policies to paper aside from a call for mass deportations, which he subsequently appeared to revise spontaneously. He wants to rein in the Bank of England, possibly ditching its governor, the incumbent, with distrust toward traditional institutions being a key part of the populist package.

His fiscal plans seem unsettled: concerned about being accused of planning a Liz Truss-style splurge, he recently abandoned a promise for large tax reductions. His Reform party deputy, the party chairman, said they would concentrate instead on reductions in government expenditure.

Labour hopes this position will allow it to portray the populist as planning to bring back fiscal tightening – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of boosting public investment.

An economics professor notes there exist inconsistencies in Farage’s economic programme, such as it is. “Reform is funded by very wealthy people demanding tax cuts and deregulation, yet also talking a lot about the grievances of ordinary workers and the loss in manufacturing employment,” he says. “There’s a tension there between wealthy supporters seeking Thatcherism on steroids, and this narrative of restoring UK employment and reindustrialisation.”

Holding on to Power

Realistically, research indicates populists of any stripe tend to fare well when faced with practical difficulties (though of course each charismatic individual claims to offer something unique).

Recent research in the American Economic Review analysed the performance of dozens of populist leaders, over more than a century. It found typically, over the long term, GDP per capita tends to be 10% lower in nations run by populist leaders than in comparable countries with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions usually go hand in hand under populist governments,” contend the researchers.

Another intriguing finding of the research, however, is that despite their economic costs, these leaders are often effective at holding on to power, remaining in power for a considerable time, compared with shorter tenures for mainstream politicians.

In other words, it remains uncertain that even when their plans crash, populists immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their appeal extends past everyday financial matters.

But returning to Buenos Aires, whether the government’s agenda collapses or is sustained through foreign assistance, the Argentine people are already bearing a heavy price.