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“Cambio, cambio.” Under the blazing sun, scores of money changers are selling US dollars on Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“little trees”), their business is booming before the October 26 congressional elections in a country long used to holding the US dollar.

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

Similar to her, economists from all backgrounds expect a depreciation of the national currency once the election is over. President Javier Milei has placed a cap on the currency to control soaring inflation and now it remains artificially high and foreign reserves are exhausted, causing the national economy stagnant as buyers turn to cheap imports.

Fertile Ground

Argentina represents a unique situation. The country has frequently been racked by debt defaults and financial turmoil and its voters have been receptive over the years to leftwing populism, in the form of the powerful Peronist movement, and now Milei’s conservative populism.

The president epitomizes populist leadership: captivating, iconoclastic, promising forceful policies to wrestle back command of the economy from traditional elites on behalf of the people.

These defining traits are also seen in his ally in the United States, as well as Nigel Farage, who styles himself as a pint-swilling people’s champion despite being a privately educated ex-finance professional.

Until recent months, the president’s strategy – involving widespread sell-offs and severe public spending cuts – had won plaudits from international lenders for contributing to control price rises in check. The programme has something in common with the policies of his political hero the former UK prime minister, who also saw inflation as a monster to be slain, regardless of the consequences.

However investors started to doubt in the government’s agenda in recent months after a poor performance in provincial elections and multiple corruption scandals. Solely large-scale economic support from abroad has prevented what looked set to become a full-blown monetary collapse.

Contradictions

The vote for Brexit in 2016 likely contained similar reasoning, and its figurehead, the former prime minister, swept away doubts regarding fiscal impacts with a bullish determination to implement the “will of the people” despite the establishment’s horror.

Farage has so far committed few policies in writing aside from proposals for mass deportations, which he subsequently appeared to revise spontaneously. He aims to curb the Bank of England, perhaps even ditching its governor, the incumbent, with scepticism toward traditional institutions being a key part of populist rhetoric.

His fiscal plans seem unsettled: wary of facing criticism for proposing reckless spending, he lately dropped a promise to make large tax reductions. His Reform party deputy, the party chairman, stated they would focus instead on reductions in government expenditure.

The opposition hopes this position will allow it to portray the populist as planning to bring back fiscal tightening – a point Rachel Reeves has made repeatedly, comparing it unfavorably to her strategy of increasing public investment.

An economics professor notes there are contradictions within the populist platform, such as it is. “Reform is funded by very wealthy people calling for lower taxes and reduced rules, but also talking a lot about the grievances of working people and the decline in manufacturing employment,” he explains. “There’s a tension there between rich backers who want radical free-market policies, and this narrative of bringing back British jobs and reindustrialisation.”

Maintaining Control

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

Recent research from a leading journal examined the outcomes of dozens of populist leaders, over more than a century. It found typically, after 15 years, gross domestic product per head tends to be a tenth less in countries governed by populist rulers than in comparable countries under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually go hand in hand with populist rule,” argue the paper’s authors.

Another intriguing finding from the study, however, is that even with their negative impacts, populist figures tend to be good at retaining office, remaining in power for a considerable time, compared with four for their more moderate equivalents.

In other words, it remains uncertain whether even if their plans crash, populists immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their attraction reaches beyond mundane economics.

Yet returning to Buenos Aires, whether the government’s agenda collapses or is sustained by external aid, Argentina’s citizens are already bearing significant costs.