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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. Referred to as arbolitos (“little trees”), their business is booming before the October 26 midterm elections in a nation long used to holding the greenback.

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

Similar to her, economists from all backgrounds expect a depreciation of the national currency once the voting concludes. President Javier Milei has imposed a cap on the currency to tame soaring inflation and currently it is overvalued and reserves are depleted, causing Argentina’s economy stagnant as consumers opt for cheap imports.

Ideal Conditions

Argentina is a very special case. The country has frequently been racked by sovereign defaults and economic crises and the electorate have been susceptible for decades to left-leaning populist movements, in the form of the powerful Peronism, and currently Milei’s rightwing version.

The president is a textbook populist: charismatic, unconventional, promising muscular measures to wrestle back control of the economy from the establishment on behalf of the people.

These defining traits are shared by his political partner to the north, as well as Nigel Farage, who styles himself as a beer-drinking champion of the common man even though he is a privately educated former stockbroker.

Up until lately, the president’s strategy – involving extensive privatisations and severe budget reductions – had won plaudits from international lenders for contributing to bring inflation under control. The programme shares similarities with that of his political hero the former UK prime minister, who also saw rising prices as a dragon to be slain, regardless of the consequences.

But investors started to doubt in Milei’s radical project lately after a shaky result in provincial elections and multiple graft allegations. Solely massive economic support from abroad has averted what looked set to become a major monetary collapse.

Contradictions

The 2016 referendum several years ago arguably had some of the same logic, and its figurehead, the former prime minister, swept away doubts regarding fiscal impacts with a bullish determination to enact public demand in the face of the establishment’s horror.

The Reform leader to date outlined limited plans in writing except for proposals for large-scale removals, which he subsequently seemed to adjust spontaneously. He aims to rein in the central bank, possibly ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment being a key part of the populist package.

His tax and spending policies seem in flux: wary of being accused of planning reckless spending, he lately abandoned a promise for significant tax cuts. His second-in-command, Richard Tice, stated they would focus instead on public spending cuts.

Labour aims this position will enable it to depict the populist as planning to bring back fiscal tightening – an argument Rachel Reeves has emphasized often, contrasting it with her approach of increasing public investment.

An economics professor notes there are contradictions within the populist platform, as it stands. “The party is funded by affluent backers calling for lower taxes and reduced rules, but also emphasizing the complaints of ordinary workers and the loss in manufacturing employment,” he says. “There is a conflict here between rich backers seeking Thatcherism on steroids, and this story of bringing back UK employment and reindustrialisation.”

Holding on to Power

In truth, research indicates populists of any stripe tend to fare well when faced with real-world challenges (though of course each charismatic individual promises distinct solutions).

A recent paper from a leading journal analysed the performance of dozens of populist leaders, over more than a century. It found typically, over the long term, gross domestic product per head tends to be 10% lower in countries run by populist rulers compared to similar economies under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the decay of governance usually go hand in hand with populist rule,” argue the researchers.

A further interesting result from the study, however, is that even with their negative impacts, these leaders are often effective at retaining office, lasting on average eight years, compared with four for mainstream politicians.

Put simply, it remains uncertain whether even if their policies fail, such leaders face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond everyday financial matters.

Yet back in Buenos Aires, whether Milei’s populist project fails or is sustained by external aid, Argentina’s citizens have already paid a heavy price.