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“Cambio, cambio.” Under the scorching heat, scores of money changers are hawking American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the 26 October congressional elections in a nation long used to saving in the US dollar.

“The best time for purchasing is currently,” says one arbolito, refusing to provide her name. “[The dollar] dropped slightly but it is a fake-out – it’ll rise again.”

Like her, economists across the spectrum anticipate a devaluation of the Argentine peso after the election is over. President Javier Milei has placed a cap on the currency to control soaring inflation and currently it remains overvalued and reserves are exhausted, causing Argentina’s economy stagnant as consumers turn to cheap imports.

Fertile Ground

Argentina represents a unique situation. The country has frequently been hit by debt defaults and economic crises and the electorate have been susceptible over the years to left-leaning populist movements, such as the powerful Peronism, and currently Milei’s rightwing version.

Milei is a textbook populist: charismatic, iconoclastic, promising muscular measures to wrestle back control of the economy from traditional elites for the benefit of ordinary citizens.

These defining traits are also seen in his political partner in the United States, and by Nigel Farage, who presents himself as a pint-swilling people’s champion despite being a public school-educated ex-finance professional.

Until recent months, Milei’s approach – involving widespread sell-offs and deep budget reductions – had won plaudits from international lenders for contributing to control price rises under control. The programme shares similarities with the policies of his political hero Margaret Thatcher, who also saw inflation as a monster to be defeated, regardless of the consequences.

But financial markets began losing confidence in Milei’s radical project lately following a shaky result in local polls and multiple graft allegations. Solely large-scale economic support by the US has averted what looked set to become a full-blown monetary collapse.

Inconsistencies

The 2016 referendum several years ago likely contained similar reasoning, and its figurehead, the former prime minister, swept away concerns regarding fiscal impacts with confident resolve to enact public demand despite elite opposition.

The Reform leader to date committed few policies to paper aside from proposals for mass deportations, that he later appeared to revise on the hoof. He aims to rein in the Bank of England, perhaps even ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment being a key part of the populist package.

His fiscal plans appear to be unsettled: concerned about facing criticism for proposing reckless spending, he recently dropped a promise for large tax reductions. His second-in-command, the party chairman, stated they would concentrate instead on reductions in government expenditure.

Labour aims this position will enable it to portray Farage as planning to bring back fiscal tightening – a point the chancellor has made repeatedly, comparing it unfavorably to her approach of increasing government spending.

An economics professor says there exist inconsistencies in Farage’s economic programme, such as it is. “The party are bankrolled by very wealthy people calling for tax cuts and reduced rules, but also talking a lot about the grievances of ordinary workers and the loss of industrial jobs,” he explains. “There is a conflict there between wealthy supporters seeking radical free-market policies, and this story of restoring British jobs and reindustrialisation.”

Holding on to Power

Realistically, research indicates neither left nor right populists often perform poorly when confronting practical difficulties (although each charismatic individual promises distinct solutions).

Recent research in the American Economic Review analysed the outcomes of dozens of populist leaders, 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 run by populist leaders than in similar economies under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the decay of governance usually occur together under populist governments,” contend the paper’s authors.

Another intriguing finding of the research, though, is that despite their economic costs, these leaders are often effective at holding on to power, lasting on average a considerable time, versus shorter tenures for mainstream politicians.

Put simply, it is not clear that even when their plans crash, such leaders face immediate consequences in elections. Similar to pledges made to “take back control”, their appeal reaches beyond mundane economics.

But back in Buenos Aires, regardless of if Milei’s populist project collapses or is kept on life support through foreign assistance, the Argentine people have already paid a heavy price.