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“Cambio, cambio.” Under the scorching heat, scores of money changers are offering American currency along Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming before the 26 October midterm 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 identity. “[The dollar] dropped a little but it’s deceptive – it’ll rise again.”

Similar to her, economic experts from all backgrounds anticipate a devaluation of the Argentine peso after the election is over. President Javier Milei has placed a cap on the peso to tame triple-digit price increases and now it remains overvalued and reserves are depleted, leaving Argentina’s economy sluggish as buyers opt for low-cost foreign goods.

Fertile Ground

The nation represents a unique situation. The country has frequently been racked by debt defaults and economic crises and the electorate have been susceptible for decades to leftwing populism, such as the influential Peronism, and now the president’s conservative populism.

The president is a textbook populist: charismatic, unconventional, promising muscular policies to reclaim control of economic management from the establishment for the benefit of the people.

These defining traits are shared by his ally to the north, and by Nigel Farage, who styles himself as a beer-drinking champion of the common man despite being a privately educated former stockbroker.

Until recent months, the president’s strategy – involving widespread sell-offs and severe public spending cuts – had earned praise from the IMF for helping to bring price rises under control. The programme has something in common with that of Milei’s idol the former UK prime minister, who similarly viewed inflation as a dragon to be defeated, no matter the cost.

But financial markets began losing confidence in Milei’s radical project lately following a poor performance in provincial elections and multiple graft allegations. Solely large-scale financial intervention from abroad has averted what looked set to become a major currency crisis.

Contradictions

The 2016 referendum in 2016 arguably had similar reasoning, and its figurehead, the former prime minister, dismissed concerns about economic detail with confident resolve to enact the “will of the people” despite elite opposition.

The Reform leader to date committed few policies to paper except for proposals for mass deportations, which he subsequently appeared to revise on the hoof. He wants to rein in the central bank, possibly ditching its governor, Andrew Bailey, with distrust toward traditional institutions being a key part of the populist package.

His fiscal plans seem in flux: concerned about being accused of planning a Liz Truss-style splurge, he lately abandoned a pledge to make significant tax cuts. His Reform party deputy, Richard Tice, said they would concentrate instead on public spending cuts.

Labour aims this stance will enable it to depict Farage as intending to bring back austerity – an argument the chancellor has emphasized often, contrasting it with her strategy of increasing public investment.

An economics professor says there exist inconsistencies within the populist platform, as it stands. “The party are bankrolled by affluent backers calling for lower taxes and reduced rules, yet also talking a lot about the grievances of ordinary workers and the decline in manufacturing employment,” he explains. “There’s a tension here between wealthy supporters who want Thatcherism on steroids, and this story of bringing back British jobs and reindustrialisation.”

Maintaining Control

Realistically, research indicates populists of any stripe often perform poorly when confronting real-world challenges (though of course each charismatic individual promises something unique).

Recent research from a leading journal examined the performance of 51 populist presidents and prime ministers, over more than a century. The study revealed typically, over the long term, GDP per capita is often 10% lower in countries governed by populist rulers than in similar economies with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually occur together under populist governments,” argue the paper’s authors.

Another intriguing finding from the study, however, is that despite their economic costs, these leaders tend to be good at retaining office, remaining in power for a considerable time, versus four for mainstream politicians.

In other words, it remains uncertain that even when their policies fail, populists immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their attraction reaches beyond mundane economics.

Yet back in Buenos Aires, whether the government’s agenda collapses or is kept on life support by external aid, the Argentine people are already bearing significant costs.