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“Exchange, exchange.” Beneath the scorching heat, dozens of money changers are selling American currency on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the October 26 congressional elections in a country accustomed to holding the greenback.

“The best time to buy is now,” states one arbolito, refusing to provide her name. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Similar to her, economic experts from all backgrounds expect a devaluation of the Argentine peso after the voting concludes. President Javier Milei has placed a cap on the peso to tame triple-digit inflation and currently it is overvalued and reserves are exhausted, leaving the national economy stagnant as buyers opt for cheap imports.

Ideal Conditions

Argentina is a very special case. The country has frequently been racked by debt defaults and economic crises and the electorate have been susceptible for decades to left-leaning populist movements, in the form of the influential Peronist movement, and currently Milei’s conservative populism.

Milei is a textbook populist: charismatic, unconventional, promising forceful measures to reclaim control of economic management from the establishment for the benefit of the people.

These key characteristics are also seen in his political partner in the United States, as well as the UK politician, who presents himself as a beer-drinking people’s champion even though he is a public school-educated ex-finance professional.

Up until lately, Milei’s approach – involving widespread sell-offs and deep budget reductions – had won plaudits from the IMF for helping to control inflation in check. The programme shares similarities with the policies of Milei’s idol the former UK prime minister, who similarly viewed inflation as a monster to be slain, regardless of the consequences.

However financial markets began losing confidence in the government’s agenda in recent months after a poor performance in local polls and a series of graft allegations. Only massive economic support by the US has averted what seemed destined to be a major currency crisis.

Contradictions

The 2016 referendum in 2016 arguably had some of the same logic, and its leader, Boris Johnson, swept away doubts about economic detail with confident resolve to implement the “will of the people” despite the establishment’s horror.

The Reform leader to date committed few policies to paper aside from a call for mass deportations, that he later appeared to revise spontaneously. He aims to rein in the central bank, perhaps even ditching its governor, the incumbent, with scepticism of a stodgy establishment being a key part of the populist package.

His tax and spending policies seem in flux: concerned about being accused of planning a Liz Truss-style splurge, he recently abandoned a pledge to make significant tax cuts. His second-in-command, the party chairman, stated they would focus instead on public spending cuts.

Labour aims this position will allow it to depict Farage as intending to reintroduce austerity – a point Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of increasing public investment.

An economics professor says there exist inconsistencies within the populist platform, such as it is. “Reform are bankrolled by very wealthy people demanding lower taxes and deregulation, but also emphasizing the grievances of working people and the loss in manufacturing employment,” he says. “There is a conflict there among rich backers who want radical free-market policies, and this story of bringing back British jobs and reindustrialisation.”

Maintaining Control

Realistically, research suggests neither left nor right populists tend to fare well when faced with practical difficulties (though of course each charismatic individual claims to offer something unique).

Recent research from a leading journal examined the performance of dozens of populist leaders, over more than a century. The study revealed that on average, after 15 years, GDP per capita is often 10% lower in countries governed by populist leaders compared to comparable countries under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance usually occur together with populist rule,” argue the paper’s authors.

Another intriguing finding of the research, however, is even with their negative impacts, populist figures are often effective at retaining office, remaining in power for eight years, compared with four for their more moderate equivalents.

Put simply, it is not clear that even when their plans crash, populists face immediate consequences in elections. Similar to pledges made to regain sovereignty, their appeal reaches beyond everyday financial matters.

But returning to Buenos Aires, regardless of if Milei’s populist project fails or is kept on life support through foreign assistance, the Argentine people are already bearing significant costs.