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“Cambio, cambio.” Under the blazing sun, scores of money changers are selling American currency on Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“little trees”), they are thriving before the October 26 congressional elections in a country long used to holding the greenback.

“The optimal moment for purchasing is currently,” says a arbolito, declining to give her identity. “[The dollar] went down a little but it is a fake-out – it will rebound.”

Similar to her, economists across the spectrum anticipate a depreciation of the Argentine peso once the voting concludes. President Javier Milei has placed a cap on the currency to control triple-digit price increases and now it remains artificially high and foreign reserves are exhausted, causing Argentina’s economy sluggish as buyers turn to cheap imports.

Fertile Ground

Argentina is a very special case. The country has been repeatedly hit by debt defaults and economic crises and the electorate have been receptive for decades to left-leaning populist movements, in the form of the powerful Peronist movement, and currently the president’s rightwing version.

The president is a textbook populist: captivating, iconoclastic, vowing muscular policies to reclaim control of the economy from traditional elites on behalf of ordinary citizens.

These key characteristics are shared by his political partner in the United States, and by Nigel Farage, who styles himself as a pint-swilling champion of the common man even though he is a public school-educated former stockbroker.

Up until lately, Milei’s approach – including widespread sell-offs and deep budget reductions – had won plaudits from the IMF for contributing to bring price rises under control. This plan shares similarities with the policies of his political hero Margaret Thatcher, who also saw inflation as a dragon to be slain, regardless of the consequences.

However financial markets started to doubt in the government’s agenda in recent months following a poor performance in local polls and multiple corruption scandals. Only large-scale economic support by the US has averted what looked set to become a full-blown currency crisis.

Inconsistencies

The vote for Brexit several years ago arguably had some of the same logic, and its figurehead, Boris Johnson, swept away doubts regarding fiscal impacts with a bullish determination to enact the “will of the people” in the face of elite opposition.

The Reform leader has so far outlined limited plans in writing except for a call for large-scale removals, that he later seemed to adjust spontaneously. He aims to rein in the central bank, possibly replacing its head, Andrew Bailey, with scepticism toward traditional institutions 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 Reform party deputy, the party chairman, stated they would focus instead on public spending cuts.

The opposition hopes this position will allow it to portray Farage as planning to reintroduce austerity – a point Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of boosting public investment.

An economics professor says there exist inconsistencies within the populist platform, as it stands. “Reform is funded by affluent backers calling for tax cuts and deregulation, yet also emphasizing the grievances of ordinary workers and the loss of industrial jobs,” he says. “There is a conflict there between rich backers who want Thatcherism on steroids, and this narrative of restoring British jobs and reindustrialisation.”

Holding on to Power

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

Recent research in the American Economic Review analysed the performance of dozens of populist leaders, over more than a century. The study revealed typically, after 15 years, GDP per capita tends to be a tenth less in countries run by populist rulers than in similar economies with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the erosion of institutions typically occur together under populist governments,” argue the paper’s authors.

A further interesting result of the research, however, is despite their economic costs, populist figures are often effective at holding on to power, remaining in power for eight years, versus shorter tenures for mainstream politicians.

In other words, it is not clear whether even if their policies fail, populists immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their attraction reaches beyond everyday financial matters.

But returning to 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.