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

“The optimal moment to buy is currently,” says a arbolito, refusing to provide her name. “[The dollar] went down slightly but it is a fake-out – it will rebound.”

Like her, economists from all backgrounds expect a devaluation of the national currency once the election concludes. The president has imposed a limit on the peso to tame soaring price increases and currently it remains artificially high and reserves are depleted, leaving the national economy stagnant as buyers opt for cheap imports.

Fertile Ground

The nation is a very special case. The country has frequently been racked by sovereign defaults and economic crises and the electorate have been receptive over the years to left-leaning populist movements, such as the influential Peronism, and now Milei’s rightwing version.

Milei epitomizes populist leadership: charismatic, iconoclastic, promising forceful policies to wrestle back control of economic management from traditional elites for the benefit of ordinary citizens.

These key characteristics are shared by his political partner in the United States, as well as the UK politician, who styles himself as a pint-swilling people’s champion even though he is a public school-educated former stockbroker.

Up until lately, Milei’s approach – involving widespread sell-offs and deep public spending cuts – had won plaudits from the IMF for helping to control inflation in check. This plan shares similarities with the policies of his political hero the former UK prime minister, who also saw inflation as a monster to be slain, no matter the cost.

However financial markets started to doubt in the government’s agenda in recent months following a shaky result in local polls and a series of graft allegations. Solely massive economic support from abroad has prevented what looked set to become a full-blown monetary collapse.

Inconsistencies

The 2016 referendum several years ago arguably had similar reasoning, and its figurehead, Boris Johnson, dismissed concerns about economic detail with confident resolve to enact public demand in the face of the establishment’s horror.

Farage to date committed few policies in writing aside from proposals for large-scale removals, that he later appeared to revise on the hoof. He wants to curb the Bank of England, possibly replacing its head, Andrew Bailey, with scepticism of a stodgy establishment being a key part of populist rhetoric.

His fiscal plans appear to be in flux: wary of facing criticism for proposing a Liz Truss-style splurge, he recently abandoned a pledge to make significant tax reductions. His second-in-command, the party chairman, said they would focus instead on public spending cuts.

The opposition aims this stance will allow it to portray the populist as planning to bring back fiscal tightening – a point Rachel Reeves has emphasized often, contrasting it with her approach of increasing government spending.

An economics professor says there are contradictions within the populist platform, as it stands. “Reform are bankrolled by affluent backers demanding lower taxes and reduced rules, but also emphasizing the complaints of working people and the loss of industrial jobs,” he explains. “There’s a tension here among wealthy supporters who want radical free-market policies, and this story of restoring British jobs and reindustrialisation.”

Maintaining Control

In truth, the evidence suggests neither left nor right populists tend to fare well when faced with practical difficulties (although every populist leader promises something unique).

Recent research in the American Economic Review 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 a tenth less in countries governed by populist leaders than in similar economies with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance typically go hand in hand with populist rule,” contend the paper’s authors.

Another intriguing finding of the research, however, is despite their economic costs, populist figures are often effective at holding on to power, remaining in power for a considerable time, versus shorter tenures for mainstream politicians.

In other words, it is not clear whether even if their plans crash, such leaders face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond mundane economics.

Yet back in Buenos Aires, regardless of if the government’s agenda fails or is kept on life support by external aid, Argentina’s citizens are already bearing a heavy price.