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“Cambio, cambio.” Beneath the blazing sun, scores of money changers are offering US dollars along Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the October 26 congressional elections in a country long used to holding the greenback.

“The best time for purchasing is currently,” states a arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it’s deceptive – it’ll rise again.”

Like her, economists from all backgrounds expect a devaluation of the national currency after the voting concludes. The president has imposed a limit on the currency to control triple-digit price increases and currently it remains overvalued and foreign reserves are exhausted, leaving the national economy stagnant as buyers turn to cheap imports.

Ideal Conditions

Argentina is a very special case. Argentina has frequently been hit by sovereign defaults and financial turmoil and its voters have been receptive over the years to leftwing populism, such as the powerful Peronism, and currently the president’s conservative populism.

Milei is a textbook populist: captivating, unconventional, promising muscular measures to wrestle back control of the economy from traditional elites on behalf of the people.

These key characteristics are shared by his political partner in the United States, as well as Nigel Farage, who presents himself as a beer-drinking champion of the common man despite being a privately educated former stockbroker.

Up until lately, the president’s strategy – including extensive privatisations and severe public spending cuts – had won plaudits from international lenders for helping to control price rises in check. This plan shares similarities with that of Milei’s idol Margaret Thatcher, who similarly viewed inflation as a dragon to be defeated, regardless of the consequences.

But financial markets began losing confidence in Milei’s radical project in recent months after a poor performance in local polls and multiple corruption scandals. Only large-scale economic support from abroad has averted what looked set to become a major currency crisis.

Contradictions

The 2016 referendum in 2016 likely contained some of the same logic, and its figurehead, the former prime minister, swept away concerns about economic detail with confident resolve to enact public demand despite elite opposition.

The Reform leader has so far outlined limited plans in writing except for a call for mass deportations, that he later seemed to adjust on the hoof. He aims to rein in the central bank, possibly ditching its governor, the incumbent, with scepticism of a stodgy establishment being a key part of the populist package.

His fiscal plans appear to be in flux: wary of facing criticism for proposing reckless spending, he recently abandoned a promise for large tax cuts. His Reform party deputy, the party chairman, stated they would concentrate instead on reductions in government expenditure.

Labour hopes this position will enable it to depict Farage as intending to bring back austerity – a point the chancellor has made repeatedly, contrasting it with her approach of increasing government spending.

Jo Michell says there are contradictions 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 decline in manufacturing employment,” he says. “There is a conflict there between rich backers who want radical free-market policies, and this narrative of restoring British jobs and industrial revival.”

Holding on to Power

Realistically, the evidence indicates populists of any stripe often perform poorly when faced with real-world challenges (although every populist leader claims to offer something unique).

Recent research from a leading journal examined the outcomes of dozens of populist leaders, over more than a century. The study revealed that on average, over the long term, GDP per capita tends to be a tenth less in countries run by populist leaders than in comparable countries with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions typically occur together under populist governments,” argue the researchers.

A further interesting result from the study, however, is despite their economic costs, these leaders are often effective at holding on to power, lasting on average eight years, versus four for mainstream politicians.

In other words, it remains uncertain whether even if their policies fail, populists face immediate consequences in elections. Similar to pledges made to regain sovereignty, their attraction extends past mundane economics.

Yet returning to Buenos Aires, whether the government’s agenda fails or is kept on life support by external aid, the Argentine people are already bearing a heavy price.