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“Cambio, cambio.” Beneath the scorching heat, dozens of money changers are offering US dollars on Florida Street, a lively shopping street in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving before the October 26 congressional elections in a country long used to holding the US dollar.

“The optimal moment to buy is now,” says a arbolito, declining to give her name. “[The dollar] dropped a little but it’s deceptive – it’ll rise again.”

Similar to her, economists across the spectrum anticipate a devaluation of the Argentine peso after the election is over. President Javier Milei has imposed a cap on the peso to tame soaring price increases and now it remains artificially high and reserves are depleted, leaving the national economy stagnant as buyers turn to low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. Argentina has frequently been racked by debt defaults and financial turmoil and the electorate have been susceptible over the years to leftwing populism, such as the influential Peronism, and currently the president’s conservative populism.

The president epitomizes populist leadership: charismatic, unconventional, promising forceful measures to wrestle back control of the economy from the establishment on behalf of ordinary citizens.

These defining traits are also seen in his ally to the north, and by the UK politician, who styles himself as a pint-swilling champion of the common man despite being a privately educated former stockbroker.

Up until lately, Milei’s approach – involving widespread sell-offs and severe budget reductions – had earned praise from international lenders for helping 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 defeated, no matter the cost.

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

Contradictions

The 2016 referendum several years ago likely contained similar reasoning, and its leader, Boris Johnson, swept away concerns about economic detail with confident resolve to enact the “will of the people” in the face of the establishment’s horror.

The Reform leader to date outlined limited plans to paper except for a call for mass deportations, that he later seemed to adjust on the hoof. He aims to rein in the Bank of England, possibly replacing its head, Andrew Bailey, with distrust of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans appear to be unsettled: concerned about being accused of planning a Liz Truss-style splurge, he lately abandoned a promise for large tax cuts. His Reform party deputy, Richard Tice, said they would concentrate instead on reductions in government expenditure.

Labour aims this stance will allow it to depict Farage as planning to bring back austerity – an argument the chancellor has emphasized often, comparing it unfavorably to her strategy of boosting government spending.

An economics professor notes there are contradictions within the populist platform, such as it is. “Reform is funded by affluent backers demanding lower taxes and deregulation, yet also talking a lot about the complaints of ordinary workers and the decline of industrial jobs,” he says. “There is a conflict here among rich backers seeking radical free-market policies, and this story of bringing back UK employment and industrial revival.”

Maintaining Control

Realistically, research indicates neither left nor right populists tend to fare well when faced with real-world challenges (although each charismatic individual claims to offer distinct solutions).

A recent paper from a leading journal examined the outcomes of dozens of populist leaders, from 1900 to 2020. The study revealed that on average, after 15 years, GDP per capita is often 10% lower in nations run by populist leaders compared to comparable countries under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually go hand in hand under populist governments,” argue the researchers.

A further interesting result of the research, however, is that even with their negative impacts, these leaders tend to be good at retaining office, lasting on average a considerable time, compared with shorter tenures for their more moderate equivalents.

In other words, it remains uncertain that even when their plans crash, such leaders face immediate consequences in elections. Like the Brexiters’ promise to regain sovereignty, their appeal extends past everyday financial matters.

But returning to Buenos Aires, regardless of if Milei’s populist project collapses or is sustained through foreign assistance, the Argentine people have already paid a heavy price.