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“Cambio, cambio.” Beneath the blazing sun, scores of currency traders are selling American currency along Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), they are thriving ahead of the October 26 midterm elections in a country accustomed to holding the US dollar.

“The optimal moment to buy is now,” states a arbolito, declining to give her identity. “[The dollar] went down slightly but it’s deceptive – it will rebound.”

Similar to her, economic experts from all backgrounds expect a depreciation of the Argentine peso once the voting concludes. The president has imposed a cap on the currency to control soaring price increases and currently it remains overvalued and foreign reserves are exhausted, leaving Argentina’s economy sluggish as buyers turn to cheap imports.

Fertile Ground

Argentina represents a unique situation. Argentina has frequently been hit by sovereign defaults and financial turmoil and the electorate have been receptive over the years to left-leaning populist movements, such as the powerful Peronism, and currently Milei’s rightwing version.

The president is a textbook populist: charismatic, iconoclastic, vowing muscular policies to reclaim command of economic management from the establishment on behalf of ordinary citizens.

These key characteristics are shared by his political partner in the United States, and by Nigel Farage, who presents himself as a pint-swilling people’s champion despite being a privately educated ex-finance professional.

Up until lately, the president’s strategy – involving widespread sell-offs and deep budget reductions – had won plaudits from international lenders for contributing to bring inflation in check. The programme has something in common with that 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 started to doubt in Milei’s radical project in recent months after a poor performance in local polls and a series of corruption scandals. Solely large-scale economic support from abroad has averted what looked set to become a major monetary collapse.

Contradictions

The 2016 referendum in 2016 likely contained similar reasoning, and its figurehead, Boris Johnson, swept away concerns regarding fiscal impacts with a bullish determination to enact public demand despite elite opposition.

The Reform leader has so far outlined limited plans to paper except for a call for mass deportations, which he subsequently appeared to revise on the hoof. He wants to curb the Bank of England, perhaps even ditching its governor, the incumbent, with distrust of a stodgy establishment being a key part of populist rhetoric.

His fiscal plans appear to be unsettled: wary of facing criticism for planning reckless spending, he lately 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 stance will enable it to depict the populist as planning to bring back fiscal tightening – an argument Rachel Reeves has made repeatedly, contrasting it with her approach of boosting government spending.

An economics professor notes there are contradictions within the populist platform, such as it is. “The party are bankrolled by very wealthy people calling for tax cuts and reduced rules, 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 Thatcherism on steroids, and this narrative of restoring British jobs and industrial revival.”

Maintaining Control

In truth, the evidence suggests populists of any stripe often perform poorly when confronting practical difficulties (though of course every populist leader promises something unique).

A recent paper in the American Economic Review examined the outcomes of 51 populist presidents and prime ministers, over more than a century. The study revealed that on average, over the long term, gross domestic product per head is often a tenth less in countries run by populist leaders than in comparable countries with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the decay of governance typically go hand in hand with populist rule,” contend the researchers.

Another intriguing finding of the research, however, is that despite their economic costs, populist figures are often effective at retaining office, lasting on average a considerable time, compared with shorter tenures for mainstream politicians.

In other words, it remains uncertain that even when their policies fail, populists face immediate consequences at the ballot box. Similar to pledges made to regain sovereignty, their attraction extends past mundane economics.

But returning to Buenos Aires, whether Milei’s populist project collapses or is kept on life support through foreign assistance, the Argentine people are already bearing a heavy price.