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“Dollars, dollars.” Under the scorching heat, dozens of currency traders are offering American currency on Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving ahead of the 26 October midterm elections in a nation accustomed to holding the greenback.

“The optimal moment for purchasing is now,” states one arbolito, refusing to provide her name. “[The dollar] dropped a little but it is a fake-out – it will rebound.”

Similar to her, economic experts from all backgrounds expect a depreciation of the national currency once the voting is over. The president has placed a limit on the currency to tame soaring inflation and now it is overvalued and reserves are depleted, causing the national economy sluggish as consumers turn to low-cost foreign goods.

Ideal Conditions

The nation is a very special case. Argentina has been repeatedly racked by debt defaults and economic crises and its voters have been receptive over the years to leftwing populism, in the form of the powerful Peronism, and currently Milei’s rightwing version.

The president is a textbook populist: captivating, iconoclastic, promising muscular measures to reclaim control of the economy from traditional elites for the benefit 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 champion of the common man even though he is a privately educated former stockbroker.

Up until lately, the president’s strategy – involving extensive privatisations and severe public spending cuts – had won plaudits from international lenders for contributing to control price rises in check. The programme has something in common with that of Milei’s idol the former UK prime minister, who similarly viewed rising prices as a monster to be defeated, regardless of the consequences.

But investors began losing confidence in the government’s agenda lately following a poor performance in provincial elections and a series of corruption scandals. Solely massive financial intervention by the US has averted what seemed destined to be a full-blown currency crisis.

Contradictions

The vote for Brexit in 2016 arguably had similar reasoning, and its leader, Boris Johnson, swept away doubts regarding fiscal impacts with a bullish determination to enact the “will of the people” in the face of the establishment’s horror.

The Reform leader to date outlined limited plans in writing aside from a call for mass deportations, that he later appeared to revise on the hoof. He wants to curb the central bank, possibly replacing its head, the incumbent, with scepticism toward traditional institutions as a central element of populist rhetoric.

His fiscal plans appear to be unsettled: wary of facing criticism for planning reckless spending, he lately dropped a promise for large tax cuts. His second-in-command, the party chairman, stated they would focus instead on reductions in government expenditure.

Labour hopes this position will enable it to portray the populist as intending to reintroduce fiscal tightening – an argument the chancellor has made repeatedly, contrasting it with her strategy of increasing public investment.

An economics professor notes there are contradictions within the populist platform, as it stands. “Reform are bankrolled by very wealthy people calling for tax cuts and reduced rules, yet also emphasizing the complaints of working people and the loss in manufacturing employment,” he says. “There’s a tension here among wealthy supporters who want radical free-market policies, and this story of restoring UK employment and reindustrialisation.”

Holding on to Power

In truth, the evidence suggests neither left nor right populists often perform poorly when confronting real-world challenges (although every populist leader promises distinct solutions).

A recent paper in the American Economic Review analysed the performance of dozens of populist leaders, over more than a century. It found that on average, after 15 years, GDP per capita is often 10% lower in countries run by populist rulers than in comparable countries with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance typically occur together with populist rule,” argue the researchers.

A further interesting result of the research, though, is that even with their negative impacts, populist figures tend to be good at retaining office, remaining in power for eight years, compared with shorter tenures for mainstream politicians.

In other words, it is not clear whether even if their policies fail, such leaders immediately pay the price in elections. Like the Brexiters’ promise to regain sovereignty, their attraction extends past mundane economics.

Yet returning to Buenos Aires, whether Milei’s populist project fails or is sustained through foreign assistance, Argentina’s citizens are already bearing significant costs.