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“Dollars, dollars.” Under the blazing sun, scores of currency traders are selling American currency on Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“little trees”), they are thriving before the October 26 midterm elections in a nation accustomed to saving in the US dollar.

“The optimal moment to buy is now,” states one arbolito, refusing to provide her identity. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Like her, economists from all backgrounds anticipate a devaluation of the Argentine peso after the election is over. The president has imposed a limit on the currency to control triple-digit inflation and currently it remains artificially high and foreign reserves are exhausted, causing Argentina’s economy sluggish as consumers turn to low-cost foreign goods.

Ideal Conditions

The nation is a very special case. Argentina has been repeatedly hit by debt defaults and economic crises and the electorate have been receptive for decades to left-leaning populist movements, in the form of the influential Peronism, and now the president’s conservative populism.

Milei epitomizes populist leadership: captivating, unconventional, vowing forceful policies to wrestle back command of the economy from traditional elites for the benefit of the people.

These key characteristics are also seen in his ally to the north, as well as Nigel Farage, who styles himself as a pint-swilling champion of the common man despite being a privately educated ex-finance professional.

Up until lately, Milei’s approach – including extensive privatisations and deep budget reductions – had won plaudits from international lenders for contributing to bring inflation in check. The programme has something in common with the policies of Milei’s idol the former UK prime minister, who similarly viewed inflation as a dragon to be slain, no matter the cost.

However financial markets began losing confidence in Milei’s radical project lately following a poor performance in local polls and multiple graft allegations. Solely massive economic support from abroad has averted what looked set to become a full-blown monetary collapse.

Contradictions

The 2016 referendum several years ago likely contained some of the same logic, and its figurehead, Boris Johnson, swept away doubts regarding fiscal impacts with a bullish determination to enact public demand in the face of the establishment’s horror.

The Reform leader to date committed few policies to paper except for a call for large-scale removals, that he later seemed to adjust on the hoof. He wants to curb the Bank of England, possibly replacing its head, Andrew Bailey, with distrust toward traditional institutions being a key part of the populist package.

His tax and spending policies appear to be in flux: concerned about being accused of proposing reckless spending, he recently abandoned a pledge for significant tax reductions. His Reform party deputy, Richard Tice, said they would focus instead on public spending cuts.

Labour hopes this position will enable it to depict Farage as intending to bring back austerity – an argument Rachel Reeves has made repeatedly, contrasting it with her approach of increasing government spending.

Jo Michell notes there are contradictions within the populist platform, as it stands. “Reform is funded by very wealthy people demanding lower taxes and reduced rules, yet also talking a lot about the grievances of ordinary workers and the loss of industrial jobs,” he explains. “There’s a tension here between rich backers seeking Thatcherism on steroids, and this narrative of restoring UK employment and reindustrialisation.”

Maintaining Control

In truth, the evidence suggests populists of any stripe often perform poorly when faced with practical difficulties (although each charismatic individual promises distinct solutions).

A recent paper from a leading journal analysed the performance of 51 populist presidents and prime ministers, over more than a century. The study revealed typically, over the long term, GDP per capita tends to be 10% lower in countries governed by populist leaders than in similar economies under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the decay of governance usually occur together under populist governments,” argue the paper’s authors.

A further interesting result from the study, however, is despite their economic costs, populist figures are often effective at retaining office, lasting on average eight years, versus four for mainstream politicians.

In other words, it is not clear whether even if their plans crash, populists face immediate consequences in elections. Similar to pledges made to regain sovereignty, their appeal extends past mundane economics.

But returning to Buenos Aires, whether Milei’s populist project collapses or is sustained by external aid, Argentina’s citizens are already bearing significant costs.