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“Exchange, exchange.” Beneath the blazing sun, dozens of currency traders are hawking American currency along Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), they are thriving ahead of the October 26 midterm elections in a country accustomed to holding the greenback.

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

Like her, economists across the spectrum anticipate a depreciation of the Argentine peso once the voting concludes. The president has imposed a limit on the currency to control soaring inflation and now it is artificially high and foreign reserves are depleted, causing the national economy sluggish as consumers opt for 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 its voters have been receptive over the years to leftwing populism, in the form of the powerful Peronist movement, and currently Milei’s rightwing version.

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

These defining traits are also seen in his ally in the United States, and by the UK politician, who presents himself as a beer-drinking champion of the common man despite being a public school-educated ex-finance professional.

Up until lately, Milei’s approach – including widespread sell-offs and severe public spending cuts – had won plaudits from the IMF for contributing to bring price rises in check. This plan has something in common with that of his political hero Margaret Thatcher, who similarly viewed rising prices as a dragon to be defeated, regardless of the consequences.

However investors started to doubt in Milei’s radical project in recent months following a poor performance in provincial elections and a series of graft allegations. Solely large-scale financial intervention from abroad has averted what seemed destined to be a major monetary collapse.

Inconsistencies

The vote for Brexit several years ago likely contained some of the same logic, and its figurehead, the former prime minister, dismissed doubts regarding fiscal impacts with confident resolve to implement public demand in the face of the establishment’s horror.

The Reform leader has so far outlined limited plans in writing aside from proposals for large-scale removals, which he subsequently seemed to adjust on the hoof. He wants to curb the Bank of England, possibly ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment being a key part of populist rhetoric.

His fiscal plans seem in flux: concerned about facing criticism for planning a Liz Truss-style splurge, he lately dropped a promise for large tax reductions. His second-in-command, the party chairman, stated they would focus instead on public spending cuts.

The opposition aims this position will enable it to depict the populist as planning to reintroduce austerity – an argument Rachel Reeves has made repeatedly, contrasting it with her approach of increasing public investment.

An economics professor notes there exist inconsistencies within the populist platform, such as it is. “The party are bankrolled by very wealthy people demanding tax cuts and deregulation, yet also emphasizing the complaints of working people and the loss in manufacturing employment,” he says. “There is a conflict here between wealthy supporters seeking radical free-market policies, and this story of restoring British jobs and industrial revival.”

Holding on to Power

In truth, research suggests populists of any stripe tend to fare well when confronting real-world challenges (although every populist leader claims to offer distinct solutions).

A recent paper in the American Economic Review examined the performance of 51 populist presidents and prime ministers, over more than a century. It found typically, after 15 years, gross domestic product per head is often 10% lower in countries run by populist rulers than in comparable countries under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions typically occur together under populist governments,” argue the paper’s authors.

Another intriguing finding of the research, however, is that even with their negative impacts, populist figures are often effective at retaining office, remaining in power for eight years, compared with four for their more moderate equivalents.

In other words, it is not clear whether even if their plans crash, such leaders immediately pay the price in elections. Similar to pledges made to regain sovereignty, their appeal reaches beyond 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 have already paid significant costs.