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“Cambio, cambio.” Beneath the blazing sun, dozens of currency traders are offering US dollars along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the October 26 midterm elections in a nation accustomed to saving in the US dollar.

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

Similar to her, economic experts across the spectrum anticipate a devaluation of the national currency after the election concludes. President Javier Milei has placed a cap on the peso to tame triple-digit price increases and now it is artificially high and foreign reserves are depleted, leaving the national economy sluggish as buyers opt for cheap imports.

Fertile Ground

Argentina represents a unique situation. The country has frequently been racked by debt defaults and financial turmoil and its voters have been susceptible over the years to leftwing populism, in the form of the influential Peronism, and currently the president’s rightwing version.

Milei is a textbook populist: captivating, unconventional, vowing muscular measures to reclaim command of economic management from the establishment on behalf of the people.

These defining traits are also seen in his political partner in the United States, and by the UK politician, who styles himself as a beer-drinking 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 earned praise from the IMF for helping to control price rises in check. This plan shares similarities with the policies of Milei’s idol Margaret Thatcher, who similarly viewed rising prices as a dragon to be slain, regardless of the consequences.

However 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 financial intervention from abroad has prevented what seemed destined to be a full-blown currency crisis.

Contradictions

The vote for Brexit several years ago likely contained similar reasoning, and its leader, Boris Johnson, dismissed concerns regarding fiscal impacts with a bullish determination to enact the “will of the people” in the face of elite opposition.

The Reform leader has so far committed few policies in writing except for proposals 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 of a stodgy establishment as a central element of populist rhetoric.

His tax and spending policies seem unsettled: concerned about facing criticism for proposing a Liz Truss-style splurge, he lately dropped a promise for significant tax cuts. His second-in-command, Richard Tice, stated they would focus instead on public spending cuts.

The opposition hopes this stance will allow it to portray Farage as planning to reintroduce fiscal tightening – a point the chancellor has made repeatedly, contrasting it with her strategy of boosting government spending.

Jo Michell notes there exist inconsistencies within the populist platform, such as it is. “The party is funded by very wealthy people calling for lower taxes and deregulation, yet also emphasizing the grievances of working people and the loss in manufacturing employment,” he says. “There’s a tension here between rich backers seeking radical free-market policies, and this story of bringing back UK employment and reindustrialisation.”

Maintaining Control

In truth, the evidence suggests populists of any stripe often perform poorly when faced with real-world challenges (although every populist leader claims to offer something unique).

A recent paper in the American Economic Review examined the performance of dozens of populist leaders, over more than a century. The study revealed typically, over the long term, gross domestic product per head is often 10% lower in nations run by populist rulers than in comparable countries with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions typically occur together under populist governments,” argue the researchers.

A further interesting result from the study, though, is that even with their negative impacts, populist figures tend to be good at holding on to power, lasting on average a considerable time, compared with four for their more moderate equivalents.

Put simply, it is not clear whether even if their plans crash, such leaders face immediate consequences at the ballot box. Similar to pledges made to “take back control”, their appeal reaches beyond mundane economics.

But returning to Buenos Aires, whether Milei’s populist project fails or is kept on life support by external aid, Argentina’s citizens are already bearing a heavy price.