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“Exchange, exchange.” Under the scorching heat, dozens of money changers are offering American currency along Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming before the 26 October midterm elections in a nation long used to holding the US dollar.

“The best time to buy is currently,” states one arbolito, refusing to provide her identity. “[The dollar] dropped a little but it is a fake-out – it’ll rise again.”

Similar to her, economic experts from all backgrounds expect a devaluation of the national currency after the election concludes. The president has placed a cap on the currency to control soaring price increases and currently it is overvalued and foreign reserves are depleted, leaving Argentina’s economy sluggish as consumers turn to cheap imports.

Ideal Conditions

The nation represents a unique situation. Argentina has been repeatedly racked by debt defaults and economic crises and its voters have been receptive for decades to left-leaning populist movements, such as the influential Peronist movement, and now Milei’s rightwing version.

Milei epitomizes populist leadership: captivating, unconventional, vowing forceful measures to wrestle back control of the economy from the establishment on behalf of the people.

These defining traits are also seen in his ally in the United States, as well as the UK politician, who styles himself as a pint-swilling people’s champion even though he is a privately educated former stockbroker.

Until recent months, the president’s strategy – including widespread sell-offs and deep public spending cuts – had earned praise from international lenders for helping to control inflation in check. The programme shares similarities with the policies of his political hero the former UK prime minister, who also saw rising prices as a monster to be slain, regardless of the consequences.

However investors began losing confidence in Milei’s radical project in recent months following a poor performance in local polls and multiple corruption scandals. Solely large-scale financial intervention by the US has prevented what looked set to become a full-blown currency crisis.

Inconsistencies

The vote for Brexit in 2016 arguably had similar reasoning, and its figurehead, Boris Johnson, dismissed concerns about economic detail with confident resolve to implement public demand in the face of elite opposition.

The Reform leader to date outlined limited plans to paper aside from a call for mass deportations, that he later appeared to revise on the hoof. He aims to curb the central bank, perhaps even ditching its governor, the incumbent, with scepticism toward traditional institutions being a key part of the populist package.

His tax and spending policies appear to be in flux: wary of being accused of planning a Liz Truss-style splurge, he lately abandoned a pledge for large tax cuts. His Reform party deputy, the party chairman, said they would concentrate instead on reductions in government expenditure.

Labour aims this stance will enable it to portray Farage as planning to reintroduce fiscal tightening – a point Rachel Reeves has made repeatedly, comparing it unfavorably to her strategy of boosting government spending.

An economics professor says there exist inconsistencies within the populist platform, as it stands. “Reform is funded by very wealthy people demanding tax cuts and deregulation, but also talking a lot about the grievances of working people and the decline of industrial jobs,” he explains. “There is a conflict here among wealthy supporters who want Thatcherism on steroids, and this narrative of bringing back British jobs and industrial revival.”

Maintaining Control

In truth, research indicates populists of any stripe tend to fare well when confronting practical difficulties (though of course each charismatic individual promises something unique).

A recent paper from a leading journal examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed typically, after 15 years, GDP per capita tends to be 10% lower in countries run by populist leaders compared to similar economies with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions typically occur together under populist governments,” contend the paper’s authors.

Another intriguing finding of the research, however, is despite their economic costs, these leaders tend to be good at retaining office, remaining in power for eight years, versus four for their more moderate equivalents.

Put simply, it remains uncertain that even when their plans crash, such leaders face immediate consequences at the ballot box. Like the Brexiters’ promise to regain sovereignty, their attraction reaches beyond everyday financial matters.

But returning to Buenos Aires, regardless of if Milei’s populist project collapses or is sustained by external aid, the Argentine people have already paid a heavy price.