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“Dollars, dollars.” Beneath the blazing sun, scores of currency traders are offering US dollars along Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the October 26 midterm elections in a country accustomed to saving in the US dollar.

“The best time for purchasing is currently,” states one arbolito, declining to give her identity. “[The dollar] dropped slightly but it is a fake-out – it will rebound.”

Similar to her, economic experts across the spectrum expect a devaluation of the Argentine peso once the voting is over. The president has placed a limit on the peso to control triple-digit price increases and currently it is artificially high and reserves are exhausted, leaving Argentina’s economy sluggish as buyers turn to low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. Argentina has frequently been hit by sovereign defaults and economic crises and the electorate have been receptive for decades to left-leaning populist movements, such as the powerful Peronist movement, and now Milei’s conservative populism.

Milei epitomizes populist leadership: captivating, iconoclastic, promising forceful measures to wrestle back command of economic management from traditional elites for the benefit of the people.

These defining traits are also seen in his political partner in the United States, as well as Nigel Farage, who presents himself as a pint-swilling champion of the common man despite being a public school-educated ex-finance professional.

Until recent months, the president’s strategy – including extensive privatisations and severe budget reductions – had earned praise from international lenders for helping to bring price rises in check. This plan has something in common with the policies of his political hero the former UK prime minister, who also saw rising prices as a dragon to be defeated, regardless of the consequences.

But financial markets started to doubt in the government’s agenda in recent months following a poor performance in provincial elections and multiple graft allegations. Only massive economic support from abroad has averted what looked set to become a major monetary collapse.

Inconsistencies

The 2016 referendum several years ago arguably had similar reasoning, and its figurehead, the former prime minister, dismissed concerns regarding fiscal impacts with confident resolve to enact the “will of the people” in the face of the establishment’s horror.

The Reform leader to date committed few policies in writing aside from proposals for mass deportations, that he later seemed to adjust spontaneously. He wants to curb the central bank, perhaps even ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His fiscal plans appear to be in flux: concerned about being accused of proposing a Liz Truss-style splurge, he lately abandoned a promise for significant tax reductions. His Reform party deputy, the party chairman, said they would focus instead on public spending cuts.

Labour aims this stance will allow it to depict the populist as planning to reintroduce austerity – a point Rachel Reeves has emphasized often, contrasting it with her approach of boosting government spending.

Jo Michell says there are contradictions within the populist platform, such as it is. “Reform are bankrolled by affluent backers demanding lower taxes and deregulation, yet also emphasizing the grievances of ordinary workers and the decline of industrial jobs,” he says. “There’s a tension here among rich backers seeking Thatcherism on steroids, and this story of bringing back British jobs and industrial revival.”

Holding on to Power

In truth, the evidence suggests neither left nor right populists often perform poorly when faced with real-world challenges (although each charismatic individual claims to offer something unique).

Recent research in the American Economic Review examined the outcomes of dozens of populist leaders, over more than a century. It found typically, over the long term, GDP per capita tends to be 10% lower in nations governed by populist leaders compared to comparable countries with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions usually go hand in hand with populist rule,” argue the researchers.

A further interesting result from the study, though, is that despite their economic costs, these leaders are often effective at retaining office, remaining in power for eight years, versus shorter tenures for mainstream politicians.

In other words, it remains uncertain whether even if their policies fail, such leaders face immediate consequences at the ballot box. Like the Brexiters’ promise to “take back control”, their attraction extends past mundane economics.

But back in Buenos Aires, whether Milei’s populist project collapses or is kept on life support through foreign assistance, Argentina’s citizens have already paid significant costs.