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“Exchange, exchange.” Under the scorching heat, scores of currency traders are offering US dollars along Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the October 26 midterm elections in a country long used to saving in the greenback.

“The optimal moment to buy is now,” says one arbolito, refusing to provide her identity. “[The dollar] went down a little but it is a fake-out – it will rebound.”

Similar to her, economic experts from all backgrounds expect a devaluation of the national currency after the voting is over. The president has placed a limit on the currency to tame triple-digit price increases and now it remains overvalued and foreign reserves are exhausted, leaving Argentina’s economy sluggish as buyers turn to low-cost foreign goods.

Fertile Ground

Argentina represents a unique situation. Argentina has been repeatedly racked by sovereign defaults and economic crises and its voters have been susceptible for decades to leftwing populism, such as the influential Peronist movement, and now Milei’s conservative populism.

Milei is a textbook populist: charismatic, iconoclastic, vowing muscular measures to reclaim command of economic management from the establishment for the benefit of ordinary citizens.

These defining traits are also seen in his political partner in the United States, as well as the UK politician, who styles himself as a pint-swilling champion of the common man even though he is a privately educated ex-finance professional.

Until recent months, Milei’s approach – including widespread sell-offs and severe budget reductions – had won plaudits from international lenders for helping to bring inflation in check. This plan shares similarities with the policies of his political hero the former UK prime minister, who similarly viewed rising prices as a dragon to be defeated, regardless of the consequences.

But investors started to doubt in Milei’s radical project in recent months after a shaky result in provincial elections and a series of corruption scandals. Only massive economic support by the US has prevented what looked set to become a full-blown currency crisis.

Contradictions

The 2016 referendum several years ago arguably had some of the same logic, and its figurehead, the former prime minister, dismissed concerns about economic detail with a bullish determination to implement public demand in the face of elite opposition.

The Reform leader has so far committed few policies in writing aside from a call for large-scale removals, that he later seemed to adjust on the hoof. He wants to rein in the central bank, possibly ditching its governor, the incumbent, with scepticism toward traditional institutions as a central element of populist rhetoric.

His fiscal plans seem in flux: wary of facing criticism for planning a Liz Truss-style splurge, he lately abandoned a pledge for significant tax reductions. His second-in-command, the party chairman, stated they would focus instead on public spending cuts.

The opposition aims this stance will enable it to depict the populist as planning to bring back fiscal tightening – a point Rachel Reeves has made repeatedly, contrasting it with her approach of increasing government spending.

An economics professor notes there exist inconsistencies within the populist platform, such as it is. “The party are bankrolled by very wealthy people demanding lower taxes and reduced rules, yet also emphasizing the grievances of working people and the decline of industrial jobs,” he explains. “There is a conflict there between rich backers who want radical free-market policies, and this story of restoring British jobs and industrial revival.”

Maintaining Control

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

Recent research in the American Economic Review examined the outcomes of dozens of populist leaders, over more than a century. It found that on average, after 15 years, GDP per capita tends to be 10% lower in countries run by populist rulers than in similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the decay of governance typically occur together under populist governments,” contend the paper’s authors.

A further interesting result of the research, though, is that despite their economic costs, populist figures tend to be good at holding on to power, remaining in power for eight years, compared with four 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, regardless of if Milei’s populist project collapses or is kept on life support by external aid, the Argentine people are already bearing a heavy price.