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“Cambio, cambio.” Beneath the scorching heat, scores of currency traders are selling US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the 26 October midterm elections in a country accustomed to holding the greenback.

“The optimal moment to buy is currently,” says a arbolito, refusing to provide her name. “[The dollar] dropped slightly but it’s deceptive – it’ll rise again.”

Similar to her, economists from all backgrounds anticipate a devaluation of the national currency after the voting is over. The president has placed a cap on the currency to tame soaring inflation and now it is artificially high and reserves are depleted, causing Argentina’s economy stagnant as buyers opt for low-cost foreign goods.

Ideal Conditions

The nation is a very special case. The country has frequently been racked by sovereign defaults and economic crises and the electorate have been susceptible over the years to leftwing populism, in the form of the powerful Peronist movement, and currently the president’s conservative populism.

The president is a textbook populist: charismatic, iconoclastic, promising muscular measures to wrestle back control 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, and by Nigel Farage, who styles himself as a beer-drinking champion of the common man despite being a public school-educated former stockbroker.

Up until lately, the president’s strategy – including widespread sell-offs and deep budget reductions – had earned praise from the IMF for contributing to bring inflation under control. This plan has something in common with that of Milei’s idol the former UK prime minister, who also saw inflation as a monster to be slain, no matter the cost.

However financial markets began losing confidence in the government’s agenda lately following a poor performance in provincial elections and a series of corruption scandals. Solely massive economic support by the US has prevented what looked set to become a major currency crisis.

Inconsistencies

The 2016 referendum in 2016 arguably had similar reasoning, and its figurehead, the former prime minister, dismissed doubts about economic detail with a bullish determination to enact the “will of the people” in the face of the establishment’s horror.

The Reform leader to date committed few policies to paper aside from proposals for mass deportations, which he subsequently appeared to revise spontaneously. He wants to rein in the Bank of England, perhaps even ditching its governor, Andrew Bailey, with scepticism toward traditional institutions being a key part of the populist package.

His fiscal plans appear to be in flux: concerned about facing criticism for planning a Liz Truss-style splurge, he lately dropped a pledge for significant tax reductions. His Reform party deputy, the party chairman, stated they would focus instead on reductions in government expenditure.

The opposition hopes this stance will enable it to depict the populist as intending to bring back austerity – an argument Rachel Reeves has emphasized often, comparing it unfavorably to her approach of increasing government spending.

Jo Michell says there exist inconsistencies within the populist platform, such as it is. “The party is funded by very wealthy people calling for lower taxes and reduced rules, yet also talking a lot about the grievances of ordinary workers and the loss in manufacturing employment,” he explains. “There is a conflict here among rich backers seeking Thatcherism on steroids, and this story of restoring UK employment and reindustrialisation.”

Holding on to Power

In truth, research indicates neither left nor right populists tend to fare well when confronting real-world challenges (although every populist leader promises distinct solutions).

A recent paper in the American Economic Review analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. The study revealed that on average, after 15 years, gross domestic product per head is often a tenth less in nations governed by populist leaders than in comparable countries with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance usually occur together under populist governments,” contend the paper’s authors.

Another intriguing finding from the study, though, is even with their negative impacts, populist figures tend to be good at holding on to power, remaining in power for eight years, compared with four for their more moderate equivalents.

Put simply, it remains uncertain whether even if their plans crash, populists immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their appeal reaches beyond mundane economics.

Yet 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 significant costs.