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“Cambio, cambio.” Under the blazing sun, dozens of currency traders are hawking American currency along Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), their business is booming before the October 26 midterm elections in a nation long used to holding the greenback.

“The best time for purchasing is currently,” states a arbolito, refusing to provide her identity. “[The dollar] went down slightly but it is a fake-out – it will rebound.”

Like her, economists from all backgrounds anticipate a devaluation of the national currency once the voting is over. The president has placed a cap on the peso to tame soaring price increases and currently it remains overvalued and reserves are depleted, causing the national economy sluggish as buyers turn to cheap imports.

Fertile Ground

The nation is a very special case. The country has frequently been racked by debt defaults and financial turmoil and the electorate have been receptive over the years to left-leaning populist movements, such as the powerful Peronism, and now Milei’s rightwing version.

The president epitomizes populist leadership: captivating, unconventional, vowing muscular measures to wrestle back control of the economy from traditional elites on behalf of the people.

These defining traits are shared by his political partner to the north, as well as Nigel Farage, who presents himself as a beer-drinking people’s champion despite being a privately educated ex-finance professional.

Up until lately, the president’s strategy – involving extensive privatisations and severe public spending cuts – had won plaudits from the IMF for helping to control price rises under control. The programme has something in common with the policies of Milei’s idol Margaret Thatcher, who also saw inflation as a monster to be slain, no matter the cost.

But investors began losing confidence in the government’s agenda in recent months following a shaky result in provincial elections and a series of graft allegations. Only massive economic support by the US has prevented what seemed destined to be a major currency crisis.

Contradictions

The 2016 referendum in 2016 arguably had similar reasoning, and its leader, Boris Johnson, dismissed concerns regarding fiscal impacts with a bullish determination to implement public demand in the face of the establishment’s horror.

The Reform leader has so far outlined limited plans in writing except for proposals for large-scale removals, that he later seemed to adjust on the hoof. He wants to curb the Bank of England, perhaps even replacing its head, the incumbent, with distrust toward traditional institutions as a central element of the populist package.

His tax and spending policies seem unsettled: wary of facing criticism for proposing a Liz Truss-style splurge, he recently dropped a promise for large tax reductions. His Reform party deputy, the party chairman, stated they would concentrate instead on public spending cuts.

The opposition hopes this stance will allow it to portray the populist as intending to reintroduce austerity – a point the chancellor has emphasized often, comparing it unfavorably to her approach of boosting public investment.

An economics professor says there are contradictions within the populist platform, as it stands. “Reform are bankrolled by affluent backers demanding tax cuts and reduced rules, but also emphasizing the complaints of working people and the loss in manufacturing employment,” he says. “There’s a tension here among wealthy supporters who want radical free-market policies, and this narrative of bringing back British jobs and industrial revival.”

Maintaining Control

Realistically, the evidence indicates neither left nor right populists often perform poorly when confronting practical difficulties (although each charismatic individual promises distinct solutions).

A recent paper in the American Economic Review examined the outcomes of 51 populist presidents and prime ministers, over more than a century. It found that on average, over the long term, GDP per capita tends to be 10% lower in nations governed by populist leaders than in similar economies with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions typically occur together with populist rule,” argue the researchers.

A further interesting result of the research, however, is even with their negative impacts, populist figures are often effective at retaining office, remaining in power for eight years, versus four for mainstream politicians.

In other words, it is not clear whether even if their plans crash, populists immediately pay the price at the ballot box. Similar to pledges made to regain sovereignty, their appeal extends past mundane economics.

But returning to Buenos Aires, whether Milei’s populist project collapses or is kept on life support through foreign assistance, Argentina’s citizens have already paid a heavy price.