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“Exchange, exchange.” Beneath the blazing sun, scores of currency traders are offering US dollars on Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the 26 October midterm elections in a nation long used to saving in the greenback.

“The optimal moment to buy is now,” says a arbolito, declining to give her name. “[The dollar] dropped a little but it’s deceptive – it’ll rise again.”

Similar to her, economists from all backgrounds expect a devaluation of the Argentine peso after the voting is over. The president has placed a limit on the currency to tame soaring inflation and currently it remains overvalued and foreign reserves are exhausted, leaving Argentina’s economy stagnant as consumers opt for cheap imports.

Ideal Conditions

The nation represents a unique situation. Argentina has been repeatedly racked by debt defaults and financial turmoil and its voters have been susceptible for decades to leftwing populism, in the form of the influential Peronism, and now Milei’s conservative populism.

Milei is a textbook populist: captivating, unconventional, promising muscular policies to wrestle back control of the economy from traditional elites on behalf of the people.

These key characteristics are shared by his political partner in the United States, and by Nigel Farage, who styles himself as a beer-drinking people’s champion even though he is a public school-educated ex-finance professional.

Up until lately, Milei’s approach – including extensive privatisations and deep budget reductions – had won plaudits from international lenders for contributing to bring inflation under control. The programme shares similarities with the policies of Milei’s idol Margaret Thatcher, who similarly viewed inflation as a dragon to be slain, regardless of the consequences.

But investors started to doubt in Milei’s radical project lately after a shaky result in local polls and multiple graft allegations. Only large-scale economic support by the US has prevented what seemed destined to be a full-blown monetary collapse.

Contradictions

The vote for Brexit in 2016 arguably had some of the same logic, and its figurehead, the former prime minister, swept away doubts about economic detail with confident resolve to enact the “will of the people” despite the establishment’s horror.

The Reform leader to date outlined limited plans in writing except for a call for mass deportations, which he subsequently seemed to adjust spontaneously. He aims to curb the central bank, perhaps even replacing its head, the incumbent, with distrust toward traditional institutions being a key part of the populist package.

His tax and spending policies seem in flux: concerned about being accused of proposing a Liz Truss-style splurge, he lately dropped a promise to make significant tax reductions. His second-in-command, the party chairman, said they would concentrate instead on public spending cuts.

Labour aims this position will allow it to depict Farage as intending to reintroduce fiscal tightening – a point the chancellor has emphasized often, contrasting it with her approach of boosting government spending.

An economics professor says there exist inconsistencies within the populist platform, such as it is. “The party are bankrolled by very wealthy people calling for tax cuts and deregulation, yet also emphasizing the grievances of ordinary workers and the loss of industrial jobs,” he says. “There’s a tension here among wealthy supporters seeking radical free-market policies, and this narrative of restoring British jobs and reindustrialisation.”

Holding on to Power

Realistically, research indicates neither left nor right populists tend to fare well when faced with practical difficulties (although every populist leader promises distinct solutions).

Recent research from a leading journal analysed the performance of 51 populist presidents and prime ministers, from 1900 to 2020. It found that on average, after 15 years, gross domestic product per head tends to be 10% lower in countries run by populist rulers than in comparable countries with more mainstream regimes.

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

A further interesting result of the research, however, is 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 their more moderate equivalents.

Put simply, it is not clear whether even if their plans crash, populists face immediate consequences at the ballot box. Like the Brexiters’ promise to regain sovereignty, their attraction reaches beyond everyday financial matters.

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