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“Exchange, exchange.” Beneath the scorching heat, dozens of currency traders are offering American currency along Florida Street, a lively shopping street in Buenos Aires. Known as arbolitos (“small trees”), their business is booming ahead of the 26 October midterm elections in a nation accustomed to holding the US dollar.

“The best time to buy is currently,” states one arbolito, declining to give her name. “[The dollar] went down slightly but it’s deceptive – it’ll rise again.”

Like her, economists across the spectrum anticipate a devaluation of the national currency after the election concludes. The president has imposed a cap on the peso to control triple-digit price increases and now it is artificially high and foreign reserves are depleted, causing the national economy stagnant as buyers opt for low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. The country has frequently been hit by debt defaults and financial turmoil and the electorate have been susceptible over the years to left-leaning populist movements, such as the influential Peronist movement, and currently Milei’s conservative populism.

Milei is a textbook populist: charismatic, iconoclastic, vowing muscular policies to wrestle back command of economic management from traditional elites for the benefit of the people.

These defining traits are shared by his ally in the United States, as well as Nigel Farage, who styles himself as a beer-drinking champion of the common man despite being a public school-educated ex-finance professional.

Up until lately, Milei’s approach – including extensive privatisations and deep public spending cuts – had earned praise from the IMF for contributing to control price rises under control. The programme shares similarities with the policies of his political hero Margaret Thatcher, who also saw inflation as a dragon to be defeated, regardless of the consequences.

However investors began losing confidence in Milei’s radical project in recent months after a shaky result in provincial elections and a series of graft allegations. Only massive financial intervention by the US has prevented what seemed destined to be a full-blown currency crisis.

Inconsistencies

The 2016 referendum several years ago arguably had some of the same logic, and its figurehead, the former prime minister, swept away 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 has so far outlined limited plans in writing aside from a call for large-scale removals, which he subsequently appeared to revise spontaneously. He wants to rein in the Bank of England, possibly replacing its head, the incumbent, with distrust of a stodgy establishment as a central element of populist rhetoric.

His tax and spending policies appear to be unsettled: wary of being accused of planning a Liz Truss-style splurge, he lately abandoned a promise for large tax cuts. His second-in-command, Richard Tice, stated they would concentrate instead on public spending cuts.

Labour aims this position will enable it to portray the populist as planning to reintroduce austerity – an argument Rachel Reeves has made repeatedly, contrasting it with her approach of increasing public investment.

Jo Michell says there exist inconsistencies in Farage’s economic programme, such as it is. “Reform is funded by affluent backers demanding tax cuts and reduced rules, yet also emphasizing the grievances of ordinary workers and the loss in manufacturing employment,” he explains. “There’s a tension there between wealthy supporters who want radical free-market policies, and this narrative of bringing back UK employment and reindustrialisation.”

Holding on to Power

In truth, the evidence suggests neither left nor right populists often perform poorly when faced with practical difficulties (although every populist leader claims to offer distinct solutions).

A recent paper from a leading journal examined the outcomes of dozens of populist leaders, over more than a century. The study revealed that on average, over the long term, gross domestic product per head is often 10% lower in nations governed by populist rulers than in similar economies with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the erosion of institutions usually occur together under populist governments,” contend the researchers.

A further interesting result of the research, though, is that even with their negative impacts, populist figures are often effective at retaining office, lasting on average eight years, compared with four for their more moderate equivalents.

In other words, it remains uncertain that even when their policies fail, such leaders face immediate consequences at the ballot box. Similar to pledges made to “take back control”, their appeal reaches beyond mundane economics.

But back in Buenos Aires, whether Milei’s populist project fails or is sustained through foreign assistance, Argentina’s citizens are already bearing significant costs.