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“Dollars, dollars.” Beneath the scorching heat, dozens of currency traders are hawking American currency along Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming before the October 26 midterm elections in a nation long used to saving in the greenback.

“The optimal moment to buy is now,” says a arbolito, refusing to provide her identity. “[The dollar] dropped a little but it is a fake-out – it’ll rise again.”

Like her, economic experts from all backgrounds expect a devaluation of the national currency after the voting is over. The president has placed a cap on the currency to control triple-digit price increases and currently it is overvalued and reserves are depleted, causing Argentina’s economy stagnant as consumers turn to low-cost foreign goods.

Fertile Ground

Argentina is a very special case. The country has been repeatedly racked by debt defaults and economic crises and its voters have been susceptible over the years to left-leaning populist movements, in the form of the powerful Peronism, and now the president’s rightwing version.

Milei epitomizes populist leadership: charismatic, iconoclastic, promising muscular policies to wrestle back control of economic management from traditional elites for the benefit of ordinary citizens.

These key characteristics are also seen in his ally to the north, and by the UK politician, who styles himself as a pint-swilling champion of the common man even though he is a privately educated former stockbroker.

Until recent months, Milei’s approach – including extensive privatisations and deep public spending cuts – had earned praise from international lenders for contributing to bring price rises in check. This plan has something in common with the policies of his political hero the former UK prime minister, who also saw inflation as a dragon to be defeated, regardless of the consequences.

But financial markets began losing confidence in Milei’s radical project lately following a poor performance in local polls and multiple corruption scandals. Solely massive economic support by the US has averted what seemed destined to be a major currency crisis.

Contradictions

The vote for Brexit in 2016 likely contained similar reasoning, and its figurehead, Boris Johnson, swept away concerns regarding fiscal impacts with a bullish determination to enact public demand despite elite opposition.

The Reform leader has so far outlined limited plans in writing aside from proposals for mass deportations, that he later seemed to adjust spontaneously. He aims to curb the central bank, possibly ditching its governor, Andrew Bailey, with distrust toward traditional institutions being a key part of the populist package.

His fiscal plans seem unsettled: concerned about facing criticism for proposing reckless spending, he recently abandoned a promise to make significant tax cuts. His Reform party deputy, the party chairman, stated they would concentrate instead on reductions in government expenditure.

Labour hopes this stance will allow it to depict the populist as planning to reintroduce austerity – an argument the chancellor has made repeatedly, contrasting it with her approach of boosting government spending.

An economics professor says there exist inconsistencies within the populist platform, such as it is. “Reform are bankrolled by affluent backers calling for lower taxes and reduced rules, yet also emphasizing the complaints of working people and the decline in manufacturing employment,” he explains. “There’s a tension here among wealthy supporters who want radical free-market policies, and this story of restoring British jobs and reindustrialisation.”

Maintaining Control

In truth, research indicates neither left nor right populists tend to fare well when confronting practical difficulties (although each charismatic individual claims to offer something unique).

Recent research from a leading journal analysed 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 a tenth less in countries run by populist leaders compared to similar economies with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the decay of governance typically go hand in hand with populist rule,” contend the researchers.

A further interesting result from the study, though, is even with their negative impacts, these leaders are often effective at retaining office, lasting on average eight years, compared with shorter tenures for their more moderate equivalents.

In other words, it remains uncertain whether even if their policies fail, populists face immediate consequences at the ballot box. Similar to pledges made to “take back control”, their attraction reaches beyond mundane economics.

But returning to Buenos Aires, regardless of if Milei’s populist project fails or is sustained by external aid, Argentina’s citizens are already bearing significant costs.