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“Exchange, exchange.” Under the blazing sun, dozens of money changers are offering US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), their business is booming before the October 26 midterm elections in a country accustomed to saving in the greenback.

“The optimal moment for purchasing is now,” states one arbolito, refusing to provide her name. “[The dollar] went down slightly but it is a fake-out – it will rebound.”

Similar to her, economists from all backgrounds anticipate a devaluation of the Argentine peso once the election is over. The president has imposed a cap on the peso to tame soaring inflation and now it is overvalued and foreign reserves are exhausted, leaving Argentina’s economy stagnant as buyers opt for low-cost foreign goods.

Fertile Ground

Argentina represents a unique situation. Argentina has been repeatedly hit by debt defaults and economic crises and its voters have been receptive for decades to leftwing populism, in the form of the influential Peronism, and currently Milei’s conservative populism.

Milei epitomizes populist leadership: charismatic, unconventional, vowing forceful policies to wrestle back command of the economy from the establishment for the benefit of ordinary citizens.

These key characteristics are also seen in 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 former stockbroker.

Until recent months, the president’s strategy – including widespread sell-offs and severe public spending cuts – had won plaudits from the IMF for helping to control price rises in check. This plan shares similarities with that of his political hero the former UK prime minister, who also saw rising prices as a dragon to be defeated, no matter the cost.

However financial markets started to doubt in Milei’s radical project lately following a poor performance in provincial elections and multiple corruption scandals. Only large-scale financial intervention by the US has prevented what seemed destined to be a major currency crisis.

Contradictions

The 2016 referendum in 2016 arguably had some of the same logic, and its figurehead, Boris Johnson, dismissed doubts regarding fiscal impacts with a bullish determination to enact public demand despite elite opposition.

The Reform leader to date committed few policies to paper aside from proposals for mass deportations, that he later seemed to adjust spontaneously. He wants to rein in the central bank, possibly replacing its head, the incumbent, with distrust of a stodgy establishment as a central element of the populist package.

His fiscal plans seem unsettled: concerned about facing criticism for planning a Liz Truss-style splurge, he lately abandoned a promise for significant tax cuts. His Reform party deputy, the party chairman, stated they would focus instead on public spending cuts.

The opposition aims this stance will enable it to depict the populist as intending to reintroduce austerity – a point the chancellor has emphasized often, contrasting it with her strategy of increasing government spending.

An economics professor says there exist inconsistencies within the populist platform, such as it is. “Reform is funded by affluent backers demanding lower taxes and reduced rules, yet also talking a lot about the complaints of working people and the decline of industrial jobs,” he explains. “There is a conflict there between rich backers seeking Thatcherism on steroids, and this story of restoring UK employment and reindustrialisation.”

Holding on to Power

In truth, the evidence suggests populists of any stripe tend to fare well when faced with practical difficulties (though of course each charismatic individual claims to offer distinct solutions).

Recent research in the American Economic Review analysed the outcomes of dozens of populist leaders, over more than a century. It found typically, after 15 years, GDP per capita tends to be 10% lower in nations governed by populist leaders than in similar economies under conventional leadership.

“Economic disintegration, weakening economic fundamentals and the erosion of institutions usually occur together under populist governments,” contend the paper’s authors.

A further interesting result from the study, however, is even with their negative impacts, these leaders tend to be good at holding on to power, lasting on average a considerable time, versus four for their more moderate equivalents.

In other words, it is not clear whether even if their plans crash, populists face immediate consequences at the ballot box. Like the Brexiters’ promise to “take back control”, their appeal extends past everyday financial matters.

Yet returning to Buenos Aires, whether Milei’s populist project fails or is sustained through foreign assistance, the Argentine people are already bearing a heavy price.