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

“The best time to buy is now,” states one arbolito, refusing to provide her name. “[The dollar] dropped slightly but it is a fake-out – it will rebound.”

Like her, economic experts across the spectrum anticipate a depreciation of the national currency once the voting concludes. The president has placed a cap on the currency to tame soaring price increases and currently it remains artificially high and reserves are exhausted, causing Argentina’s economy sluggish as consumers turn to cheap imports.

Fertile Ground

The nation is a very special case. The country has been repeatedly hit 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 currently Milei’s conservative populism.

Milei is a textbook populist: captivating, iconoclastic, vowing muscular policies to wrestle back control of the economy from the establishment on behalf of ordinary citizens.

These defining traits are also seen in his political partner in the United States, and by the UK politician, who styles himself as a pint-swilling people’s champion despite being a privately educated former stockbroker.

Up until lately, Milei’s approach – including extensive privatisations and severe budget reductions – had earned praise from international lenders for helping to bring inflation in check. This plan shares similarities with that of Milei’s idol Margaret Thatcher, who also saw rising prices as a dragon to be slain, no matter the cost.

However investors began losing confidence in the government’s agenda in recent months following a poor performance in provincial elections and a series of corruption scandals. Only massive financial intervention by the US has prevented what seemed destined to be a full-blown monetary collapse.

Inconsistencies

The 2016 referendum several years ago arguably had similar reasoning, and its figurehead, Boris Johnson, dismissed concerns regarding fiscal impacts with confident resolve to implement public demand in the face of the establishment’s horror.

The Reform leader to date outlined limited plans to paper except for a call for mass deportations, that he later seemed to adjust on the hoof. He aims to curb the Bank of England, possibly replacing its head, Andrew Bailey, with scepticism of a stodgy establishment being a key part of the populist package.

His fiscal plans appear to be in flux: wary of facing criticism for planning reckless spending, he lately abandoned a promise to make large tax cuts. His second-in-command, the party chairman, stated they would concentrate instead on public spending cuts.

The opposition aims this stance will enable it to portray the populist as planning to bring back fiscal tightening – a point Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of increasing public investment.

Jo Michell notes there exist inconsistencies within the populist platform, such as it is. “The party is funded by affluent backers demanding tax cuts and deregulation, yet also emphasizing the complaints of working people and the decline in manufacturing employment,” he explains. “There is a conflict here between rich backers seeking Thatcherism on steroids, and this story of restoring British jobs and reindustrialisation.”

Maintaining Control

In truth, research indicates populists of any stripe tend to fare well when confronting real-world challenges (although each charismatic individual promises distinct solutions).

A recent paper from a leading journal examined the outcomes of 51 populist presidents and prime ministers, from 1900 to 2020. It found typically, after 15 years, GDP per capita is often a tenth less in nations run by populist rulers compared to similar economies under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance usually go hand in hand with populist rule,” contend the researchers.

Another intriguing finding from the study, though, is even with their negative impacts, populist figures tend to be good at retaining office, lasting on average a considerable time, compared with shorter tenures for mainstream politicians.

In other words, it is not clear whether even if their policies fail, populists immediately pay the price at the ballot box. Similar to pledges made to “take back control”, their attraction extends past everyday financial matters.

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