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

“The best time for purchasing is now,” says a arbolito, refusing to provide her name. “[The dollar] went down a little but it is a fake-out – it’ll rise again.”

Like her, economists from all backgrounds expect a depreciation of the Argentine peso once the election concludes. The president has imposed a cap on the currency to control soaring price increases and currently it remains artificially high and foreign reserves are exhausted, leaving the national economy stagnant as consumers opt for low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. The country has frequently been racked by sovereign defaults and economic crises and its voters have been susceptible over the years to left-leaning populist movements, in the form of the influential Peronism, and currently Milei’s conservative populism.

Milei is a textbook populist: charismatic, unconventional, vowing muscular measures to reclaim control of economic management from traditional elites for the benefit of ordinary citizens.

These key characteristics are shared by his ally to the north, as well as the UK politician, who styles himself as a beer-drinking champion of the common man despite being a public school-educated former stockbroker.

Up until lately, the president’s strategy – involving widespread sell-offs and severe budget reductions – had earned praise from international lenders for contributing to bring inflation under control. This plan shares similarities with that of his political hero the former UK prime minister, who also saw inflation as a monster to be defeated, no matter the cost.

But investors began losing confidence in Milei’s radical project in recent months after a poor performance in local polls and a series of graft allegations. Solely large-scale economic support by the US has averted 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, swept away concerns about economic detail with confident resolve to implement the “will of the people” in the face of elite opposition.

The Reform leader to date committed few policies to paper except for a call for mass deportations, which he subsequently seemed to adjust on the hoof. He aims to curb the central bank, perhaps even replacing its head, Andrew Bailey, with distrust toward traditional institutions being a key part of the populist package.

His fiscal plans appear to be unsettled: concerned about facing criticism for proposing a Liz Truss-style splurge, he recently abandoned a pledge for significant tax cuts. His Reform party deputy, the party chairman, stated they would focus instead on public spending cuts.

The opposition hopes this position will enable it to depict Farage as planning to bring back austerity – an argument Rachel Reeves has made repeatedly, contrasting it with her strategy 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 in manufacturing employment,” he says. “There is a conflict there between rich backers seeking radical free-market policies, and this story of restoring British jobs and reindustrialisation.”

Holding on to Power

Realistically, the evidence suggests populists of any stripe tend to fare well when faced with practical difficulties (although each charismatic individual promises something unique).

A recent paper in the American Economic Review analysed the outcomes of 51 populist presidents and prime ministers, over more than a century. It found that on average, over the long term, gross domestic product per head tends to be 10% lower in countries governed by populist rulers than in similar economies under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance typically occur together with populist rule,” contend the paper’s authors.

A further interesting result of the research, however, is that despite their economic costs, populist figures are often effective at holding on to power, remaining in power for a considerable time, compared with four for mainstream politicians.

In other words, it is not clear whether even if their plans crash, such leaders immediately pay the price at the ballot box. Like the Brexiters’ promise to regain sovereignty, their appeal reaches beyond mundane economics.

But returning to Buenos Aires, whether Milei’s populist project collapses or is sustained through foreign assistance, Argentina’s citizens are already bearing a heavy price.