Argentina voted today in the first round of its presidential election, and the result initially appears almost impossible to reconcile with the country’s economic conditions. Economy Minister Sergio Massa finished first with roughly 37% of the vote, ahead of libertarian Javier Milei on approximately 30%, sending both towards a runoff next month. Massa achieved this while serving as economy minister in a country where annual inflation is approaching 140%, the peso has repeatedly depreciated, foreign-exchange reserves are under severe pressure and confidence in economic policy remains weak. If elections simply rewarded economic success and punished economic failure, this result would make very little sense.
It begins making more sense once elections are understood as choices between futures rather than report cards on the past. Argentine voters were not asked whether they approve of 140% inflation. They were asked whether Massa, Milei or another candidate should control the institutions responsible for addressing it. Those are different questions. A voter can consider the current government’s economic record disastrous and still conclude that Milei’s proposed alternative carries greater expected risk.
This develops the argument from August, when Milei unexpectedly emerged as the strongest individual candidate in Argentina’s nationwide primary. At the time, his success demonstrated how repeated institutional failure can lower the perceived risk of radical alternatives. Dollarising the economy, closing the central bank and dramatically shrinking government sound less frightening when the existing monetary system already appears incapable of protecting savings or providing price stability. The status quo loses its normal advantage when the status quo itself becomes crisis.
Tonight reveals the other side of that mechanism. The status quo can lose credibility without losing all of its insurance value. Once an outsider moves from protest candidate towards plausible president, voters begin evaluating not only what he promises to destroy but what happens after destruction. Anger makes experimentation attractive. Proximity to power makes the consequences of experimentation more concrete.
This is essentially loss aversion applied to politics. Behavioural economics suggests people frequently weigh potential losses more heavily than equivalent potential gains. A voter may believe Milei could finally stabilise Argentina and still fear that if his programme fails, the immediate costs could be severe. Massa represents continuation of a system producing obvious losses, but those losses are at least partly familiar. Milei represents a distribution of outcomes with potentially much larger upside and potentially much larger downside.
Different voters can rationally choose differently depending on how they estimate those probabilities.
This is why describing Massa’s voters as simply supporting the current economic system would be misleading. Some undoubtedly support Peronism ideologically or materially. Others may be voting defensively. A citizen dependent on public healthcare, education, subsidies or employment can believe inflation is intolerable while worrying that Milei’s proposed fiscal adjustment will remove benefits before macroeconomic stability arrives.
The sequencing of reform therefore matters almost as much as its destination.
Suppose dollarisation eventually reduces inflation substantially. That does not tell us what happens during the transition. Where will the dollars required to replace pesos come from? At what exchange rate does conversion occur? How are bank deposits treated? What happens to wages and contracts? How quickly can the fiscal deficit be reduced? What happens if political resistance prevents complementary reforms?
A policy can possess a coherent long-term equilibrium while creating enormous short-term distributional effects on the route towards it.
Voters live through the route.
This is one reason radical economic reforms face a credibility paradox. Milei needs to convince markets that he is sufficiently committed to implement painful reforms even when opposition emerges. That commitment can increase economic credibility among investors who want fiscal stabilisation. The same commitment can frighten voters who fear becoming the people absorbing the adjustment.
Credibility with markets and reassurance to households can therefore pull in opposite directions.
Massa faces the reverse problem. As economy minister, he can promise gradual stabilisation and protection of social programmes, but voters reasonably ask why the policies that will supposedly solve inflation tomorrow have not solved it while he already holds the economic portfolio today.
Incumbency gives Massa administrative experience.
It also gives him ownership of the current failure.
His campaign therefore needs to separate Massa the future president from Massa the current economy minister, which is an unusual political challenge. He effectively asks voters to believe that the coalition responsible for governing can implement a different economic strategy once he personally becomes president.
That argument would be weak if elections were evaluated only through retrospective accountability.
Coalitional politics makes it more plausible because Massa can argue that presidents operate under different political constraints from ministers and that he would construct a broader government. Whether voters accept that explanation is another matter.
Peronism’s durability also requires explanation beyond individual candidates. The movement has dominated Argentine politics in various forms for much of the period since the 1940s because it is not simply a conventional party. It contains trade unions, provincial political machines, social organisations and networks connecting government programmes with communities across the country.
Those networks create organisational capital.
Political outsiders can gain enormous support quickly through media and dissatisfaction, but established parties possess activists, local officials and institutions capable of mobilising voters repeatedly. Elections are therefore contests between organisations as well as ideas.
Milei’s movement is much newer. His personal political brand is exceptionally strong, but building a national governing coalition requires candidates, legislators, provincial relationships and technical personnel capable of operating the state.
This creates another distinction between winning the presidency and governing the country.
Argentina is a federal republic. Congress matters. Provincial governors matter. Courts matter. Bureaucracies matter. Milei could win the presidency without winning anything resembling complete institutional control.
That is constitutionally healthy.
It also means some of his most radical proposals would require negotiation with politicians he describes as belonging to the political “caste”.
The anti-establishment candidate could therefore enter office and immediately become dependent on establishment institutions to implement anti-establishment reform.
That is where populist politics often encounters institutional reality.
Campaigns can divide society into people and elites.
Governments need votes from legislators, cooperation from governors, expertise from bureaucrats and compliance from courts.
The institutions populists attack rhetorically become the institutions through which they must govern.
This does not make reform impossible. It means reform requires coalition-building, which can look like betrayal to supporters attracted precisely by refusal to compromise.
Milei therefore faces a potential mandate trap. The more radical his campaign becomes, the stronger the signal that he genuinely intends structural change. That helps differentiate him from politicians voters believe repeatedly promised reform and failed. Yet the stronger the mandate he claims for maximal change, the harder it becomes to compromise later without disappointing the constituency that elected him.
Moderation can help govern.
It can weaken the political identity that produced victory.
The runoff will intensify that dilemma because Milei now needs voters who supported Patricia Bullrich, the centre-right candidate eliminated tonight, as well as other anti-Peronist constituencies. Those voters may share his desire for economic change while remaining uncomfortable with parts of his rhetoric or programme.
Massa faces the mirror-image problem. He needs voters who dislike Peronism but fear Milei more.
The second round will therefore become less about each candidate’s core supporters and more about which candidate can become the acceptable second choice of people who preferred somebody else.
Runoff systems deliberately create this incentive. The first round rewards differentiation. The second rewards coalition expansion.
Candidates therefore often moderate between rounds.
But Argentina’s polarisation may make moderation difficult because each candidate has spent months explaining why the other represents an existential threat.
This is the political cost of catastrophic rhetoric.
If Milei represents the destruction of Argentina and Massa represents the corrupt caste responsible for national decline, compromise becomes morally suspicious.
Politics turns from choosing policies into preventing catastrophe.
That can increase turnout and mobilisation.
It makes governing after the election harder because roughly half the electorate begins by believing the winner poses a fundamental threat.
Argentina therefore needs to lower political stakes while simultaneously implementing economic reforms whose stakes genuinely are enormous.
That is difficult.
Inflation itself increases polarisation because it converts macroeconomic policy into everyday loss. When prices rise by more than 100% annually, citizens do not experience economics through quarterly GDP statistics. They experience it while buying groceries, negotiating wages and deciding whether to hold pesos overnight.
Inflation becomes political constantly.
This is why monetary stability is more than a technocratic objective. A functioning currency reduces the amount of mental and political attention households must devote to protecting themselves against government economic policy.
Stable money becomes almost invisible.
Unstable money becomes unavoidable.
Argentina’s repeated failure to provide that stability has weakened trust not only in the peso but in institutions responsible for managing it.
That is what gives dollarisation political appeal.
The proposal effectively says: if Argentine governments cannot be trusted to manage money, remove their ability to manage it.
This is an extreme form of credible commitment through surrendering discretion.
Dollarisation would constrain future governments by making monetary financing much harder and eliminating independent exchange-rate policy.
The benefit is credibility.
The cost is flexibility.
Argentina would effectively import US monetary policy regardless of whether American interest rates suit Argentine economic conditions.
The choice therefore depends partly on how voters compare two risks: future governments abusing monetary discretion versus future governments needing monetary flexibility they no longer possess.
There is no institution without trade-offs.
The same applies to fiscal policy. Milei’s argument that government expenditure needs drastic reduction responds to a genuine constraint: persistent deficits eventually require taxation, borrowing or money creation. Argentina has repeatedly struggled with all three.
But “cutting the state” remains an abstraction until particular programmes disappear.
Massa understands this politically and has emphasised the potential social costs of Milei’s proposals.
That can be interpreted as fearmongering.
It can also be legitimate distributional politics.
A reform increasing aggregate efficiency can still create losers. Democracy gives those potential losers votes.
Economists therefore cannot evaluate political resistance merely as irrational obstruction. People may oppose reforms because they expect to bear concentrated costs while benefits arrive later or accrue elsewhere.
Successful reform often requires compensation.
That creates another fiscal problem because compensating losers costs money precisely when the government is attempting to reduce expenditure.
Political economy therefore constrains the speed of stabilisation.
A technically optimal adjustment implemented without enough political consent can collapse and eventually produce less reform than a slower programme citizens tolerate.
Conversely, gradualism can become an excuse for postponing adjustment indefinitely.
Argentina has experienced enough failed programmes that voters have reasons to distrust both approaches.
This may explain tonight’s fragmented result better than ideological labels. Argentines are choosing between different theories of failure.
Milei says the system itself is the problem.
Massa says destroying the system would worsen the crisis and that reform can occur within it.
Neither argument can be proven before governing.
The election therefore becomes a decision under uncertainty.
This is where Bayesian political judgement becomes useful conceptually. Voters begin with beliefs about each candidate and update them as information arrives. Milei’s primary victory demonstrated electoral viability, which may have reassured some voters and frightened others. Massa’s campaign performance may have changed perceptions of his political competence even while economic data remained terrible.
Voters are constantly updating not simply on policies but on probabilities of implementation.
Can Milei govern?
Can Massa stabilise?
Will Congress cooperate?
Will markets panic?
Will social resistance explode?
Nobody knows.
Political choice therefore involves expected values rather than certainty.
This is why outsiders should resist mocking voters for apparently contradictory behaviour. Supporting an economy minister during an inflation crisis can be rational if the alternative is perceived as carrying greater expected losses.
Likewise, supporting radical dollarisation can be rational if the existing monetary regime is perceived as having sufficiently low probability of reform.
The disagreement lies partly in probability estimates.
The runoff will force Argentina to choose between those distributions of risk.
That is what makes the election more interesting than a simple left-right contest.
Massa represents a political establishment whose failures are visible.
Milei represents an institutional experiment whose failures are hypothetical.
Human beings often overweight familiar risks.
Sometimes that produces excessive conservatism.
Sometimes familiarity contains useful information.
The difficult part is determining which applies before the experiment occurs.
Argentina cannot avoid risk by voting.
It can only choose which risk to take.
That may be the defining feature of countries where institutional credibility has deteriorated sufficiently. Elections stop offering voters a safe option.
Continuity carries costs.
Disruption carries costs.
Gradualism may fail.
Radicalism may overshoot.
The political centre loses its traditional advantage because it can no longer promise stability convincingly.
Tonight, Massa has demonstrated that the centre of the existing system still possesses more resilience than August’s primary suggested. Milei has demonstrated that roughly a third of Argentina remains willing to contemplate a much more radical break. Neither has persuaded a majority.
The runoff will therefore be decided substantially by citizens who wanted neither of them first. That may be appropriate. Argentina’s central political question is no longer whether the existing system works. Few voters seem satisfied that it does.
The question is whether repairing a failed system is less dangerous than attempting to replace much of it. Massa asks voters to trust reform from inside institutions that have repeatedly disappointed them. Milei asks them to trust disruption by institutions that do not yet exist. Neither offer is safe. That is exactly why this election matters.
