Populism, Patronage, and COVID-19: An economic history perspective on Milei’s election

Yifan Chen

President Javier Milei’s rise to Argentine federal politics is seen as unprecedented. Since 2003, there has only been one candidate elected to the presidency who was not from the two main political parties, Partido Jursticialista and Union Civica Radical.^[i] Throughout his 2023 candidacy, Milei campaigned on a platform of dollarization, a closer relationship to the United States, the elimination of the country’s central bank, and cutting high government spending to tackle Argentina’s soaring inflation and poverty.^[ii] Most importantly, he argued that the previous administrations were single-handedly responsible for Argentina’s current economic crisis.^[iii]

The election of a far-right libertarian and anti-establishment candidate in Argentina may seem to represent an ideological shift in the populace and raise concern about democratic backsliding. However, in Argentina, politics are more likely affected by economic outcomes from trade, clientelism, and patronage than ideology and partisanship.^[iv] Using a historical analysis of Argentina’s federal economic policy since 2003, Milei’s election can be seen less as an ideological shift in the populace, but more so a manifestation of the public’s frustration with Argentina’s current economic outlook and patronage politics.

Argentina’s economy historically experienced profound shocks from the Global Financial Crisis in 2007 and again in 2012. The economy’s fragility has been exacerbated by policies enacted by husband-and-wife establishment leaders Néstor Kirchner and Cristina Fernández de Kirchner (CFK), both preeminent presidents from 2003 to 2015.^[v] They “overvalued the exchange rate to subsidize consumption”^[vi] and, in turn, nationalized private pension funds for them to be distributed at the executive’s discretion, garnering political support through patronage. Over the long term, however, the overvalued exchange rate weakened the trade account balance. Argentina’s exports were more expensive for foreign buyers, while imports became cheaper to purchase, damaging the competitiveness of the domestic industry.^[vii] Even an increase in subsidies for domestic industry was unable to match losses. Public spending for pension coverage, cash-transfer schemes, and other subsidies to gather public support increased, but tax revenue, important for funding these redistributive projects, decreased due to falling exports.^[viii]

As a result, center-right politician Mauricio Macri, who promised economic growth while dismantling CFK’s systems of corruption and patronage, won the 2015 election in an upset that ended twelve years of Kirchernist governance.^[ix] Initially, Macri was set up to be a much-needed change in stabilizing economic conditions across the country: international financial markets “embraced” his market-oriented policies and financed 4% of GDP in 2016 and 2017.”^[x] However, Macri then changed inflation targets, which offset the trade benefits of the devalued peso. Macri’s term as the first right-wing candidate since 2003 is certainly an anomaly in Argentine politics but follows the established pattern of economic outlook and patronage affecting voter preference in presidential elections. Poor economic conditions in the international market and decreased purchasing power undermined faith in Macri’s policies, leading to the return of Kirchnerism through the election of Alberto Fernández and his vice president CFK in 2019.^[xi] Short-term considerations of economic progress, rather than partisanship, were the most important factor in these elections. Voters selected Macri because they believed CFK’s corruption and economic policies failed them, and the same base of voters ousted him when his policies also failed.^[xii]

Shortly into Fernández’s term in office, the COVID-19 pandemic struck. Given the federal government’s reliance on the established system of patronage through gains from exports, the pandemic was extremely detrimental to his and his party’s popularity. Fernández enacted redistributive policies simultaneously to garner political clout and support distressed industries, but inflation rose too quickly for these policies to be effective.^[xiii] High government spending and fiscal imbalances, combined with structural inflationary pressures from the pandemic, caused inflation to skyrocket. By the 2023 presidential elections, the inflation rate increased to 142.7% in October 2023.^[xiv]

The return of Kirchnerism, as represented by the Fernández administration, and its ultimate failure to spur economic growth or stability meant that it was no longer a solution for the Argentine people. Instead, it became representative of a corrupt and incompetent economic and political elite that was out of touch with the devastating realities of poverty in Argentina. While the public was already dissatisfied with the Kirchners’ economic policies, the persistent failure of the same systems created a structural distaste. In this sense, Milei’s election was not unprecedented. After two decades of an incumbent party that relied on economic policies that fed on structural corruption and patronage,^[xv] Milei’s rhetoric of fundamentally ridding Argentina of Peronism was appealing. No matter how controversial his policies are, they struck at the core the frustrations that voters then felt. Milei’s popularity will only continue if he can access the material resources necessary to distribute benefits to key interest groups while spurring economic growth and correcting inflation,^[xvi] all of which are daunting tasks. After Milei’s inauguration, he backtracked on some of his radical economic policies, including his stance on dollarizing the peso to control inflation.^[xvii] Ultimately, if he is unable to create a positive economic outlook, Milei’s popularity as a president may decline.

^[i] Lupu, Oliveros, and Schiumerini, Campaigns and Voters in Developing Democracies: Argentina in Comparative Perspective, 31.

^[ii] La Libertad Avanza, “La Libertad Avanza: Bases de Acción Política y Plataforma Electoral Nacional,” 2.

^[iii] Schmidt, “Argentina’s New Far-Right President Promises Shock to the System.”

^[iv] Lupu, Oliveros, and Schiumerini, Campaigns and Voters in Developing Democracies: Argentina in Comparative Perspective, 40.

^[v] Peña and Barlow, “Beyond the Boom.”

^[vi] Ibid.

^[vii] Richardson, “Export-Oriented Populism,” 238.

^[viii] Ibid., 240.

^[ix] Sturzenegger, “Yes, Macri Failed on the Economy. But It Wasn’t All for Naught.”

^[x] Ibid.

^[xi] Ibid.

^[xii] Rossi, “Democratorship in Argentina.”