Fear is one of the six basic emotions of the human being. Financial markets, as a group of human beings, also go through waves of exacerbated fear. In the case of Argentina, the markets, with their extreme fear of Kirchnerism, and as self-fulfilling prophecy, ended up generating the macro conditions that made those who feared so much win.
The electoral results in Argentina were a surprise for many, since a triumph of opposition candidate was not predictable, because in the last stage of its last government, executed a painful economic policy, along with a great embezzlement of public funds, whose results have not yet been overcome. However, they won again! What happened is the expression of the complex psychological behavior of Argentine people, marked by a big emotionality in their decision-making process, a vote exercised mainly from the reptilian brain: fear and flight.
In Argentine, fear is permanent, its inhabitants are always on the defensive. Everything seems to be going wrong for decades. "Center-left, center-moderate, and center-right governments fail" with all success. People and local businesses live in waves of endless economic pessimism, which leads them to frustrate or sub-execute personal and business projects, and to always live with the idea that "in a more stable country I would have done better."
The advises of the IMF fail, the recommendations of the international gurus fail, everything fails. Could it be that the Argentine people are a special case, a case that nobody fully understands? It may be ... the great Simon Kuznets, Nobel Prize economist, said "there are developed and underdeveloped countries, and also Japan and Argentina." It may be true that Argentina is a different case from the rest, but that does not make its citizens less guilty of not finding their political course.
THE RECENT BACKGROUND
The Kirchner´s era, in its last stage, was characterized by populism, corruption and waste; the discourse on the left served as an opium to co-opt the citizens with subsidies from the government, while the ruling leadership was busy filling out their bank accounts, with an economy that had already stopped growing. Given these facts, the triumph of any option that offered something different, that sowed hope, reconstruction and change, was going to have the majority support of the population, and thus Mauricio Macri managed to win in 2015.
This is how the change assumed with the new government was supported by a high level of expectations. It was the vote in exchange for recomposing the economy and institutions, in that order, however, the reality is that, in the economy, the promises were not fulfilled in the time that was expected and the fear that no concrete improvements could be envisioned with Macri made that, in an opportunity to ratify or change, people decided to change, even if this implies an institutional setback.
THE MARKETS AND THE "FEAR OF CRISTINA KIRCHNER"
A notable effect in these elections was the role of the markets towards Argentina. Already since 2018, when the polls did not give Macri's sure victory over Cristina, Wall Street began to strongly punish Argentine debt securities, significantly increasing country risk, and with it domestic interest rates. That problem of expectations, that “fear of Cristina”, paralyzed private investment, increased unemployment and began to generate devaluations of the local currency, which spread the fear of the markets to the common people, which eventually ended up sinking electorally to Macri. That is, fear of Cristina made Cristina win. It seems irrational, but in a country like Argentina it is not, it is normal.
THE BRAIN CHOOSES PRESIDENT
While we believe that by choosing we are fully rational, we are plagued with biased, induced stimuli, which lead our decision making towards a certain option. This happens on a daily basis in the economy and constitutes the basis of large corporations marketing to promote consumption, but it also happens with the electoral issue.
As with purchasing decisions, various aspects come into play in the electoral decision, where it seeks to exacerbate intuitive, emotional and instinctive elements, where fear and flight are key. As Daniel Kahneman supports it, the human brain is torn between what is interpreted by System 1 (unconscious symbolic experiences or beliefs analyzed quickly) and System 2 (the analytical and logical part that processes information in a rational way, much more slowly). In the end, System 1 almost always wins, the logic of political marketing leads to the decision being subject to the dominant emotion, fear, especially in the case of Argentina.
THE PSYCHOLOGICAL BIAS OF THE ARGENTINE VOTER
As in the purchase process, average voter made an electoral decision based on a particular point of reference, a framing effect. Several cognitive biases to decide came into play, including, in the Argentine case:
• Self-fulfilling prophecies: as a pygmalion effect, financial markets were so much afraid of Cristina, and as future is created from current expectations, the economy slowed. People could not understand this effect, believed that it was all because Macri's fault, and severely punished him at the polls.
• Loss aversion: nobody likes to sign up for a loser. Argentine average voter feel Mauricio Macri is not doing a good government, so they think, consciously but biased, the little that was had with Cristina Kirchner was valued more than what could be achieved diffusely in the future with Macri, although this means losing institutional quality.
• The framing effect: the brain draws different conclusions depending on the way in which information is presented, in this case, economic information. Playing with the way in which the data on inflation, unemployment, exchange rate and economic growth is shown to the electorate, as well as comparisons of these figures in the previous government had impacts when deciding.
• Bias for personal interest: a large part of people believe that they have an analytical capacity that is above average. We like to feel part of that select group that is always right. And indeed, Macri has not achieved the expected economic results, so being in the wrong group does not generate personal well-being, therefore deepens the vote against.
THE PROBLEM IS POLITICAL: PROGRAM AGREEMENTS NEEDED
The fundamental Argentine problem is not economic, but political. Never have their leaders, since the return of democracy in 1983, been able to build a stable vision of the way forward, which convinces people and entrepreneurs, and that generates confidence and faith to invest and consume in a growing and sustained way. Absolutely all cases of international success have required a shared vision maintained over time. That is the key of the Argentine failure, that shared vision was never had, one always lives in a pendulum.
Majority of its voters are politically of a moderate middle (with nuances), and yet their politicians have not been able to consolidate a programmatic agreement that contains all that mass of voters, of at least ten major issues, with legal status, and with a moderate range of variation of results, which is maintained over time.
The human brain, including the Argentine, needs clear, simple and predictable rules, to feel safe, happy, and thus prosper. Argentina needs shared programmatic agreements, of at least ten of the great economic and social issues, maintained over time, whoever wins the elections every four years, that gives security and stability to the Argentine's "animal spirits". Probably this would be the correct path that will manage some day Argentine to the success.
Authors: Marisela Cuevas Sarmiento (Behavioral Economist, UCLA, Venezuela), Sebastián Laza (Behavioral Economist, UNCuyo, Argentine)
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