There're populists and then there are populists

Torsten Bell tells us that populists are bad, M’Kay?

Silvio Berlusconi may be dead, but Giorgia Meloni is running the show in Italy. Donald Trump wants back into the White House (it’s cosier than jail), and are we really confident that arch-centrist Emmanuel Macron in France won’t be followed by Marine Le Pen? Even the pope is worried about a libertarian former sex-coach taking power in Argentina.

I raise this because it should encourage anti-populists to focus on addressing the bad economic outcomes that help drive populism. If you need further encouragement, it should come from recognising the scale of bad economic outcomes that follow populists actually coming to power.

Those are all rightish, or at least arguably conservative, type populists. And while it’s easy enough to disagree with some or all of the things they do/would like to do we’re not sure that economic disaster can quite be pinned on any of them. So we thought we’d have a look at the source here. Which is this paper:

A widespread academic view is that populist leaders are bad for the economy and “self-destruct” quickly. Influential work by Sachs (1989) and Dornbusch and Edwards (1991) on Latin American populism in the 1960s, 1970s, and 1980s identified a “populist cycle.” Populist leaders generate a short-lived boom using expansionary fiscal policy that ultimately ends in an economic and political crisis.

Rudi Dornbusch writing a paper on right wing populists sounds a bit odd to us so we looked at that paper too. To find that his two named examples were Garcia in Peru and Allende in Chile. So not really noting right wing, or conservative, at all.

The middle paper, Bell’s reference, actually talks of economic populism as being the thing that goes wrong. Also known as spending all the money in one fell swoop because it’s gonna be great, this new society with its new economics. So, Chavez/Maduro, Mugabe, and so on.

Or, if we were to survey recent British politics, Jeremy Corbyn and his Magic Money Tree (courtesy Richard J Murphy). That’s the sort of populism that ordains economic disaster.

The researchers find that having a populist leader hits a country’s GDP per capita and living standards by about 10% over 15 years as the economy turns inward, institutions are undermined and risks are taken with macroeconomic policy.

Well, yes, it’s a good warning. But possibly a good idea to be a little more specific over what is being warned about? It’s not actually populism at all, it’s fiscal incontinence.