Tuesday, April 6, 2021

The economic cost of populism

(This is a slightly expanded English version of the article that I originally wrote in Spanish and that was published in the newspaper La Vanguardia on Monday, April 5th)

When Mayor Pasqual Maragall visited secondary schools in the 1990s to explain to young people the transformation of the city of Barcelona, he told the students (given their understandable anxiety to find quick solutions to problems) that they had to be "analytical" , that they had to avoid simplistic explanations. Little did he foresee that a few decades later a wave of populism would make it even more urgent for the youth (and public opinion in general) to hear that message. The presence of populists in national governments peaked in 2018, with Trump, the Brexit leaders, Modi, Bolsonaro, Orban, Erdogan, and the Italian populist coalition. Despite the elections in the United States and the fall of the Italian coalition, from the last century until today, populism has proven to be a fairly successful strategy to reach, and stay in, government, but at a high cost for democratic societies. 

There are several definitions of the complex and multidimensional populist phenomenon in circulation. Surely, none of them are totally satisfactory. A widely used one is that of the political scientist Cas Mudde, for whom populism would be characterized by combining a very thin-centered ideology capable of covering very disparate political forces, with the use of a rhetoric based on the “us” (“the people” defined in a specific way, at the same time homogeneous and exclusive, denying pluralism) against "them" (some supposed "elites", whether political or economic, guilty of everything, although this often hides a confrontation between elites, or distraction strategies on the part of a dominant sector). Despite the variety of definitions, there is considerable consensus among experts on which leaders have been the most populist (including Trump and those of Brexit). 

In some societies, the phenomenon is more associated with identitarianism, and in others with authoritarianism, which somehow carry more risks than populism itself, which is an ideal complement to these drifts. The experts Funke, Schularick and Trebesch, in an article that is circulating as a working paper of some German universities, are very precise when it comes to quantifying the economic costs of populism. After examining dozens of episodes from the last century to today of populist leaders who presided over national governments, and who more than comply with Mudde's definition, they conclude that these leaders caused a decline in GDP on average of 10%, fifteen years after the start of a populist episode, compared to a plausible counterfactual about what would have happened had they not come to power. In addition, the longer populist leaders are in power, the greater the damage to the economy.

This happened without reducing inequalities (and in the case of right-wing populists, aggravating them). Despite the rhetoric of the leaders, and despite the great diversity of experiences, the most disadvantaged sectors paid a high price for populism. According to these authors, one of the mechanisms that led to this economic cost was the erosion of norms and institutions, which hold back investments, cooperation and risk-taking. Populism practices a constant confrontation with justice (like Netanyahu) or independent institutions (like Erdogan with the Central Bank). This weakens the institutional advantages of democracies, questioning the separation of powers, and undermining the good management of public services (populists such as Trump and Bolsonaro have been especially nefarious managing COVID). The normalization of behaviors previously considered unacceptable, leads to the polarization of societies and legal uncertainty, which affects more seriously the most vulnerable groups. The data provided by these economists on the economic damage of populisms surely underestimate the real damage, since they do not take into account the influence that they exert even when they do not lead the government of a country. When they don't, they can influence other parties with their pressure, or they can be minor partners in a coalition government, or they can exert destabilizing actions from sub-national governments. In composite states, such as Spain and Europe, multilevel government is a double-edged sword: other governments protect from the populist drifts of one of them, but that protection acts as insurance, as a guarantee that others will come to the rescue. We supporters of democracy have to update it permanently so that it does not remain in the hands of saving messiahs. Let us hope that citizens increasingly run away from apparently simple solutions, and that analytical thinking prevails (as Pasqual Maragall asked the youth in the 1990s), and embrace deep and lasting action to improve the living conditions of the popular and working classes.

No comments:

Post a Comment