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HomeNewsA vicious circle?: Populists and their social-economic promises

A vicious circle?: Populists and their social-economic promises


James Woods (U.S. Army Corps of Engineers, South Pacific Border District), Public domain, via Wikimedia Commons

Steven Stillman

Populist leaders often make promises about implementing very specific policies. This typically leads to an oversimplification of public discourse and policies that favor special interest groups and are bad for the economy.

In the political debate of recent years, populism has become an uncomfortable guest, unrelated to political orientation and typically denied by those who invited it in. Political scientists define populism as an ideology or communicative style that divides society into two, on the one hand a corrupt elite and on the other hand a homogeneous people expressing the general will. Anyone who is not part of this people is a potential enemy, either because he or she is directly part of the elite or accepts them as the proper leaders of society. As discussed below in more detail, populist leaders often commit to policies which favor special interest groups and lead to poor economic outcomes.

An important question is whether this recent phenomenon is transitory or is now inherent in modern democracies, and further whether it is dangerous for society or merely a democratic manifestation like any other to be positively valued as a nonviolent and formally constitutionally compliant expression of widespread discontent. Several recent studies have pointed out that a feature of populism in recent years is the tendency of populist leaders to propose to the electorate very specific policies on which they make a strict promise to achieve, for example Donald Trump’s commitment to build “A big, beautiful wall”.

Binding commitments

The negative consequences of these ‘binding commitments’ is obvious. They often lead to oversimplification of public discourse and, in the context of collective choice, impose questionable constraints on the decision-making of politicians. Moreover, there is a tendency to make binding commitments on policies that favor special social and economic interests rather than general ones, as this an obvious electoral strategy. For example, Trump’s commitment to build a wall was clearly aimed at attracting voters in border regions who are poor and traditionally vote for the Democrats. Similarly, his commitment to impose tariffs on Chinese imports was aimed squarely at blue-collar workers who traditionally vote for the Democrats.

Dangerously, populists cannot renounce these commitments even if they become untenable for political or public finance reasons. Instead, when a populist leader fails to fulfill the commitment, he or she demonstrates through symbolic achievements that he or she is moving in that direction, and always blames the failure to achieve the goals on some external reason. Unsurprisingly, continuingly blaming others for one’s failures tends to lead to further discontent and increasing polarization in society.

Another problem that should not be underestimated is the economic performance of populist governments. Recent research by economists Manuel Funke, Moritz Schularick, and Cristoph Trebesch on 51 populist leaders worldwide between 1900 and 2020, soon to be published in the American Economic Review, finds that they are associated with weaker economic performance on average. They estimate that countries with a populist government have 10 percent less growth of GDP over a 15-year period.

Paranoid style of populism

This raises the question why voters support politicians that are typically found to be less competent. Some explain this puzzle by a voter aversion to the betrayal of electoral promises by those politicians judged as more competent by a large majority of the population (see for instance, Rafael Di Tella and Julio J. Rotemberg about the “paranoid style” of populism). Indeed, even though voters may generally prefer more competent politicians, being disappointed by them pushes them toward an incompetent politician, partly because lower expectations are held toward such a politician and thus disappointment will be lower in the case of ‘betrayal.’

Extending this theory, we see a vicious circle that is frankly quite troubling and from which it may be difficult to escape. The circle works roughly as follows: an initial disappointment prompts people to vote for politicians toward whom they have lower expectations; if those expectations are then low enough to be easily achieved, then the politician is considered a success; if, on the other hand, those expectations are not met, voters will gravitate towards politicians for whom they have even lower expectations, and so on. The result would be a progressive reduction in the competence of politicians, fueled by lower and lower expectations.

Populists and shift to illiberal democracy

A final consideration relates to the long-term effects of the type of structural changes that tend to give rise to populism and to which populism, for obvious reasons, has no interest in ‘fixing’. In a paper just published in Economic Inquiry together with Eugenio Levi and Isabelle Sin, studying the consequences of the economic and migration crisis that New Zealand experienced at the end of 1980s and start 1990s, we found that these shocks caused a shift to the right in people’s political preferences over time that persists to this day. Indeed, from studies in political psychology, it is well known that traumas in a country’s social and political life lead to a preference for messages that emphasize a sense of security, which right wing populists promise to guarantee, rather than change.

With this in mind, it seems to us that the Italian (European) evolution of populism from parties that put forward “revolutionary” messages, like the early Five Star Movement and National Front, to parties that espouse conservative ideologies, as Brothers of Italy or Austrian Freedom Party today, is not contradictory to what happened in New Zealand. Nor is it contradictory to the position of Dani Rodrik, who suggests that populism, if it remains in government for long periods, can only lead toward illiberal democracies, where voting rights remain, but minority rights are constantly challenged and the balance of power slips dangerously toward the executive.

In conclusion, recognizing the pervasiveness of populism in today’s politics and its negative consequences for the quality of democracy in Europe should prompt parties that have not yet fully succumbed to populism’s discreet allure to reflect on the causes of populism itself. They should, therefore, go back to discussing how to address structural issues in our societies, such as low economic and productivity growth, worsening inequality, and low social mobility. And how to get political parties back on their feet that produce political culture, participation, and a competent ruling class? Perhaps, we first need a politics that aspires to recover a sense of purpose beyond winning elections and the survival of individual leaders.

Steven Stillman is a Professor of Economics at the Free University of Bozen-Bolzano. His research focuses on empirical labour economics, specializing in the behavior of individuals and households, and the interplay between government policy and human behavior.


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