Image by Sam Greenhalgh.
It is nearly impossible to deny that populism has swept through the world. By the turn of the century, populism was nothing more than a blip on the horizon. Back in 1998, only two European countries had populists in government—Switzerland and Slovakia. By now, however, another nine countries do. Italy, Greece, and Hungary, all important members of the EU, now have prime ministers who rail against the European Union and wish to follow in the way of the UK.
The label “populist” is sometimes used excessively. However, from Marine Le Pen to Donald Trump, from the Hungarian Prime Minister Viktor Orban to the UK independence party, the different forms it takes have several strong commonalities. In political discourse, of course, they offer an anti-elite, anti-immigration platform for voters to follow. Moreover, the economic solutions they propose are also similar. Populist parties are gaining popularity and traditional parties are losing votes. This article will discuss the impacts of populism on the national economy and politics in countries across Europe.
To be fair, the short-run economic impacts of populism are not entirely negative; indeed, some of the policies populist leaders campaign on are sure to spur growth in the short term. Most people would argue, for example, that increasing spending on dilapidated public infrastructure or giving more tax cuts would boost consumption and investment. In this sense, it seems reasonable that voters would choose a populist who promises explosive growth in the next four years over a reformist who proposes to completely overhaul the current system in hopes of future growth and investment.
In the long run, however, populism has the potential to hinder growth, fuel inflation, and result in a loss of competitiveness and productivity. Increased government spending over time reduces taxation, which will eventually take its toll on the Treasury and increase the budget deficit. Although the growth may please the populace, by opting for momentary economic gain the government loses out on long-term economic growth. What’s more, the anti-immigration rhetoric hampers worker mobility and limits the market. Not only are immigrants more likely to boost growth due to higher entrepreneurship rates, but they are also often willing to take jobs that other citizens may be unwilling to take. This allows them to fulfill a crucial role in society. On the other hand, preventing their entry leads to a mismatch between labor and demand. After all, few college graduates would be enticed by the opportunity to work in construction.
Populist governments often also attempt to limit the independence of external agencies such as the central bank or larger governing bodies such as the EU. This, coupled with the unrestrained use of fiscal spending in order to boost growth, often leads to rampant inflation. Without economic advisors to guide them on policy decisions, politicians often run expansionary policies that artificially boost short term growth while curtailing future investment. Trade barriers can lead to the suboptimal use of resources under the pretense of protecting national security interests when those same resources could have been used in more productive capacities.
Now, let’s turn to the political aspect of populism to explore how it has impacted democratic countries. Populism, with its focus on representing the people rather than the elite, offers the potential for more representative democracy. However, populist parties frequently focus on charismatic leaders at the expense of party institutionalization. This can mean that, once in power, populist legislators’ lack of ability or interest in policy-making shifts policy formulation to other parties, the bureaucracy, or even hostile foreign powers, any of which can undermine democratic accountability by obscuring the actors responsible for given policies. If populists in government appear unresponsive to public opinion—having come to power themselves precisely because of mainstream parties’ lack of responsiveness—then countries can be subject to a vicious cycle wherein the candidates promise policies that they rapidly forget about once in office.
Populist officials often lack aptitude for politics and good governance. Even when the populist party elects citizens as political officials, they are usually less likely than mainstream politicians to have received tertiary education or to have had public sector experience. As a result, they often tend to make decisions designed to appeal to the general public instead of instituting policies that are economically and politically sound. For instance, many populist leaders (especially those in the Mediterranean) promise to stem the flow of immigration should they be elected. Not only is this a bad economic decision since it stymies growth, as discussed earlier, it is also a bad political decision because it decreases the country’s standing on the world stage. After refusing to accept any immigrants and single-handedly vetoing an EU motion, Hungary is now branded as one of the least democratic countries in the union.
All this points to the detrimental effects of populism. Although it may temporarily provide citizens with better welfare and more benefits, populism drains away at the democratic nature of the country over time. Although populism has been around for just as long as democracy (ancient Greece was notorious for populists like Pericles), it was only in the last two decades that it has become so widespread in modern society. All the same, although it may seem sometimes that modern politics has been completely overrun by populism, there are also some cases in which populism has been defeated and where the nation has transitioned back to a healthier democracy—these countries ought to serve as models for the world to follow in the future. In my third regional focus piece, I will be examining one particular country’s experiment with populism and how they managed to defeat it.