Populism and economic prosperity
mainlymacro.blogspot.com
mainlymacro.blogspot.com
We are also going through an economic realignment as major powers prepare, in different ways, for the possibility of conflict. That shift is causing slowdowns, disruptions, and a chain of related effects that are creating significant economic costs around the world.
In the long run, the most important goal is to prevent war. I believe our leaders are focused on deterrence, reducing dependencies, and building contingencies to make a large-scale conflict less likely and long term economic sanctions more likely.
Ever since Russia invaded Ukraine, I have felt this unease deep down. It also helps explain why political parties that would normally prioritize growth are now making decisions that seem to go against that goal.
Billionaires, that own newspapers and TV stations, are not trying to maximize the size of the economy of their countries. They are maximizing the percentage of that economy that they own, even at the cost of its size.
For people at the top of economic power that set as their personal goal to accumulate as much money/power as possible will tweak the system to that goal. All the economic machine of the country gets fine tuned to move money from the general economy to their own pockets.
It would make sense to set some limit to that transfer of wealth so the economy does not suffer the worst outcomes. But once all institutions are focused on wealth transfer, to grow the economy is no more in their goals.
You may have better health care, better technology, and many advantages than a King from the middle ages. But many billionaires want the absolute power of the King even if we go back to the middle ages.
This dynamic is hard to break, because this concept is so foreign to 'regular' people, they can't spot it, even if it is in front of their own eyes. Their have an ingrained concept of cooperative and constructive behavior in a social context, they derive their sense of dignity in part from it, they learn it is their path to success.
Populism: the idea of the "common people" in opposition to a perceived elite. Frequently associated with anti-establishment and anti-political sentiment.
They describe a scenario that can include greater wealth and plenty by our wealthiest despite a smaller relative percentage of a much larger and more dynamic economy.
Should we take the fallacy of the middle, split the difference, and just behead half the nobility?
Or should perhaps instead engage with the idea, as presented?
> Populism: the idea of the "common people" in opposition to a perceived elite.
The elite certainly act like they believe it to be true. Does that make them populists, or..?
Don't bring elites into every discussion. Inequality causes problems, it's not directly relevant to every thing, like this discussion. Populism is the insanity of the masses.
An increase in populism is a direct result of higher inequality. When people experiences a fair system, populism is rejected. When people lives in an unjust society populist will offer easy but false solutions to problems.
> Populism is the insanity of the masses.
Populism is taking advantage of unhappy masses. Masses are unhappy for real economic reasons.
Generally considered false by most social scientists, definitely oversimplification. Inequality is a contributing factor to the rise of populism, but it is not a direct or sole cause.
For example, Trump voters are better off economically compared with most Americans. Some recent research:
Mutz, D. (2018). Status threat, not economic hardship, explains the 2016 presidential vote. Proceedings of the National Academy of Sciences (PNAS). https://www.pnas.org/doi/10.1073/pnas.1718155115
Norris, P., & Inglehart, R. (2019). Cultural Backlash: Trump, Brexit, and Authoritarian Populism. Cambridge University Press.https://www.cambridge.org/core/books/cultural-backlash/3C7CB...
They are utterly critical to the discussion of political and economic power, and who shapes public discourse.
We aren't talking about spherical cows, here. Ignoring their existence and influence is like ignoring that people need to eat, or that 95% of the mass media you consumed is owned by a monoculture.
> There are obviously countless issues in any analysis of this type, like ... how you ensure you are not getting reverse causality (i.e. bad economic times encourage the election of populists etc) and so on. For those interested in those issues the paper is very readable.
> There are obviously countless issues in any analysis of this type, like how a populist government is defined, how you do the counterfactual, how you ensure you are not getting reverse causality (i.e. bad economic times encourage the election of populists etc) and so on. For those interested in those issues the paper is very readable.
Did you read the paper in question?
>"Mainstream political parties normally claim that populist parties, if they ever got to power, would damage the economy. We have clear evidence that they are right, and right in a big way. A paper in the American Economic Review (one of the top economics journals) published nearly two years ago, looked at the macroeconomic consequences of populist regimes coming to power. The results can be summed up in the chart below (from this working paper version)"
Rest of blog goes on talking about the paper mostly accepting the premise when first paragraphs admit entire premise might be wrong.
I would point out that GDP also has shortcomings in that it does not measure well-being directly (happiness, mental health, life satisfaction) nor does it account for non-economic quality of life factors like political stability, personal freedom, safety or social cohesion.
It's extremely faulty to measure general living standards, a country with expensive healthcare will generate higher GDP while having a sicker population, the same repeats for any essential service to quality of life which is fraught with middlemen, each step in the chain increases GDP. Also for shoddy construction, repairs and renovations will increase GDP.
Using GDP as a proxy for living standards is very poor.
The best-known alternative I am familiar with is HDI, here is a scatterplot vs GDP: https://ourworldindata.org/grapher/human-development-index-v...
The problem lies in that populist governments essentially make irrational decisions just to stay in power (appease the public), which makes most forms of government populist in one form or another and democracy in particular extremely susceptible to it.
This usually manifests as short-term actions with negative long term effects (i.e. taking too much debt, rather than being fiscally sound).
I always wondered if a random-cracy wouldn't be better in the end, just pick anyone that cares to have a position by lottery and have a limited term and basic checks and balances.
At least it statistically makes a mediocre government more likely, not just as an upper bound.
Studies now show that an overwhelming majority Americans don’t believe the economic system is fair
https://www.ipsos.com/en-us/most-americans-think-economy-rig...
some of the problem the Democrats have is that they’re supposed to be a left wing party that is responsive to those kind of concerns but they’ve gotten trapped in a “protect institutions no matter what the cost” mentality which has the cost of losing.
For instance people really want to believe that the recent spike in house prices has been caused by private equity or a monopoly of home builders or some other “other”. I don’t know what the truth is but when so many people feel this way politicians have to do something about it and I can tell you one of the things I learned about activism early on is that if you tell people that they’re feeling the wrong way they will react even more violently against you than if you tell them they are thinking the wrong way.
I guess it varies by country/culture.
Really, did you mean in the USA?
- Hugo Chavez, 1999 until his death
- Lula, 2003-2011 and again in 2023 after spending 2 years of a 12 year sentence in jail (!)
- Ortega, 1985-1990 and 2007-present
- Kirchner, 2007-present
This seems like a pretty decent idea to me. Instead of making it the main legislative body though Id have it like the house of lords. Expected to pass laws passed by the democratic body but with the ability to say no if things get crazy. No duty to engage with politics, they just get paid to focus on whether the laws actually make sense.
People might have different interests and they vote for themselves.
Would that be irrational then? Or just selfish? Or both, or neither?
Most rational people where I live also consider the wellbeing of others and will make decisions (and even vote) to make sure others live well besides them.
Is you defition of rationality basically "maximum selfishness and extraction of benefits from others"?
[1] if not effective in policy
Even the example of Venezuela blames populism and omits the role of sanctions.
On the other hand, when I look at the recent history of the "elites" in the US, they seem (at a minimum) poorly selected or (more practically) flatly idiotic.
So maybe elitism and populism are just two bad choices?
Lower income taxes sounds great today, but greater wealth inequality and no social safety net making wealth meaningless (population level poverty and poor social mobility make life for even the wealthy worse)
The working class doesn't think that way, on the contrary! They have to live careful as small missteps have long term consequences. There are plenty of cases where people will happily vote for austere measures, and they rather think the government should spend less.
For the ultra wealthy, everything is free lunch for them, even if that would mean you will be 10% poorer.
If the 0.01% get 10% richer, and the rest 10% poorer, than that is still a win for them. Hence why right wing populists are a great business case to invest in.
Maybe you're saying it means democracy-when-it-doesnt-select-"elites"?
- people made bad choices through deception or carelessness - populism.
Populism is a type of political messaging. Democracy is a system of government. They’re orthogonal concepts.
You should give the message another try, sincerely. It might come across like that if the environment has become a polarized world, where it is not about policy, but about the tribe one identifies with. I guess you are sick of that, and I am sure the author doesn't mean anything like that.
What he talks are real world consequences if politics doesn't concern itself with policy for the people, but rather focuses on the bare quest for maximum of power, often helped by the 0.01%, by deliberately misleading people, usually to advance the interests of those 0.01%, and so getting the populus to vote against their own interests. That phenomenon is known and measurable, as the article demonstrates.
> We benefited greatly from the fact that the academic literature of recent years has converged on a consensus definition of populism that is easily applicable across space and time and for right-wing and left-wing populists alike. According to today’s workhorse definition, populism is defined as a political style centered on the supposed struggle of “people vs. the establishment” (Mudde 2004). Populists place the narrative of “people vs. elites” at the center of their political agenda and then claim to be the sole representative of “the people.” This definition has become increasingly dominant, and is now also widely used by economists (see Section 2, and the recent survey paper by Guriev and Papaioannou, 2020). Populist leaders claim to represent the “true, common people” against the dishonest “elites,” thus separating society into two seemingly homogeneous and antagonistic groups.
But that isn't how the word is used by the media. Mamdani and Trump are both described as populists, but resistance to elites is hardly in their platform. Trump would never describe the democrats as "elite", and AFAIK resisting elites isn't Mamdani's platform either.
The "elite" is referring to "the establishment"
The "deep state" and the "swamp" represent the establishment. You also have people like RFK Jr whose entire claim to fame is questioning the legitimacy of scientific institutions.
That’s what you’re saying, which is absurd, but what you’re really thinking is that your people are better than other people
I know is not a deliberate motte-and-bailey, it’s just so fully baked in that you can’t be objective about it
Wikipedia has a great definition if you care.
Would you call them elites?
Come on man.
So if you vote based on your happiness and thigs you care about as opposed to voting to optimize the "GDP", then you're a populist voter.
And if you get what you want (instead of increased GDP at all costs) then the government is populist.
And if then you're happy, then you're a fascist.
This article is talking about protectionism not populism. It is continuing the trend of forgetting that protectionism was a core Democratic trait until they abandoned the working class and decided to become super cool technocrats.
And now that Trump, of all people, is championing protectionism, the left side is digging its heels in and cursing one of its former values.