Populism is everywhere
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Populism is back in fashion. From Victor Orbán in Hungary to Rodrigo Duterte in the Philippines, from Geert Wilders in the Netherlands to Donald Trump in the United States, from Benjamin Netanyahu in Israel to Recep Tayyip Erdoğan in Turkey, voters increasingly prefer leaders capable of connecting with people who feel ignored by the powerful elite. It is them and only them, populist leaders claim, that stand between the common man and a ruling class that does not have – and never will have – their best interests at heart.
Though populism is as old as politics itself, the ideological origins and policy implications have evolved. Concerns about the welfare of ordinary people used to be the home of the political left, for example. When the economists Rudiger Dornbusch and Sebastian Edwards studied populism in the previous century, they understood it to be the pro-redistribution policies of the Latin American populist movements dating back to Juan Peron in Argentina and Getúlio Vargas in Brazil. Advocating for state intervention to improve the lives of the working class, these ideas live on in the more recent Latin American examples: Nestor and Christina Kirchner of Argentina, Luiz Inácio Lula da Silva in Brazil, Hugo Chávez of Venezuela, Evo Morales from Bolivia, and so on.
But today populism has moved from a narrowly defined (if unsuccessful) set of economic policies to something more universal and … divisive. Think of it, scholars now explain, not as an ideology of the left but one that splits society into two clear groups: the ‘virtuous people’ and the ‘corrupt elite’.1 Unlike its association with redistributive policies, it is now characterised by three things: First, it assigns moral authority over economic or social issues, arguing that ordinary people are morally superior and, thus, rightfully should hold power. Second, it views the electorate as entirely uniform, leaving no room for diversity or minority rights. Third, this us-versus-them mentality encourages populists to ignore traditional checks and balances, which they claim are tools of the corrupt elites.
One consequence of this stance is that it generally clashes with the principles of liberal democracy. The economic historian Barry Eichengreen notes, for example, how populism today often goes hand-in-hand with authoritarian practices, blending anti-elite sentiments with harsh security measures and anti-immigrant nationalism.2 Even though this might appear like a cultural backlash, its roots might ultimately be economic, writes Dani Rodrik in a 2017 working paper:
The elite are separated from the rest of society by their wealth. The minority is separated by particular identity markers (ethnicity, religion, immigrant status). Hence there are two cleavages: an ethno-national/cultural cleavage and an income/social class cleavage. An important implication of this reasoning is that even when the underlying shock is fundamentally economic the political manifestations can be cultural and nativist. What may look like a racist or xenophobic backlash may have its roots in economic anxieties and dislocations.
A paper published in the December 2023 issue of the American Economic Review shows just how dramatic this rise in populism is.3 They applied a modern, broad definition of populism to analyse political leaders from 1900 onward, categorising nearly 1,500 of them as either populist or non-populist. Their research involved reviewing several hundred books and articles, totalling more than 20,000 pages from the social sciences, to determine if a leader’s political approach aligns with key populist traits, such as focusing on the common people and opposing the elite. This methodology allows them to differentiate between left-wing and right-wing populism and maintains a strict standard for labelling someone as populist.
What do they find? First, populism within central governments peaked in 2018, the culmination of a 30-year upward trend, as shown in the figure above. Second, populism tends to recur within the same countries, as seen in Italy and Mexico, where previous experiences with populist leaders make future populist regimes more likely. Third, many populists gain office following economic downturns such as the Global Financial Crisis of 2009. Fourth, populists often remain in power for extended periods, typically lasting twice as long as non-populists, with an average tenure of eight years compared to four. The exit of populists from power rarely occurs through conventional electoral defeats; instead, their departures are frequently marked by significant political upheaval, including scandals, constitutional crises, or even more dramatic events like coups and tragic accidents. Lastly, the patterns of how left- and right-wing populists come to power, stay in power, and leave power are remarkably similar, and their representation over the last two decades is roughly equal.
It is not just financial crises that explain the rise of populism over the last three decades. In a 2022 Journal of Economic Literature review paper, Sergei Guriev and Elias Papaioannou note two additional factors that have played a prominent role: trade and technology. It is especially the manufacturing industries of rich countries that have been affected by globalisation and automation, providing fertile ground for the rise of populism. For example, Donald Trump garnered strong support in the Rust Belt, Brexit was favoured in manufacturing towns of the Midlands, and Marie Le Pen of France’s National Front succeeded in areas experiencing an industrial decline.
Numbers support this. The U.S. manufacturing sector lost six million jobs, a third of its workforce, from the late 1990s until 2008, even as the economic value added doubled. One 2018 study shows that an increase in jobs at risk of automation was linked to an increase in Trump’s 2016 vote share.4 The same authors did a counterfactual analysis to show that a reduction in the impact of automation by just 10% would have led Wisconsin to favour Hillary Clinton, leading to her winning the presidential race. Machines, not money, hold the keys to political power.
Similar results can be found in Europe. As I explain in this 2017 post, one study using European data shows that the more individuals are exposed to competition from imports and immigrants (the higher their economic insecurity), the more they vote for populist parties. One more recent study used data from 63,417 electoral districts across all EU countries in the 2019 European Parliament elections to demonstrate a higher voting rate for anti-EU parties in regions of industrial decline.
What are the economic consequences of electing populist leaders into office? The authors of the AER paper use several methods to come to the same conclusion:
Our analysis points to significant medium- and long-term economic costs of populism. Over 15 years, real GDP per capita is 10 percent lower compared to the nonpopulist counterfactual, i.e., compared to a synthetic control economy that does not receive a populist ‘treatment’. Declining economic fortunes under populists can be observed regardless of the region, era, and also ideology. The GDP decline is primarily driven by left-wing populists that emphasize distributional and social issues, but it is also observable for right-wing populists, whose rhetoric typically focuses on cultural and religious topics.
One unexpected (and surprisingly overlooked) aspect of this research is the scarcity of populist leaders in Africa. The AER study classifies only one leader – South Africa’s Jacob Zuma, in office from 2009 to 2018 – as a populist leader. No African country is mentioned in the 82-page JEL overview of the political economy of populism. There may be several reasons for this. First, and most frustratingly, it may simply be that a lack of comprehensive data for most African countries makes it difficult to apply the same analytical frameworks used in other regions; the AER study only includes two African countries, for example, Egypt and South Africa.
More fundamentally, though, the impact of globalisation on African economies may be inherently different from that in the West. While deindustrialisation and the displacement of manufacturing jobs by automation are key drivers of populism in developed countries, many African nations have not experienced industrialisation to the same extent. This means the economic grievances driving populism elsewhere – stemming from job losses in sectors like manufacturing due to global trade and automation – are less relevant.
African labour markets are also characterised by a high proportion of informal employment, which may buffer the direct impact of globalization and automation seen in more formalised economies. Another reason is that the narrative of globalisation and its discontents may not resonate in the same way within African political discourse. Populism in Western contexts often leverages a nostalgia for a lost economic past – usually a well-paying industrial job market. In contrast, African political narratives might focus more on issues of development, with less emphasis on the nostalgia for industrial jobs that were never there to begin with.
The upcoming South African national election is an opportune time to reflect on the lessons from populism around the globe. Leaders from various political parties, on both the left and the right, frequently use rhetoric that mirrors the populist themes of ‘us’ versus ‘them’. Were these leaders to be elected, or be part of the ruling alliance, the evidence suggests that we can expect further delays to reviving economic growth. It is ordinary South Africans, rather than the ruling elite, who are likely to bear the heaviest burden of such an outcome.
An edited version of this article was published on News24. Support more such writing by signing up for a paid subscription. The image was created with Midjourney v6.
Guriev, Sergei, and Elias Papaioannou. 2022. ‘The Political Economy of Populism.’ Journal of Economic Literature, 60 (3): 753-832.
Eichengreen, Barry. 2018. The Populist Temptation: Economic Grievance and Political Reaction in the Modern Era. New York: Oxford University Press.
Funke, Manuel, Moritz Schularick and Christoph Trebesch. 2023. ‘Populist Leaders and the Economy.’ American Economic Review, 113 (12): 3249-88
Frey, Carl Benedikt, Thor Berger, and Chinchih Chen. ‘Political machinery: did robots swing the 2016 US presidential election?’ Oxford Review of Economic Policy 34, no. 3 (2018): 418-442.
Massively interesting!!