Do populists redistribute more?

Picasso, Santiago; Machado, Maximiliano; Rius, Andrés (2019). 'Do populists redistribute more?' Paper presented at the annual conference of the HDCA 2019, London, UK.

Abstract

In the last several years populism has acquired more relevance not only in the press, but also in academic circles. Because of the emergence of new leaders like Trump, Le Pen or Bolsonaro, populism has positioned itself on the contemporary political agenda once again. This phenomenon is not new, as there have been populist waves since the first half of the twentieth century (especially in Latin America with Perón in Argentina or Vargas in Brazil). We show that these waves are a kind of Polanyi´s pendulum between (Stewart, 2010 and Polanyi, 1944). In this case, it is not between the state and the market, but between a traditional political system and a populist style of politics that is disruptive to its opposite pole. An expansive literature has proliferated on the general topic of populism that has lately pursued discursive conceptual and empirical strategies, landing on ideational definitions of the phenomenon. In the economic studies of populism, the most frequently used concepts are not the most analytically solid. Though, as we argue in the paper, the economic studies of populism tend to use problematic definitions in most of the cases, defining the populism trough the policies carried out by the rulers. The most frequent reference is Dornbusch and Edwards (1991), in which the populism implies emphasizing growth and income redistribution, downplaying the inflation risks, the financing of the deficit and the external relationships. This circular definition makes impossible to analyze the effects of populism, as the economic policies are tied to the definition. Instead, we reject these types of definitions, opting for an ideational approach. Moreover, populism is a polysemic concept -it varies between authors and areas of study-; we have to choose and use the Mudde & Kaltwasser (2013) definition where populism is based on the moral distinction between “the people” and “the elite”. The authors differentiate the inclusionary and exclusionary populisms, where the first is usual for most of Latin American populism with a radical left programmatic position, while the second is predominantly a European phenomenon with a radical right agenda. Little is known about the effects of populism on the economy unlike its causes. This article tries to address this fact, filling the existing gap in the economic literature. Can we say that populism is generally good or bad for human development? And, can we say that this oscillation of the pendulum allows generating the capacities to reach that development? We elaborate a model to disentangle the effects of populism on a bunch of socioeconomic variables like inequality, development, growth, inflation and democracy participation. To our knowledge, this paper is unique in the literature on populism, since it ventures into the study of the effects of populism worldwide, in more than two decades, with more than 100 countries and using an adequate definition for the empirical distinction populism and other regimes. Using our own database based on information from the World Bank, the Interamerican Development Bank, the Interamerican Center of Tax Administrations, and merged with a database created by Kyle & Gultchin (2018), the SWIDD (see Solt, 2016) and the Polity IV, we study which have been the effects of populism in the economy and democracy between 1990 and 2018. Then, we get a global panel of countries where 46 leaders in the world were identified as populists in 33 countries. Those that did not have populist governments in the period were also included in the panel, so it extends to more than a hundred countries. We exploit the multidimensionality of the panel, adopting both, fixed and random effects models. Controlling for country and time we are able to extract the effects of populism in a bunch of variables: growth, inequality (on income and market), inflation, democracy, human development and fiscal policy. The control variables include natural resources, political orientation, share of votes obtained by the candidate, popular support and the lags of some of the dependent variables mentioned above. There is not an evident expected effect of the populism in all the variables exposed, but some populist rulers have managed to affect such variables in a strong way. For example, Carlos Menem, developed a set of policies to control the inflation that achieved to reduce the Argentinian hyperinflation at the 1990s. The average growth rate between populist and non-populist governments in South America are not very different (3.39 and 3.59 respectively), but the first have a higher standard deviation (3.85 and 2.29 respectively), with governments like Hugo Chávez, Cristina Kirchner or Fujimori that achieved both, growth rates over 10% and negative ones. However, this is not common in non-populist governments. Trough estimations of fixed and random effects models we show that populism has implications in economic and fiscal policy. The preliminary results show that populists behave differently than non-populist governments. If we can avoid creating confusion, we could say that there´s not a single way of being populist and it isn´t sufficient to be non-populist to pursue the “right” combinations of policies. However, there are also differences between both types of populisms. The inclusive governments present a greater volatility in the behavior of macroeconomic variables with respect to the excluding ones. It is also found that being populist is not determinant to have higher levels of growth, nor lower levels of inflation. In term of capabilities, we show that populism let fewer participation than no populist government with a major effect in inclusionary type of it. These results are novel because they contradict the economistic definition cited above and used in many works. It also provides empirical evidence on what are the effects of populism on the economy from a development and capacity perspective. As the effects of populism have not been studied broadly, unlike its causes, this article may represent a novelty in the field, expanding the knowledge barrier to look for new features on the economics of populism. The results shown are preliminary, as the research still in process.

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