Populism

Question 1

What is populism?

Answer 1

Political strategy

Focus on the “people” versus the “elite”

Left vs. right wing populism
- Left wing: Typically a focus on economy –> campaign about financial elites and pro-redistribution
- Right wing: Typically a focus on cultural aspects –> campaign about cultural elites and ethnic/religious minorities

There has been a rise in populism in recent years
- Mainly in Europe (right wing populism)
- Latin America (where there is mostly left-wing populism) has been relatively stable

Question 2

What are the economic determinants of populism?

Answer 2

Effect of import competition/globalization shock
- Correlation between the labor market effect of import competition/globalization shock (lower wages, higher unemployment etc.) and the share of “Leave votes” for Brexit.
- The import shock is a good variable to measure causality –> Because how badly you will be hit by the import shock is kind of predetermined (it’s about what your main type of business is in different regions etc. - often big industrial/manufacturer societies are hit hard by this). So the teacher would argue this a somewhat causal relationship and not just a correlation.

Effects of increased automization
- If the sector you work in are exposed to many changes in regards to robot automatization taking away jobs etc., then you are more likely to vote Trump

Effect of unemployment
- In regions where unemployment rose more strongly overall populist vote shares have increased.

Question 3

What are the economic effects of populism/a populist leader?

Answer 3

Effect on GDP
1. Populist countries are doing worse in terms of GDP growth
2. The negative gap is biggest for the left-wing populists

Effect on inequality
1. No significant effects
2. It does not look like the people benefits from populist leaders

Effect on inflation and debt
1. Higher inflation and higher debt

Effects on institutions
1. Judges become less independent
2. Elections become less free
3. Media becomes less free