🌅 Populism Is Bad Economics

SOURCE

Funke et al. (2023)

WHAT TO KNOW

• Researchers at the Kiel Institute in Germany compiled a comprehensive dataset covering the economic and political history of populist countries since 1900, finding the past 120 years has made one thing clear: populism is distinctly bad economics. The study found both right- and left-wing populism reduces trade, causes incomes to stagnate, and, 15 years after takeover, lowers GDP by an average of 10% compared to non-populist countries.

WHY IT MATTERS

• The researchers found populists weaken economies through two main objectives: protectionism and undermining the law. Populists’ nationalist rhetoric and impotent trade policies hamper growth by slowing the flow of goods and services and erecting barriers to investment. Populists also undermine the rule of law in their effort to stay in power, trampling on norms and insulating themselves with officials appointed through nepotism. This effort weakens the standard indicators of judicial, electoral, and media freedom businesses, institutions, and global trade partners use when deciding where to invest their money.

CONNECT THE DOTS

• The study found both right- and left-wing populism has been on the rise globally over the past three decades, though right-wing populism has skyrocketed recently. Despite their poor economic and legal records, populists are significantly more likely to have two or more terms in office and usually stay in politics for far longer than their non-populist peers. Populism also tends to stick; once a country experiences it, it tends to experience more.