The Political Economy of Populism: An Introduction

This book explores the interplay between identity, the economy and inequality to explain the dynamics of populist votes since the beginning of the 20th century. It also discusses the political and economic implications of populist governance using data on populist incumbencies and linking it to historical data on the macro economy and democracy.

Populism emerges and gains traction when political entrepreneurs exploit underlying identity conflicts for political gains. Such power plays are more likely to succeed in times of economic transformations because economic shocks produce a variety of distributional consequences. As the distributional consequences of both economic distress and economic growth typically favor the elite over the poor and the lower middle class, economic shocks usually sharpen the underlying identity conflicts between the groups. The book provides evidence of significant differences in the ways fiscal and monetary policies are conducted by incumbent populists in Latin America, on the one hand, and in Europe and the OECD, on the other hand. In Latin America, policies fit the classic populist paradigm. In the developed world, they tend to be far less destructive.

The book draws from the most recent political science, economics and other social science literature, as well as the most recent historical data, to explain the long-term causes and consequences of populism. In conclusion, the book suggests avenues through which a 21st century social consensus can be built, so that our society can avoid repeating the mistakes that led to wars and failed economic experiments in the 20th century.