The Buzz of Populism and Its Pull on the Economy

February 9, 2018

[caption id="attachment_22659" align="alignnone" width="1024"] (photo: Berkeley Review) [/caption]

If you believe the economy can explain the rise of populism, political scientist Cristóbal Rovira Kaltwasser says it’s a bit more complicated than that.

“If you think about populist radical right parties in Western Europe, the party that gets the most votes is in Switzerland. And the economy in Switzerland is running perfectly!”

Populism has become a bit of a buzz word of late, and it was the subject of a seminar at the 2018 American Economic Association’s Annual Meeting. The IMF’s Antonio Spilimbergo organized the panel, which included Kaltwasser and economic stalwarts Dani Rodrik and Raghuram Rajan.

In this podcast, Kaltwasser delves into populism, where populist politicians pin the people against the elite and pressure mainstream political parties to adapt.

Kaltwasser says economists often argue that the rise of populism is related to the so-called modernization losers—those who have been losing due to the globalization process, and conclude that those people are going to vote for populist right parties. But he points out that being a modernization loser is not an objective category.

“Going back to the case of Switzerland, how the hell do we understand 35 percent voting for the populist party? A great part of this has to do with a segment of the electorate feeling that inequality is too high, that immigrants are taking their jobs. Although this is not true, it’s the feeling they have.” 

The data shows that it is relative deprivation, not absolute deprivation, that is the key driver behind those voters, he says. “Those who vote for populist parties are not suffering in the sense that they don’t have food in the fridge, but they feel the system is unfair.”

Kaltwasser notes that the success of populist parties should not simply be measured by the number of votes they get, but by the extent to which mainstream political parties are changing their economic policies because of the pressure they feel from populist parties.

“So it’s both sides of the coin, and this is something that both economists and journalists tend to forget,” he says.

Listen to the podcast for the full conversation: