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Victory in the elections in the Ukraine comedian Vladimir Zelensky caused panic in the media: that the President is a populist for sure will be sent to the bottom. The rise of populism around the world considered to be one of the major threats to the global economy. What do statistics say?
In Venezuela there is a local end. Inflation last year reached 1 700 000%, GDP fell by 15%, a third of the population lost their jobs and more than 3 million people fled the country, literally from starvation. But Venezuela is among the top ten in oil production. Direct culprits of the crisis economists call a former President Hugo Chavez's program of "Bolivarian socialism" and its successor, nicolás Maduro. The nationalization of enterprises, the growth of taxation, fixed prices for many groups of goods (for example, the domestic price of gasoline from 1998 to 2007 was 3 cents and was the lowest in the world), restricting the circulation of foreign currencies — all this is slowly but surely brought the country to the edge of the abyss, the impetus to which was the drop in oil prices in 2016. The actions of Chavez and Maduro is a good example of leftist populism, when politicians make decisions that effect the approval "of the masses", but dangerous in the long term. Left populism tends to socialism, and the main enemy sees the financial elite.
On the European continent played its populist drama. UK residents with the filing of the conservatives in the summer of 2016 voted to secede from the European Union. The consequences for the British already have: if in 2015 the country's GDP grew by 2.3%, by the end of 2018 — only 1.4%. The final price Brexit is unknown, because the unknown terms of the country's withdrawal from the EU, but now, in this situation of uncertainty, UK loses more than 500 million pounds each week — due to the fact that an international business, leaves the country, local — loses income, the amount of taxes collected decreases, bonds become cheaper, falling capitalization companies. Brexit is an example of right-wing populism, where politicians are in favor of "national interests". Enemies of the people usually appoint the migrants or the minority.
One great Britain the conquest of populism can not be limited. The values of freedom and even identity of Europe as the original carrier of these values in jeopardy — with the Manifesto delivered at the end of January 30 writers, historians and Nobel laureates, among them Milan Kundera, Salman Rushi, Orhan Pamuk. "After three quarters of a century after the victory over fascism and 30 years after the fall of the Berlin wall, there is a new battle for civilization," write the authors of the Manifesto. Europe is unraveling, they warn, and the may elections to the European Parliament can become "the most horrible elections in Europe since the 1930-ies".
His contribution to the fight against populism decided to make economists. They joined in the project Team Populism (with eng. "The team of populism") and created a "world Database of populism", which includes 40 countries from different parts of the world whose leaders declare their populist beliefs of a wing.
However, here the result of the analysis surprised scientists. "This was contrary to what I expected, — said the head of the Team Populism, Oxford University Professor David Doyle in the report "Effects of populism" in March 2019. Apparently, I was too biased, a lot of years studying what the bad populism."
What did the economists?
are to blame
"populism is a result of the economic failure. Ten years have passed since the last financial crisis showed that the system of economic management that prevailed for the last 40 years, destroyed. Some call the current approach of neoliberalism. Perhaps a better title would be "antipopulist," explains the editor of the economy of the British newspaper The Guardian, Larry Elliott.
"Antipopulist" arranged so that those responsible for the global financial crisis unscathed, while the whole burden of the consequences rests on the shoulders of innocent people." "Antipopulist" arranged so that the fruits of economic growth went to a few, and not many. "Antipopulist" means a change in the balance of forces in favor of the management and treatment of people as salary slaves. So explains his position Larry Elliott. Actually, that's how things are.
the Banks.ru already wrote about the fact that growing the last decade, income inequality increased sharply after 2008, the policy of quantitative easing has led to the longest growth cycle in the stock markets and to multiple increase the welfare of the owners, while wages in Western countries over the last ten years, or practically ceased to grow in real terms, or even decreased.
However, the problems began ten years ago. Elliott notes that the richest 10% of the US population in the period from 1950 to 1980, got 34% of national income. Then this percentage started to rise, jumping in the period of the housing bubble of 2001-2007 to 98%. Literally, 98 cents on every dollar of GDP growth was in the pocket of the richest 10% of Americans.
Economists James Montier and Philip Pilkington, a global investment company GMO in his work "the Underlying causes of the long stagnation and the rise of populism" write that since 1970-ies of the developed countries began to change the priorities in economic policy. These changes gradually weakened the protection of ordinary people, and in the event of crisis has hit them in full force. The first change was the rejection of the idea of full employment. Instead, the economic authorities started to regulate inflation. The second is the desire to make the labor market flexible. The downside of this flexibility was the uncertainty. The result increased the precariat — a class of people with unstable employment (workers with temporary contracts, self-employed, etc.). and unprotected social rights. The third change was brought about by the globalization growth of international flows of people, capital and trade, which has resulted in the loss of jobs among the population in developed countries. Finally, the fourth was the focus on maximizing the profitability of shares is reinvested which, in turn, would lead to growth (as the economy in General and wages).
Under the control of the populists today is more than 50% of the global economy, estimated by the chief economist of Capital Economisc Neil shearing. To a large group of leaders-populists include Matteo Salvini in Italy, Viktor Orban in Hungary, Andrzej Duda Poland, Rodrigo Duterte in the Philippines and, of course, Donald trump. Statistics show that not in all countries the coming to power of the populists automatically leads to economic disaster. There are at least three areas in which politicians from this cohort to improve the situation.
Plus # 1: less poverty
In 2006, located near Venezuela Bolivia came to power, Evo Morales — now ending his third term as President. He became famous similar to Venezuela's anti-American rhetoric, nationalization of the mining industry and other initiatives. Only here since the arrival of Morales to power, the proportion of people living below the poverty line declined from 59.9% in 2006 to 34.6% in 2017. And average GDP growth for the period stands at an impressive 4.9 per cent.
what is the difference between these two countries? The point is not how to get money (both countries are large exporters of natural resources), and how to redistribute them, involves a group of scientists in Team Populism, combined to study the influence of populism on the economy.
Morales made a bid on poverty reduction "from below". Millions of Bolivians receive cash benefits — primarily this applies to the elderly, pregnant women and low-income families with children. Chavez decided to help the poor the "top" fixing inadequately low prices for some consumer goods. There was a case when he went to the store, crossing out the numbers on the price tags on Chinese refrigerators and drawing a new, "fair", in his opinion, price.
the secret of the success of the Morales poverty reduction also lies in public expenditure on basic infrastructure, says economist on development at the UN Ernesto Perez. According to his calculations, in 2005, Bolivia has spent on schools, hospitals, power plants, electrification and irrigation 629 million dollars, and in 2018 — to over 6.5 billion dollars, increasing investment by more than 10 times. Today these construction projects create direct jobs, but, more importantly, tomorrow they will change the country's economy, the economist said. "In scale it resembles the program of post-war reconstruction of Europe, but it occurs in Bolivia, 70 years later," explains Perez.
The study Team Populism shows that the correlation between the rise to power of populist, especially the left, and the reduction of income inequality has "pretty big effect". In addition to Bolivia, he clearly manifested itself, for example, in Ecuador under Correa. Poverty reduction, though on a smaller scale, it was typical for populist centrist or right-wing.
From the generalization of the experience of all countries, the researchers found that the role played by the introduction of a minimum wage and protective measures in the labour market. And definitely reducing the gap between rich and poor was not the result of a progressive tax instrument, is considered a classic for solving such kind of problems.
Plus # 2: the growth of the economy
Another interesting effect of populism found the chief economist at Capital Economisc Neil shearing. He studied the economy of Poland, Hungary, the Philippines and the United States, where he came to power right-wing populists, and saw a significant acceleration in economic growth two years later. One of the reasons the economist points out the weakening of fiscal policy that made the new leaders. As well as in the global trend of low debt rates, which, however, populism is irrelevant.
the growth of the economy can say in the case of Portugal, adds the analyst investitsionno-the financial company "solid" Vadim Kravchuk. "The presidential election in 2016, won a follower of the last leader, that is, formally it cannot be considered a populist, but his subsequent decisions fall under such criteria, explains Kravchuk. Instead of reducing costs it was decided to increase their wages were paid in full, increased social support, and utility rates for beneficiaries decreased. As a result, economic activity has increased markedly, improves business confidence and grows consumption, shows the latest macroeconomic report. By the end of 2017, GDP gained 2.8%". Significantly, in 2016, the GDP grew only by 1.9%. Moreover, the economy of Portugal in 2017, ahead of the EU economy (which grew at 2.5%) for the first time since 2009. In 2018, the growth of the European economy has slowed, but Portugal again managed to score above average: GDP growth was 2.1% against the pan-European growth of 1.9%.
"I Think it's fair to admit that if there are no acute problems, the populists coming to power is unlikely to cause immediate economic collapse, says shiring. Short — term risks often exaggerated: in reality economic growth in the majority of cases, is accelerated".
Plus # 3: out of the crisis
Some economists, looking at all these examples lead counterargument: perhaps a positive thing is, but only for a short time. In the long term populism carries a mere evil. But is it?
the fact that economic populism works, and "long-term", says the Professor of international political economy school of Government John F. Kennedy school of government at Harvard University Dani Rodrik. He cites a who came to power in 1933, American President Franklin Roosevelt and his economic policies of "New course" undertaken to bring the country out of the great depression.
Initiative Roosevelt often ran into the resistance of the judiciary who did not like his first intervention in the economy. For example, the courts have blocked the new law on the introduction of the minimum wage. To reverse the situation, Roosevelt increased the size of the Supreme court to dilute the composition of their supporters. He was under constant criticism for what were called corporations and banks "economic royalists", having in mind that they monopolized the economy at the expense of ordinary people.
although the final exit of the great depression, America owes the Second world war, before Roosevelt's policies had led to its results. In 1932, US GDP fell by 12.9%, and in the first year of the reign of Roosevelt the drop fell to -1.2%, and by the end of 1939, the economy grew by 8%.
the Intervention of the President in areas which must be independent from him, can have a positive effect in crisis, concludes Rodrik upon review of the "New course" Roosevelt.
the Cons: foreign investors withdraw, and corruption remains
But it would be unfair to ignore the negative phenomena in the economy of the country, where came to power populists. The main one is the risk of reductions in foreign investment. "Once a foreign company makes investments, it is, in fact, is in thrall to the whims of the host government, explains Dani Rodrik. Promises were made to entice the investor... replaced with a policy that begins to shrink in favor of the state Treasury or domestic companies. But foreign investors aren't dumb: and for fear of such consequences, they invest elsewhere. And the economy of the country is deprived of capital and experience". Major oil companies SonocoPhillips and ExxonMobil left the country, filing lawsuits against Venezuela 30 billion and $ 15 billion respectively.
Populism did not lead to the reduction of corruption, although often the election campaign of the candidate-the populist goes under the slogan of struggle against corruption, draw the attention of the researchers Team of Populism.
it's Possible the predecessors of the current leaders-populists were so deaf to the aspirations of the people that worked the low base effect and any decision now ceased to be a uniquely bad. Perhaps populists are evolved from the sample of dictators of the 1930s politicians, who can more effectively consider the interests of "ordinary citizens" without destroying the economy and unleashing of the world wars. Anyway, the term "populist" in reference to the head of state is rapidly losing its definitely a negative connotation. In any case, from the point of view of the economy.
Milena BAKHVALOVA, Banki.ru
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