Tuesday, January 1, 2019

The three caballeros: on populism and the economy

Cartoonish figures... and Disney toons too

With the incoming inauguration of Jair Bolsonaro in Brazil, the United States and the two largest countries in the Latin American region will have what the press has more or less universally and uncritically referred to as populist leaders in power. It has been very common in the press to compare Trump and Andrés Manuel López Obrador (AMLO) as right and left-wing populists. And although the term has not been applied as often to Bolsonaro, comparisons with Trump abound. Yet, while they do share certain characteristics, I would argue that populism is not one of them. The comparisons that make them all similar are at the end of the day caricatures.

Admittedly populism is a complicated and somewhat fuzzy term. It has a complicated history, and many in the developed world associate it with the old agrarian movements in Russia and the US, and can be seen as somewhat progressive. Alternatively, in Latin America it has been more often than not associated with the rise of Peronism in Argentina, and the affinities with Italian corporatist and fascist ideologies leads many to see it as somewhat reactionary movement.

The economic definition of populism, or what Dornbusch and Edwards called macroeconomic populism, is even more problematic. They basically suggested that running fiscal deficits would fit the bill. That makes the list of possible populist leaders almost all encompassing, and devoid of any relevance. I won't try to solve the question of what a good definition of populism is, but I'll try to explain why to emphasize the similarities between the three might not be completely accurate, and might distort understanding of what to expect ahead. Mind you, on some level, one expects that populism should deliver something for the people and should be the opposite of oligarchic regimes.

Trump and Bolsonaro are clearly associated with conservative ideas while AMLO might be seen as a lefty (note, however, that according to Cuauhtémoc Cárdenas, the son of General Cárdenas and an icon of the left in Mexico, that is not correct; see here, in Spanish). While Trump was brought to power by the votes in the Rust Belt (in Michigan, Pennsylvania and Wisconsin) dissatisfied with Free Trade policies that have affected the region, in Brazil and Mexico a fight against corruption (real or perceived) played a more important role (something stimulated by US interests in LA). In Brazil, during the Workers' Party (PT) administration income inequality decreased (and real wages went up). A mediatic-juridical coup brought down the government, and Bolsonaro represents the continuity with the coup. AMLO represents the dissatisfaction not just with the economic woes of Mexicans, but with the failures of democracy (including the return of PRI, Institutional Revolutionary Party, after two governments of PAN, National Action Party).

In the case of Brazil, the formerly nationalist Bolsonaro has actually appointed an openly neoliberal Chicago Boy to the newly enlarged economic ministry. While Trump and AMLO are less keen on Free Trade, it is unclear that this would be central to Bolsonaro and the opposite might be true (Paulo Guedes, his economic minister seems to dislike MERCOSUL, but not free trade). Also, while Trump trade disputes with China can be seen as part of a reaction to the latter's challenge to American Hegemony, and both that and the increase in military spending might extend for a bit the slow recovery and the bubbleized American economy, the tax cuts and the resistance to any kind of expansion of social spending will imply that very little of the growth trickles down to the less privileged in American society. In the two LA giants, austerity will, most likely if they follow through with their fiscal plans, lead to slow growth. Worse, they will be unable to use the US/China conflict to gain advantage for national strategies of development, but for very different reasons. In Brazil because Bolsonaro (and his fanatic foreign affairs minister) suggest direct alignment with American interests. In Mexico, because the new UMSCA ties the hands of the government in many ways (something that AMLO seemed to welcome, or at least did not think he should fight it).

While Trump has at least promised an expansion of infrastructure spending (and the infamous wall of shutdown fame too), making him somewhat populist in Dornbusch's definition, both Bolsonaro and AMLO promise austerity and balanced budgets. While AMLO wants to raise  raised (h/t Guillermo Matamoros) the minimum wage, there is no indication that Trump or Bolsonaro think a minimum wage should even exist.

Trump for all his anti-establishment rhetoric is no threat to the American oligarchy (Pence is in the pocket of the Koch brothers, if anything else needs to be said). I had suggested a while ago that with Bolsonaro Brazil could follow the path of Mexico or of 19th century Brazil, "an oligarchic state... in which the rents of a relatively stagnant... economy were distributed among a few powerful families, while the vast majority was left out." At least AMLO is trying to break with Mexican oligarchic traditions. It might not be enough. Happy old year!

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