The Political and Economic Theory of Populism

Abstract

The paper presents a cross-disciplinary theory of populism. The first part of the article considers a definition of populism, the main electorate of populist forces, and the economic triggers of protest votes for populist parties. The second part deals with the different types of political populism, the reasons for their actualization in the 21st century, and the institutional consequences of populist power. The demand for populism comes from fragmented social groups that lost out in the social transformations following the neoliberal revolution of the 1970s and experienced the negative shocks of globalization. The protest electorate is organized around charismatic leaders who find 'scapegoats' in the form of traditional elites, migrants, or minorities and claim to speak for the «nation». Populism can contribute to democratization in its early stages. However, once in power, populists tend to undermine the system of checks and balances, leading to a decline in the quality of institutions and a slowdown in economic growth. The third part of the paper assesses the impact of economic populism. It is concluded that the definitional approaches used in academic literature do not meet the requirement of universality and do not imply a sufficient level of operationalization necessary for empirical research. An alternative approach is proposed that develops the «classical» definition of R. Dornbusch and S. Edwards: economic policy aimed at provoking economic shocks in order to increase the political ratings of the authorities and downplaying socio-economic risks. This approach enables economic populism to transcend the ideological framework of «right-left» economic policy, separate it from the economic policy of political populists, and evaluate the populist policies of mainstream parties. The theory of economic populism converges with the theory of political business cycles, but is not limited to elections and focuses on assessing demand rather than supply.