What can a populist social and fiscal policy based on subsidies and handouts lead to with the money of the public finance system in a situation of economic downturn, falling state budget revenues and growing indebtedness of the public finance system?
What can the ever-increasing subsidy- and welfare-based populist social policy and the soft fiscal policy with money from the state's financial system lead to through increased public debt and the printing of national money?
The political objective of the socio-economic policies implemented in this way, including social, budgetary and fiscal policies, is the plan to win the next parliamentary elections by the political party currently holding the reins of power. However, the economic consequences and the impact on the state's finances in the years ahead could be seriously negative.
Such socio-economic policies may contribute to continued high levels of inflation in the coming months.
What other negative effects could arise from such socio-economic policies in the future?
What can the ever-increasing populist social policy based on government subsidies and handouts and the soft fiscal policy implemented with the money of the state financial system, which is raised through the increase of public debt and the printing of national money, lead to?
What is your opinion on this topic?
What is your opinion on this subject?
Please reply,
I invite you all to discuss,
Thank you very much,
Best wishes,
Dariusz Prokopowicz
Dear Prof. Prokopowicz, the question posed is absolutely topical. As economists, we are well acquainted with many examples from the past of the dramatic socio-economic effects of the populist economic policy pursued by the government in order to maintain the power of a certain ruling group regardless of price and international repercussions. A clear example in this case is the economic history of Latin America in the 20th century and of Africa after decolonization. However, in Europe too, we have many examples of many years of expansive fiscal policy and corruption of money by the central bank in many countries. For example, an experiment with the central planning and nationalization of all or almost all economic units under communist rule in the Soviet Union camp. Treating the economy as a cash cow was also present under the rule of fascists in Italy, Germany in the 1930s and 1940s and General Franco in Spain. Currently, the populist way of managing the economy is expanding in the world and it was favored by the greatest pandemic in centuries, which caused gigantic demand and supply shocks as well as the current international disputes and the war in Eastern Europe, in which Ukraine, Russia, Belarus are directly involved, but indirectly already around 60 countries of the world, including almost all countries of the NATO Pact!
If the war in Ukraine, which continues to scale, is not immediately stopped and the defeat of one of the parties to the conflict is unequivocally resolved, this barbaric aggression by Putin's Russia will lead to mass populism in all countries that will be indirectly subjected to the energy war that Putin's dictator declared against Western countries supporting the attacked Ukrainian people in any way. Thus, in times of war, populism, understood as keeping society from protests and riots, is tolerated by financial markets. In contrast, the same policy of financial wastefulness in peacetime is immediately criticized and discounted by financial markets and international organizations such as the IMF and the World Bank. I recommend in particular the following studies:
Christian Houle and Paul D. Kenny, The Political and Economic Consequences of Populist Rule in Latin America, https://www.cambridge.org/core/journals/government-and-opposition/article/abs/political-and-economic-consequences-of-populist-rule-in-latin-america/DF3D269BA3D964CCDED5B07B0EA380B5#
https://www.researchgate.net/publication/307529986_The_Political_and_Economic_Consequences_of_Populist_Rule_in_Latin_America
Jeffrey Sachs, Social conflicts and populists policies in Latin America, https://pdf.usaid.gov/pdf_docs/PNABK770.pdf
Thank you for Your time and best regards
Populists never say why bank can privatize or nationalize the time and no one else can do the same.
The likely effect, if such policies are allowed to continue, is hyperinflation.
I think that it is better to ask the question, How do we work to strengthen the economy in light of adhering to social policies to protect the poor and low-income?
As these policies are obligatory and should not be directed to limit them
In my opinion, the question is wrong. The "populism" term is ambiguous in the context. By Good Governance concept, without sufficient (and effective) public expenses, economy might decline. Latin America is the best example of the fail of NPM (New Public Management) concept. Even IMF and World Bank left definitively NPM and have supported Good Governance concept. Party is over long time ago. If the question is about Crony Capitalism, systemic corruption, and illiberal democracies, I think the formulation would be different. The same ambiguity exists for "Soft fiscal policies" term, as well: In a Globalized world, capital liquidity is extremely high. Investors avoid inappropriately high taxs very effectively, especially if the country is not a safe heaven as Netherlands or Germany. "Hard fiscal policies" could justified only in a well-developed social/welfare state and with a reserve currency, I think. Even in that case, there might be most of exceptions: Start-ups, etc.
Populist social and soft fiscal policies mean different things to different people. A clear definition of how you conceive or view both concepts will enhance greatly the answers to your questions.