The debate on populism has recently been revitalized by the rise of new political actors, especially in Latin America and Europe. Despite the renewed interest, the concept of populism remains vague, complicating any empirical investigation on its political and economic outcomes. Still, all populist politicians strongly emphasize the defense of the common man’s interest against those of privileged elites, suggesting that such governments will have notable implications for economic policy and institutions. Using a non-partisan indicator of populism, this paper seeks to assess the impact of populist policies on institutional change, as measured by the economic freedom of the world index. Results indicate that populist governments actively reduce economic freedom. In particular, they erode legal security, reduce freedom to trade, and tighten economic regulation. Findings expand on previous research with empirical methodology, questioning the importance of ideological orientation in some definitions of populism.
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The structural definition also closely links populist regimes with dependency theory and import-substitution industrialization (Cardoso and Faletto 1979). The latter was an especially popular development strategy among Latin American governments from the 1940s until the late 1970s.
Content analysis is defined by Neuendorf (2011) as “a summarizing, quantitative analysis of messages that relies on a scientific method, including attention to objectivity/intersubjectivity, a priori design, reliability, validity, generalizability, replicability, and hypothesis testing”. Among others, it has been successfully used in the analysis of the manifestos of the Dutch political parties by De Vries (1999), British and Irish political parties by Laver and Garry (2000), and Argentinean presidential speeches by Armony and Armony (2005).
Rooduijn and Pauwels (2011) are able to quantify the degree of populism in party manifestos, confirming descriptive analysis in a comparative European setting. They further demonstrate that there are no significant differences between a classical- and an electronic analysis, which substantially raise the confidence that one can place in reliability.
This is not a trivial matter, because the selection of who is a populist, and who is not, can be a highly arbitrary affair. As discussed above, earlier research on populist governments does not sufficiently address this potential problem of selection bias.
To empirically quantify their discourses, Hawkins (2009) uses a form of content analysis from educational psychology, known as holistic grading. This method establishes a guide for discourse evaluation and employs anchor texts to exemplify different scores in the grading procedure.
The resulting populism index therefore fulfills the general requirements for content analysis, as laid out by Weber (1990): objectivity, systematic, generality, reliability, and validity. In a recent article, Rooduijn and Pauwels (2011) also agree that the results obtained by Hawkins (2009) are valid and reliable.
The chain-linked version of the EFW Index is used, because it is a more accurate measure across time.
The Cheibub et al. dataset covers the period between 1950 and 2008. In joint work with Christian Bjørnskov we have updated the dataset to 2011 and ensured that all regime changes pertain to the correct year such that regime changes in the latter half of year t are coded as taking effect in year t + 1.
Especially the BCIA provides detailed information on the political parties of the politicians covered.
In the case of popularly elected presidents, we take the share of the popular vote from the first round of the last presidential election. In the case of prime ministers, we take the share of the popular vote that the corresponding party received in the last legislative elections.
An exception was only made in the case of Carlos Menem. This is due to EFW data, which before the year 2000 is only available for 1990 and 1995. Menem was removed from power in December of 1999, so attributing the year 2000 to his term in office, is certainly justifiable.
EFW data between 2000 and 2012 is available on an annual basis. Data for 1985 is attributed to 1985–1989, data for 1990 to 1990–1994, and data for 1995 to 1995–1999. This partly affects the terms of 3 chief executives (Leonel Fernández, Göran Persson, Tony Blair), and further affects the total term of 3 more (Carlos Menem, Alan García, Alberto Fujimori).
In general, the sample contains 18 Latin American countries, 8 European countries, 3 Asian countries (without Russia), 3 African countries, and 2 North American countries (without Mexico). According to the current World Bank country classification, there are 7 High Income countries, 15 Upper Middle Income countries, 10 Lower Middle Income countries, and only 1 Lower Income country.
Only 2 countries (Iran, South Africa) are autocratic during the entire observation period, while Peru exhibits an autocratic and a democratic shift.
These are not shown, but available upon request.
Marginal effects are calculated according to Brambor et al. (2006).
The EFW Index area 3 is measured by combining 4 individual variables. These are: Money growth, Standard deviation of inflation, Inflation: most recent year, Freedom to own foreign bank accounts.
These results are not shown, but are available from the authors upon request.
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The authors would like to thank the following persons for making helpful comments on earlier versions of the paper: Niclas Berggren, Andreas Bergh, Christian Bjørnskov, Sebastián Coll, James Gwartney, Kirk Hawkins, and two anonymous reviewers.
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Rode, M., Revuelta, J. The Wild Bunch! An empirical note on populism and economic institutions. Econ Gov 16, 73–96 (2015). https://doi.org/10.1007/s10101-014-0154-5
- Economic institutions
- Economic policy