European populism: Is there a common economic strategy?

To understand how right-wing populism, often characterized by rhetoric nationalistpolicies anti-immigration and protectionist tendencies, it is important to understand their political roots.

In current political discourse, the term populist immediately indicates an anti-establishment bent, and if by system we presume to be the liberal parliamentary democracies of Europe, then the populist narrative must, by definition, criticize the current order.

As summarized Branislav Slantchevprofessor at the University of California in San Diego, for ‘Euronews’: “Populism always pits the ‘people’ against some nebulous ‘elites’ and, therefore, can use all kinds of economic ideas depending on the definition of the grievance or of the enemy. This means that there is no kind of populist International coordinated with a linked economic strategy.

Populist movements thrive when they oppose liberal policies

However, in the context of 21st century Western Europe, having a common enemy in terms of a free market economysocial subsidies, immigration systems aimed at attracting foreign labor and liberal democracy point to separate, but similar, populist movements that oppose the status quo.

As Slantchev added: “In principle, populism is implacably opposed to liberal policies, and therefore the pattern of economic growth is going to reflect that.”

In the Europe post-communistwhere populist regimes have already taken root in some places, such as Hungary either Serbiathe common enemy is different from that of the established democracies and developed economies of the western part of the continent.

Đorđe Trikošstrategic communication consultant and co-founder of the think tank Libekexplains for ‘Euronews’ that “unreformed post-socialist economies increase the likelihood of populism emerging in their respective countries and populism itself is less likely to survive with economic liberalization.”

Therefore, a general explanation of the success of populist movements in Europe post-communist may be the incomplete liberal economic reforms, which were subverted during the liberal or social democratic administrations that preceded their populist competitors.

Hungary and Serbia share characteristics

If we take a closer look at some of the long-standing populist regimes of the post-communist Europe, we see some common points. Both Orban’s Hungary and Vučić’s Serbia share open economieslargely oriented towards attracting foreign direct investment, while building a clientelistic socio-political order to support their permanence in power.

András Tóth-Czifrascholarship holder Eurasia Program of the Foreign Policy Research Instituteoffers ‘Euronews’ a detailed explanation of Hungary’s economic system under a populist regime:

“The government’s policies, while undoubtedly generating economic growth over the past 14 years if you look at GDP figures, have reduced Hungary’s long-term economic prospects. This is a economic growth based on cheap labor, cheap energy, a degradation of labor rights and a small number of large export-oriented investment projects, which often receive political support, rather than knowledge-intensive industries and domestic consumption.” .

If we compare the above statement with that of Trikoš about the current Serbian economic model, a clear pattern emerges: “The Serbian economy is based on rent-seeking, in subsidized jobs without much organic development, and in investment projects ostentatious that show strength but They don’t provide any real value to society.”

Hungary and Serbia go against the populist trend

Both Hungary and Serbia have enjoyed steady, if not remarkable, economic growth under their respective populist regimes and have not resorted to the supposed protectionist model. Dušan Pavlovićprofessor at the University of Belgrade, highlights this argument for ‘Euronews’ in the case of Serbia:

“The country enjoys steady growth, controlled inflation and balanced public finances, with a budget deficit of only 2.2% of GDP and public debt less than 60% of GDP. Furthermore, Serbia’s relationship with the IMFwhich is likely to extend beyond September 2024, underscores macroeconomic stability.”

No increase in living standards

This certainly differs from Western European populist movements, which typically prefer protectionist measures, at least to some extent. On the other hand, the populist regimes of Hungary and Serbia have failed to translate economic growth into an increase in the standard of living of the majority of their citizens, since growth itself is based on a mixed model of government subsidies for the foreign investors and the disenfranchisement of the local workforce.

One of the factors that contribute to stifling economic growth under a populist government is the systemic corruptionwhich is an intentional product of the construction of a political loyalty system by providing economic gains or favorable market positions to capitalist actors dedicated to the regime.

A capitalist class of power loyalists

Tóth-Czifra puts this into perspective with the example of Hungary: “One of the stated objectives of the Orbán government was to create a national capitalist class; This objective was achieved, in a certain way, by enriching the business actors with connectionspolicies through state orders and EU funds, as well as by involving them in foreign investment agreements facilitated by the Government.”

Trikoš assesses that “systemic corruption is the main explanation for the strength of populism in Serbia”, while Pavlović adds that: “The incumbent Serbian president seems to have found a clientelistic formula to tolerate certain levels of corruption as long as it does not obstruct progress economic”.

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Türkiye benefits from policy change

If we compare the data on the economic performance of the populist regimes of Hungary and Serbia with that of the case of Turkey, conclusions could be drawn on the question of whether a populist regime must always adhere to a coherent economic strategy.

Timothy Ashassociate member of the Russia and Eurasia program of Chatham Househighlights for Euronews the fact that the populist Erdogan regime has made a fundamental change in its previously ideological and low interest rate central bank policy: “The 180-degree change since the elections last May and now the best political trends in Turkey: a return to orthodoxy.”

Populist regimes encourage corruption

This is an important statement as it demonstrates how populist regimes build economic and financial models based on necessity if an economic crisis threatens political stability, which in certain cases can contradict their own political narratives.

That said, the right-wing populist regimes show a tendency to create corrupting socioeconomic structures and clientelistsin order to prolong his stay in power indefinitely, although not dismantling both the fundamental rules of the democratic system and those of the free market economy.

In conclusion, although populist regimes are ideologically opposed to liberal democracy, they are not obliged to implement protectionist economic strategies.

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However, all populist regimes shape their economic and political model so that encourage great corruption and ultimately deprived of their rights to the people, whom populists have come to power to protect from supposedly evil elites.

Furthermore, declared populist policies can negatively affect long-term economic growth by limiting diversification, innovation and free enterprise, especially in the areas of small and medium-sized businesses.