Lula’s populism may be a long-term project with a high social cost – 01/27/2023 – Marcos Mendes

Lula has adopted a political posture consistent with what the literature calls “populism”, characterized by leaders who claim to be representatives and defenders of the “people”, as opposed to the insensitive and greedy “elite”. A typical example is in statements such as: “Why are people forced to suffer to guarantee this country’s fiscal responsibility? (…) You try to dismantle everything that is part of the social and don’t take a penny from the financial system” .

The “us against them” strategy can be used both by left-wing politicians, who emphasize economic issues, and by right-wing politicians, who focus on cultural and religious issues, as we saw with Bolsonaro.

Populists usually have greater tolerance for inflation and generate unsustainable fiscal deficits. They are nationalist and protectionist, blocking gains from international trade and subsidizing national companies of their choice. Lula’s speeches and actions have fitted this profile.

Analysts question when there would be a change in posture, considering that maintaining this route would result in an economic crisis that would cost Lula and the PT the defeat in the next election. In “Populist Leaders and the Economy” (Funke and coauthors, 2020) they question the idea that economic disasters remove populists from power.

The article analyzes a database with almost 1,500 national leaders, since 1900, classifying them as populist or non-populist. Using well-established statistical techniques, they show that, 15 years after a populist leader, left or right, comes to power, per capita income is 10% lower in relation to a counterfactual scenario, in which there was no populist leadership .

Despite the great and lasting economic damage, it is common for populist leaders to survive in power for a decade or more. On average, they remain in power for eight years, compared to four for non-populists. And they are more likely to return later for new terms.

The option for populism seems politically rational. Even at a high economic and social cost.

An example of the political resilience of populism is in Peronism. Since Perón came to power in Argentina in 1946, the policies he inspired have led to economic decline. Despite this, Peronism has remained the main political force in that country for eight decades. It was reborn after the military dictatorship and survived hyperinflation.

Clientele relationships created political loyalty, becoming machines for generating votes. The blame for economic problems can always be placed on a scapegoat: the IMF, the elites, international imperialism, opposition sabotage, the Central Bank.

If in Argentina the power strategy “worked”, why wouldn’t it work in Brazil? Perhaps this is Lula’s calculation.

According to data from the Maddison Project Database, when Perón came to power, Argentina had the 9th highest per capita income. It surpassed, for example, France, Belgium, Norway and the Netherlands. In 2018, it had dropped to 64th position. Per capita income fell from the equivalent of 57% of the US, in 1947, to 34%, in 2018. Between 1950 and 2018, it grew only 133%, against 354% of the world average: 115th among 145 countries.

The economic and social costs of a populist strategy would be even greater for Brazil. For having started its process of economic destruction from a very high income, Argentina had fat to burn. Despite the long decline, its per capita income is still 46% higher than Brazil’s. We were never rich, they were.

Argentina’s economic and social indicators are much better than ours. They are ranked 47th on the UN Human Development Index, and we are ranked 87th. They have more schooling, less illiteracy, less poverty, longer life expectancy. Inequality in Argentina is high, but lower than ours: among 108 countries in the World Bank database, we are in 6th in the ranking, and they, in 18th.

Embarking on a Brazilian-style Peronism will have a high and persistent socioeconomic cost.

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