Petőcz Kálmán (szerk.): National Populism and Slovak - Hungarian Relations in Slovakia 2006-2009 (Somorja, 2009)
Zsolt Gál: Argentina on the Danube - Populist Economic Policy as the Biggest Enemy of Sustainable Economic Growth
Argentina on the Danube... of the majority (Olson, 1965). Most interest groups are well organized and focus on concrete areas in which they strive to bend the rules in their favour that subsequently bring significant and concentrated profits to (a limited number of) their members while only slightly increasing the costs borne by a large number of unorganized majority members. Even in most developed democracies, the greatest problem is that particular interests of too many lobby groups tend to form a cobweb around government, paralyzing effective resource allocation, hindering economic growth and causing the economy to operate below its potential. Practically since the dawn of modem democracies, political and economic thinkers realized that this form of government - even though they considered it the best of available options - may not guarantee effective economic policy that will secure sustainable development. The greatest problems of democracy stemmed primarily from the model of majority voting but also from existence of interest groups. The single most important challenge central European democracies are facing today is the phenomenon of populism. The goal of the present study is to analyze its economic pillar, i.e. populist economic policy. I believe that its principal vital force is continuous demand for such policy on the part of voters, which is closely related to the already described basic problem of the democratic system of government, i.e. majority voting. The opening part of the study defines populist economic policy and compares its Central European modification to the ‘classic’ Latin American version. The second part will demonstrate why this kind of economic policy (especially its most important segment, i.e. fiscal expansion) is completely ineffective and even destructive for small and open economies in Central Europe. The final part tries to find an answer to the question of why political leaders keep reviving this policy despite its proven ineffectiveness and harmfulness. That answer is the already mentioned demand on the part of voters that ensues from a blend of rational interests of the government-financed majority and economic values, concepts and preferences of a substantial part of the population that are irrational from the viewpoint of mainstream economy. Phenomenon of PopulisT Economíc Policy While is quite problematic to define the phenomenon of populism in general,4 its economic mutation is easier to describe. For the purposes of the present study, economic populism shall entail pursuance of such policies that do not hesitate to sacrifice the country’s long-term economic stability 183
