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... were published a year later. In the introductory study of this book, authors Dornbusch and Edwards (1991, pp. 7-9) defined Latin American economic populism as an approach to economy that neglects the risks of inflation and deficit financing of public budgets, external limitations and economic players’ reactions to aggressive non-market policies. In order to increase economic growth, wages, employment and achieve more just redistribution of the national income, policy makers substantially increase public expenditures (typically through wage growth), which eventually leads to high inflation and great external economic imbalances. The populist experiment usually leads to economic collapse and there is no other alternative but to implement a drastic austerity package with heavy social costs, typically with assistance from the International Monetary Fund (IMF). Populism is therefore self-destructive and populist policies are bound to fail; those population groups that were originally supposed to benefit the most usually turn out to be the greatest losers, mostly through a decline in employment, wages and income. In the next chapter, Kaufman and Stellings (1991, p. 16) define this kind of Latin American populism as a set of economic policies (tools) designed to achieve specific political goals. These goals usually are: (1) drumming up principal support among organized workers and members of the lower middle class; (2) drumming up additional support from local enterprises that focus on the domestic market; (3) achieving political isolation of the rural oligarchy, foreign corporations and domestic industrial tycoons. The economic tools designed to achieve these goals include (but are not limited to) the following: (1) inflating budgetary deficits aimed at stimulating economic growth; (2) increasing nominal wages and controlling prices in order to influence redistribution of income; (3) controlling the national currency’s exchange rate or its artificial appreciation in order to wrestle down inflation and increase wages and profits in sectors that produce untradeable goods.5 According to Dornbusch and Edwards (1991, pp. 11-12), economic populism in Latin American countries occurs in irregular cycles; each of these cycles may be divided into four stages: Is' stage. At the beginning, populist economic policies seem to work as production, employment and wages continue to grow while price checks keep inflation on the leash and the demand for scarce goods is temporarily saturated by imports. 2nd stage. The economy begins to face a critical shortage of goods and foreign exchange while inflation pressures increase. The budgetary deficit reaches exorbitant levels. Releasing the grip on price control and foreign exchange control as well as devaluation of the national currency and protection of the domestic market seems increasingly inevitable. 185
