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... 1999 in Slovakia). An exemplary exception confirming that the ‘Argentine on the Danube’ scenario was not merely a figment of international press’s imagination was the collapse of Bulgarian economy in 1996-1997 that came as the result of enormous foreign debt, belated and slow implementation of market reforms and lingering soft budgetary restrictions in the field of public finance and banking sector.6 Despite the described differences, Latin American and Central European populism have more in common than meets the eye. The most important similarities may be summed up as follows:- The most frequently applied and virtually ubiquitous tool is fiscal expansion, i.e. stimulating economy through increasing budgetary expenditures. Populist politicians in both regions tend to underestimate the risks (e.g. galloping inflation and ballooning debt) of deficit financing of their megalomaniac projects.- In both cases, fiscal expansion leads to high double deficits (i.e. budgetary and balance-of-payments ones); the economic growth is increasingly less balanced and sustainable; inflation and devaluation pressures continue to mount.- At the end of the populist cycle, economy is threatened by a dramatic increase in inflation, falling exchange rate of the national currency, withdrawal of capital from the country and collapse of the financial sector that is followed by a deep recession with grave social implications. Unless the government adopts an emergency stabilization package (i.e. restrictive measures and structural reforms usually consulted with the IMF), the collapse becomes a reality and forces the government to adopt an even more drastic austerity package with even graver social consequences. The political elite are usually very reluctant to endorse such packages and tend to postpone them until it is too late. If it manages to introduce them before the actual collapse, it is in the nick of time before economy crumbles away; usually it is at the point when capital already began to withdraw, national currency began to lose its value (often due to speculative attacks against it) and inflation got out of hand.- Populist economic policy is self-destructive and eventually leads to reducing the standard of living that often falls even below the level from before launching the populist cycle; paradoxically, those who hoped to benefit from it the most (i.e. workers, members of the lower middle class, public servants, pensioners) end up as the greatest losers. Even the political elite that introduced populist economic policy are unable to preserve its political power in the long run, particularly in a democratic environment. 187
