Politics and Macroeconomics of Populism

POLITICS AND MACROECONOMICS OF

POPULISM

IT’S CONSEQUENCES. Diego A. Estévez R. ECONOMIST BSI BANK GROUP A.G. International Financial Consultant

INTRODUCTION The POPULISM is not a new phenomenon.

NERO (54-68 A.D.) was the first POPULIST. POPULISM is not a man: it’s a CULTURE of the ANTIPOLITICS to take power.

The POPULIST leader is not a DICTATOR, but he is at a STEP to TRANSFORM in it along time. This presentation is a brief of the actual trends.

Singapore, February 2017

Is this TRUE? The historic empirical evidence shows that after great economic crisis, disruptive social, political and institutional movements emerged in several societies.

Many of this imbalances came with war.

Nowadays, in a more pacific way, this societies search another models through the appearence of POPULISMS as the LEADER is beleave as the redeemer that will restore the lost values (values & wealth).

Healthy Democratic Pillars  Institutions (public & private)

a. Rule of law; Contracts RESPECTFULNESS b. Real Democracy: two powers and INDEPENDENT JUSTICE (civil & public rights)

 Education, formation & training  Adequate health system  Macroeconomic eviroment a. b. c. d.

Good economic practices Good market efficiency and genuine competition Soundness in the labor market Financial market solid development.

 Technological readiness innovation & promotion of creativeness.  Business sophistication & absence of markets restrictions

The Seeds of Populism The populism is a CULTURE and a methodology to TAKE and managing power.

It’s the ANTIPOLITICS

• UNEMPLOYMENT or employment of low quality • • • • • • • • •

POVERTY and/or inequality WEAK institutions Contracts VIOLATION GAP between the ”POLITICAL CASTA” and the voters ”Comfort zone” in the PARLIAMENT CORRUPTION and WEAK JUSTICE Increase of UNSECURITY and impunity Existing of political and legal VACCUMS The BEHAVIOUR of the stablishment

The X-RAY of a POPULIST 12 points Check List

1. CHARISMATIC leader, in the way Max Weber defined it (1934) Note 1.

2. RELATION OF LOVE between the leader and the followers.

3. NO SPECIFIC POLITICAL PARTY: a populist can be either from the left or from the right.

4. AUTOINFALIBILITY, attribute in his decisions.

5. The leader is DISRUPTIVE, BORDERLINE, and a CHALLENGER with the establishment, the banking & financial sectors, the 'oligarchy", media, and intellectual idiots" (in the terms NASSIN TALEB definition. Note 2

6.

The contact has be the most DIRECT way possible between the leader and the followers.

7.

The contents are filled up during the way, from EMOTIONAL points of view, with EPIC PHRASES.

The X-RAY of a POPULIST 8.

The contents are PROMISES. The final stage of this chain of promises is the

POPULAR REDEMPTION AND HAPPYNESS. 9.

The leader always need a SET OF ENEMIES to 'save' the followers (fallacies).

10. High trust in MEMBERS OF THE FAMILY as advisers and AIDES that support him ("red circle"). This entourage INSPIRE TRUST among followers.

11. For the leader, the ideologies had died. Only matters the FOLLOWERS

WELLFARE, no matter in what way.

12. The leader needs a high dosis of ENERGY and a "SCREENPLAY" that works as a roadmap of his acts (iconoclastic symbols). The "SCREENPLAY" is broadcasted heavily through the SOCIAL NETWORKS & MEDIA.

TAKE OVER PROCESS…  The leader in his campaign identifies local and external enemy/ies Both of them are the "ANTI-PEOPLE"…..This…. latter, is the seed for annoyment and hate.  In contrafactics arguments: people are: HONEST WORKERS, FIGHTERS, HONORABLE, etc.  “PEOPLE ALWAYS CHOOSE THE BEST LEADER AND NEVER MISTAKES”, the leader always argues.  As the people and followers get "enchanted" and "enlove" with the leader, they are tolerant with his arguments, his proposals, arbitrarieties, and disruptive languaje. The people perceive a rare increase of APETITE for JUSTICE.

Once on power …the main drivers for the "CHANGING TIMES”…

• A call for change the main LEGAL FRAMEWORKS. • Arbitrary moves in the main institutions to allocate "AIDES" : CENTRAL BANKS, S.E.C., BUREAU OF COMMERCE AND TRADE (to manage prices, tariffs, etc.)

• Reshapping of ARMED FORCES. • Changes in SECURITY FORCES. • Changes in the INTELLIGENCE BUREAU. • Increase the control of the SOCIAL NETWORKS and MEDIA. • Appointment of ”FRIENDLY” Judges and Courts Members • Changes in the SUPREME COURT. • A call for CONSTITUTIONAL CHANGES

OPTIMUN CASE: SWITZERLAND

SEMI-OPTIMUN CASE: USA

POPULISM IN EXTREMIS: VENEZUELA

POPULISM: ARGENTINA

CHART COMPARISSON

Macroeconomics of the Populism Behaviour of

Base Case

Initial Stage

Intermidiate Stage

Final Stage

Fiscal revenues

Under control

Increase

Start falling

Collapse

Fiscal expenditures

Under control

Important increase

Full increase

Explosive

Fiscal deficit

Deficit targeted

Low increase

High increase

Explosive

GDP

stanflation

Increase

Stalls

Collapse

Poverty & inequality

Moderate to highly

Decrease

Increase

Explosive increase

Real Wages

Still

Important increase

Decrease

High speed decrease

Highly corrupted to keep the �voting machine� supply

Macroeconomics of the Populism Behaviour of

Base Case

Initial Stage

Intermidiate Stage

Final Stage

Net Capital movement

Low+

Low

Negative

Highly negative

Private invest.

Small +

Low to neutral

Vanishes

Dissapear

Public invest.

Low+

High +

Very high + +

Exponential ++++

Monetary Base

Neutral Grow

Increase +

Quick increase ++

Exponential ++++

Exchange rate

Stable

Soft increase

High increase (FOREX Control)

Exponential ++++

Inflation

Low+stable

Increase

Increase jump

Exponential grow ++++

VOICES of POPULISM

Marine LE PEN (FRANCE).

MP French Parliament.

Leader of the MOVEMENT FOR FRENCH LIBERTY.

THE

" I do not feel either from the right or from the left; I feel myself french. I defend the french interest "

VOICES of POPULISM

Nigel FARAGE (U.K.).

MP of the EUROPEAN UNION UKIP Party brexiter. .

VOICES of POPULISM

Beppe GRILLO (Italy).

Actor & showman.

Leader 5 Star Party.

� The country is at the limit of tolerance; the families income is not sufficient and I'm thinking too in the retired people ".

VOICES of POPULISM

Nicolas MADURO (Venezuela) President Former aide of Gral. Hugo CHAVEZ

”Let’s transform our love and loyalty for CHAVEZ, in our daily work and engagement”.

VOICES of POPULISM

Cristina F. de KIRCHNER (Argentina) Former VICE and PRESIDENT 12 years in power.

" This guy has to be killed”… Transcription of an audio tape in reference to the former General Prosecutor. He had sensible proofs of the KirchnerIRAN connections. He appeared murdered in the morning of January 18, 2015.

There is life after Populism .?

• Many years of hard work.

• CHALLENGE: MENTALITY switch • FULL Enforcement of the 7/12 Pillars.

• EDUCATION & TRAINING cross the border.

• New JUSTICE • New ECONOMIC policy.

References and credits • • •

The WORLD ECONOMIC FORUM. Report 2016 (Graphics). (C.H.).

Institute for Fiscal Studies. (U.K.).

Macroeconomic populism in Latin America. May 1989. Rudiger Dornbusch and Sebastian Edwards. NBER (U.S.A). (The essay is based in the monetary analysis of the Balance of payments deployed by Harry Johnson (University of Chicago 1976) during the ’70 in LATAM.

• • •

The Protestant ethics and the Spirit of Capitalism (Note 1). 1905. 1934 (printed full version). Max Weber. Germany.

Skin in the Game…. The intellectual yet idiot (IYI)(Note 2). October 2013/2016 Nassin Talleb and Constantine Sandis. Review of Behavioral Economics. Oxford Books. (U.K.).

My acknowlege for their valuable coments to: Prof. Rajeev DHAWAN (Georgia

State University, USA); Prof. Rodrigo ZARAZAGA (Jesuitic Priest, University of Berkeley, USA); Dr. Enrique Prados (Chairman Ahorro Corporación, Madrid, SPAIN); Prof. Eduardo FIDANZA (Sociologist. University of Buenos Aires, ARGENTINA).

THANK YOU SO MUCH FOR YOUR ATTENTION.