From Perón to Trump: Why Populism and Economics Don’t Mix
Democracy around the world is in crisis. In many cases, the crisis has stemmed from populist politicians attempting to use an illiberal form of democracy to concentrate power in their own hands and undermine democratic and constitutional institutions. But where did these populists come from and how did they succeed? The answer lies in the economic transitions happening across the world as globalization accelerates and developed countries transition to post-industrial artificial intelligence-fueled economies. Looking at the history of populism and two modern populist leaders with whom I am extremely familiar, Jair Bolsonaro in Brazil and Donald Trump in the United States, we will see how populism is capitalizing on these destabilizing economic transitions without providing any real solutions. In fact, the reliance of these leaders on their predominantly working-class bases prevents them from delivering even on their own rhetoric because they are promising the impossible.
What is Populism?
First, any regular DS reader will know that I am a stickler for definitions. Therefore, before we can begin, we must first clarify what we mean by populism. Populism is one of the most hotly debated terms in all of social science. Definitions range from so narrow that they describe only a specific politician’s movement to so broad that they would include anyone who has ever participated in a democratic election. Populism is best understood as a political style where a charismatic leader appeals to a group that feels excluded or ignored and claims to embody the will of the people, usually with a narrow definition of “the people,” and champions them against some loosely defined “elite” or “establishment.”
Populism is often confused with both socialism and fascism. Socialism because populism also often references a connection to the working class or lower class and fascism because it frequently emphasizes a collective national identity over the individual. Nevertheless, populism is neither because it has no ideological base and is instead solely driven by the leader who is the sole source through which the “will of the people” can be known. Populist messages are identifiable because their overriding focus is the relationship between the leader and their followers, not a national vision or ideological program. For this reason, populism is usually considered an “unmediated” form of politics because the relationship between the leader and the followers is direct. People do not support the leader because of their party affiliation or because of the ideas they represent but because of who they are or at least who they claim to be.
Now that we have reached an understanding of what populism is, it is logical to ask, why is it bad for democracy? Surely a democracy should thrive under a popular leader whose primary focus is the people. Unfortunately, populism is a lie. No one can truly channel the will of the people, especially in countries as large and diverse as Brazil and the United States, because there is no such thing. Instead, as discussed, these leaders tap into the fear and rage of some excluded group and then try to ensure that only their supporters are considered true manifestations of “the people.” Once a populist leader reaches power they then proceed to demonize any constraint on their power as a constraint on “the people.” Populism, therefore, trends towards authoritarianism on the justification that a popular autocrat will be able to easily mandate the will of the people. Even this, though, is a façade as this supposed dictatorship of the majority is really just a dictatorship of one, the leader.
Both Bolsonaro and Trump easily fit the populist mold. Their appeals are based almost entirely on emotion and lack any ideological underpinning or serious policy positions. Instead, they focus their energies on rallying their bases whom both men refer to as “patriots” to denote that only their cult-like supporters are the real Americans or Brazilians and anyone who opposes them is an enemy of the people. The Bolsonarista and Trumpian movements constantly and consciously try to co-opt national symbols such as the national flag, even as they denounce and undermine their constitutions and democratic institutions. Both Trump and Bolsonaro began their movements by targeting a corrupt “establishment.” Trump famously promised to “drain the swamp” and lambasted the political corruption of the Clinton family while Bolsonaro declared himself the defender of the anti-corruption investigations underway in Brazil in 2018 which included his main political opponent. Over time both presidents have shifted to targeting a communist/globalist elite which has proven far more fear-inducing and is almost entirely fictitious making it easier for the leaders to mold it to their desires. Both frequently lashed out at checks on their power and attacked their constitutional structures as constraints on the will of the people. Both refused to admit defeat after they legitimately lost their reelection bids which inspired their supporters to launch violent assaults on the institutions of government. Crucially, both of these men were able to build a base out of individuals who felt excluded in large part due to ongoing economic transitions.
Their messages to their followers openly reflect the populist credentials of both politicians. Bolsonaro whose followers frequently serenade him with cheers of “mito” or legend, always positions himself as defending his followers from corruption and communism while frequently highlighting public works he feels he deserves credit for, an old Latin American practice. Bolsonaro never fails to mention his connection to God and his divine “mission” to save Brazil. “I pray the Lord’s Prayer and ask God that this Brazilian people never experience the pains of communism,” Bolsonaro told his followers upon accepting his nomination for reelection. It should be noted that Bolsonaro’s opponent, now President Luiz Inácio Lula da Silva comes from Brazil’s Workers’ Party which has a socialist orientation, but there was never any real prospect of victory by a true communist faction in the 2022 presidential election.
Trump is an even more straightforward example of a populist. The message of his current reelection campaign can be summed up succinctly by saying that there is an evil communist deep state running the country and only he can save Americans from it. His supporters don apparel with the phrase “In Trump We Trust” with the would-be authoritarian’s name not so subtly substituted in the place of God. At a now infamous rally, Trump told attendees “I am your justice. And for those who have been wronged and betrayed: I am your retribution.” seemingly paraphrasing biblical verse to again insert himself in the place of deity as he vowed to wage war on the imaginary deep state that so terrifies his followers. Yet, as if to aid me in my task, as I was writing this article Trump delivered a speech so stereotypically populist it almost sounds fake. Speaking to striking auto workers the former President said “I put everything on the line to fight for you. I’ve risked it all to defend the working class from the corrupt political class that has spent decades sucking the life, wealth, and blood out of this country.” He cast himself as the erstwhile defender of the working class against a corrupt political elite, it was as if he was reading from a political science textbook.
The History of Economics and Populism
So where do economics come in? Economic transition and populism go way back. In effect, the history of populism is the political side of the history of industrialization. The term populist can be traced back to the late 19th century United States and its People’s Party or Populist Party. In that case, the excluded group was midwestern farmers who felt left behind by US economic policy focused on industrialization.
Populism came into its own in 20th-century Latin America. There is a long list of examples but the two most notorious are Getúlio Vargas in Brazil and Juan Perón in Argentina of Evita fame. These two made populism into an art form. Both came onto the political scene as their countries were grappling with industrialization which took place much later in Latin America than in the United States.
Almost everywhere industrialization took place it brought in its wings rapidly growing inequality and social upheaval due to displacement caused by the disappearance of traditional agricultural jobs in favor of modern industrial ones. In Western Europe and the United States, this happened in the 18th and 19th centuries. The default response of the state was to violently suppress labor and make minor and slow democratizing concessions. But by the mid-twentieth century as Argentina and Brazil tried to finish their own industrialization processes, democracy and liberalism had advanced globally to points that made this heavy-handed approach to labor more difficult. As happened elsewhere, industrialization in these two countries led to rapidly growing urban workforces, different from earlier industrialization processes though, the working classes in these countries, by in large, had the right to vote.[1] This created a new voting bloc that traditional politicians, with power bases in rural areas and the upper classes, understood poorly and had little interest in. This meant the environment was ripe for Perón and Vargas to ply their trade.
Both men preceded their populist political periods by building up popularity with the working class and creating government institutions that allowed them to control unions in their countries. The entirety of the working class did not support them of course, just as they don’t support Bolsonaro and Trump now, and so their followers were labeled as the true manifestation of “the people.” Both declared themselves the people’s champion against the “elite” which tended to be a vague combination of opposing politicians, unfriendly segments of the upper class, and foreign business interests. Both promised to advance industrialization while improving the lives of the working class. Crucially, both focused on building intimate links with their base that went far beyond politics.
Both men again bear the hallmarks of populist messaging. If you didn’t know which quote went with whom you could almost shift them interchangeably among the four presidents discussed in this article. In a speech trying to define his own populist movement President Perón declared, “And Peronism is learned, not said: it is felt or it is not felt. Peronism is a matter of the heart more than the head. Fortunately, I am not one of those Presidents who isolate themselves but rather I live with the people, as I have always lived; So I share with the working people all their vicissitudes, all their successes, and all their failures.” (Perón was a military officer from a wealthy family and had never lived among the working class).
Vargas, again a lifetime member of the Brazilian elite, in some ways, took populist messaging to even greater heights. Prior to entering into electoral politics, Vargas had already served as the unelected dictator of Brazil from 1930 to 1945 when he was forced out by a military coup. Vargas turned to populism as he sought to return to power via the ballot box in the 1950 presidential election. Foreseeing a return to electoral politics, Vargas had used his position as dictator to organize two political parties, one which was directed to the urban working class and made up of the government-approved official unions that became engines to turn out the working class vote for Vargas. The former dictator’s campaign focused on his “second coming” and declared Vargas the “Father of the Poor,” constantly referencing the paternalistic labor legislation his authoritarian government had enacted.
Perhaps the greatest act of populism ever came in the form of Vargas’ suicide note. In 1954, Vargas had again run afoul of the military, to avoid a coup he took his own life. Before doing so he left a letter that would shake Brazil to its core: “Once again the forces and interests against the people have been coordinated and once again, they are unleashed on me. . . They need to stifle my voice and prevent my action so that I do not continue to defend, as I have always defended, the people and especially the humble. . . I choose this way to be always with you. . . My sacrifice will remain forever in your soul and my blood will be the price of your ransom.” (You could be forgiven for thinking this was a statement from Trump following one of his recent indictments). The country exploded, mobs attacked politicians and news media whom they blamed for Vargas’ death, and turmoil ensued. Vargas got what he wanted; he died a hero to his populist base.
So naturally, once in power, both men enacted a program of comprehensive economic reform with stunning results, right? Wrong. This is not because the economic problems they addressed weren’t real, they were, hence the strong connection they were able to build with working-class voters. It’s because their solutions weren’t real, just vague illusions of some nationalistic utopia that only they could bring about. In practice their economic policy decisions ranged from nonsensical (like combating inflation with insanely generous minimum wage hikes thus provoking further inflation) to mere acts of showmanship (passing niche laws and regulations designed to irritate foreign business interests but that had little real impact on the national economy).
Water, Water, Everywhere, Nor any Drop to Drink
I dislike the phrase “history repeats itself,” because it doesn’t. Unique circumstances and individuals matter, but the populism of Vargas and Perón is alive and well in Bolsonaro and Trump. Again, fear of economic transition (globalization and a shift to a post-industrial economy) is causing social upheaval and traditional politicians have been slow to understand how. Now a new batch of populists are pitching economic solutions that appeal to those most affected but that have no real content.
My sister-in-law works on a cruise ship and last year my family and I took a cruise on her liner. One night my wife and I had dinner with her sister, and we spoke about the massive ship she had come to call home. At one point, my wife, whose greatest fear is to be on a sinking ship, commented that she had seen some watertight doors earlier that day. Confused, my sister-in-law asked where she had seen these doors, and my wife answered by describing where in the ship she was. A smile crept onto my sister-in-law’s face as she exclaimed “That’s on deck 10!” You see our ship only had 11 passenger decks. As my sister-in-law gleefully explained to my embarrassed wife, if there was water on deck 10 then 90% of the ship would be submerged and the time for watertight doors (all of which were located below the passenger levels) would have long since passed.
Nevertheless, this is exactly what the Bolsonaro-Trump brand of populist economics promises to do. They are promising to roll back time to economic periods in their respective counties’ histories that are not only long gone but never really existed on the terms these presidents claim. The ship has nearly completely sunk and these two politicians, and many others, are promising to save it by closing the watertight doors. The sinking ship metaphor is not to suggest that the economic transition is a bad thing that should have been avoided earlier just to highlight that fighting it is a fantasy that will never come true because economic change is inevitable.
Let’s start with Bolsonaro. Brazil again finds itself late to the party, in this case globalization. Particularly, in the run-up to the 2018 election, Brazil remained one of the most closed-off economies in the world. Further dragging down the economy were the 418 state-owned enterprises, an absurdly large and region-leading number. Bolsonaro focused his campaign on anti-corruption (a top priority of the Brazilian public at the time) and opening up the country to free market capitalism. He promised to end protectionism and accelerate privatization. His inspiration was the Brazilian military dictatorship (1964–1968) that he claimed had overseen a long stretch of economic success due to its rejection of communism in favor of capitalism. An economic opening was long overdue, the problem with Bolsonaro’s vision was that it was all built on lies and fantasies.
First, Brazil’s military dictatorship was not a paragon of free market economics. It certainly used its strong position to suppress labor and ignore the economic complaints of the working class, but it was heavily involved in the economy. It created many of Brazil’s state-owned enterprises and a large network of government oversight to channel development in the direction it wanted. Brazil did see impressive economic growth in the 1960s, but this was all erased the following decade when the military’s over-intervention and the global energy crisis brought Brazil to a halt. The return of civilian government in the 1980s was, in part, inspired by the military’s desire to not be left holding the bag when the full consequences of their disastrous economic mismanagement came to bear.
Next, Bolsonaro promised that this economic transition would bring instant economic success for almost all of Brazil while inconveniencing only corrupt politicians and socialists. This could never be true. A shift from protectionist to open policies will have multiple growing pains for all of society or else the protectionist policy wouldn’t exist in the first place. Bolsonaro also mirrored the military dictatorship in that he never had any sincere commitment to economic opening, he wanted control over the economy he just wanted to use it differently than his predecessors had.
Time after time, from privatization to badly needed entitlement reform, Bolsonaro himself proved more effective than his opposition in stopping his planned economic opening. While he publicly declared his support for these measures he refused to do them in any real way because they would and often did upset his populist base in the short-run. Ultimately, Bolsonaro’s vision of an economic opening was always doomed to fail. It was based on a fictitious version of the past and impossible promises; not to mention, he didn’t actually want to do it. It was always just a populist weapon to attack his left-wing opposition that had no substance behind it.
Trump’s promises trended in the opposite direction from Bolsonaro’s. Appealing to the segment of the working class most impacted by globalization, Trump promised to reverse it. He claimed he would put “America first” and “Make America Great Again.” Once more, frequent references were made to the past when American industry was thriving, and the country prioritized its internal economy. But Trump and his supporters never actually tell you when it was that America was great because they are again referring to a fictitious view of the past. The 1950s, the decade Trump’s slogan is generally assumed to be referencing, was not a period of protectionist economic policies and isolationism, it was the exact opposite. The greatest successes of American industry were due to its ability to dominate global markets.
The idea of reversing globalization and delinking from the global economy was always a terrible one that could only have led to economic ruin. Unlike Bolsonaro, Trump appears to have been truly committed to his impossible goals. Trump lambasted free trade agreements and promised to end them. One rare case where he actually followed through was immediately withdrawing the United States from the Trans-Pacific Partnership agreement (TPP). This was only possible because it was not yet in practice. This decision dramatically weakened the US in its geopolitical competition with China and cost the United States billions in potential GDP and income growth that would have benefited his base. Trump then turned his attention to the North American Free Trade Agreement (NAFTA) which he promised his base he would scrap to get all the jobs back that Mexico had “stolen.” Then Speaker of the House Paul Ryan recalled frantic conversations with President Trump trying to explain to him that pulling out of NAFTA would crash the US economy to the detriment of everyone. Instead, in 2020, the Trump administration replaced NAFTA with the United States–Mexico–Canada Agreement which did nothing to roll back free trade between the countries.
Trump followers continue to lambast globalists who are frequently the subject of Trumpian conspiracy theories. But the truth is Trump did almost nothing to roll back globalization because economic realities frequently prevented him from doing so. The rare things he actually did, such as pulling out of the TPP and his many tariffs, were to the detriment of the US economy and his working-class base. One 2021 estimate found that Trump administration tariffs cost the US approximately a quarter million jobs. They certainly did nothing to recreate the economic realities of 1950s America. The reality could be no other. There is no scenario in which a country, especially the one with the world’s largest economy, can abandon free trade and globalization and be economically better off. It’s a comforting populist lie that Trump tells his supporters, but it can never be a reality.
The left-wings in Brazil and the United States now find themselves repeating many of the same errors as they try to recapture the voting bases that populism took from them. Economic policy in the two countries continues to chase the fantasies that Bolsonaro and Trump preached. The problem has no clear solution, any political vision willing to account for the hard truths of an economic transition can easily be defeated at the ballot box by a populist telling people it doesn’t have to be that way, they can have everything they want and nothing they don’t. What is clear is that will never be true, and it will only lead to bad governance. Populism and economics don’t mix.
[1] Literacy restrictions on suffrage remained but they had only a small impact on urban populations.
