The People Versus The Elites

Populism at the country level is at an all-time high, with more than 25% of nations currently governed by populists (as of 2018). How do economies perform under populist leaders? To answer this question Manuel Funke, Moritz Schularick and Christoph Trebesch have built a database identifying 50 populist presidents and prime ministers 1900-2018.

Populism is bad economics. In this paper, we studied the macroeconomic history of populism since 1900. Our key finding is that populism has negative consequences for the economic and political pathways of countries. In the medium and long run, virtually all countries governed by populists witness subpar economic outcomes evidenced by a substantial decline in real GDP and consumption.

Protectionist trade policies, unsustainable debt dynamics, and the erosion of democratic institutions stand out as commonalities of populists in power, across region, era, and ideology. Populists typically deliver on their often anti-foreign rhetoric, enacting policies of economic nationalism and protectionism. We also find a significant decline in judiciary independence, election quality, and press and media freedom, damaging the innovation friendly economic environment of democracies (Acemoglu 2019). The fact that populist often change the institutional “rules” of the game helps explain why, despite their subpar economic performance, populists typically do not quickly “self-destruct”. Our new database of populist leaders opens up many new avenues for research on populism, its drivers and consequences.

Funke, M., Schularick, M., and Trebesch, C. (2020). Populist leaders and the economy (Kiel Working Paper).
projections gap: real GDP paths (years) after populist governments enter into
office (Fig. 4 op. cit.)

Ok, but someone might ask: what’s a populist regime and leader? Here is their simple (workhorse) definition:

[A]cademic literature of recent years has converged on a consensus definition of populism that is easily applicable across space and time and for right-wing and left-wing populists alike. According to today’s workhorse definition, populism is defined as a political style centred on the supposed struggle of “people vs. the establishment”. Populists place the narrative of “people vs. elites” at the centre of their political agenda and then claim to be the sole representative of “the people.”

Building on the workhorse definition in political science, we define a leader as populist if he or she divides society into two artificial groups – “the people” vs. “the elites” – and then claims to be the sole representative of the true people.

For a Spaniard it is interesting to observe that Spain does not appear among the populist regimes. Since 1900 Spain has gone through a fake democracy (restoration and the the peaceful turn starting in 1874), a short and stormy republic (1931-36), a dictatorship (1936-77), and what many (including myself) thought it was a true “full” democracy since 1978.

Reading the workhorse definition, hearing today’s government narrative and realizing how badly the pandemic has already impacted the economy, I prefer to close my eyes and picture myself in a boat on a river with tangerine trees and marmalade skies.


Featured Image by Gerd Altmann from Pixabay


  1. It is difficult to predict anything in politics, since there is no real model. I tend to agree with your pessimism, however, but for the EU. Fortunately, Spain is not really independent nowadays.

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