C Gopinath

Latin American labyrinth

C Gopinath | Updated on June 16, 2021

The pitfalls of populist politics

Mexico recently had midterm elections for the lower house which saw the alliance led by the President’s party winning a majority of the seats and seen as a mandate for the President’s policies. The majority is especially important since the legislature passes the budget providing the President with the funding he needs to execute his programs.

Mexican President Andres Manuel Lopez Obrador usually shortened to AMLO, is following a unique nationalist path, declared even by his party’s name, the National Regeneration Movement, or Morena. In the last three years, he has focused on the poor. He sees the need to transform the country from his predecessor’s policies that he believes benefitted the upper classes. He expanded social spending, including doubling of the cash pension for the elderly and raising the minimum wage and also followed an austerity program that cut salaries for government servants and shut some departments. AMLO is personally austere, flying economy class and wants to control corruption. But he is also strengthening the armed services by handing out more activities for them to run. He seems to prefer small businesses and agricultural activities rather than mega corporate projects. Some of his decisions, such as cancelling a major partially built airport project for Mexico City (but starting another near his constituency), and giving more importance to state ownership of key resources such as oil have been worrisome and dampening business confidence.

That such a populist President is elected shows the deep rooted feelings of the poor who do not see the gains that come from neoliberal economics. But the fine line such a leader has to walk in democratic societies is to keep the aspirations of the masses satisfied while signalling stability through business friendly policies to attract investments.

In that sense, are we seeing a repeat of what happened in Venezuela and Bolivia?

Evo Morales was the first from the indigenous communities to be elected President of Bolivia in 2005 with a vision to empower marginalised peoples. When he was forced out in 2019, he had succeeded in halving the percentage living in extreme poverty and keeping a GDP growth of just under 5 per cent. He nationalised the oil and gas industries and invested in health and education. But towards the end, he had begun to shift from the vision and priorities that made him successful and popular. He was forced out in 2019 for fiddling with constitutional term limits and polling irregularities.

Hugo Chavez as President (1999-2013) of Venezuela rode a wave of anti-imperialist themes. He nationalised the country’s dominant oil industry and slowly inefficiencies choked it as a revenue generator for the economy. He was wildly popular among the poor and instituted many policies to benefit them. Yet, his desire to remain in power hurt the country’s economic activities and social progress. His successor continues to ruin the economy. When populist leaders get elected in democratic societies and institute social programs, those marginalised are elated, but nationalisations bring in inefficiencies, business confidence falls and investors turn tail.

This suggests the need for new thinking by public policy analysts to identify the package of policies that can work in poor and democratic societies, that would provide the justification for centrist thinking, and where some growth may have to be sacrificed for better distributive justice.

Otherwise, we will see an unfortunate repeat in Mexico of good intentions heading towards disaster. As the second largest trading partner of the US, Mexico is well placed to charter a new path that can bring economic benefits to its people while carrying everyone forward.

The writer is an emeritus professor at Suffolk University, Boston

Published on June 16, 2021

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