Against economic populism

Legitimate criticism should not be grouped together with demagogy

2018-01-16

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In a January 9, 2018 column for Project Syndicate, Dani Rodrik makes a strong case for what he terms “economic populism”.¹ Populists, he argues, are united by their universal opposition to constraints on the executive. The will of the people, which the government represents, is considered absolute, boundless. Couched in those terms, Rodrik starts by describing the dangers of “political populism”, such as the erosion of the rule of law and the dismantling of fundamental rights. Political populism is a form of tyranny. He then examines the pros and cons of economic populism, to ultimately suggest that there are certain cases where restraints on the executive should be removed, hence his defence of economic populism.

There are a number of problems with this line of reasoning.

Firstly, it commits a conceptual error. By Rodrik’s definition, every view that criticises any kind of institutional constraint on economic policy is, in some way or another, populist. Opinions and analyses such as my own on the need to revise the operational independence—as well as the mandate—of the European Central Bank,² could easily be bundled together with arguments like those of Geert Wilders or Nigel Farage. Crass generalisations leave no room for subtlety, deliberation, and examination of the specifics. It is fundamentally incorrect to treat dissimilar things as similar.

Secondly, and drawing from the conceptual error, it provides grist to the mill of apologists of the status quo. If we are all populists, and if informed criticism is treated in the same way as misinformation and ignorance, then proponents of the establishment can simply dismiss our views without engaging with them. The counter-argument to our advances could always be something along the lines of “oh, but look at what other populists are saying—you cannot be taken seriously”. And so we will be cast aside as ignoramuses and charlatans, by means of a false association with groups we may profoundly disagree with.

Thirdly, it is analytically incorrect insofar as distinguishing between the general and the particular. The examples Dani Rodrik offers, such as policies that favour multinational corporations, are instances of cronyism and corruption. These are always bad even if the underlying institutional setup is sound. However, that detracts from the discussion on legal-institutional principles. When, for example, we formulate our position against the independence and the current mandate of the ECB, we are making a case for the revision of the relevant Treaty provisions and/or the ECB’s statute. The problem is with the existing rules themselves—with the precise instantiation of the legal and political norms—though not with the general notion of the separation of powers. By the same token, if a parliament is composed of corrupt politicians, the fault lies in the mechanisms that engender or enable mischief, not with parliamentary democracy per se.

Fourthly, it fails to account for the various types of constraint on the executive. Not all limitations on power are made equal. We need to have some sense of their content and particularities. Rodrik offers the example of the gold standard and why President Roosevelt had to circumvent it. This tells us nothing about such restraints on the government as the separation of state functions, the principle of limited government, or, in the case of the EU, the constitutional norms of conferral, subsidiarity, and proportionality.³ Limitations that derive from jurisprudence and philosophy, those that are universally applicable, cannot be put under the same denominator as conventions whose propriety is context-dependent. For example, public entities are always limited in their options on software—in their digital self-determination, if you will—by following the trend of buying Microsoft products. That too is a constraint (of subjecting authorities to the stratagems of a corporation), which has nothing to do with the dialectics on ethics/politics and the province of law. It can—and in my opinion should—be overcome without changing the principles that underpin the overall operation of the state, by means of using free and open source software.

Fifthly, it falsely assumes that economic policy is a unique category that can be kept separate from the rest of governance. If, for the sake of argument, we were to allow a government to engage in economic populism, what kind of defence would we then have when the exact same rationale would spill over to other policies? Nothing. And this points at a common mistake, particularly among economists, to treat economic affairs as distinct from the rest of politics. If somehow a certain policy programme could be insulated from the entirety of the agenda, then that should be possible for every kind of policy. Why not have “police populism” where state absolutism is ‘only limited’ to matters of public order? Why have technocrats, such as judges, ombudspersons, and data protection supervisors place obstacles to the “will of the people” for security? The point is that these mental gymnastics are inapplicable. Governance comes as a package. Rules are, and should remain, policy-independent. Anything else is a slippery slope to serfdom.

In conclusion, Dani Rodrik’s defence of economic populism leaves much to be desired. While his intention may be good, he has not articulated it effectively. Do we need economic populism? No. Should we be more specific with our proposals, so that we do not inadvertently produce the adverse results? Yes. As for legitimate critiques on the faults of the status quo, these are most welcome. We need reforms, certainly in major aspects of the EU edifice, but quality and the underlying principles must also be taken into consideration.

1. In Defense of Economic Populism by Dani Rodrik. Published on January 9, 2018 in Project Syndicate. [^]

2. ECB independence: concept, scope, and implications. Power and accountability should be symmetrical. Analysis published on April 2, 2017. [^]

3. Sovereignty and the vertical separation of powers in the EU. Distribution of competences in the EU federal system. Published on December 31, 2017. [^]