Towards a genuinely Inclusive, Liberal, and Open Global Agenda

The recent past has been witness to the increasing rise of ‘economic-nationalism’, anti-immigration policies, and increasing xenophobia. Countries which in the past have welcomed immigrants, and have been protagonists of Free Trade and open borders, while immensely benefiting from the same, are becoming more and more insular. While this point got strongly reiterated by the election of Donald Trump. Apart from the US and UK, many of the EU member states and Australia are also becoming more and more inward looking.

Germany and Canada have tried to develop an alternative narrative while being open to immigrants, and opening their doors to refugees. Justin Trudeau in Canada, like Angela Merkel, deserves immense credit for exhibiting courage and conviction and not capitulating before populist and ultra nationalist sentiments.

Both Trudeau and Merkel have opened their doors to refugees, with Trudeau opening his country’s doors to nearly 40,000 Syrian refugees. After the US imposed a ban on immigrants from certain Muslim countries, he tweeted:

“To those fleeing persecution, terror & war, Canadians will welcome you, regardless of your faith. Diversity is our strength #WelcomeToCanada.”

Angela Merkel, Chancellor of Germany, in spite of scathing criticism for her decision to admit over 1 Million refugees, since 2015, from Syria, Iran, and Afghanistan, has stuck to her guns. In an interview, the German Chancellor stated:

“It was an extraordinary situation and I made my decision based on what I thought was right from a political and humanitarian standpoint.”

The rise of the extreme right AfD, which emerged as the third largest political outfit, and which Merkel managed to beat by a lesser margin than usual, has been attributed to Merkel’s open door policy.

Along with Macron and Trudeau, one more leader who is trying to offer an alternative narrative is the Mayor of London, Sadiq Khan, who has started a campaign, ‘London is Open’. Said Khan in his message:

…Many people from all over the globe live and work here, contributing to every aspect of life in our city. We now need to make sure that people across London, and the globe, hear that #LondonIsOpen… 

Not restricted to any ideology or country

It would be pertinent to point out that while the rise of right-wing leaders like Trump and AFD in Germany is cited as one of the reasons for this growing insularity, even left leaning leaders have been equally inward looking, when it comes to economic and trade policies. One thing which was common between Trump and Bernie Sanders was their economic policies, which found resonance with the working class.

Not just Trump

While Trump has emerged as the mascot of ‘insularity’ and economic nationalism, it must be pointed out that not just the US, but other countries which have benefited from immigration, to have tended to look inwards on important issues.

Australia, which has opposed Trump’s withdrawal from the Trans Pacific Partnership TPP and has repeatedly spoken in favour of an ‘open’ Indo-Pacific, has brought in some tough laws to oppose immigration. This includes the abolition of the 457 Visa (for skilled migrants), replacing it with a new visa program which is far more stringent, and will make it tougher for workers from other countries.

Commenting on the abolition of the Visa, Australian Prime Minister Malcolm Turnbull stated:

“The migration program should only operate in our national interest. This is all about Australia’s interest.”

The second point to bear in mind is that some countries have spoken vociferously in favour of trade agreements, and open borders, but have played it safe on important human rights issues and immigration. This includes not just Syrian refugees, but more recently the Rohingya Issue. If one were to take the case of ASEAN for instance, a number of member states including the Chair for 2018, Singapore, have argued in favour of economic openness, and were critical of the US approach towards TPP. Yet, they have been cautious on the Rohingya Issue, not wanting to rub Aung San Suu Kyi the wrong way.

Conclusion

In conclusion, there can  not be a selective approach, countries which seek to benefit from globalization, need to be open to immigrants and at times shoulder onerous responsibilities. After all, it is not just immigrants who benefit economically, but countries which they have migrated too also benefit from their skills and productivity.

Secondly, an enlightened, liberal agenda cannot just be restricted to economic issues, important human rights issues, can not be obliterated and must get the attention they deserve.

Third, it is pointless, to blame any one country or ideology for insularity, everyone shares collective responsibility for the same.

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Libertarianism, Classical Liberalism, Right Wing Populism, and Democracy

An interesting exchange has occurred between Will Wilkinson of the Niskanen Center and Ilya Somin writing for the Washington Post on the issue of the influence of libertarianism over the modern Republican Party’s erosion of liberal democratic norms. In his initial piece, Wilkinson seemed to argue that the Libertarian view of absolutism in regards to property rights which was a way to offer an emotionally gratifying alternative to socialist redistribution was responsible for the Right’s adoption of a populist outlook which eroded democratic norms, for example, policies like Voter ID and Gerrymandering. Ilya Somin responded by pointing out that the libertarian “absolutist” conception of property rights had next to nothing to do with why many libertarians Wilkinson cites are skeptical of democracy. Wilkinson responded by saying his initial argument was confusingly stated, not that absolutist property rights is driving democratic erosion on the part of the right, by trying to clarify his distinction between “libertarian” and “classical liberal.” Somin pointed out that this response undermines the force of Wilkinson’s initial argument and took issue with some of his other points.

I wish to contribute to this debate because, even though Somin is largely right that Wilkinson’s argument is weakened by his clarification, I think both have missed that Wilkinson has fundamentally misunderstood what right-wing populism is and why it is a threat to democracy. Modern right-wing populism does not try to erode majoritarian democracy, even if it erodes some of the institutional norms which make it possible for modern liberal democracy to function. Rather, populism, in its many forms, weaponizes democratic rhetoric which is premised on the very notions which libertarians and classical liberals critical of democracy seek to challenge. Attempts to tie such criticisms to the modern right is absurd and distracts us from confronting those aspects which are actually threatening about the right’s pathologies. Afterwards, I will comment on some of the other minor confusions into which I believe Wilkinson falls.

Populism and Folk Democratic Intuitions

In Wilkinson’s genealogy, the root of modern libertarianism is an attempt to weaponize classical liberalism’s defense of property against the desire for socialist redistribution. As he tells it, classical liberals like Hayek and Buchanan sought to put trigger locks on democracy in the form of constitutional constraints on majority rule whereas radical libertarians like Rand, Nozick, and Rothbard sought to disarm democracy altogether from violating property rights. This conception leaves no room for any analysis of or support for democratic decision-making. Since the end of the Cold War, the right has continued to believe this absolutist property rights argument was extremely important even after the Red Menace had been slain and so is willing to do anything, including throwing democracy under the bus, to defend property rights. As Wilkinson puts it:

And that’s why ideological free-market conservatives tend to be so accommodating to, if not exactly comfortable with, populist white identity politics. In their minds, mundane left-right differences about tax rates and the generosity of the welfare state are recast as a Manichean clash between the light of free enterprise and the darkness of socialist expropriation. This, in turn, has made it seem morally okay, maybe even urgently necessary, to do whatever it takes—bunking down with racists, aggressively redistricting, inventing paper-thin pretexts for voting rules that disproportionately hurt Democrats, whatever—to prevent majorities from voting themselves a bigger slice of the pie.

In his follow up, after Somin pointed out that irrational factors like partisanship are more likely to influence a voter’s decision than complicated moral theories such as property rights, Wilkinson attempted to make this argument more plausible by giving the hypothetical example of a white working-class republican voter who, while not fully libertarian, uses his thin knowledge of libertarian property rights absolutism as a form of motivated reasoning justifying his erosion of democratic norms:

Burt is a moderately politically engaged mechanical engineer with ordinary civics-class ideas about democracy, as well as a strong distaste for paying his taxes. (He wants to buy a boat.) One day Burt picks up Atlas Shrugged on the recommendation of a friend, likes it a lot, and spends a few weeks poking around libertarian precincts of the Internet, where he encounters a number of libertarian arguments, like Rand’s, that say that taxation violates a basic, morally inviolable right. Burt happens to find these arguments extremely convincing, especially if he’s been idly shopping for boats online. Moreover, these arguments strongly suggest to Burt that democracy is a dangerous institution by which parasitic slackers steal things from hyper-competent hard workers, like Burt.

Now, none of this leads Burt to think of himself as a “libertarian.” He thinks of himself as a Lutheran, a moderate Republican, and a very serious Whovian. He’s suspicious of “free trade.” He’s “tough on crime.” Burt would never disrespect “our troops” by opposing a war, and he thinks legalizing drugs is bananas. Make no mistake: Burt is not a libertarian. But selective, motivated exposure to a small handful of libertarian arguments has left Burt even more indignant about taxes, and a bit sour on democracy—an altogether new attitude that makes him feel naughtily iconoclastic and a wee bit brave. Over time, the details of these arguments have faded for Burt, but the sentiments around taxation, redistribution, and democracy have stuck.

Ayn Rand and the other libertarian thinkers Burt encountered in his brief flush of post-Atlas Shrugged enthusiasm wanted him to be indignant about redistribution and wanted him to be sour on democracy. He drew the inferences their arguments were designed to elicit. The fact that he’s positively hostile to other elements of the libertarian package can’t mean he hasn’t been influenced by libertarian ideas.

Let’s suppose that, a few years later, a voter-ID ballot initiative comes up in Burt’s state. The local news tells Burt that this will likely make it harder for Democrats to win by keeping poorer people without IDs away from the polls. Burt rightly surmises that these folks are likely to vote, if they can, to take even more of his money in taxes. A policy that would make it less likely for those people to cast a ballot sounds great to Burt. Then it occurs to him, with a mild pang of Christian guilt, that this is a pretty selfish attitude. But then Burt remembers those very convincing arguments about the wickedness of democratic redistribution, and it makes him feel better about supporting the voter-ID requirement. Besides, he gives at church. So he votes for the initiative come election day.

That’s influence. And it’s not trifling, if there are a lot of Burts. I think there are a lot of Burts. Even if the partisan desire to stick it to Democrats is doing most of the work in driving Burt’s policy preference, the bit of lightly-held libertarian property rights absolutism that got into Burt’s system can still be decisive. If it gives him moral permission to act on partisan or racial or pecuniary motives that he might otherwise suppress, the influence might not be so small.

The problem here is not just, as Somin says, that this dances around the issue that people like Burt have become less libertarian over time and so it seems silly to blame libertarianism for his actions. It sounds as if Wilkinson has never actually talked to a populist-leaning voter like Burt. If you do, you will not find that Burt is skeptical of democracy or sees himself as defending some important ideal of laissez-faire capitalism against irrational socialist voters who are using democracy to destroy it. It is more likely that you will find that Burt sees himself as defending the “silent majority” who democracy should rightly represent from evil liberal, socialist and “cultural Marxist” elites who are undermining democracy, and how Trump will stop all the elitist liberals in the courts and media from alienating the common man with common sense by “draining the swamp.”

Read, for example, Rothbard’s original call for libertarians to ally with nationalist right-wing populists. In it, you’ll find no mention of how small “d” democracy attacks property rights because voters are rationally ignorant, and you won’t find, to quote Wilkinson, skepticism towards “a perspective that bestows dignity upon democracy and the common citizen’s democratic role.” Instead, you’ll find that the “grassroots” of the right-wing common man like the secessionists and neo-confederates who are defending property rights against the “socialist tyranny” of the “beltway elites,” Clintons, and the Federal Reserve. Modern adherents to this Rothbardian populist strategy define populism as “a political strategy that aims to mobilize a largely alienated base of the populace against out-of-control elites.” It sounds more like a radically majoritarian, Jacksonian screed about how the voice of the people needs to be truly represented.

Importantly, what the libertarian populists are trying to do is take the folk democratic intuitions which populist right-wingers have, intuitions upon which most peoples’ beliefs in the legitimacy of democracy rely, and channel those intuitions in a more thinly “libertarian” direction. Unfortunately, this is why many modern right-libertarians in the style of Ron Paul are impotent against white supremacists and often try to cozy up to them: because an important part of their strategy is to regurgitate the vulgar democratic rhetoric in which populists believe.

By contrast, modern skeptics of democracy in libertarian circles (or “classical liberal” or “cultural libertarian,” whichever semantic game Wilkinson wants to play to make his argument coherent), such as Ilya Somin, Bryan Caplan, and Jason Brennan, fundamentally undermine those folk democratic intuitions. While right-wing populists believe that the “common man” with his “common sense” knows better how the world works than the evil conniving academic elite does, the libertarian skeptic of democracy points out that the majority of voters know next to nothing and fail to be competent voters due to their rational ignorance. While populist voters believe that the voice of the majority should rule our governing structure, public choice tells us that “majority will” is mostly an illusionary concept. While populist voters believe that the “trigger locks” like courts are evil impediments to the people’s will and regularly attack them, libertarian skeptics of democracy view such institutions as the last line of defense against the irrational and ignorant mob of hooligan voters.

In fact, if people listened to folks like Somin and Brennan, populism of the sort that we’ve seen on the right would be an impossible position to maintain. This is partially why Rothbard largely rejected the public-choice analysis on which scholarship like Somin’s depends.

To try to link modern public choice-inspired skepticism of democracy with populism of any form, even in its most pseudo-libertarian form of the late Rothbard, is to grossly misunderstand populism, classical liberalism, and libertarianism. It seems rather odd to blame Somin and company for the rise of a political ideology which their arguments render incoherent. A Nancy MacLean-like conspiracy to undermine majority rule doesn’t have much of anything to do with the modern right when they think they are the majority who’s being oppressed by elites.

Neither is this some trivial matter of simply assigning blame incorrectly. The problem with populism on the right which has eroded American democracy is not that it thinks democracy is wrong, most populists naively have a lot of folk intuitions which imply some sort of vague proceduralist justification of strongly majority rule. Rather, they’ve taken the majoritarian, quasi-Jacksonian rhetoric (rhetoric to which libertarians other than Rothbard and classical liberals alike have mostly been opposed) which democrats often use and weaponized it in a manner that undermines the non-majoritarian norms on which liberal democracy is dependent for functioning. For someone like Wilkinson, who defends liberal democracy vigorously, misunderstanding the very nature of the threat seems like a particularly grave error as it renders his arguments impotent against it.

Democratic Majoritarianism versus Democratic Norms

In part, I think Wilkinson falls for this trap because he makes a conceptual confusion between the non-majoritarian liberal ideals on which democracy depends—towards which most libertarians are sympathetic—and democracy’s institutional form as majority rule. I’ve described this as a distinction between “institutional democracy” and “philosophical democracy” in the past, and have argued that one can uphold philosophical democratic norms while being skeptical of the current institutions in which they are embedded. Wilkinson argues, citing an article by Samuel Freeman, that libertarian absolutist conception of property is inherently illiberal as it implies a sort of propertarian, feudalist order. Of course, Wilkinson neglects to mention a response to Freeman by Peter Boettke and Rosolino Candela claiming that Freeman misunderstands the role property rights play in libertarian theory.

I am not an absolutist natural property rights-oriented libertarian at all, however in their defense, it is wrong for Wilkinson to think that belief in absolutist property rights—even to the point that one becomes an anarchist like Rothbard—means one is necessarily willing to do anything to undermine democracy to defend property rights. As Somin mentions, not all libertarian absolutists in property completely disbelieved in government like Nozick, but more importantly one can be an anarchist who is strongly skeptical of democracy for largely propertarian reasons but still believes, given that we have democracy, certain norms need to be upheld.

Norms such as equality before the law, equal footing in public elections (which Gerrymandering violates), and equal access to political power (which Voter ID laws violate). Just because one believes neo-Lockean arguments about property rights are valid does not mean one cannot coherently also endorse broadly Hayekian accounts of non-majoritarian liberal norms which make it possible for democracies to function (what Wilkinson calls “trigger locks”), even if in particular instances it might result in some property rights violations.

In other words, one can be skeptical that institutional democracy is moral for libertarian reasons while still embracing a broadly philosophically democratic outlook, or simply believe it is preferable to keep some democratic norms intact given that we have a democracy as an nth best possible solution.

What Wilkinson takes issue with is how the modern right attacks the sort of norms which make democracy work, norms with which no libertarian ought to take issue with given that we have a democracy as they are precisely the “trigger locks” which Hayek called for (even if libertarians want much stronger trigger locks to the point of effectively disarming governments). To think these norms are identical with how many libertarians think the specific voting mechanisms which democracy features are flawed is a conceptual confusion.

An Alternative Account of the Relationship between Libertarianism and the Right’s Pathologies

To me, it seems that Wilkinson’s attempt to shoehorn the somewhat nuanced (by the standards of electoral politics, if not by the standards of academic philosophical argumentation) philosophical arguments of Nozick and Rothbard into an account of the rise of Trumpian politics seems fundamentally inconsistent with the way we know voters act. Even if voters sometimes use indirect intellectual influences as a way to reason about their voting preferences in a motivated manner likes Wilkinson imagines, it’s not really explaining why they need to use such motivated reasoning in the first place. Here’s an alternative account:

During the Cold War, as Wilkinson notes, libertarians and conservatives had a common enemy in communism and socialism. As a result, fusionism happened and libertarians and conservatives started cheering for the same political team. After the end of the cold war, fusionism continued and libertarians found it hard to stop cheering for the “red” team for the same tribalist reasons we know non-libertarian irrational voters remain fiercely loyal to their political parties. Today, even though the GOP is becoming extremely less libertarian, some libertarians find it hard to stop cheering for the GOP for the same reasons New England Patriots fans still cheer for Tom Brady after the deflation scandal: old tribalist affiliations are hard to break.

The only real link between libertarians and modern right-wing pathologies are that some voters who have vaguely libertarian ideas still cheer for populist right-wingers in the GOP because they’re irrational hooligans who hate the left for tribalist reasons. This accords better with the fact voters aren’t all that ideological, that they (unlike Burt who’s interested in just lowering his own taxes selfishly) vote based off of perceived national interest more than self-interest, and how we know generally voters behave in partisan tribalist patterns. But this doesn’t make libertarianism any more culpable for the rise of the modern right’s erosion of democratic norms any more than (and probably less than given its limited influence) any other ideological current which has swayed the right to any degree.

How does this make sense of Wilkinson’s only real, non-hypothetical evidence of libertarian influence on the modern GOP, that some right wing politicians like Paul Ryan and Rand Paul sometimes cite Ayn Rand and Rothbard? Politicians sometimes use intellectual influences haphazardly to engage in certain sorts of motivated-reasoning to cater to subsets of voters, even though they overwhelmingly disagree with those thinkers. This why Paul Ryan first praised Ayn Rand, to get some voters who like Rand, and then later emphasized how much he rejected Rand. This is why Rand Paul cites libertarians simply to virtue-signal to some subset of libertarianish voters while constantly supporting extremely un-libertarian policies. Ted Cruz has said that conservatives “should talk about policy with a Rawlsian lens,” but nobody thinks that Rawls has been particularly influential over Cruz’s policy decisions. All politicians do when they cite an intellectual influence is try to play to cater to the tribalist, pseudo-intellectual inklings of some nerdy voters (“I read the same guys as you do, therefore I’m on your team”), it usually doesn’t mean they really were deeply influenced by or even understand the thinker they cite.

Libertarians and Classical Liberals

Let me conclude this article by addressing a side-issue of how to parse out the distinction between classical liberals and libertarians. One of Wilkinson’s ways of clarifying his disagreement with Somin was by claiming that there is something fundamentally different between “libertarianism” and “classical liberalism.” As Wilkinson puts it:

Absolutist rights-based libertarianism isn’t really part of this conversation at all. It’s effectively an argument against liberalism and the legitimacy of liberal political institutions, which is why it’s so confusing that the folk taxonomy lumps libertarianism and classical liberalism together, and sets them against standard left-liberalism. The dispute between liberalism and hardcore libertarianism concerns whether it’s possible to justify democratic political authority at all. The dispute within liberalism, about the status of economic rights and the legitimate scope of democratic decision-making, is much smaller than that.

Thus, Wilkinson seems to think that libertarians think political authority can’t be justified given that property rights are absolute and that classical liberals just think economic liberties should be included as liberal liberties. However, in my view this taxonomy of ideologies is still confused. Many who typically count as “libertarians” do not fit neatly into such a schema and need to be ignored.

You need to ignore significant portions of libertarians who still endorse property rights but think they are insufficient to a full conception of liberty and endorse other liberal freedoms, like the aforementioned Peter Boettke paper. You need to ignore intuitionist libertarians who do not endorse an absolutist conception of property rights but still dispute that political authority is justified at all, like Mike Huemer. You need to ignore consequentialists who do not embrace absolutist property rights as a philosophical position but think some sort of absolutist property-based anarchist society is desirable against liberal democracy, like David Friedman and Don Lavoie’s students. You need to ignore “thick” left libertarians like Charles Johnson and Gary Chartier who endorse libertarian views of rights yet think they imply far more egalitarian leftist positions. Further, you’d need to claim that most people the public readily identifies as some of the most influential libertarians of all time, like Hayek and Milton Friedman, are not actually libertarian which obscures rather than clarifies communication. Basically, the distinction is only useful if you’re trying to narrowly clarify disagreements between someone like JS Mill and someone like Rothbard.

I agree that there are distinctions between “libertarians” and “classical liberals” that can be drawn and the folk taxonomy that treats them creates a lot of confusion. However, it seems obvious if one talks to most libertarians, there is more going on in their ideology than just “property rights are absolute” and that there is a strong intermingled influence between even the most radical of anarchist libertarians and classical liberals. It is also true that there are a small minority of libertarians who are thoroughly illiberal (like Hoppe), but it seems better to just call such odd illiberal aberrations “propertarian” and still treat most libertarians as a particularly radical subset of classical liberals.

Ultimately, however, I think this taxonomical dispute, while interesting, isn’t particularly closely related to the problem at hand: the relationship between right-wing populism and libertarianism.

A feast of classical liberal thought: Mont Pelerin Society in Stockholm

Last week, Stockholm hosted a special meeting of the Mont Pelerin Society (MPS) on the populist threats to the free society. MPS meetings are held under Chatham House rules, which means I cannot report in any detail about the proceedings. Yet a few impressions can be shared.

I have been a MPS member since 2010, when my nomination was accepted at the end of the general meeting in Sydney. In those days the old rules still applied, which meant you had to attend three meetings before you could be nominated for membership. However, this strict rule led to the erosion of the membership base (the MPS was literally starving out), so the rules to join as a member have been made easier.

My first MPS meeting was in Guatemala City, in 2006. I had participated in the essay contest for young scholars which is always organized in the run-up to the bi-annual General Meetings. As a runner-up I won free entry to the meeting. I happened to be in the south of the USA in the weeks before, doing PhD research at the Mises Institute in Alabama, so could easily make the trip to Central America. Because I lived in Manila during those years, I could also easily attend the 2008 meeting in Tokyo.

I had are number of reasons for wanting to join the MPS. First of all, the quality of the meetings offer a great chance to listen to and speak with the leading scholars within current classical liberalism. Increasingly multidisciplinary (back in the old days the economists dominated), the programme committees of the MPS Meetings always succeed in attracting an impressive crowd of high quality speakers and commentators from across the globe. I always find this a great intellectual treat. Second, the meetings are characterized by extremely pleasant and open atmospheres. Everybody mingles with everybody, you can talk with everybody, no matter your age, or academic background. Thirdly, the meetings take place across the globe, so they offer a great opportunity to travel and see places. Although it must be added that even when you do not stay at the conference hotel, the meetings are never very cheap, so it remains an investment. Fourth, for a Hayekian like myself, it feels very good to be a member of the society founded by the master himself, which had and has such an illustrious membership, ever since its beginnings 70 years ago.

Besides the big one week General Meetings held every two years, there are shorter regional or special meetings in the other years. Last week’s MPS meeting in Stockholm was a special meeting, very well-organized by the Ratio Institute. The theme was discussed from numerous angles, through sessions on Russia’s foreign policy, the economic issue of secular stagnation, or the danger of political Islamism. Two sessions were focused on new classical liberal ideas to counter the threats. At the opening day there was a session for young scholars to present papers. This was of course also a way to attract new talent and interest in the MPS. And at the end of the second day there was something different: beer tasting while listening to Johan Norberg. A rather splendid combination!

The speakers and commentators were high level, including MPS chair Peter Boettke (George Mason), David Schmidtz (Arizona), Deirdre McCloskey (Illinois), John Tomasi (Brown), Leszek Balcerowic (former president of Poland’s Central Bank), Russia specialist Anders Aslund, German thinker Karen Horn, Jacob Levy (McGill), Mark Pennington (Kings College London), Paul Cliteur (Leiden), Amigai Magen (Hoover Institution), and the energetic Ralf Bader (Oxford). A lineup like this guarantees a number of new insights, solid arguments, and general intellectual stimulus. Many answers were provided, yet in true academic fashion, many questions remain.

While well represented in this program, International Relations are normally a minor topic at MPS meetings, and there are not many IR scholars around (nor are sociologists or legal scholars, by the way). Personally I am convinced that the future appeal of classical liberal thought also relies on taking into account world affairs. So there is a need to keep on writing and publishing about it, to expand the basis for thought, also in the MPS. To hear about the concerns and insights of other classical liberals in other disciplines helps my thought process, besides remaining up to speed with current classical liberal issues in general.

So it was a great meeting again, And for all you young scholars out there: if you are interested make sure to regularly check the MPS website (www.montpelerin.org) to see if there are opportunities to participate in one of the upcoming meetings.

Digging Deeper into Populism: A Short Reply to Derril Watson

Derril Watson offer some critical remarks on my short post about populism in Latin America. In short, Watson is arguing that (1) I’m stating something obvious (populism diminishes economic freedom) and (2) that I’m wrong when I say that populism fails to produce economic growth.

Seems I haven’t been quite clear, because I state none of the above. The intention of my post is not to show that populism decreases economic freedom, I think this is uncontroversial. The point of the post is to show, with a very simple calculation, how fast economic freedom is reduced. I might be wrong, but I have the impression that most individuals do not realize how fast they can loose their economic liberties under this type of government. This is the message carried in the title of the post “How fast does populism destroy economic freedom in Latin America?” rather than “Does populism destroy economic freedom in Latin America?”

With respect to the second point, my claim is not that under populism there is no growth of GDP, my claim is that “populist governments failed to increase GDP per capita consistently faster than the region.” My original post is just a small bite of a paper that is still work in progress and I’ll share in due time. I wasn’t expecting this claim to be controversial. Still, the figure below shows the ratio of GDP per capita (PPP) of each of he countries I observe with respect to Latin America. All countries are centered in year 0 as the first year of populism as defined in my original post. That’s the first dot in the graph. The second dot shows either the last data available or the end of populism. None of these countries show a consistent higher growth rate than the rest of the region.

Populism - Fig 1

It seems to me that Watson is confusing growth with recovery. The fact that economic growth produces a growth in GDP does not mean that a growth in GDP is due to economic growth. The recovery mentioned by Watson in Argentina happens after the largest crisis in the history of the country and the largest default worldwide at the time. As I mentioned in my post, Argentina hits stagflation in 2007. This suggests to me a rapid recovery with no significant growth and built upon an unsustainable policy (for instance, Argentina fails to improve its relative income with respect to the region, it rather stagnates in 2007 and starts to fall a few years after.) I can show a large increase in my personal GDP as measured by consumption by depleting my savings (consuming my capital stock at the country level). I wouldn’t call that personal economic growth. The Kirchner government, for instance, failed to reduce poverty below the levels seen in the 1990s. It does, of course, if that is compared with the poverty levels around the years of the crisis (which is what Watson’s table is doing.) It should also be kept in mind that official poverty measures in Argentine were hampered by the government.

There’s still another important issue regarding GDP measures of Argentina. As it became well known, GDP series were hampered by the government (also inflation and poverty rates were hampered.) By 2014 official GDP values were overestimating the size of the economy by 24%. Another sign is the evolution of real wages in Argentina, which hits a ceiling again in 2007 with a level similar to the one at the end of 2001 (just before the crisis). In 2008, 2009, and 2010 real wages decline.

As a final comment, I’m not sure to what comment of mine Watson refers to. I don’t see a comment entry of mine in my original post, nor I remember doing so. In any case, I don’t get into the definition of populism precisely for how difficult that task can be. The problem of defying populism is one of the areas covered in my yet unfinished paper.

Digging Deeper into Populism

TL;DR summary: The one thing most populist governments studied had in common was a declining protection for property rights. Focus there next time.

Nicolás Cachanosky explained that populism in five Latin American countries had led to a rapid deterioration in their economic freedom, intimating that this also led to a relative drop in living standards compared to other South American countries. Given that the two primary economic strategies of populism are control and spend (Dornbusch and Edwards 1991 quoting Carbonetto et al. 1987), it would be shocking if a populist government did not reduce economic freedom. That’s the idea! However, there is more we could learn about how populism reduces economic freedom by doing a little more to identify exactly what it was that populist governments did. First, I think it’s useful to go a little further back, to compare how trends were looking before* populism (say by 1991) to how those trends changed with the election of a populist government. Second, I’m going to take a more careful look at how and why economic freedom decreased.

It is funny to me that when Cachanosky’s response to his first commenter is to ask for a definition and a measure before being willing to debate a correction; that suggests he really ought to have been more careful to define populism in his post. In fairness, that’s a tall order*: much of the literature on populism has been trying to define it and there is still no consensus as far as I can tell. Are we focusing primarily on increasing statism, whether it is called populism or progressivism or socialism or cronyism? Or is there something special about the populist brand of statism that we should be looking out for? To the extent populism is a “power to the people” movement, Libertarianism itself could try to appropriate the populist brand and claim they are taking power back from the government for the people! I don’t think this is what Cachanosky has in mind. :). I tend to think that he is focused mostly on statism and for the purposes of his post, it doesn’t matter whether it’s populism or socialism that caused it, so please assume when I say “populism” hereafter, I mean increased state control over the economy.

Even given that, populism/statism exists on a continuum. There is a marked difference between a determined populist government that nationalizes wide swathes of an economy rapidly in order to redistribute riches to the common people and someone in an unnamed developed country who uses populist rhetoric to get elected and keep his base happy only to turn around once in office and enact largely pro-business deregulations and strengthen conservative social mores.

Because of this, it’s important to make distinctions between the 5 countries in question (Argentina, Bolivia, Brazil, Ecuador, and Venezuela). To demonstrate that, let me focus on Argentina and Brazil. Mueller and Mueller (2012) contrast Brazil and Argentina’s responses to the global food price crisis in 2006-08, during this populist period in both countries. There have been very few checks and balances on executive power in Argentina, allowing the Kirchners to enact “opportunistic price controls and intrusive export bans, generating significant discontent and investment disincentives” (pg 3). In Brazil, the checks on the presidency to prevent a repeat of the late 80s/early 90s inflation led to “the surprising conversion of President Lula once in office in 2003, reneging the leftish policy agenda his party had defended for years in the opposition, only to continue the fiscally disciplined macroeconomic policies of his predecessor” (pg 5). These kinds of difference are very important to understand what happens and when and why.This table shows how Heritage’s Economic Freedom in the World survey ranked the five countries Cachanosky singles out as populist in 1995 when the survey started, the year when they elected a populist government, and 2015; I then add five other South American countries for comparison. 10 represents high economic freedom and 1 very low freedom. The astute reader will notice that I am using the raw scores rather than country rankings as Cachanosky does because I suspect it matters more for economic growth what happens within my country rather than thinking economic growth will collapse because a handful of other countries on other continents become more free while I stay put where I am: I will look worse by comparison, but not be worse.

Heritage Overall
1991 start 2015
Argentina (2003) 6.8 5.6 4.4
Bolivia (2006) 5.8 5.8 4.7
Brazil (2002) 5.1 6.2 5.6
Ecuador (2007) 5.7 5.5 4.9
Venezuela (1999) 6 5.6 3.4
Heritage overall
1995 2005 2015
Chile 7.1 7.8 7.9
Colombia 6.5 6 7.2
Paraguay 6.6 6.1 6.8
Peru 5.7 5.3 6.1
Uruguay 6.3 6.7 6.9

To delve into the Argentina/Brazil comparison again, the survey shows Argentina scoring markedly higher than Brazil in 1995. This situation had already reversed itself by 2003 and the start of populism. Since then Argentina has continued to fall rapidly while Brazil has turned reversed its progress. Delving deeper into those numbers, Argentina has become markedly less free in terms of almost every category Heritage measures (respect for property rights in 2001-2003, government integrity 2006-2008, tax burden, government spending since 2011, business freedom in 2002, and monetary, investment, and financial freedom in 2003), while Brazil’s primary sin was an increase in spending in 2006 and an increase in taxes to pay for it. That’s it. This shows a real deterioration in Argentinian freedom before populism, a trend only continued and exacerbated by the Kirchners, while Brazil has shown both improvement and decline, with a much different, constrained form of policy making. Argentinian populism and Brazilian are far from the same phenomenon.

In Bolivia and Ecuador, property rights fell in 2001 and investment freedom by 2005 before populism in either country and both slid down steadily after electing a populist government; both countries have improved in government integrity, taxes got worse in Ecuador in 2008 with spending increasing massively in 2010, and financial freedom worsened after populism started. Venezuela saw the largest decrease in respect for property rights right after electing Chavez and again in 2008. In contrast to other countries, Chavez initially reduced government spending and kept taxes roughly constant, with spending not increasing again until after 2008. Business and financial freedom declined steadily, investment freedom plummeted in 2004, and monetary freedom only declined in 2014.

We see then five rather different patterns, even though most of them saw the same sort of decline of 1.2-1.4 points. The key feature in all but Brazil is the decrease in respect for property rights shortly after the election of a populist government. Spending also tends to be higher in these five countries, though all happened during the global food price crisis and the US/EU financial crisis when spending also increased by many non-populist countries as well. Otherwise, there is very little in common among the five countries, with some embracing freer trade and others fleeing it, some cracking down on monetary and financial freedoms with others largely ignoring them. Our five ‘control’ countries saw an improvement in economic freedom from 2005-201, particularly in Colombia.  Colombia and Peru reduced their respect for property rights in 2002, but later repented; Paraguay has not held property rights in even modest esteem since 1998.

All of this suggests the place to look in future research is to the importance of declining respect for property rights among populist governments as a driver of economic freedom and economic growth.

And that brings us to the second of Cachanosky’s points – that this drop in economic freedom in those five countries led to shrinking economies compared to other economies in the region. First off, to be clear, all five of these populist economies experienced rapid economic growth during the time period in question, and this economic growth was much higher than the economic growth enjoyed in the decade before populism started. This would lead pro-populists to conclude that populism was actually quite good. Cachanosky admits that even though Argentina fell farther in the economic freedom rankings than its peers, its GDP/capita actually increased. He excuses this as being “largely explained as recovery after the 2001 crisis and by consuming capital stock, not as an expansion of potential output.” Unfortunately for his story, Argentina’s GDP/capita in terms of real USDollars not only surpassed its pre-crisis level (around $12300 in 1998), but rose to $17500 – a 42% increase during its populist period. (All numbers from www.gapminder.org are PPP$ inflation-adjusted.) In every single case he cites, GDP/capita rose while the headcount poverty rate fell dramatically.

However, compare their growth to the five control countries, and compare the time period before and after in each case:

GDP/cap (PPP$) Growth poverty (% below $3/day)
1991 start 2015 91-start start-15 1991 start 2014
Argentina (2003) 9330 10300 17500 10.40 69.90 3.9 19.1 4.3
Bolivia (2006) 3850 4370 6150 13.51 40.73 30.4 32.4 12.7
Brazil (2002) 10300 11600 15400 12.62 32.76 35.8 24.5 7.56
Ecuador (2007) 7690 7810 10800 1.56 38.28 36.5 32.9 10.2
Venezuela (1999) 16100 14200 15800 -11.80 11.27 N/A N/A N/A
GDP/cap (PPP$) Growth poverty (% below $3/day)
1991 2003 2015 91-start start-15 1991 2003 2014
Chile 9750 15500 22500 58.97 45.16 N/A N/A N/A
Colombia 7780 8680 12400 11.57 42.86 22.7 26.6 13.2
Paraguay 6040 5870 8040 -2.81 36.97 7.9 19.4 7
Peru 5290 6880 11500 30.06 67.15 33.9 27.2 9
Uruguay 10100 11500 19900 13.86 73.04 2.1 5.2 1.3

The 2003-2015 period was good across the board in South America, with most growing at least 30% more from 2003ish-2015 compared to 1991-2003. Similarly, poverty rates fell markedly from 2003-2014 in every country for which I have Gapminder data. So the claim is not that populism resulted in negative economic growth. The issue is that the average growth in the non-populist countries was around 1% per year higher than in the populist countries. Thus, to the populist-supporter who points to the high growth of Argentina et al as proof that populism works, the response is that growth was even higher in their non-populist neighbors and poverty is lower in them as well.

Now the unfortunate thing for drawing a clear causal interpretation from these correlations is that economic growth was also higher in the non-populist countries in the before period as well, perhaps due in part to having higher economic freedom to begin with. Growth in the freedom-preserving countries was slightly more than 1% per year higher, and that is driven predominantly by Chile. If Chile had had a more average 11-13% growth during that time period, we would be able to show more conclusively that the economic growth gap increased after populism. So, really, the claim that populism caused a lower economic growth in those countries doesn’t hold up very well – economic growth was lower in those countries before populism as well. It may well be that economic growth would have been higher in Argentina, Bolivia, Ecuador, and Venezuela had they maintained or improved their respect for property rights, but the raw data doesn’t tell us that without significantly more controls and doing some proper regressions.


* – One of the problems of this exercise is that to get “before” populism, you need to go back a hundred years or so. Ah well.

How fast does populism destroy economic freedom in Latin America?

The turn of the twentieth century has seen an increase in populist government in Latin America. That populism is no friend of free markets is well known. And even if their movement against free markets if fairly quick, it is common for individuals to loose track of how fast they are loosing their economic freedoms.

There are five cases of populist governments in Latin America that can work as benchmarks for the region. In particular, we can look at the behavior of governments in Argentina, Bolivia, Brazil, Ecuador, and Venezuela for the time frames depicted in the following table.

Table 1

During this time period, populist governments failed to increase GDP per capita consistently faster than the region. The only exception is Argentina. But its fast increase in GDP is largely explained as recovery after the 2001 crisis and by consuming capital stock, not as an expansion of potential output. It is no accident that Argentina met stagflation in 2007. In the last three issues of the Economic Freedom of the World (Fraser Institute) Argentina ranks among the bottom 10 free economies in the world.

The following figure shows the fall in ranking of each country in the Economic Freedom of the World.

Figure 1

We can translate the information shown in the above into loss of ranking position per year of populist government. This is what is shown in the next table.

Table 2

This table offers a few readings:

  1. Argentina is the country that fall in the ranking of economic faster than its peers.
  2. Ecuador shows a very slow fall. This is due to two reasons: (1) Ecuador already starts from a low ranking position. (2) The last year of the index (2015) shows an improvement (without this improvement the fall is quite sharp as well.) Ecuador does not represent a case of “good populism.”

What this table is showing is that if an individual is born in any of these countries ranking 1st in economic freedom the same year a populist government takes office, then the same country will rank at the bottom of the world before he retires. In the case of Argentina, in 27.8 years the country will be at the bottom of the list, this means that by the time this individual starts to work, Argentina will already have a very repressed economy. By retiring time, this individual will have no experience of living and working in a free economy.

This numbers are not just descriptive of populism in Latin American countries. They also serve as a sort of warning for Europe and the United States, regions that have already seen some signs of populist behavior in their governments and political groups in the last few years. Populism can be emotionally attractive, but is very dangerous for our economic freedoms.

Who is Jair Bolsonaro and why you should care

Since 1994, Brazilian presidential elections follow a pattern: PSDB and PT candidates are the main competitors, with a third candidate falling between the main leaders and countless dwarf candidates. Although this third candidate does not reach the presidency and does not even dispute the second round of the elections, its political influence tends to increase and its support happens to be disputed by the candidates of the PSDB and the PT. So it was mainly with Marina Silva in 2010 and 2014, and possibly will be so with Jair Bolsonaro in 2018.

After being defeated in 1989, 1994 and 1998, Luis Inacio Lula da Silva finally won the presidential election in 2002 and was re-elected in 2006. In 2002 Lula was benefited by the low popularity of President Fernando Henrique Cardoso (FHC), hurt by the circumstantial economic difficulties that the country was going through. FHC was practically absent from the campaign of his successor candidate, José Serra, apparently by common agreement of the incumbent and the possible successor. In addition, Lula and the PT had a radical change of stance that year, expressed mainly by the “Letter to the Brazilian People”. In this document Lula promised to abandon his historic struggle against free markets and to maintain the basic guidelines of FHC’s economic policy, which in the middle of the previous decade had taken the country from one of the worst economic crises in its history. The Brazilian economy left the circumstantial difficulty of 2002 and with this Lula secured his reelection in 2006. However, looking back, the arrival of Lula to the power was not accidental. Created in the late 1970s, the PT always faithfully (and not secretly) followed Antonio Gramsci’s guidelines of cultural Marxism: to come to power not by violence and also not by elections per se, but by cultural influence. This guideline guaranteed to Lula, even in the elections he lost, about 30% of the valid votes. The other 21% were electors dissatisfied (in the case of 2002) or excited (in the case of 2006) with the economic conditions of the moment. However, it is this same strategy of cultural Marxism that is now opening room for Jair Bolsonaro.

Bolsonaro is already an old congressman in Brazil, but has only really become famous in recent years. Elected for the first time in 1990, he fiercely criticized FHC’s free-market economic policy during the 1990s. In his view the then-president was a entreguista (something like a surrenderer) and the Brazilian economy needed to be protected against foreigners. Bolsonaro has also many times attenuated or even denied the fact that Brazil underwent a military dictatorship between 1964 and 1985. But what his followers (who call him Mito) really admire him for is the way he stands against political correctness, in a way reminiscent of Donald Trump. Bolsonaro became famous mainly for opposing the introduction of gender ideology as content in the country’s public schools. For this reason he is often accused of machismo and homophobia by his opponents. In recent statements Bolsonaro expresses greater support for the free market, but maintains his admiration for the military that governed Brazil in the past and a hard line against the politically correct.

Not only in Brazil, but in other parts of the world, the spell of cultural Marxism is turning against the sorcerer. When the facts refuted Marx’s economic theory (already brilliantly refuted by Mises) some Marxists, such as Oskar Lange, and more recently Thomas Piketty, sought a soft version of economic Marxism. Many others, however, took refuge in the cultural Marxism of Gramsci, Foucault, Herbert Marcuse, and others. The option was simple: instead of admitting that Marxism is not true, many Marxists decided that truth is relative. The main result of this is the identity politics that spread throughout the world. Everyone wants to identify themselves as members of minorities who are not represented by traditional politicians. It was only a matter of time before white middle-aged men began to complain that they were not represented. And so white middle-aged men have taken Britain out of the European Union, elected Trump US president and will shortly elect leaders in other countries or at least greatly annoy the globalist establishment.

Throughout the world there is a weakening of the semi-Marxist welfare state, and the same can be observed in Brazil. Important right-wing leaders have emerged in recent years, ranging from conservatism to libertarianism. In the case of Brazil, however, where the population is still largely socially conservative, there is a strong tendency towards a conservatism with which libertarians do not identify, and this trend is stopping the advance of communism in the country. Brazilians can accept Marxism in politics and economics, but they do not accept it in their bedrooms as easily. It is possible that Bolsonaro is accepting the basic premises of a free-market economy, but his main appeal is to be the most anti-Lula, anti-PT, anti-establishment and politically incorrect presidential candidate. Even if he is not elected president in 2018, or even reaches the second round of elections, Bolsonaro is already a political leader impossible to ignore.