It is evident that populist politicians, even if they come to power through free elections, deviate from the same path when they stay in power for an extended period and transform the regime. Turkish President Erdogan’s prolonged tenure in Turkey allowed him to skillfully reshape the political regime into a one-person rule. By monopolizing the achievements of his ancestors and emphasizing religious values in opposition to ultra-secularist elites, whom he portrayed as foreign puppets and defenders of the oppressive status quo that insulted the way of life of ordinary citizens, Erdogan successfully created a deep polarization in society to maintain his grip on power.
In my Project Syndicate piece titled “Erdogan’s Success Story” (June 14, 2011), I provided a positive assessment of Erdogan’s remarkable economic achievements over the past decade, highlighting Turkey’s expected entry into higher-income country status during his third term. However, I concluded the article by posing the question: “How will Turkey utilize its rapidly growing economic power?”
In a notable departure from the initial period (2003-2011) when Erdogan strengthened his position and reformed the regime, he veered away from the essential factors that contributed to his success. The period following the 2011 election victory witnessed a shift towards a process of power intoxication, culminating in the complete consolidation of the presidential government system (PGS) in 2018. This marked a departure from the so-called “orthodoxy,” replaced by a more arbitrary approach characterized by learning by doing and trial-and-error, which Erdogan referred to as “heterodoxy.” Although this era resulted in unprecedented economic and political turmoil, Erdogan’s election for a third term as president raises the question of why a populist government that initially came to power amidst an economic crisis did not encounter more significant challenges.
However, empirical evidence suggests that populists often come to power through relatively “free,” if not entirely “fair,” elections, yet only a few of them are consistently able to exit power. This usually occurs through being voted out of office, primarily if they manage to stay in control long enough to transform the system into a more authoritarian one. Consequently, the modes of departure often involve scandals, impeachment or resignations, constitutional crises, refusals to step down, coups, suicides, or tragic accidents. The recent elections in Turkey have demonstrated that in cases of democratic backsliding, an economic crisis alone is a necessary but insufficient condition for an authoritarian leader to change course. The positive case of successfully defeating an authoritarian populist in Brazil in March 2013 highlights that the sufficiency condition lies in the opposition’s ability to employ and manage various factors more effectively than the government, even when the latter abuses state power.
Erdogan as a Mastermind of Populism
Engaging in debates about the fairness or fraudulence of Erdogan’s election victory at this stage does not provide significant insights. As highlighted by Funke et al., when populists manage to remain in power for a decade or longer, they often shape their country’s political destiny in negative ways. After Erdogan’s prolonged tenure, Turkey has regressed from being considered a “free” country, as indicated by the Freedom House Index of 2023, and the elections can no longer be deemed fair. In a country like Turkey, where the general election results show that the opposition party (Republican People’s Party, CHP – 25%) consistently lags behind the ruling party (Justice and Development Party, AKP – 35% on May 14, 2023) by approximately 10 percentage points for nearly 21 years, the transfer of power appears unlikely, regardless of the coalition formed.
While the definition of populism may vary, as the Pope declared, it is commonly viewed as an “evil” that tends to lead to undesirable outcomes. Erdogan’s brand of populism aligns perfectly with a Machiavellian approach, where any means or methods to secure victory are deemed permissible or legitimate. Engaging in a political game with a leader like Erdogan, who does not hesitate to employ divisive tactics and polarize society through the creation of antagonistic groups such as “us vs. them,” “the people (ordinary, virtuous citizens) vs. the elite (pro-statuesque, corrupt, self-serving),” “true believers vs. infidels,” and “nationalists vs. traitors,” is a recipe for a nightmare scenario. He consistently invents and substitutes (foreign or domestic) enemies, identifies (internal or external) scapegoats, stokes security concerns within society, and perpetuates a state of conflict to solidify his hold on power.
Populism, with its rhetoric in defense of the rights of the “innocent and silent majority” against the perceived beneficiaries of an establishment or elite, implies that political power should not be held by economic, financial, intellectual, or political elites, but by a homogenous and virtuous “people.” This perspective, as highlighted by Arnesen and Peters, draws from Norris (2018) and encourages the emergence of a charismatic leader who presents themselves as an outsider to the establishment and claims to understand the “true desires” of the people, representing their voice and serving their interests. Consequently, this discourse undermines the significance of “mediating institutions,” particularly in the countries dominated by a paternalistic or patrimonial culture like Turkey. As a result, modern governance institutions, norms, and values, such as the division of labor and expertise, lose their relevance. Merit is increasingly replaced by loyalty and militant advocacy, and professional, autonomous specialized institutions are either weakened or filled with supporters. Erdogan’s era exemplifies the harm inflicted upon institutions and the economy as populists remain in power. It is important to note that Erdogan’s “populism” is not a learned, an acquired or imported ideology but an original synthesis deeply connected to geography, culture, history, and the cult of his leadership personality.
Several factors play a decisive role in Erdogan’s populist discourse:
A multipolar world in power transition without an omnipotent hegemonic power dictating its unilateral will to the “rest.”
Geopolitics, which can be negotiated and marketed in such a world, just like the geography of Turkey. A situation that brings both high risk and return.
A majority population whose “memory” has been manipulated and updated with an older version of the software, ancestors, and religion being the two strategic tools.
In such a geostrategic location of great power rivalries, Erdogan’s situation can be likened to a person who owns few rooms but several keys to open them. Obviously, it is almost impossible to find the right key and open the door in time always quickly. But he doesn’t waste time opening the door; either he breaks it in an emergency or uses the only lock in this geography to open all the doors with a magical capacity; culture! In that regard, Erdogan can be called the “inventor of populism” in the 21st century when it comes to the creation and exploitation of a nostalgic “populist heartland” that corresponds to a retrospectively imagined utopia built on an abandoned but undead human based past.
As Yilmaz and Morieson put,“the addition of religion has made populism a formidable force capable of producing a range of emotions among segments of the public, thereby increasing the demand for populism.” Keeping society intact with his constantly renewed agenda, Erdogan’s emotional populism allows him to employ the elements of religion-history-culture and friends-foes antagonism.
An additional defining trait, and perhaps surprising to some, is Erdogan’s religious belief, encapsulated by the motto “After you have done all you can, leave the rest to God and trust it.” This philosophy stems from the recognition that in the face of complex and ever-changing circumstances, risks are amplified by deteriorating institutions and declining human capital. Such challenges reflect the vulnerability of the “one-man system,” where even an omnipotent dictator cannot single-handedly handle significant challenges. In such situations, prayer becomes the only recourse, driven by the conviction that “the new day will come with new hopes or opportunities!”
Erdogan’s approach to economic management serves as a field where his populism is exemplified through the stylized characteristics outlined above.
The Transformation of Turkey’s Economy: From Orthodoxy to Heterodoxy
In countries with strong institutions, an orthodox economy signifies a market that operates based on its internal dynamism, guided by market-friendly rules that address potential market failures. Conversely, in a country dominated by authoritarian populism, a heterodox economy implies arbitrariness and uncertainty. Both of these approaches were tested and experienced in Turkey from 2003 to 2023. In this article, Erdogan’s economic management can be examined within three distinct periods: the first period (2003-2011) characterized by the application of good governance principles to a reasonable extent, the second period (2011-2018) marked by a turbulent transition to a completely different regime, and finally, the consolidation of the authoritarian PGS since 2018.
In the following discussion, I will summarize the key achievements and highlight unresolved problems that have spiraled out of control, particularly with the consolidation of the single-man regime under the PGS.
During the first period, the orthodox approach primarily involved:
(i) the establishment of quality institutions such as central bank autonomy and the rule of law,
(ii) fostering peaceful coexistence and regional relations through the “zero problems with neighbors” policy, and
(iii) pursuing integration with the EU, the global community, and global governance institutions.
Except for the global economic crisis of 2008-2009, the first period witnessed domestic reforms, solid institutional capacity, and comparable long-term growth performance to similar countries. The economy expanded by an average of around 5.8 percent, as depicted in Figure 1, although with a visible loss of momentum. By 2013, national income surpassed the trillion-dollar threshold, and per capita GDP reached $12,500, propelling Turkey to the status of an “upper middle-income country” for the first time.
Figure.1 Economic Growth in Turkey (2003-2022)
i) According to Acemoglu and Üçer, a notable development during this period was the dominance of overall productivity growth over factor inputs, marking a significant shift. Additionally, the implementation of monetary and fiscal discipline contributed to a decrease in inflation from 55% in 2002 to single-digit figures by 2005.
ii) In terms of financing economic growth, there was a notable increase in capital inflows across all categories and terms, which facilitated a smooth expansion. Furthermore, thanks to fiscal and monetary discipline, interest rates experienced a significant decline across all categories and terms. This period also witnessed a reduction in the budget deficit and a decrease in the share of interest burden on the budget.
iii) According to World Bank data, there was a striking improvement in income distribution during this period. This was evident in the decrease of the Gini Coefficient from 0.45 in 2005 to 0.38 by 2007, indicating a more equitable distribution of income.
On the downside, despite positive progress in leading economic indicators and relative macroeconomic stabilization, the following aspect remained fragile, with long-term implications:
i) While the population increased from nearly 65 million to 85 million as of 2023, primarily due to the influx of millions of unorganized refugees, GDP receded to nearly 800 billion dollars after 2019. As a result, per capita GDP also declined by 8000-9000 dollars, indicating Turkey’s middle-income trap status as of 2022.
ii) Turkey’s potential for growth did not improve, primarily due to a decline in productivity growth resulting from the discontinuation of reforms after losing external anchors, such as Turkey’s full membership negotiations process with the EU.
iii) The halted structural transition led to the persistence of a growth model based on classical low-value-added, capital-labor intensive industries. Moreover, the share of upper-middle-income technology in production and exports remained stagnant at around 2.5% until 2022, showing no improvement over nearly two decades. It is worth noting that countries like South Korea and China achieved a share of 35% at a similar development level.
iv) Reflecting the insufficiency of national savings and structural weaknesses, Turkey’s reliance on imports and capital inflows for growth persisted. As a result, each period of economic growth led to a significant increase in the current account deficit, which reached approximately 5-6 percent of GDP in 2022.
In his third term, which began in June 2011, Erdogan exhibited an increasing authoritarian tendency, reflecting a sense of power intoxication. Unfortunately, this period saw a decline in the gains that had been achieved. The process was initiated by the corruption operations on December 17-25, 2013, and further exacerbated by the self-orchestrated coup attempt by “the team Erdogan” on July 15, 2016. It culminated in a complete overhaul of the system in 2018, leading to a severe economic downturn referred to as a “free fall.”
Throughout the years, Erdogan systematically politicized and undermined the independence of key judicial institutions, including the Council of State, Court of Cassation, Court of Accounts, and the Constitutional Court. He also exerted control over institutions such as the Central Bank, Statistical Institute, Competition Authority, and banking supervision and regulation bodies. This process resulted in a loss of control over inflation, unemployment, domestic and foreign deficits, and the accumulation of national debt. Official figures indicate that annual inflation reached 86% in 2022, significantly higher than the global average rate of less than 8%. These macroeconomic imbalances were primarily causedby the excessively low policy rate pressure imposed on the Central Bank of Turkey and excessive monetary expansion, which became rapidly unsustainable. Moreover, these policies enabled Erdogan-backed speculators to generate exorbitant profits.
Then Why and How Erdogan Wins: A Hate and Hope Paradigm
In a country the size of Turkey, lacking abundant natural resources, it is impossible to conceal economic facts and failures from the public and international community for an extended period. Manipulating data through Soviet-style fabricated politburo methods or exerting strict militant control over autonomous policy-making authorities like the statistical institute is ineffective. This is because the impact of these developments is directly felt in people’s daily lives.
This finding aligns with the overall understanding that populist economic policies have a short lifespan and are not sustainable. Furthermore, it predicts that such a government either loses power or transitions into complete authoritarianism. Unfortunately, Turkey currently teeters on the brink of such a development following the May 2023 elections.
Does Erdogan’s continued stay in power, particularly with the main opposition party CHP trailing the ruling party by almost 10 points, imply that economic factors have lost importance in authoritarian regimes during elections? While the literature suggests that populist parties often come to power after a macroeconomic crisis, the reverse is not necessarily true. These elections demonstrated that an economic crisis is necessary but insufficient to dislodge an authoritarian government. It also indicates that Erdogan skillfully constructed an ‘uneven playing field’ and relied on a dependent electoral majority. The opposition made every effort to win the rigged game, even adopting the populist-ethnonationalism strategies of its adversary, but ultimately failed. In addition to Erdogan’s “success” in providing livelihood security to a significant portion of the electorate, he also stoked security concerns and fear of a return of the old status quo elites, known as “White Turks,” who previously threatened and humiliated the lifestyle of ordinary citizens.
The most crucial factor that neutralized or balanced the devastating economic crisis, as indicated in Table 1, is the extensive and effective use of the “Welfare regime.” Despite Turkey’s unfavorable rankings in all categories compared to similar authoritarian populist countries like Argentina and Brazil, it excelled in implementing widespread social support programs, including those targeting the most vulnerable families. Furthermore, these measures were presented skillfully within the framework of culture and religion, yielding profound political consequences. Culture matters. In a region where the notion of citizenship demanding justice and the rule of law as a public good has remained premature for centuries due to the culture of patrimonialism, citizens perceived “social support” not as a constitutional guarantee but as a benevolent offering from the Sultan. Their “loyalty” was consequently secured through a minimum level of economic security, protecting those who felt neglected and left behind.
Table.1 Governance in Selected Populist/Authoritarian Countries
The second decisive factor is the utilization of immigrants as a source of cheap labor and a voting reserve for the ruling AKP. Despite having to work informally in low-wage sectors without social security protection, Erdogan adeptly leveraged foreign funds, primarily from the EU, to compensate for their losses, including providing social protection. In the midst of a deteriorating economic environment, the opposition’s discourse of repatriating immigrants did not resonate, particularly among small and medium-sized companies, due to this practice that alleviates labor costs for millions of refugees and grants a comparative advantage to low value-added sectors.
In addition to financial support, Erdogan fostered a strong emotional connection and sense of belonging among the immigrants by invoking a highly susceptible concept from religious literature known as “ummah” or “Ansar brotherhood.” Moreover, he transformed this imaginary notion into tangible expectations that shape the minds of millions of people. Depicting a mythical “global land of brotherhood” based on religious commonalities and historical memories, Erdogan conveys the message: “Just like our esteemed ancestors, it is time to reclaim our history as the worldwide Muslim diaspora eagerly looks to us as protectors.” As a result, sympathy towards Erdogan among the average person on the streets of any Muslim country may be higher than in Turkey itself.
While these “pull factors” served their economic purpose, Erdogan also strategically employed “push elements” in his rhetoric. Believing in the power of media under his control and the limited memory of the people, Erdogan not only took credit for past successes but also shifted blame for past failures onto present-day politicians who were not in power at the time and never governed Turkey. In a country with low levels of political, religious, and economic literacy, he manipulated the decision-making capacity of the electorate through the media he seized. The production of manipulated statistics, inventions, and innovations within this context instilled a sense of pride and superiority in a society yearning for a return to the glory days of the past.
Therefore, it is evident that populist politicians, even if they come to power through free elections, deviate from the same path when they stay in power for an extended period and transform the regime. Erdogan’s prolonged tenure allowed him to skillfully reshape the political regime into a one-person rule.
By capitalizing on and monopolizing the achievements of his ancestors and emphasizing religious values in opposition to ultra-secularist elites, whom he portrayed as foreign puppets and defenders of the oppressive status quo which oppressed and insulted the life patterns of ordinary citizens, Erdogan successfully created a significant divide that was crucial for maintaining control.
To secure the loyalty of the people, with whom he had “connected with heart and imagination,” particularly those who were likely victims of economic difficulties, Erdogan employed a combination of cultural and economic transactional policies. He not only provided various economic benefits but also manipulated them by instilling fear of losing their privileges and fostering a sense of national security, sovereignty, and even independence. When one considers the opposition parties’ leadership, policy quality, and communication skills with the public, it becomes clear that Erdogan would not be replaced with the configuration of such a coalition.
“Saving multilateralism and democracy under global power transition and rising authoritarian populism,” by Věra JOUROVA (The Vice President of the European Commission for Values and Transparency –Previously the European Commissioner for Justice, Consumers and Gender Equality).
Multilateralism: The Past and the Future
Moderator:Aline BURNI(Policy Analyst on International Relations, Foundation for European Progressive Studies, Brussels).
“How international law enables great power domination and great power competition and what can be done about it,” by Mattias KUMM(S.J.D. Harvard, Research Professor for Global Constitutionalism, WZB Berlin Social Science Center).
“Mini-literalism in the Indo-Pacific as an alternative to multilateralism and bilateralism? The role of public support and populism,” by Werner PASCHA (Prof. of Economics, Duisburg-Essen University, Institute of East Asian Studies-IN-EAST).
“On the new paradigms of cooperation in the rising world of multiplexity in countering populism,” by Richard CLARK(Associated Professor, Department of Government, Cornell University).
Power Shift, Multiplex World, and Populism
Moderator: Emilia ZANKINA(Interim Vice Provost for Global Engagement, Dean, Temple University Rome).
“Cooperation regimes and hegemonic struggle: Opportunities and challenges for developing countries,” by Sara CARIA(Research Professor at The Center for Public Economics and Strategic Sectors at the Institute of Higher National Studies).
“The Chinese perspective of multilateralism, power transition, and the so-called new world order,” by ZHANG Xin (Associated Professor, School of Politics and International Relations, Deputy Director/Center for Russian Studies, East China Normal University, Shanghai).
“In pursuit of Xi Jinping’s dream world order: The case of the BRI,” by Ibrahim OZTURK(Professor of Economics, The ECPS Senior Researcher and the University of Duisburg-Essen, Institute of East Asian Studies).
The ‘New Globalization’ and Countering Populism
Moderator:Helmut WAGNER(Professor of Economics, Fern Universität in Hagen).
“Economic populism and sovereigntism: The rise of European radical right-wing populist parties,” by Oscar MAZZOLENI (Political Sciences, University of Lausanne).
“Populism or embedded plutocracy? The emerging world orders,” by Michael LEE (CUNY-Hunter College, New York).
“Chinese ‘hub and spoke’ – multilateralism and the notion of populist economic policy,” by Marcus TAUBE(Professor of East Asian Economics/China, Mercator School of Management, Institute of East Asian Studies (IN-EAST), Duisburg-Essen University).
Closing Keynote Speech
“Multipolar globalization, learning curves and populism,” by Jan Nederveen PIETERSE(Mellichamp Chair and Distinguished Professor of Global Studies & Sociology, University of California, Santa Barbara, CA).
By Naim KAPUCU(Pegasus Professor, School of Public Administration & School of Politics, Security, and International Affairs, University of Central Florida).
Moderator:Aline BURNI(Policy Analyst on International Relations, Foundation for European Progressive Studies, Brussels).
“How international law enables great power domination and great power competition and what can be done about it,” by Mattias KUMM(S.J.D. Harvard, Research Professor for Global Constitutionalism, WZB Berlin Social Science Center).
“Mini-literalism in the Indo-Pacific as an alternative to multilateralism and bilateralism? The role of public support and populism,” by Werner PASCHA (Prof. of Economics, Duisburg-Essen University, Institute of East Asian Studies-IN-EAST).
“On the new paradigms of cooperation in the rising world of multiplexity in countering populism,” by Richard CLARK(Associated Professor, Department of Government, Cornell University).
Power Shift, Multiplex World, and Populism
16:00-17:30 (Central European Time)
Moderator: Emilia ZANKINA(Interim Vice Provost for Global Engagement, Dean, Temple University Rome).
“Cooperation regimes and hegemonic struggle: Opportunities and challenges for developing countries,” by Sara CARIA(Research Professor at The Center for Public Economics and Strategic Sectors at the Institute of Higher National Studies).
“The Chinese perspective of multilateralism, power transition, and the so-called new world order,” by ZHANG Xin (Associated Professor, School of Politics and International Relations, Deputy Director/Center for Russian Studies, East China Normal University, Shanghai).
“In pursuit of Xi Jinping’s dream world order: The case of the BRI,” by Ibrahim OZTURK (Professor of Economics, The ECPS Senior Researcher and the University of Duisburg-Essen, Institute of East Asian Studies).
Day II (March 31, 2023)
13:00–17:30 (Central European Time)
“Saving multilateralism and democracy under global power transition and rising authoritarian populism,” by Věra JOUROVA (The Vice President of the European Commission for Values and Transparency –Previously the European Commissioner for Justice, Consumers and Gender Equality).
The ‘New Globalization’ and Countering Populism
14:00-15:30 (Central European Time)
Moderator:Helmut WAGNER(Professor of Economics, Fern Universität in Hagen).
“Economic populism and sovereigntism: The rise of European radical right-wing populist parties,” by Oscar MAZZOLENI (Political Sciences, University of Lausanne).
“Populism or embedded plutocracy? The emerging world orders,” by Michael LEE (CUNY-Hunter College, New York).
“Chinese ‘hub and spoke’ – multilateralism and the notion of populist economic policy,” by Marcus TAUBE(Professor of East Asian Economics/China, Mercator School of Management, Institute of East Asian Studies (IN-EAST), Duisburg-Essen University).
Closing Keynote Speech
15:30-16:30 (Central European Time)
“Multipolar globalization, learning curves and populism,” by Jan Nederveen PIETERSE(Mellichamp Chair and Distinguished Professor of Global Studies & Sociology, University of California, Santa Barbara, CA).
16:30-16:45 (Central European Time)
By Naim KAPUCU(Pegasus Professor, School of Public Administration & School of Politics, Security, and International Affairs, University of Central Florida).
How international law enables great power domination and great power competition and what can be done about it
By Mattias Kumm
After WWII the UN Charter established the obligation to resolve disputes peacefully, to prohibit the use of force and establish a system of collective security. In practice this system has failed in its core mission to prevent militarily organized great power competition. Instead, the system has evolved to effectively establish prerogative powers in favor of certain great powers, who compete with one another today over the question who and within what limits these powers are to be exercised. The presentation will analyze the specific features of international law, that effectively enable the United States, China and Russia to exercise prerogative power and addresses the question what might be done to curtail and eventually eliminate those powers and the dangerous competition it produces.
Minilateralism in the Indo-Pacific as an alternative to multilateralism and bilateralism? The role of public support and populism
By Werner Pascha
Minilateralism has spread considerably in recent years, and the Indo-Pacific has been a pivot for this development. The Quad group, encompassing Australia, India, Japan and the US, is but the most prominent example. The trend towards minilateral initiatives is usually explained by referring to issues on the level of international cooperation, namely certain deficiencies of multilateralism and bilateralism. Another argument is related to presumed organizational efficiency advantages. In this contribution, we explore the under-researched argument that minilateralism is also related to domestic political factors of the countries involved. Namely, we look into the argument that in many circumstances it may be easier and more promising for both populist governments and for governments that need to defend themselves against populist sentiments to engage in minilateral initiatives, rather than to focus on different levels of international cooperation.
On the new paradigms of cooperation in the rising world of multiplexity in countering populism
By Richard Clark
A nascent literature in international relations has identified a reticence by populist leaders to engage in good faith with international organizations (IOs), including international financial institutions like the World Bank and International Monetary Fund (IMF). This is largely because such organizations are staffed by elites and experts, which populists position themselves against, and perceived by populists’ constituents as benefiting elites rather than the common people. As a result of this populist skepticism of IOs, resurgent populism in many parts of the world has corresponded to mounting attacks by populist leaders on IOs and the experts that staff them. Moreover, populists may take advantage of regime complexity, or the presence of multiple IOs in a given issue space, to select the forum that intrudes least on state sovereignty. I will specifically discuss how the IMF and its operations have been targeted by populist leaders in this way; how the Fund has reacted to the populist challenge; and the conditions under which populists may cooperate with rather than criticize the IMF.
Cooperation regimes and hegemonic struggle: Opportunities and challenges for developing countries
By Sara Caria
There is an increasing convergence in the international relations literature around the idea that changes in the world economy during the last decades are reshaping the international order; although the outcome of such a reconfiguration is yet unclear, many scholars argue that a dispute over global hegemony is already underway. At the same time, drawing on realist and neorealist approaches, international cooperation can be seen as a means to gain legitimacy and tighten alliances. In this framework, this article analyses three cooperation regimes as terrains of dispute to expand—or maintain—international leadership. The first, the Sustainable Development Goals (SDGs) Agenda, reflects mainly the attempt to maintain the legitimacy of the United Nations system and the multilateral institutions that make up the traditional cooperation regime. This framework still responds to Western interests, despite China’s efforts to contest and contain US influence. The second, South–South cooperation, wrapped up in the rhetoric of horizontality and common challenges, is the privileged terrain of middle powers and emerging countries, aiming at increasing regional influence. Finally, the third scheme, International Cooperation for Structural Transformation, is China’s new development doctrine and the fulcrum of its struggle to promote itself as a successful new model for global development. In my conclusions I reflect on the opportunities that the co-existence of different regimes offers for developing countries, as well as the challenges that they continue to face in their search for autonomous development paths.
Shifting Chinese perspectives on multilateralism and the “new world order”
By ZHANG Xin
The presentation first unpacks the multiple layers of connotations within Chinese state’s discourse on multilateralism and new world order, including multilateralism vs. isolation; multilateralism vs. multipolarity; multilateralism as institutions/rule binding behavior vs. non-institutionalized behavior; genuine multilateralism vs. fake multilateralism, etc. It then traces how Chinese state’s perceptions of multilateralism have shifted over time, partially driven by the ongoing power transition in international system. Last, it briefly matches such shifting perceptions and discursive mechanisms on multilateralism and new world order with China’s key policy choices and institutional building during the past two decades.
In pursuit of Xi Jinping’s dream world order: The case of the BRI
By Ibrahim Ozturk
The current multipolarity and power shifts make it essential to see what kind of world order the rising powers like China want. While some experts endeavor to grasp this concerning the long history of China, in this presentation, we will try to project the future by following the strategy, institutional governance quality, policy and practices that China has put forward since 2014 in BRI, the most important vision project put before the international community. China’s selective and dual approach towards the current “global order” is the most prominent hint about China’s world order. Namely, the communist party keeps silent in reforming the existing multilateral global system’s deficiencies in matters deemed appropriate for China’s interests. It also uses the opportunities of the liberal order abroad but denies the principle of reciprocity at home and tries to legitimize it with the so-called “socialism with Chinese characteristics”. This presentation will argue that the Chinese perspective observed in the BRI can be interpreted as the reincarnation of China’s hierarchical “world systems approach”, which refers to its ancient investiture-tribute system.
Economic populism and sovereigntism: The rise of European radical right-wing populist parties
By Oscar Mazzoleni
The study of the ideological and policy stances of successful European radical right-wing populist parties represents important research topics in political science. Although cultural dimensions taken in a narrow sense are crucial (e.g. Norris & Inglehart 2019), scholarship has been increasingly interested to economic aspects, with a focus on welfare, redistribution and international trade. This contribution argues that the economic supply of radical right populist parties is characterized by a mix of economic populism and sovereignism, which forms the basis of a common mobilization frame. While economic populism refers to defense of the economic prosperity of the ‘heartland’ against its enemies, e.g. the elite and immigrants, economic sovereignism entails the message of “nostalgia of the old good times” by referring to an idealized or “gold” period when economic well-being was predominant among the people, and which needs to be restored” (Ivaldi & Mazzoleni 2021).
Populism or embedded plutocracy? The emerging world orders
By Michael Lee
What kind of foreign policy vision are populist governments likely to bring to the world stage? Conventional wisdom would suggest that populists are likely to oppose multilateral cooperation and the cosmopolitan global vision that has characterized much of the post-Cold War era. However, this does not mean that populists are intrinsically opposed to all forms of international interaction – particularly in a world order increasingly shaped by populist governments themselves. I argue that while populists are likely to oppose formal and technocratic intergovernmental organizations, populist leaders are likely to engage in bilateral cooperation with other leaders, and even in more broad-based cooperation when doing so is aligned with the divisions they would like to stoke domestically.
Chinese “hub and spoke”-multilateralism and the notion of populist economic policy
By Marcus Taube
Chinese leaders present themselves as advocators of a multilateral world order. As exemplified by the Belt & Road Initiative, however, China’s de facto (economic) external relations are modelled on a “hub-and-spoke” system, where China establishes a multitude of bilateral relations, which are then integrated in a larger (multilateral) setting in which China commands a central, leading role. The presentation discusses this phenomenon and outlines populist features of China’s external economic policies designed to promote further Chinese influence, economic leverage and soft-power in an international economic environment.
Multipolar globalization, learning curves and populism
By Jan Nederveen Pieterse
Right-wing populist parties move to the center (Italy, France, Sweden), repeat electoral rollercoasters (Netherlands), insert authoritarian nostalgia into the mainstream (Philippines), fail (Trump, Bolsonaro) or remain stuck in failure (Brexit, Freedom Caucus). Right of center parties move to the extreme right (Likud Israel, US Republicans), muddle on (UK) or nearly crater (UMNO Malaysia). Center parties may opt for ‘critical centrism’ (Macron). Other parties are in the phase of changing not just politics, phase one and policies, phase two, but laws and institutions, level three (BJP India, Likud, Erdogan Turkey, Fidesz Hungary, Justice Party Poland), a level that established authoritarian regimes have long achieved. These multi-directional trends involve crisscrossing learning curves, alongside Realpolitik, on the part of politicians, publics, media, think tanks, funders, foreign interests (Russian influencers) and so forth. For rightwing voters issue loyalty often matters more than party loyalty. Politics is constant learning, its nature changes as dynamics change and learning is multi-directional. Polycrisis focuses social attention on capable governance rather than ideological posturing. While much right-wing populism has been a response to economic setbacks, deindustrialization, 2008 crisis, austerity, immigration, now great power conflicts take the foreground and multipolar globalization takes a geopolitical turn, a shift that leaves less room at the table for right-wing populists. Overarching trends play a part in multi-directional movements, yet they are not linear and their implications are not uniform across settings. Generalizations about populism miss its diversity and diverse learning curves.
Ozturk, Ibrahim. (2023). “Before the last exit: Chance for Lula to save democracy and market in Brazil.” Populism & Politics (P&P). European Center for Populism Studies (ECPS). February 27, 2023. https://doi.org/10.55271/pp0021
After the Cold War, not only the economic discontent created by capitalism and globalization went to the extreme, leaving the environment at the mercy of multinational corporations, but also the perception that the sovereignty, autonomy and independence of nations, and with them, the right to self-determination was increased to a limited extent. In particular, as the global crises of 2008-2009 hit people’s lives hard, the sense of “being left behind” prepared the ground for the demand and supply of populist politics. However, populist governments not only failed to achieve any progress on the main problems complained about, rather the contrary, but primarily right-wing authoritarian-populist governments also worsened the situation by threatening multilateralism, democracy, human rights and the free market economy worldwide. Besides, the Covid-19 pandemic since 2020 posed quite mixed results for the future of populism. While the populists gained strength in the opposition, the right-wing populists in government began to lose power. Therefore, in such an environment, in Brazil, the rise of Lula’s left-wing (and to some extent populist) government to power after defeating a right-wing authoritarian government has potential implications for the future of democracy, human rights, the market economy, and multilateralism. If the Lula government takes a reformist, transformative, and progressive path, it can become a positive role model for other countries under populism threat. However, this article questions the possibility of that under local and global constraints.
After a fierce race against the right-wing authoritarian populist leader Jair Bolsonaro, the left-wing leader Luiz Inácio Lula da Silva Lula (Lula, hereafter) took the lead on November 2, 2022, elections by a considerably narrow margin in Brazil. Given the fact that the local and global structural challenges are there, Bolsonaro’s loss of power does not indicate the final defeat of his right-wing populism. Latin America’s recent history shows that as long as the internal and external conditions that provide supply and demand conditions for populism remain in place, the ongoing vicious circle between the right and left populist pendulum will continue. For this reason, this result in Brazil can be seen as the beginning of a new showdown rather than a final victory against authoritarian tendencies in society that is highly characterized by authoritarian populist values.
On the other hand, while the right-wing populism (RWP) poses an obvious threat to the democracy and human rights, it would be too simplistic to present the left-wing populism (LWP) as progressive, democratic, and pro-human rights from the viewpoint of hardcore populist theory. The current question is whether Lula, one of the established actors of Brazilian politics, who previously ruled Brazil for two terms, can show a genuine leadership for change and reform, and trigger a conjuncture with an overarching impact that might extend beyond Brazil, and trigger an anti-populist wave. Despite Latin America’s political graveyard, which imposes a political culture of excessive short-termism, Lula can lead Brazil in that direction.
To discuss these arguments, after analyzing the nature of the currently shifting global landscape towards populism in the second part, the third part deals with the overall political climate between right- and left-wing populism in Brazil. This section will consider Lula’s legacy (2003-2010), Bolsonaro’s populism in power and the expectations from Lula, who has returned for the third time. Finally, the fifth section considers the new global conjuncture and its implications for a comprehensive economic transformation, the need for funding and source of finance, efficiency considerations on the use of public money as well as the need for comprehensive tax reform to create a new source of finance such as wealth tax. Article ends with final remarks and observations.
Shifting Global Landscape Towards Populism
Many prominent economists, such as Stiglitz (2003), Rodrik (2011), Acemoğlu & Yared (2010), and Greider (2003), argue that hyper globalized capitalism has exceeded its limits and produced unsustainable social, political, economic, and environmental repercussions. With those self-reinforcing inherent mechanism, they argued, “excessive globalization” threatens democracy, human right, and market economy.
Some alternative views, however, found that perspective overly pessimistic in an environment where socialist planning economies had collapsed in former Soviet Union in the early 1990s and nearly a decade after when China began transforming Mao’s regime to embrace and converge to the market economy led by Deng Xiaoping. After socialism collapsed and the possibility of communism as an alternative ideology lost its appeal worldwide, Fukuyama (1993) hastily published his “end of history” thesis, presenting capitalism as the most progressive and definitive form of an organization human beings can create.
Besides China and Russia, the number of countries transitioning to democracy and the market economy system suddenly increased and that created illusions about the final victory of capitalism over its alternatives. This process of globalization which was driven by technological breakthroughs, trade-openness, and financial liberalizations paved the way for multinational national enterprises (MNEs) to accumulate disproportionate concentration of wealth and a worsening of global income distribution at the national and global levels (IMF7WEO, 2007). Besides the great recession of 2008-2009 and the recent COVID-19 pandemic, a recent UN report also underlines the impact that climate change, urbanization and international migration has had on global income inequality (World Social Report, UN, 2020).
Global income disparities and a lack of opportunities are creating a vicious cycle of inequality, frustration, and discontent across generations and consequently have serious negative repercussions in the rise of authoritarian populism. Societies detach from the institutional structures to which they are accustomed to and eventually become more receptive to the recipes of the populist politics. Therefore, in a sharp contrast to the expected “third wave of democratization” in the post-Cold War period, the world has experienced “the third wave of autocratization,” an era that can be termed “the New Cold War.” For the first time in the post-Cold War world, authoritarian-oriented regimes outnumber democracies. This number does not include countries that have already surrendered to authoritarianism, like Russia and China (Lührmann & Lindberg, 2019). As of today, the global conditions for freedom and democracy are clearly trending downward. The growing signs of democratic recession, spreading to the core of the world’s liberal democracies, particularly Europe and the United States. While these are the first serious doubts about the future of democracy in the advanced liberal democracies since the beginning of the third wave of democracythe erosion of liberal democracies is part of a broader downward shift worldwide. Besides the former president Donald Trump in the US and Jair Bolsonaro in Brazil, who lost the chair, recent autocrats include Hungary’s Viktor Orban, India’s Narendra Modi, Mexico’s Andrés Manuel López Obrador, Russia’s Vladimir Putin, Turkey’s Recep Tayyip Erdogan, Venezuela’s Hugo Chávez and Nicholas Maduro formerly, Filipino Rodrigo Duterte, Austria’s Sebastian Kurz (Meyer, 2022).
The key observation to make here is that the rise of the new global wave of populism in the so-called New Cold War era has been driven by the current distorted globalization, large MNEs spiraling out of control, and the Western-biased multilateral governance order (MLO) losing its relevance. A rising multipolar world and new global powers such as Russia, India and China are the driving force of the populist tide, among others. As geopolitical competition between the West (especially the US) and these two geopolitical rivals intensifies, we are increasingly threatened with a regression to the Cold War days where alliances matter above democracy and human rights. The rulers who aspire to become autocrats, or to deepen their autocracy, perceive no serious consequences from “the international community.” Seeking a way to distance themselves from the West, many populist leaders are finding an opportunity to consolidate their power by exploiting the gaps in this emerging world (Aiginger, 2020).
A Quick Evaluation of the Populism in Opposition and in Power
Having lacked a coherent known ideology or a worldview, populism is better understood as a technique for striving for power. Populists increase their strength and adaptability through pragmatism and opportunism and, therefore, are compatible with an unlimited range of specific ideologies. It can be deployed anywhere through several rhetoric, such as anti-elite resentment, that can mobilize the masses, especially in countries where economic inequality and inequality in power sharing are widespread. The failure of the status quo to answer the ever-growing challenges such as economic woes, cultural fears, the speed of change brought about by globalization and digitization, and the failure of politics to manage the transition to higher levels of prosperity, provide the necessary supply and demand conditions for populist politicians to gain electoral support from the forgotten or socially neglected part of society. Under these challenging conditions people frequently turn to messianic solutions and demand extraordinary leaders with a cult of personality or metaphysical charisma who denies institutions and rules.
Left- and right-wing populists expose the following common characteristics: First, as Britannica emphasizes, a charismatic leader who appeals to and claims to embody the people’s will to consolidate his power also explains the inherent tendencies of populists towards authoritarianism. In this personalized form of politics, political parties lose their importance, and elections confirm the leader’s authority rather than reflect the people’s different allegiances. Believing themselves to be the “voice of the people and the right,” they keep themselves outside and above the norms of control and regulation, often acting dependent on the situation and the people, and even displaying purely arbitrary administration.
Second, with no initial chance of coming to power alone, the populist parties seek social and political legitimacy by creating coalitions with “mainstream” parties. In situations where political elections reveal no majority rule options, they also play a more active part in the party and make further inroads until they dominate (Hayward, 2003). Once they finally take the lead by promoting simplistic solutions to complex problems, extreme promises, and superficial rhetoric, they entrench themselves by changing the rules and dismantling the separation of power among government, parliament and the courts. Additionally, they restrict media freedom, grow closer to the military, and close foreign borders. By harming MLO, the rule of law, democratic control mechanisms, human rights, and the market economy, populists ultimately incline to authoritarianism. Rather than do away with elections altogether, they hold pseudo-elections to legitimize their anti-institutionalist, plebiscitary, and majoritarian attitudes (Naím, 2022).
A third related and common unifying feature of the RWP and LWP is their “divide and rule” strategy. They practice this by pushing intensely polarizing messages and dividing people binarily into the “us” and the “them.” The former is used to refer the ordinary people as virtuous citizens and the latter as a corrupt, self-serving elite. This divisive policy is shared among the populist, whether they are in opposition or in power. After the division of society into “the evil and happy minority” and “the good, unhappy and the silent majority,” the assertion that the great masses, i.e., the real people, also have an extremely homogeneous structure has significant consequences (Vidigal, 2022).
Relatedly, populist actors strive for “uniting the nation,” and perceive this as a permanent crisis. To that end, authoritarian populism tends towards extreme nationalism, racism, conspiracy-mongering, and scapegoating of marginalized groups. If there are sinister foreign forces and cultures that seek to intrude on the homogeneity of ‘our people’, country, nation, and religion, then the society needs protectors or guardians who can take care of society. All these factors help consolidate the leader’s power and distract public attention from the leader’s failures, the nature of the leader’s rule or the real causes of economic or social problems (Britannica, 2022).
Fourth, when they are in power, as Diamond (2017) summarizes, (i) populists demonize the opposition as illegitimate, (ii) undermine the independence of the courts, the independence of the media, gain control of public broadcasting, put stricter control on the internet, (iii) subdue (depoliticize) other elements of civil society and the business community into ceasing support for opposition parties, (iv) use state control over contracts, credit flows, and other resources to enrich a new class of political crony capitalists, (v) extend political control over the state bureaucracy and security apparatus to purge professional civil servants and create loyal servants to the political party. (vi) They also use the state intelligence apparatus as a weapon against the opposition, manipulate electoral rules and gain control over electoral administration to retain power in the elections.
Fifth, in economics, populism refers to a process that results in heroism when they are in opposition; while in power, they might foster pleasure in short-run unsustainable policies. With their oversimplified interpretation of a society’s problems, they talk about fair income distribution, national sovereignty and independence. What they do in reality is that by ignoring scientists, professional and economic constraints, and efficiency considerations, they rely upon policies, such as excessive monetary expansion, inflationary financing, and accumulation of debt and, thus, unsustainable growth (Aiginger, 2020). Populists characteristically favor strong but somewhat selective government intervention in the economy to counteract market forces, which ends with economic inefficiency and unsustainable growth.
Sixth, in terms of “good versus bad populism” (Larry, 2017), one must first consider populist leaders’ main ideologies, not their pragmatism, opportunism, tactics or maneuvers (Huber & Schimpf, 2017). Hardcore ideologies like communism, capitalism, or fascism target to redistribute political power, economic dominance, and cultural leadership away from what they declare as corrupt, greedy, over-centralized, urban-based oligarchies in favor of empowering “the common people.” In that context, three distinguishing characteristics of LWP than RWP can be mentioned: Because of their main leftist ideologies, LWP parties tend to define the people on a class basis, mainly referring to the poor. They, therefore, recognize class differences, consciousness, and conflicts of interest. In contrast, RWP parties define the people on a cultural and nativist base (Mudde, 2004). In other words, while LWP parties frame their criticisms economically and seek to protect the proletariat from exploitation by capitalists, RWP parties’ champion nativism (Mudde, 2007).
Seventh, RWP and LWP differ regarding political inclusion but share similarities in their ideas of political contestation and control of power. While LWP parties generally do not discredit minority groups nor object to granting these groups political rights, they do not accept political competition for that they, and only they, are the true representatives of the people. Consequently, they consider political control through effective opposition and institutional power check mechanisms as obstacles that prevent them from implementing the people’s will. In this sense, left-wing populists are inclusive on the societal level and the dimension of political participation. Thus, left-wing populist parties differ from right-wing populist parties in that they embrace an inclusive as opposed to an exclusive view of society (Katsambekis, 2017; Mudde & Kaltwasser, 2013).
Eighth, like RWP, LWP parties are also anti-elitist and anti-establishment, but LWPs are more international than RWPs. This attitude might help bring about necessary institutional reforms to mitigate injustices, break monopolies, redistribute power and income, and therefore play a progressive role in integrating forgotten or left-behind groups in the system. In this categorization, LWP represents progressive, good populism, whereas RWP represents the “bad.” However, the mentioned similarities should also not be overlooked. Populism, both right and left, is based on an individual’s personal preferences and their emergency management and arbitrary decision-making. They constantly try to increase power and adjust the system to their whims. RWP and LWP demand more power for the ruling executive to shift power away from parliaments and courts. They show no significant difference regarding their influence on mutual constraints.
Looking at the issue from this perspective, it is clear that the populist leaders from both sides should be under constant suspicion. Their act of undermining modern governance based on the separation of powers between the legislature, judiciary and executive, undermining media freedom and silencing civil society NGOs with various tactics should be resolutely opposed.
Populists often use a strong pragmatism full of empty promises (i.e., promising a return to non-existent past glory) that helps them defeat the status quo parties in the elections. Their underestimation or oversimplification of society’s problems cause them to severely underperform when in the power. However, that doesn’t mean they can be removed from power just for not fulfilling their promises. Removing the populists from the seat is likely to be much more complicated than ascending them. As Trump in the US, Bolsonaro in Brazil and Orban in Hungary have shown, they do not go as easily as they come. That is because of the crimes and corrupt activities they commit while in power. After “crossing the Rubicon” in power, they pass a point of no return, and “unable to leave power.” They try to hold on to power by any means within their courage and strength by undermining the democratic order that enabled them to come to power. They even invent a foreign enemy or dangerous power or, like Erdogan in Turkey, artificially organize a fake coup to consolidate their power. As Naim (2022) puts it, both left- and right-wing populists can be more ideologically different but more similar in their strategies to seize and retain power.
In this respect, as Aiginger (2020) states, democracies are fragile in their efforts to protect themselves from destructive attacks by populists. Although the number of military dictatorships, which peaked in the 1980s, has sharply declined, they have been replaced by pseudo-democratic personal dictatorships (Lührmann & Lindberg, 2019). Given that an “authoritarian” regime refers to the absence of democracy, a system where free and fair elections determine who holds power, the most dangerous form of dictatorship in our time comes with the populist regimes. They are evolving under God-like charismatic leaders and seek legitimacy through a theater of rigged elections to govern their “pseudo-democracies” (Frantz, 2018).
In game-theory language, society may prefer “the least bad,” the so-called “second-best” where “the first best solution” is not possible in the given social pay-off matrix. However, when it comes to favoring populism over the established order, the situation expressed by the phrase “get caught by the hail while escaping the rain” can arise. As Martin Wolf puts it, “yes, indeed, the failings of the existing governmental and commercial elites – their indifference to the fate of large sections of the population, their greed and incompetence, which have been so clearly demonstrated – are hard to answer for; the solution does not lie with the populists.”
To conclude this section, populism does not allow a self-determined life to enrich human dignity and self-esteem. It does so by undermining life opportunities and lowering income. It also increases the probability of conflict with neighbors. Under populism, government expenditures for policy, border control, environmental degradation and health problems increase significantly, and this in turn leads to higher taxes and debt.
In terms of fighting with populism, it has multiple roots which must be addressed, but there exist numerous better solutions for these problems if they are discussed with citizens. However, given the new majority rules and suppression of the media, if there is no candidate presenting an alternative or opposition is divided, the return to liberal democracy is difficult. In order to combat and reverse populism, the disappointments of the “big silent majority” must be addressed and their hope for the future must be managed on a realistic basis.
In that regard, economic, cultural, and social expectations must be satisfied. The fears, anxiety, and concerns (i) like unemployment, income loss and inequalities, and rising cost of living in economics must be resolved. Also, negative repercussions of excessive globalization that comes with free trade and the unbounded activities of MNEs should be prevented from giving the impression of losing national autonomy, sovereignty, and independence. (ii) “Fear of foreigners,” that caused mainly by legal and illegal immigrants, are also perceived as a threat over the settled life patterns and civilizational values of native citizens. That should also be managed more accurately. Redrawing the picture without whitewashing must be the starting point of a new policy. It is necessary to explain the importance of a pluralistic society and its dynamism. Furthermore, it needs to be stressed that heterogeneity is not negative. The interaction of different cultures brings innovativeness, creativity and opens the door to further prosperity.
Moreover, each era has its own language, culture, and necessary organizations. Reactions should be appropriate. Instead of fleeing to the supposed “glorious centuries” of ancestors in different ages, it should be made clear that the necessary advances will never come through protectionism. Previous jobs and family structures will not be repeated either. As Rumi (1207-1273) once said: “My sweetheart faded away along with yesterday / No matter all the promises of yesterday / Now it’s time to say something new.”
In this respect, developing a vision outlining where the country or region wants to be in the medium term, for example by 2030, and defining the effective tools that can be used and partners found to achieve that vision are two Herculean tasks. In other words, it is important to structure the institutions, rules, instruments, actors, stakeholders, future industries, financial resources, and the place of the major national sectors in the global value chain and division of labor in a timely manner. All vision and measures should comply with good governance criteria, like transparency, accountability, and inclusion. The vision, which needs to be developed together with experts and policymakers, should be ambitious but achievable and shared by citizens, including the type of jobs to be created in a number of specific, future-oriented sectors. The skills and educational level of the youth as well as emigrants should also be aligned with this overall vision. The vision should specify which public services should be provided and how living conditions can be improved. Performance should be assessed against sustainable development goals. Actions needed include comprehensive tax reform, transforming the education system, supporting the hybrid work systems, and taking public action to support the process, investing in climate change and supporting green sectors such as better public transport, electric car incentives, car sharing and renting unused houses.
Brazil between RWP and LWP
To uncover the right-wing and left-wing populism of Bolsonaro and Lula, respectively, and to predict Brazil’s future in terms of democracy, human rights, and the market economy, it would be helpful to briefly examine the rhetoric of these two leaders on the one hand and their real policies and implementations in power on the other. Although they both refuse to be labeled as populist, both Lula and Bolsonaro cause political polarization, albeit in different tones, by adopting an exclusionary, discriminatory, marginalizing, and divisive language. This turns politics into a struggle between angels (the big silent majority) and demons (elites, professionals, bureaucrats).and reduces political competition to a dangerous struggle between “traitors” and “patriots.” According to a recent analysis by Käufer (2022), in the last election campaign, they both used terms like fascists, communists, devils, demons, thieves, agents of genocide, or Ku Klux Klan sympathizers to describe each other.
More specifically, Lula, who governed Brazil for two terms between 2003-2010, followed aggressive campaign rhetoric and insulted anyone who did not vote for him as “enemies.” Rather than pursuing a reconciliatory course to build bridges, repairing social fault lines, and uniting the nation, he used the environment Bolsonaro had divided to his advantage. It seems he found this to be a productive strategy in a socio-political culture where demand for strong political leadership, authoritarian and populist values is high. Lula was able to win the election with a majority, just 2 million votes more than his rival, and take charge of a deeply polarized country from January 1, 2023 by making different coalitions (León &Magni, 2022). Now, however, Lula has to mend this division he helped create and in such an environment he must propel Brazil into the future by giving the country a new vision.
Bolsonaro’s campaign was characterized by a fear of violence when he repeatedly cast doubt on the electoral system in October 2022. Bolsonaro announced that “only God can remove him from the presidency” and suggested that if he received less than 60 percent of the vote that would mean “something unusual (fraud) happened.” Like former US President Donald Trump, Bolsonaro refused to say whether he would leave office peacefully if he lost. He also scapegoated Lula by arguing that he is not only corrupt and a thief, but also will bring Communism to Brazil. The last, but not least, he blamed Lula for being pro-LGBTQ supporter, harming Brazilians morality. When he lost elections to Lula,Bolsonaro remained silent for hours after the result was announced and called on the military to oversee the vote count in October.
Both Bolsonaro and Lula have commonly attempted “scapegoating methods” to divert attention from their failures. Lula heavily relied on this strategy as he ruled the country for two terms (2003-2010). After the court rejected his candidacy, Lula ceded his post at the pinnacle of his popularity and social approval to another president (Dilma Rousseff – January 2011 – August 2016) from the same party, the Labor Party. Facing similar and serious controversial corruption-related lawsuits, Rousseff lost her post to Michel Temer (August 31, 2016, to December 31, 2018) as interim president, and then Bolsonaro rose to power from January 2019 to late 2022 (Käufer, 2022).
Looking at the language used by the two political leaders during Brazil’s last election campaign, one can say that both can be cited as “examples of subversive populism.” However, as the analysis presented in the first section concludes that LWP are expected to be more progressive than RWP because of the difference in their main ideology, we should focus on what they did in power in addition to their rhetoric. In this context, some selected practices of Lula and Bolsonaro (2018-2022) will be briefly discussed below.
Lula’s Legacy (2003-2010)
Lula, a politician who has made a name for himself as a unionist and struggling leader in Brazilian politics since the 1980s, gained experience on his way to the presidency. There were two main challenges for Lula to overcome: (1) Brazilians were overly politized and had a divided political culture and (2) Lula’s hardcore left ideology on economic management.
In terms of the first issue, the important chronic challenge was that all presidents of Brazil since re-democratization in the late 1980s have had to form coalitions among rival factions in the Brazilian Congress to govern (Käufer, 2022).Considering that fact and his previous attempts at the presidency, he toned down his rhetoric and succeeded in increasing his stakeholders and coalition partners. Lula was able to win the 2002 elections as a result.
Regarding the second issue, Lula was aware of the uncertainty that was held amongst the public on how a left-wing leader, who used very harsh ideological language during the election process and was a union leader in his past, would act as leader of the country. Lula kept a flexible and pragmatic approach; He emphasized the unity of the country and tried to calm fluctuating markets by publishing market-friendly statements. For instance, by publishing a “letter to the nation,” Lula tried to relieve “financial capital” by ensuring to follow an “evolutionist, pro-market, not revolutionary” reform and change path if the phrase is appropriate. The old saying that “the crowned head grows wiser” was vindicated in Lula’s case. As soon as he came to power, he began to adopt very pragmatic policies as if to say, “what is said on the campaign trail stays there.”
Lula was expected to take the necessary steps to resume economic growth during his first term in power, after almost 25 years of semi-stagnation, fight poverty, and improve historically deep income inequalities. Lula decided to continue the International Monetary Fund (IMF) program signed in 2002 by the former academic president Cardoso. Lula greatly benefited from the stability created by the Cardoso government, with the Plano Real taming inflation while avoiding recession and the privatization of monopolies increasing the inflow of foreign capital. To increase the credibility in his commitment to the market economy system, Lula also appointed Cardoso’s Minister of Finance Pedro Malan to the same position.
Thanks to these measures, compared to other left-of-center reform projects, Lula caused fewer confrontations with internal political adversaries and economic elites. He gained a reputation as a moderate and pragmatic leader (Hughes, 2012). However, that level of pragmatism even risked disappointing his ideological supporters’. In a way to balance that perspective, he also stressed that rather than following the so-called Darwinian philosophy, implying the survival of the fittest where the big fish eats the small, advocated by the right-wing politicians, he would pay attention to the social policies to improve income distribution and alleviate poverty. In other words, Lula protected the balance between the elites, that is to say, the finance capita and the “silent majority”. The combination of social sensibility and fiscalresponsibility promoted him as a “modern left” (de Carvalho, 2008).
In addition to his capacity to build and maintain coalitions and his ability to promote a pragmatic-flexible approach to the economic management Lula was also lucky, which allowed him to benefit a great deal from changes underway before his presidency. Geologists found a huge new oil field deep in the ocean off the Brazilian coast, and ethanol production expanded. The tens of billions of barrels of oil discovered in the fields of Rio de Janeiro in 2006 have been declared one of the most important discoveries of this century. Many hoped this would bring an abundance of education and health and make Brazil one of the largest economies in the world (The Guardian, 2015).
The most significant luck for Lula and Brazil was a new phase of globalization that encouraged an uninterrupted long growth cycle from 2002 till the burst of the global financial crisis in 2008. This new phase of globalization was driven by revolutionary developments in communication and transport technologies, the integration of China and then ex-Soviet markets into the world system via the WTO, and the breaking down of barriers to factor movements across the board. Globalization of production, trade, and financial flows, accompanied by great opportunities for energy and commodity-exporting countries like Brazil. As a result, unlike the period between 1990-2022, when, besides Argentina, Russia, and the South African Republic, Brazil recorded the lowest growth performance among developing countries (DCs) and, therefore, almost stagnated (Figure.1), during Lula’s two terms, a growth rate more than doubled in the 2000s and surpassed the OECD and world growth averages. Accordingly, nominal GDP increased fivefold from $500 billion in 2002 to over $2.5 trillion and per capita income from about $4,500 to $13,000 in 2010 (Figure.2). With that performance, Brazil came to the brick of successfully graduating from upper middle-income country status to becoıam a high-income country for the first time in its modern history.
The growth performance and the associated social policies have contributed significantly to Lula’s phenomenal success in the social sphere (Green & Skidmore, 2021). Growing export surplus and rising tax revenues allowed the Lula government to fight widespread poverty by investing in social programs, such as the Family Stipend (Bolsa Família), which started in 2003, to reduce poverty and increase human capital. Former president Cardoso’s School Stipend (Bolsa Escola) preceded that program, and Lula merged it with his Zero Hunger (Fome Zero) campaign (Hall, 2006). Bolsa Família supported families with children with a per capita income of fewer than 70 dollars a month, granted a small sum of money per child (up to three children) as long as they were vaccinated, stayed in school and did not engage in illegal child labor. As of 2010, 12.4 million households had enrolled in the program, and, in sum, 20 to 30 million Brazilian escaped from poverty.
According to Neri (2014: 25), one-sixth of Brazil’s strides in poverty reduction can be attributed to this program, which only costs 0.5 percent of the Brazilian GDP. Besides Bolsa Família, the creation of 13 million new jobs and the minimum wage surge from 100 to 205 dollars during his presidency helped him improve traditionally very skewed income distribution. According to the World Bank (2022) indicators, the Gini coefficient, an indicator of inequality, was above 0.60 in 1995s and 0.58 when he took office in 2003, declining to 0.53 at the end of his two terms in 2010, signifying a significant improvement. Rather strikingly, some experts like Hughes (2012) attribute Brazil’s success in securing the 2014 World Cup and the 2016 Olympics in Rio de Janeiro, during his successor Dilma Rousseff, to Lula’s legacy. Among others, what is equally important to note is that the mentioned average rate of 4.5 percent annual growth during his two terms associated with a reduced public debt from roughly 60 percent to 40 percent of GDP, reduced inflation from more than 12 percent in 2002 to just under 6 percent in 2010, and increased trade surplus from $13.1 billion to $33.3 billion (The Economist, Sep.19, 2022).
To conclude, through pragmatism and a flexible attitude, Lula successfully balanced a market-friendly economic approach with his socially sensible programs. He aligned with the market expectations and did not give much space to the expected left-wing populism, which sacrifices fundamental macroeconomic balances at the expense of unsustainable high growth, income redistribution, and economic isolation policies. That is to say, he sacrificed neither social sensibility nor business responsibility and macroeconomic stability. After all, his ten years were a period of delivering high economic growth, macroeconomic stability, and social protection not only subsided reactions from international investors and national economic elites but also increased his approval rating among the citizens to an unprecedented rate of 87 percent.
The appropriate question is: Why did Brazil then surrender to right-wing populism in 2018? What lessons can we learn from the experiences of Lula and his Labor Party? Accordingly, what can be expected from Lula in his third term, which came at a drastically different local and global political and economic surrounding?Despite these positive aspects, Lula’s two terms in power were also subject to the following shortcomings.
Among others, the most disdainful criticism against Lula’s government concerns his inability to propose a strategic transformation vision for the country. Particularly during the first term, when capitalism was in a period of favorable expansion, the opportunity to transform the overall economy and diversify the existing industrial base through the use of a large volume of foreign capital inflows and the revenue generated from commodity exports was largely missed. Instead, the resources were directed to bigger transfer expenditures for single use at consumption (de Carvalho, 2008). So, the big vicious-cycle and therefore source of fragility for Brazil is that while the country remained dependent on unstable income via the exports of commodities and unstable capital inflows, the significantly big size of the population became dependent on transfer expenditures from the budget.
Moreover, being subject to a host of special interest groups at congress, despite levying taxes at levels close to the OECD average, much public spending is misdirected into feather-bedding bureaucrats or oiling political machines. In other words, interest-seeking coalitions lobbying power led the government to misdirect the resources to the investment in the sunset industries of the 20th century, with lower productivity and innovativeness.For instance,Brazil hosted the football world cup and Olympic games in 2014 and 2016, respectively, while the country’s hospitals and schools fell into disrepair, causing severe economic problems and social tensions. Much of the explanation related to these failures have to do with governance. Brazil remains a relatively closed economy and has failed to develop internationally competitive exports outside of agribusiness and mining (de Paula, 2016; Jenkins, 2014).
If there is a “missing vision and wrong investment” somewhere, it is inevitable that corruption will follow it, and it points to a reality that is looming over Brazil like a nightmare. Relatedly, a period of big disappointment began in 2005 when Lula did not take “corruption rumors” seriously while in office. His involvement in the vast Odebrecht, a giant construction company, and Petrobras, Brazil’s most prominent public institution corruption scandals have not been appropriately investigated (Sotero, 2022; DW, 2020). There was a constant effort to hide all these corruption scandals involving the name of Lula. However, Lula’s reputation came crashing down after leaving office when he was convicted in a wide-ranging corruption probe involving the state oil company Petrobras. Corruption rumors during the presidency of his close colleague Dilma Rousseff, whom he handed over in 2010, were reheated. While Rousseff’s defense of playing the “three monkeys” was roughly summed up as “I did not see it, I did not hear it; I did not do it,” she preferred to explain the incident as a political revenge plot on her political career by her opponents. However, none of these defenses saved her from impeachment in 2016 by the senate. That is because, for years, Ms. Rousseff had been placed on the board of directors of Petrobras.
Finally, she was replaced by the vice-President Michel Temer, who was also impeached and arrested during his tenure as acting president in 2016. Temer has been the subject of five court cases and one investigation, mostly related to passive corruption and money laundering. As part of the investigation, he was jailed in 2018 on bribery and money laundering charges and ultimately replaced by right-wing authoritarian leader Bolsonaro in the same year. After presidents Rousseff and Temer, this process eventually reached Lula, which led to his imprisonment for 580 days. However, the Supreme Court later ruled it as a mistrial, clearing his path to run for reelection. The inability of the judiciary to resolve these issues with the necessary transparency and impartiality in a country where all political leaders, including Lula, are prosecuted for corruption, impeached, or imprisoned has caused corruption to be legitimized, the public to lose its sensitivity to these scandals, thus, causing those involved to return to politics quickly. This social mediocrity points to a legacy that eclipses reformist and changer expectations for Lula.
Bolsonaro’s Populism in Power
Bolsonaro came to power by successfully mobilizing anti-establishment anger towards the above-given political deadlock. He ran against the grain in a country roiled by scandalsand suffering from a stagnant economy (Phillips, 2022). Moreover, the negative repercussions of the global economic crisis in 2008-2009 continued to hurt society. As a result, in 2018, after two years of economic crisis and several public corruption scandals, Bolsonaro came to power in this environment with intense anti-establishment populism.
Bolsonaro began implementing policies that should be expected of a right-wing populist party. To mention just a few, he first worked to curb the judiciary’s power and attack electoral institutions. Second, with time, his aggressive and often profane manner and his attacks on women and journalists have left the population tired of him (Phillips, 2022). Third, the pandemic set an excellent example of how a populist denies science, scientists, expertise, division of labor, institutional capacity, and autonomy. Experts say the story of how Brazil’s leader went flaccid involves a litany of outrages, ineptitudes and errors committed during a chaotic four-year reign. At the height of the pandemic, like many other populists, Bolsonaro dismissed COVID-19 as a “little flu” and promoted the unproven and possibly harmful remedy hydroxychloroquine (Burni & Tamaki, 2021). He has expressed skepticism of vaccines — he suggested they could cause women to grow beards and turn people into crocodiles — in a country that has embraced them. Not surprisingly, Brazil has recorded one of the worst COVID-19 responses—nearly more than 34.5 million cases and 700,000 deaths since 2020. Both are presumed to be significantly undercounted (Béland et al., 2021).
Surveys show that more than 40 percent of Brazilians rate Bolsonaro’s administration as “bad” or “very bad.” Many experts also accuse him of having a role in hundreds of thousands of Covid deaths and his fake news-fueled attacks on Brazil’s young democracy (Boyle, 2022; Villega, 2022). Therefore, it is expected that after losing power and presidential immunity, he might be subject to sanctions. With that fear, just two days before the successors’ inauguration ceremony, Bolsonaro left Brazil for Florida and did not specify his return date. This action breaks with the Brazilian convention of outgoing leaders being present at the ceremony.
Fourth, besides pandemic challenges in the supply side of the economy, rising inflation stagnated national income and declining per capita GDP (Figure.2), and rising government debt that reached a record high of 90 percent of GDP (as of 2020), 30 percentage points higher than a decade ago. Because he underestimated hunger and malnutrition, tens of millions were plunged into poverty. Rather strikingly, after Lula’s globally renowned success story in fighting against poverty, Brazil reappeared on the World Food Program’s “Hunger Map” of the United Nations (UN) in 2021, with 28.9 percent of the population living in food insecurity. Thirty-three million Brazilians face acute hunger, and 100 million live in poverty, the highest number in years. It is a significant setback for a country that had been removed from the map in 2014, after an economic boom and landmark social programs helped lift 30 million people from poverty during Lula’s administration (France 24, 2022). As the 10th largest economy in the world, the largest one in Latin America, and one of the world’s largest food producers and exporters, Brazil’s return to the UN’s hunger map is not easier to bring any convincing explanation.
Lastly and most dramatically, South America’s largest economy become an international pariah notorious for Amazon annihilation. Deforestation in the Amazon region returned with a vengeance, turning Brazil into a pariah in the global fight against climate change. After almost a decade of steady decline in the deforestation process, mainly under Lula’s administration, the damaging process took off again under Bolsonaro’s administration beginning in January 2019 (Figure.3).
Bolsonaro’s actions up to this point typically describe a populist politician; to exploit the failures of the incumbent regime, making grand promises, and ascendance to power using the democratic mechanisms that the system still allows. When in power, however, populist politicians do the opposite of what they promised resorting to unsustainable policies and not leaving power by employing all the available means when unsuccessful. Bolsonaro paid too much effort to reverse the situation towards the campaign’s final stretch to keep his power. Flagging billions of dollars of welfare payments designed to seduce poor voters and a suspected attempt at voter suppression by federal highway police on election day. With Brazilians struggling with double-digit inflation and an election just weeks away, Bolsonaro has cut fuel taxes to reduce prices at the pump and sent monthly cash transfers to low-income families. He has created cash benefits for truck and taxi drivers and dispensed $20 to families needing gas cylinders for cooking. Although energy prices stabilized, inflation started to decline, and employment rose, Bolsonaro lost the seat.
The legacy of Bolsonaro is that Bolsonaro’s policies weakening institutions, loosing macroeconomic stability, dismantling environmental regulations and agencies, and disregarding social programs. Brazil’s fiscal situation is worse: public debt is 78 percent of GDP and 93 percent of the budget is consumed by mandatory spending on things such as salaries and pensions. The global outlook is fraught. Though high commodities prices have helped the economy, inflation is hurting the poor. Political conditions are tougher, too. Brazil’s Congress is more avaricious and less cooperative (The Economist, Sept.19, 2022). The highly fragmented political system in Brazil remains the biggest concern. In his inauguration ceremony on January 1, 2023 Lula described the diagnosis he received from the Bolsonaro government as follows: “emptied the resources for health, dismantled education, culture, science, they destroyed the environmental protections, haven’t left resources to school meals, vaccines, public security, forest protection and social assistance” (Watson & Davies, 2022).
Lula’s Third Return and Expectations
After his third-round successful presidency in his sixth run, Lula has once again overtaken a politically divided and economically devastated country. Bolsonaro has gone, but “Bolsonarism” remains strong, making Congress hostile to the new government and society more fragmented (Sabatini, 2022). Keeping a possibly wider reform coalition in such a surrounding is troublesome. For instance, many prominent backbenchers (to be translated as “political parasites”) are funded by agribusiness. Therefore, they could be a significant obstacle in Lula’s highest priority areas of protection of the Amazon forests. That is why much of his speech to Congress at the inauguration ceremony was about “unity” and “reconstruction” of the nation through keeping and enlarging his existing stakeholders, which took him to the election victory.
Deep as they are, political divisions are not Brazil’s only problem. Economic problems are relatively high inflation, unemployment, high public debt, deep income inequality, massive poverty, and an almost stagnating economy (Ottis, 2022). Real growth in GDP per capita has averaged zero since 2011. The commodities boom that generously helped financing many of Lula’s social programs the first time around is over.
Very similar to what happened before he came to the power for the first time in 2003, during his third adventure to the power, Lula has once again tried to convince markets that he would not go on an uncontrolled spending spree. Similarly, he chose Geraldo Alckmin, a center-right and business-friendly former São Paulo Governor who was Lula’s rival in the 2006 election, as his Vice President. Going even beyond that, Lula has criticized a few of Rousseff’s policies, such as keeping fuel prices artificially low and offering tax breaks worth more than 450bn reais ($86bn) to businesses (which amounted to 7.5 percent of GDP).
On the other hand, today’s fraught geoeconomics climate offers Brazil some opportunities as well. The country is rich in food, fuel and metals and has a flourishing renewable energy sector. It is located far from global conflict spots and has traditionally sought good relations with the US, China, Europe, and Russia. However, economic transformation, industrial diversification, and generating funding resources in an unfavorable global and national environment are pretty uncertain. By lamenting the drop in car production and Brazil’s dependence on commodity sales to China, Lula has underlined the need for “re-industrialization,” proposed solutions such as investments in technology and the green-energy transition. However, Lula will continue balancing his “market-friendly” approach with “society-centric sensibilities.”
Lula’s quite ambiguous program involves the following topics:
In terms of fighting with poverty, through the Bolsa Familia poverty-relief program that includes transfers, expansion of social-housing scheme as well as debt-relief, Lula wants to “put the poor back in the budget.” He targets 33m Brazilians, who live on less than 289 reais ($55) per month, the highest number since 2012. Accordingly, the poorest families will get 600 reais ($110) a month and those with children under six years of age will get an additional 150 reais ($30). His second major measures to improve income distribution involves “updating” the existing labor reform, which he calls “slaveholder mentality.” Accordingly, he will increase the minimum wage, provide equal pay for men and women, aims adding protections for part-time workers.
Other challenges await Lula that are as important as overthrowing Bolsonaro through a legitimate and fair election. Lula must maintain the coalition he has formed, convince the highly politicized parliament to get support for the needed reforms, provide the necessary financial resources and restore the badly damaged financial balances. Implementation of a comprehensive tax reform, therefore, is one of his priority areas.
The New Global Conjuncture
It is a very positive development that Trump in the US and Bolsonaro in Brazil were removed from their seats without being given a chance for a second term. However, after the right-wing authoritarian populist leaders lost elections in both countries, their supporters became even more divisive and did not accept the election results. Trump’s supporters in the US and Bolsonaro’s in Brazil have shown again that right-wing authoritarians come with free elections but try not to go by fair elections. At first, they wanted “military intervention” after the election results in October 2022. However, thanks to the army’s neutral position, it did not happen. After that, Bolsonaro fled the country to the US before Lula took office. Finally, with the encouragement and organization of the Bolsonaro team that occupied high-level security-oriented bureaucracy, his supporters attempted a coup d’état against the newly appointed government and stormed parliament. Thanks to his leadership and experience, Lula had no hesitation in declaring a state of emergency and dismissing many of the top security bureaucracies appointed by Bolsonaro. This evidence shows that Trump and Bolsonaro have gone, but Trumpism in the US and “Bolsonarismo” in Brazil have remained. This fact has deep-rooted implications that current global order and its structural characteristics feed populism at both the global and local levels remain.
Multiple adverse effects of excessive globalization manifest themselves in DCs through transmission mechanisms like the activities of the MNEs, mainly in labor markets and foreign trade sectors. Among others, the primary outcomes appear in the form of unemployment, downward pressure on wages in traditional import-competing industries, and difficulties in regulating tax evasion of MNEs, generating income inequalities and poverty. It also cultivates a perception of a loss of sovereignty and national independence. The wave of global immigration, triggered by the mentioned process, not only increases the fear of local people losing their jobs but also alienates native people and feeds the perception of losing their endogenous values. Furthermore, international capital movements not only have weakened national governments’ regulatory and taxation autonomy, but they have also shifted the balance of power within nations away from labor towards capital and allowed it to accrue further political power and wealth, opening yet more opportunities for the internationalization of capital.
According to a recent report by IPSOS Global Trends (2020), while six in ten (62 percent) globally agree with the meritocratic ideal (that if you work hard, you will get ahead), it is under threat in even in the most advanced and social welfare states in key European countries. For example, only half of those in Germany (53 percent) and Spain (50 percent) feel their economies produce rewards their efforts, as do just four in ten people in Italy (41 percent). One core response to this perceived inequality of outcome and opportunity is support for wealth redistribution – one of the top ten values of IPSOS in 2020. It encompasses the widely held view that national economies are rigged to advantage the rich and powerful (74 percent agree globally) and that large income differences are bad for society (76 percent). Finally, “the big silent majority,” who was entirely excluded from the decision-making processes but could not avoid its negative consequences, have come to rely more and more on populist rhetoric, which, given the excesses of hyper globalization, is obsessed with the idea that zero-sum situations invariably characterize market exchanges.
To reverse the mentioned process, DCs need to balance excessive globalization through localization, poverty prevention, tax reforms, and improved skills and abilities for a comprehensive future oriented sectoral transition. These tasks require four interlinked transitions comprised of mainly manufacturing, fiscal structure, education, and governance sectors. To address these tasks following tasks must be fulfilled.
i) Repositioning of the country in the global supply chains through re-scaling and re-shoring.
ii) Further localization of production and governance.
iii) Transition of energy systems towards renewables from fossil fuels, and
iv) Substitution of basic universal and targeted income through a comprehensive tax reform are the priorities.
Regarding the first three recommendations, the pandemic crisis has marked another turning point in the process already underway, which is leading many companies to transform their supply chains and invest in more resilient and often more localized production patterns (Zhan et al. 2020; Lawrence, 2020). Localization measures involve empowering community-based decision making, participatory budgeting, and local action on such issues as renewable energy, green infrastructure, public services, and food production. As thought from Brazil’s perspective, localization is especially beneficial for food production, as the pandemic has revealed the precariousness of global food supply chains. Yasmeen etal. (2020) adds that nearly one quarter of the world’s food crosses a border before consumption. Countries tend to specialize in a few products and import most others. Meanwhile, just a handful of mega-sized corporations dominate international food markets, and production often depends on the exploitation of vulnerable groups, such as migrant workers. As can be seen, one of the critical issues here is the balance between the quality of integration into the global order and localization.
Lula’s vision to give more weight to the public sector in transforming the industries where Brazil has competitive advantages, particularly in infrastructure investments, transition to a green economy with low-carbon target in the 2030s, agribusiness has been one of the hot topics of discussion in the country. However, the quality of public sector leadership in industrial transformation through selecting the national champions or the potential winners has been a highly problematic issue, as we know it from the failed industrialization models of import substitution in Latin American countries. It is a story of failed models, squandered resources, entrenched crony capitalism in corruption, and widespread authoritarian regimes.
Similar to his earlier experiences, Lula insists on big infrastructure projects, like public transportation, energy and water with investment from both the public and private sector. He also advocates a heavy dose of intervention, describing a national food reserves policy, the exchange rate as an instrument to reduce volatility, and the need to “Brazilianize” petrol prices. Meanwhile, Lula does not talk much about reducing trade barriers or making public spending more efficient.
Considering the nature of rising industries, in the age of fourth industrial revolution, Brazil should craft a model which carefully distinguishes between “crony-friendly,” “business-friendly,” and “market-friendly” approaches in search of attributing a new role to the public sector. In a crony-friendly policy regime, a few firms obtain many privileges from the government by leveraging their political connections. These include resources directly allocated by the state, such as public procurement contracts, public land, or subsidized credits. Politically connected businesses may influence the regulatory framework in a way that creates barriers to entry for potential competitors through several direct and direct lobbying. In a business-friendly approach, rather than bestowing favor on a few cronies, some businesses groups are supported in a transparent way to stimulate specific sectoral and regional development policies. Obviously, business-friendly policies are superior to crony-friendly policies. However, sometimes these policies may also disproportionately benefit a few. For example, suppose a tax benefit, cash subsidy, or import tariff protection are given in a sector or industry, where concentration ratio is high, dominated by a few big conglomerates. The “first best condition” is market-friendly policies as it fosters fair competition in the market after setting the rules and observing the proper implementation of the game’s rules.
In order for Brazil to grow faster, it needs reforms to improve the quality of spending and the business environment. Viewed in terms of the public sector effectiveness, when using public banks to finance large infrastructure projects, it must be ensured that this support remains at the level of providing a positive signal effect to the private players. The efficiency criteria are consistently met when the projects are carried out under more market-oriented conditions. Given the caveats above, a market-friendly public-private-partnership (PPP) (Matsumoto et al., 2021; Straub & Islam, 2022) model might trigger externalities in important sectors such as (renewable) energy, agroindustry, automotive, machinery, iron and steel, health, finance, and logistics, which, in turn, creates “crowd-in” effect for foreign as well as domestic investors. Foreign interest will emerge much stronger in the above sectors, especially as Brazil, with its 250 million population, raises its per capita income to the upper middle-income level and strengthens the middle class by improving the income distribution.
Finally, in repositioning the country in the global supply chains through re-scaling and re-shoring, localization, and transition of energy systems also require resources, to be briefly discussed below.
The Search for a Risky Flexible Budget
Since 2016 Brazil’s budget has been restricted by a Constitutional Spending Cap (CSC) that limits the growth of spending to the rate of inflation. However, such a restrictive anchor for Brazil, where crony business-friendly capitalism has been deeply rooted, is seen unacceptable (Limoeiro, 2020). First Bolsonaro announced that he plans to replace it with “more flexible” fiscal rules. However, the challenges with the COVID-19 crisis caused this constraint to be de facto out of action, as it did in other countries, without the need for a de jure amendment to fund COVID-19 spendings. However, these stimulus measures were also used to benefit former president Bolsonaro’s campaign and harmed the fiscal balances in the country. As a result, it has lost its power as a fiscal anchor.
Quite reasonably, Lula also wants a new fiscal framework that allows for more short-term borrowing while assuring markets that the debt-to-GDP ratio will come down in the medium term. Indeed, under Lula’s initiative, Brazil’s Congress has already suspended the government’s CSC to allow his government to raise expenditures on social welfare and public works, two urgent task and priority for his government. It corresponds to a spending of an extra $28 billion in 2023 outside of the CSC, sidestepping a fiscal anchor designed to keep free-spending governments in check (Pearson & Magalhaes, 2022).
However, several caveats should be noted also here. In Latin America in general, and Brazil in particular, the issue of fiscal flexibility points to a deep stalemate. On the one hand, the priority of Lula’s administration is to “put the poor back in the budget”, but, on the other hand, it is open to irresponsible populist abuses. As seen in the previous Bolsonaro era, the populist government ignored budgetary constraints, particularly the current anchor, leaving the Lula government financially vulnerable to extreme damage. This applies to both the national debt and budget deficits. The policy implication is that, in Latin America, where populism and short-termism dominate, lacking technical control over the use and draft of budget and borrowing can open the door to costly abuses. For that reason, that approval has prompted concerns in markets about the fiscal health and long-term growth of Brazil, Latin America’s biggest economy. So, we have come to two conclusions: First, for sustainable economic growth, transparency and efficiency in public spending, on the one hand, and second, a disciplinary, albeit flexible, limitation on budget expenditure in the medium term, if not now, on the other, should be sought. However, in addition to these measures at the spending side, the biggest challenge in providing the required funding for development projects as well as for improving income distribution, a truly tax reform is needed.
Wealth and Taxation
The tax reform could play a crucial role for Lula’s government to permanently reverse the waves of populism via improving the distribution of income. Since the lower social segments are dragged into deeper poverty due to job and income loss as well as rising cost of living recently, finding ways to support such vulnerable segments, for instance, through the provision of either a guaranteed/universal basic or targeted income, and the necessary financial resources for social expenditures have become one of the most urgent topics of discussion globally. The “guaranteed” basic income provides the same lump sum to all citizens regardless of circumstances, whereas a “targeted” basic income is available only to those who need it because their income falls below a minimum threshold. Their goal is to alleviate poverty and replace other need-based social programs that potentially require greater bureaucratic procedure.
It is evident that all these expenditures would increase the cost to government budgets, which are already being inflated by fiscal stimulus. Among others, one important source of income would come from levying a net wealth tax on the wealthiest without causing capital flight, tax base erosion and profit shifting (BEPS). OECD defines BEPS as “the tax planning strategies used by multinational enterprises that exploit gaps and mismatches in tax rules to avoid paying tax. BEPS is quite crucial in DCs due to their higher reliance on corporate income tax, and they, therefore, suffer from it disproportionately. Among other harms it causes, this undermines the fairness and integrity of tax systems because businesses that operate across borders can use BEPS to gain a competitive advantage over enterprises that operate at a domestic level. Moreover, when taxpayers see MNCs legally avoiding income tax, it undermines voluntary compliance by all taxpayers. Thus, the task of financing growth and development in DCs becomes clear; By evaluating in terms of efficiency, equity and administrative arguments the imposition of a net wealth tax on the richest will not cause capital flight and levying a tax on the earnings of MNEs from the country they operate in a way to prevent BEPS are the two interrelated tasks (OECD, 2018)
However, the needed measures such as the implementation of a comprehensive tax reform are relatively easier to pronounce but hard to execute for numerous reasons. First, governments have long feared that higher taxes would produce capital flight and discourage investment. As a result, countries are engaged in a “race to the bottom” on corporate taxation, which ultimately, they lose. Second, in a world of large MNEs, mobile capital, and seamless digital transactions, it is hard to identify where modern businesses with significant intangible capital, especially digital businesses, locate their activities to be taxed away.
As a global public good, a tax reform requires international cooperation in renewing fiscal sovereignty through a new social contract. However, as Cobham (2021) notes, there are also potential arrears to be taxed away despite its complications along the way. As a matter of fact, according to the finalized landmark deal in October 2021, agreed by 136 countries and jurisdictions representing more than 90 percent of global GDP, MNEs will be subject to a minimum 15 percent tax rate from 2023, corresponding to more than $125 billions of profits from around 100 of the world’s largest and most profitable MNEs to be reallocated globally. Therefore, as the winners of globalization,paying a fair share of tax wherever they operate and generate profits will contribute to a more balanced globalization and multilateralism.
Returning to the taxation of richest companies, in principle, a fiscally neutral reform pair higher income taxes on high earners with lower payroll taxes for firms to incentivize formal employment seems reasonable in Brazil. Lula is quite eager to move quickly on a reform that would increase taxes on the richest while simplifying the labyrinth of levies on consumption, which are seen as a drag on growth. Income tax and VAT reform are priorities, particularly in the context of one of Lula’s main pledges, which is to address the crushing poverty situation in Brazil and ensure a progressive tax system where the wealthy pay more tax than the poor. However, given the fact that involves complex negotiations with states and interest groups, and the polarized political divisions in Brazil, these herculean changes, like a tax reform seem almost unlikely.
To conclude this section, it should be noted that when the agenda of industrialization and transformation in new sectors for Brazil is combined with the plan of taxing MNEs and levying a “welfare tax” on the richest in the country: In the efforts to delegate a more active role to the public sector, crony capitalism through rent-seeking of the privileged segments that distort competition, effectiveness, and innovations should be carefully avoided. Brazil’s attractive potential should be opened to the world, and the above taxes should be levied on high earnings.
Only at the end of the 1980s did Brazil transform into a democracy, which was also quite unstable. Brazil’s experience has also shown that even if the modern bureaucratic apparatus, autonomous and professional institutions, and principal institutions of the state— executive, legislative and judiciary—are supplied, if culturally and mentally supportive epistemology is not there, the system will not cultivate the expected outcomes.
In Brazil, the erosion of institutions in the last three decades have continued and they have become increasingly dysfunctional and politicized. In such an environment, corruption has become rampant, and the country’s presidents, including Lula, Rousseff and Temer, have been impeached or imprisoned on corruption charges. In the last case, Bolsonaro is trying to rid himself of the same fate by leaving the country. However, not only has the modern state apparatus failed to stop the rise of such a massive crony system and corruption, but also most of the impeached leaders were soon released from prison and compromised to return to politics, like Lula himself. These examples point to the poor quality of the judiciary and the institutionalization that is destroying public confidence in the system. That overall environment leaves voters open to losing their interest in the democratic system, adhering to short-term solutions and populist rhetoric. While the country’s authoritarian culture persists, populist discourse seems to dominate politics on both the right and left.
Externally, the imperfections created by the multilateral order in the post-WWII era and global capitalism, which both reflect Western values and dominance, have been subject to significant structural economic, political, social, and civilizational problems. The message is that, in the persistence of unresolved problems, the supply and demand conditions of populism at home and abroad also stay in place.
During Lula’s first two terms in power (2003-2010), the dimensions of left-wing populism were seen both in terms of progressive as well as regressive aspects. During his government, Lula followed a responsible, flexible, pragmatist path regarding the market and a socially sensible path adhering to societal expectations. Intending to improve income distribution, he focused on eliminating poverty. However, rather than driving the economy into a wide-range competitive transformation and boosting employment and income Lula addressed social vulnerabilities through regular social transfer expenditure aided by the fact that energy commodity prices gave Brazil relative fiscal flexibility in Lula’s first two terms. This shows that Lula’s vision was far from a fundamental transformation and relied heavily on the positive global conjuncture. Likewise, we can say that Lula supported the privileged classes and sectors with “business-friendly” approaches instead of being “market-friendly,” and therefore his government could not stay away from corruption rumors and gossip. He did not even take them seriously, until he left power in 2010, when all these allegations started to undermine the entire system in more than one decade.
As of today, with the world teetering on the brink of authoritarianism and Brazil itself oscillating on the verge of such authoritarianism, Lula who has been active with a left-progressive rhetoric in Brazilian politics since the 1970s, might lead a radical reform leadership the impact of which would extend beyond Brazil. With that in mind, we can assume he sees it as “the last exit before the bridge.” Despite the social fragmentation and the split in parliament making it challenging to reach a consensus, Lula will have to build efficiency in governance and the economy and create competitive advantages in the sectors of the future through fundamental reforms. Provided that Lula keeps the “social and political coalition,” which led him to the victory in the last election, he can succeed these tasks and also overcome populism.
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Independent of its ideology, beliefs, ideals, strategy or tactics, populism, in the final analysis, is a way of seizing power. Notwithstanding, differences between the different strands carry significant repercussions. One leader who has drawn increasing attention on the crest of the most recent wave of populism is Turkey’s president Erdoğan. It seems that after a short period of progressive and democratic leadership through to 2007, Erdoğan’s fundamental beliefs and personality surfaced, and the entire process was reversed, with devastating consequences for Turkey.
This article intends to show how Erdoğan’s Islamist–nationalist populism has undermined Turkey’s already fragile autonomous institutions and paved the way for reform reversals and incoherent economic policies. Politically, having denied the fact that Turkey’s positive image both in the Western and Islamic world throughout the 2000s was closely tied to the country’s skillful harmonization of democracy, Muslim identity, and economic development in a free-market context, Erdoğan has succeeded in branding Turkey as a nationalist, Islamist, and authoritarian country that makes trouble for its neighbors and is hard to work with. Economically, “Erdoğanism” has triggered Turkey’s current political and economic meltdown, as observed in recent macroeconomic indicators, including rampant inflation, mounting national debt, massive unemployment, deteriorated income distribution, rising poverty, and a profound currency shock.
Whether it adopts a right or left-wing ideology or it is embraced as a belief or a set of ideals, and no matter the strategy or tactics, populism, in the final analysis, is a way of seizing power, and differences between the different strands carry significant repercussions. Many diverse economic, political, and cultural factors have been put forward to explain the rise of populism. At the international level, scholars point to the distortions created by hyper-globalization, the impositions of great powers on smaller nation-states, and the related sovereignty considerations. State repression, corrupt elites, and anxiety over inequality and cultural class consciousness are salient at the domestic level. We could point to the Great Recession between 2008 and 2009—especially how the world’s elites dealt with it—as a more proximate cause of the most recent wave of global populism. How the COVID-19 pandemic, which was still raging at the time of writing (in early 2022), will influence the populist zeitgeist is not yet clear.
One leader who has drawn increasing attention on the crest of the most recent wave of populism is Turkey’s incumbent president, Recep Tayyip Erdoğan (Erdoğan, henceforth). Before coming to office as Turkey’s prime minister and leader of the Justice and Development Party (AKP) in the early 2000s, he was adamant that he had “developed, changed, and transformed” himself and accordingly revised the strict religious–nationalist ideological worldview he had exhibited as part of the Islamist Millî Görüş (“National View”) movement and as mayor of Istanbul. As the party leader, he stipulated that the AKP’s three goals were to eliminate chronic corruption, eradicate widespread poverty, and complete Turkey’s transition to democracy. During his first term as prime minister (2003–2007), he stuck the progressive reforms agenda of Turkey, set forth by the former coalition governments under the auspices of the international organization. The main pillars of the reforms were to establish a pluralist and democratic state with a particular priority on human rights, the rule of law, and membership in the European Union (EU). As a result, Turkey’s economic performance during the same period was truly remarkable, with gains on almost every development goal comparable to the top performer emerging market economies (EMEs).
However, after a period of progressive and democratic leadership through to 2007, Erdoğan’s fundamental beliefs and personality surfaced, and the entire process was reversed, with devastating consequences for Turkey. The AKP election victory in 2011 was a turning point, but more so after the transition to an executive presidential system in June 2018, when Erdoğan revealed his true authoritarian tendencies. As a result, after almost three and half years, Turkey has become a one-person regime, with increasingly dire implications for the economy, politics, and the broader society.
This article argues that Erdoğan’s religious–nationalist populism has been one of the primary triggers of Turkey’s current political and economic meltdown. Moreover, his populist rhetoric has weakened Turkey’s already fragile autonomous institutions and paved the way for reform reversals and inconsistent (and incoherent) economic policy. Taken together, Erdoğanism has brought a woeful deterioration in macroeconomic indicators, including rampant inflation, mounting national debt, massive unemployment, rising poverty, and a profound currency shock.
None of this failure is surprising. Around the world, populists in government have established a reputation for contesting institutional autonomy, rejecting expertise, the division of labor and science, and disregarding the principles of good governance. More to the point, they are renowned for damaging social cohesion by leveraging societal divisions and fears to get into power and—once they do—for their rampant addiction to staying in office at all costs.
Empirical evidence shows that although populists come to power on a promise to “restore” democracy, return sovereignty to the people, and enhance the welfare of citizens, they are quick to change the rules of the game that brought them to power and obstruct the peaceful transition of power when elections roll around again. In that regard, populism represents a regressive dynamic of history rather than a progressive one.
The remainder of the article is organized as follows. The first section analyzes Erdoğan’s turn from “political outsider” to an incumbent populist demagogue through the lens of the most salient theories of authoritarian populism. The second section details Turkey’s economic performance under successive AKP governments since 2002. The third section analyzes how the AKP’s increasingly populist mode of governance since 2010 has undermined Turkey’s overall macroeconomic outcomes. In particular, it shows how the turn to populism has paralleled the rise of reform fatigue, a turning away from good governance and—ultimately—a consolidation of crony capitalism, and contingent and reckless policy-making. Noting the severe institutional decay in Turkey since 2018 and pandemic-related hits to the economy, the final two sections analyze the impacts of Erdoğan’s reckless populist model, which may well wipe out all of the welfare and human capital gains achieved over the past two decades. The conclusion draws the findings together and offers several lessons.
The Rise of Erdoğan, the Populist
Among others, the fragmentation of the global order into multipolarity has been an important trigger of populism worldwide. In the absence of a dominant hegemonic power to enforce common norms, the world finds itself increasingly subject to competing norms, which coexist and challenge one another. That process, obviously, fosters hybrid approaches to global and domestic governance, resulting in a diffusion of pragmatic and often opportunistic responses to growing challenges. However, while hybrid approaches might sometimes help cooperation on crucial economic issues, more often than not, they produce significant technological, political, and security conflicts. The above-mentioned evolving contingency or discretionary approach to governance in crucial areas such as trade, developmental aid, intellectual property rights, public enterprises, currency reform, and environmental protectionism is shaping the nature of the emerging world order.
Against this backdrop, populists have risen to power in EMEs like Brazil, Russia, South Africa, and Turkey, adopting policy responses that seek to address the various crises without triggering default and the subsequent recourse to a large-scale IMF austerity program.
Erdoğan typifies this approach. His rise to power and populist approach in Turkey reflects, in many ways, Robert Barr’s definition of populism. Specifically, Barr defines populism as “a mass movement led by an outsider or maverick seeking to gain or maintain power by using anti-establishment appeals and plebiscitarian linkages.” Moreover, as described by Aytaç and Öniş, the “core characteristics” of populist mobilization are political flexibility, economic pragmatism, and recourse to cultural politics.
Drawing inspiration from Zygmunt Bauman’s notion of “retrotopia,” Ezgi Elçi has summarized this approach neatly. First, populists exploit nostalgia (i.e., the promise to return to an imaginary past) to construct a “populist heartland,” corresponding to a retrospectively constructed utopia based on an abandoned but undead past. Erdoğan’s constant appeal to Turkey’s “glorious” Ottoman past is crucial here. In this context, whenever a policy choice appears to have failed and no scapegoat is readily available, Erdoğan turns habitually to religious and abstract national concepts. Erdoğan arguably learned this trait in his lengthy career in the Millî Görüş movement, which was adept at blending victim rhetoric with appeals to Turkey’s glorious Islamic past. One such appeal notes that “Instead of being a passive subordinate, follower, obedient to Europe, we [i.e., Turkey] should be the head and leader of the Islamic world.” The assumption here seems to be that the Islamic world is demanding that Turkey take over the leading position of the World of Islam as a “big brother.” Erdoğan’s call presupposes the existence of an appropriate institutionalized mechanism that would facilitate Turkey’s leadership of the Islamic world, which is highly doubtful. Yet, influenced by an image of a glorious past in which Ottoman Turks did, in fact, lead the Muslim world, the Turkish people are unsurprisingly drawn to such populist appeals. Similarly, Erdoğan’s religious aspirations can speak to the widespread desire for economic security via debt relief, as in his recurrent statement that “interest is prohibited (haram) in Islam, and there is nothing to discuss from an economic perspective as interest relies on direct compulsory principles and restrictions. We will implement an interest-free economy.”
Second, populists deploy anti-establishment rhetoric against the power elite. As Mudde has noted, populism is a “thin ideology” that considers society separated into two antagonistic groups, the people versus the elite. Referring to Mudde’s approach, Dani Rodrik defines populism as “an anti-establishment orientation, a claim to speak for the people against the elites, opposition to liberal economics and globalization, and often (but not always) a penchant for authoritarian governance.” Erdoğan’s early status as an “outsider” against the entrenched beneficiaries of the status quo is a constant refrain in his claim to be a voice for the “forgotten” Turkish people, the silent and big majority.
Third, populists emphasize the plebiscitary aspect of elections to create an impression that populist mobilization is nothing less than “the people” rising up to retake their sovereign rights. Populists legitimize themselves by claiming they represent the people’s will against powerful and exclusionary interest-seeking coalitions among the elite.
At a much deeper level, unsolved, long-lasting, and cross-cutting political cleavages within a society also fuel both the demand and supply conditions of populist sentiments. Somer and McCoy define these cleavages as “formative rifts that either emerged or could not be resolved during the formation of nation-states, or, sometimes during fundamental re-formulations of states such as during transitions from communism to capitalism, or authoritarian to democratic regimes.”
On the demand side, it is commonly accepted that populism appears as a backlash to a sense of severe crisis or discontent with present conditions. Key domestic scapegoats include corrupt elites or a comprador bourgeoisie. Yet, in the present era, external factors—namely, globalization and its champions in the global elite—are pinned as key “external enemies” of the people. This concern is not entirely untethered from facts. Many academic studies have shown the adverse impacts of globalization on national economies, including financial instability, trade diversion due to unfair trading rules and competition, distortionary patents, and impacts on wages and labor conditions, mainly for low-skilled workers. Empirical evidence shows that import competition, especially from China after it joined the WTO in 2001, has led to higher unemployment, lower wages, and more governmental transfers in Western countries.
As nation-states fail to manage the mentioned negative repercussions properly, the result is economic instability and the rise of chronic income inequality. Constraints that come through IMF-imposed austerity or belt-tightening programs, hitting the most fragile segments of society the most, is believed to be caused by globalization. Also, on the assumption that large corporations are “too big to fail,” such firms become the priority for bailouts, while the poorer segments of society feel abandoned and alienated. In good times or bad, the perception that self-serving and corrupt local elites successfully align their interests with global capitalism at the expense of the most vulnerable segments of society breeds populism. More often than not, this demand for populist responses to economic problems is expressed through cultural codes, leading to a cultural backlash against multiculturalism, left-wing identity politics, and the like. Populists tend to instrumentalize the above-mentioned external impacts and domestic reactions to legitimize their attacks on supranational institutions, reverse reforms, undermine checks and balances, and weaken local autonomous institutions.
What are the important repercussions of such a populist divide? The first implication is related to the leadership cult of the strong man that leads to authoritarianism. The Encyclopedia Britannica lists features of authoritarian populism, including:
“extreme nationalism, racism, conspiracy mongering, and scapegoating of marginalized groups, each of which serves to consolidate the leader’s power, to distract public attention from the leader’s failures, or to conceal from the people the nature of the leader’s rule or the real causes of economic or social problems.”
In this personalized form of politics, political parties lose their importance, and elections confirm the leader’s authority rather than reflect the voters’ policy preferences.
The second implication is related to the national “economic model” that populists employ, which is typically highly heterodox and explicitly opposed to the “orthodox” way of doing things since this is the approach of the “economic elite.” The focal point of a populist economic program changes depending on the sources of the crisis, such as trade, economic and financial shocks, the migration crisis, and cultural change. It might resemble pro-nationalist and anti-global rhetoric when the program targets the interests of ordinary citizens and the country as a whole through policies such as high growth, income redistribution, public spending, rising trade and tariffs barriers, tax cuts, restrictions on immigration. As Dornbusch and Edwards showed in their early study on the political economy of populism, populists prioritize high growth and income redistribution through highly politicized resource transfers.
We turn to the third implication, the systematic undermining of institutions. Populists’ disdain for autonomous institutions and the discrediting of their role in economic development opens Pandora’s Box. Rather than isolating institutions from interest group lobbying, the subordination of institutions to politics produces economic chaos. Attempts to limit the autonomy of policy-making agencies leave a country vulnerable to further crisis as untested social, economic, and political experiments are deployed to address challenges. In the absence of institutional checks and balances, populists are free to employ heterodox policies that ignore economic efficiency criteria and resource constraints, promoting high growth through expansionary monetary and fiscal policies. The result is a vicious cycle of unstable prices, domestic and external deficits, and an associated accumulation of unsustainable national debt. As is well known, such an approach has led to cycles of boom and bust in many developing countries in Latin America and Asia as well as in Turkey at different conjunctures. The outcome of permanent fiscal and financial crises also triggers currency shocks, exacerbating the scale of the problems.
Moreover, government deficit financing can crowd out private investment and lead to higher inflation. In addition, restrictions on migration in developed countries can hamper workers’ mobility and have a similarly inflationary impact on wages due to the mismatching of labor, skills, and demand. Finally, as the Latin American populist cases clearly show, the longer-term results are stagnation, lower productivity, and loss of competitiveness.
In power, populists increasingly employ more “divisive” rhetoric and policies, creating “enemies” both inside and outside the country to hide their incompetence and legitimize their governance. Populists’ denial of scientific reason and good governance (professionalism, autonomous institutions, expertise, division of labor, delegation, pluralism, participation, transparency, and accountability) results in the total erosion of the country’s material, moral, and human capital stocks. It causes deep fragmentation across societal fault lines and prevents the formation of national coalitions from upgrading the economy through collective action, which is needed for painful and complicated reforms. The incompatible time dimension in unstable societies also makes politicians highly opportunist and short-term oriented at the expense of long-term structural reforms, which bring ex-ante costs and ex-post returns. In taking advantage of circumstances with little regard for principles or the consequences for others, expedient actions of opportunists are guided primarily by self-interested motives. The deadliest harm of this divisive rhetoric materializes in the erosion of social trust and social capital.
To conclude this section of the article, the recent assault of populist regimes on democracy and the market economy shows that they are increasingly distancing themselves from these public goods and becoming more authoritarian, refuting the optimistic view of populism as a “democratic corrective” to “technocratic governance.”
On its face, the populist model champions collective welfare on the economic side and popular sovereignty in the political realm. Yet, in practice, populists can seldom keep their promises, and their mentality and policy toolkits are unable to meet economic and social challenges sustainably. Because of successive political-economic crises, populists are increasingly forced into policy binds that do more harm than good and often substantially harm ordinary people. Therefore, in the long term, populists cannot increase the level of democracy, human rights, the rule of law, or welfare.
How does this theoretical outline speak to Erdoğan’s populist vocation in Turkey? Three implications come to mind. First, he has deployed culture to construct a picture of an imaginary past and a promise to restore “lost glory.” Second, he has exploited secular, religious, and ethnic cleavages to further divide the people. Third, Erdoğan’s right-wing populism has quite opportunistically and pragmatically exploited ordinary Turks’ discontent with the slow pace of economic development, the challenges of globalization, and Turkey’s apparent failure to secure a more autonomous role for itself in the region and the world.
Before and After the 2001 Crisis
Despite receiving just 25% of the vote in the 1994 mayoral election in Istanbul, Erdoğan won, holding the post until 1998. Then, antagonizing the establishment, he was jailed for four months on trumped-up charges of “anti-secular” behavior and subsequently banned from politics. Erdoğan’s experience of “political persecution” at the hands of “an unjust establishment” is central to his political rise. Soon after being released from prison, he and several others in the “modernist wing” of the Millî Görüş founded the AKP in 2001.
The party swept to power in the 2002 elections, and in 2003, after the Constitutional Court overturned the ban on him holding political office (a move that has never been satisfactorily explained), he became a member of parliament and then prime minister. Given the longstanding (and often justified) sense among the country’s pious Muslim population that it was the victim of “persecution” by the secular elite, Erdoğan’s rise to power represented the “voice of the people” moving to the center of Turkish politics. Moreover, his ascension came in the wake of tremendous popular discontent with the deep and successive economic and political crises that roiled Turkey under the rule of the pro-status quo parties throughout the 1990s.
Erdoğan’s good fortune continued in that the painful (and electorally toxic) reforms needed to right-size the economy after the severe crisis of 2001 had already been implemented by the previous government. Thus, although he came to power as an “outsider,” he took over an economy that had already begun to recover significantly and move smoothly. In other words, the comprehensive structural reforms in the post-crisis era, plus the exceptionally supportive overall domestic and global circumstances, helped Erdoğan achieve remarkable economic outcomes during his first term in office (2003–2007). As Spicer has recently noted, “Erdoğan leveraged the economic rebound and a diplomatic pivot to the West to bring about a decade of prosperity. Poverty and unemployment plunged. Inflation that was in triple digits a decade earlier touched 5%, boosting the Turkish lira’s appeal for locals and foreigners.”
However, things started to change during his second term (2007-2011). Even though the economy resumed after a relatively short interruption during the Great Recession and returned to the pre-crisis growth path, there were visible signs of deterioration in the quality of growth, including declines in total factor productivity (TFP) and foreign direct investment (FDI) as well as weaker job creation. As a result, although growth in the third period (2011–2015) was above average, its quality continued to decline, and it quickly moved away from sustainability. Moreover, institutions have been further destabilized through destructive policies and a patchy record of reform over the period. Recent indicators about Erdoğan’s fourth and most recent period in office, after the new executive presidential system was introduced in June 2018. Now we see that Erdoğan is heading toward a kind of “Pyrrhic victory.” Having brought the entire political order to heel by taming institutions, Erdoğan looks likely to reap a bitter harvest, given the damage wreaked in the process.
The Political Legacy
In terms of political tradition, Erdoğan inherited the legacy of the first well-known right-wing populist, Adnan Menderes, who became Turkey’s prime minister in the first free and multiparty elections in 1950. After a decade in power, the popular Menderes was felled in a military coup in early 1960 and then executed by the army a year later. This “martyrdom” of a prime minister beloved in many of the country’s poor rural parts underpinned a longstanding view of a “pure, innocent, and silent majority” against the status quo, at least for a large segment of Turkish society.
That assault on the “will and the sovereignty of people” created an exceptional and lasting political leverage for right-wing politicians to mobilize political support in Turkey. As famously observed by Metin Heper, the Republican People’s Party (CHP) became “the state party” in Turkey, representing its “bureaucratic center” in an apparent “center-periphery” divide. From the 1950s onwards, center-right parties have addressed the tension between the Kemalist elite – the bureaucracy and the military – and ordinary people through religious symbols and emphasizing the country’s secular vs. anti-secular cleavage. A succession of populist right-wing parties, from Menderes’ Democrat Party to the Justice Party of Süleyman Demirel and the Motherland Party of Turgut Özal, have taken up this mantel. The AKP is the last in this long line. In other words, the AKP has leveraged a widespread view in Turkey that the center-right represents the true “will of the people” and the establishment parties’ recurrent and persisting mistakes, especially in the troubled 1990s.
More on the Economic Legacy
As mentioned, persistent economic instability in the 1990s, culminating in a debt and currency crisis in 2001, paved the way for the AKP to come to power in 2002. This was nothing short of an institutional realignment in Turkey, paving the way for a more stable institution order. As Olson showed in his path-breaking book, The Rise and Decline of Nations: Economic Growth, Stagflation, and Social Rigidities, institutions are shaped by distributional coalitions, the relative power of competing groups, and individuals in society. In that context, institutional reform follows either the collapse of existing political balances or results from new political coalitions favoring comprehensive reforms, mainly to create inclusive intuitions. Unlike distributional coalitions, inclusive institutions effectively delegate activities to professional bureaucrats and autonomous institutions.
Acemoglu and colleagues mention six dimensions in achieving such institutions. The first of these is voice and accountability in selecting government, freedom of expression, freedom of association, and a free media. The second is political stability and the absence of violence, particularly politically-motivated violence, including terrorism. The third dimension is government effectiveness in the quality of public services, its independence from political pressures, the quality of policy formulation and implementation, and the government’s commitment to such policies. The fourth dimension is regulatory quality in formulating and implementing sound policies and regulations that permit and promote private sector development. The rule of law is the fifth dimension, mainly in the quality of contract enforcement, property rights, the police, and the courts, as well as the likelihood of crime and violence. The sixth and final dimension is control of corruption so that public power is not exercised for private gain, including both petty and grand forms of corruption, as well as “capture” of the state by elites and private interests.
The 2001 Turkish economic crisis opened up space for the kind of comprehensive economic, political, and social reforms needed to create the conditions for inclusive institutions. The country was assisted in this by support from the IMF and the World Bank alongside the EU, the so-called “double anchors” of reform. The most important institutional reforms included (i) improving the legal system in terms of its efficiency and independence from the executive; (ii) reducing policy uncertainty by restoring the independence of the Turkish Central Bank and other regulatory agencies; (iii) reducing political discretion in economic decisions making; (iv) increasing the overall competitiveness of the economy; and (v) containing corruption.
The most critical autonomous regulatory bodies, which aimed to professionalize the bureaucracy and reduce discretionary government influence, over-regulation, and policy uncertainty, were the Public Procurement Authority, the Banking Regulatory and Supervision Agency, the Energy Market Regulatory Authority, the Telecommunications Authority, the Competition Authority, and the Capital Markets Board.
Reform and Opening, and the Golden Age of Growth (2003–2007)
Erdogan started his political career as a prime minister when a smoothly functioning reform program inside produced quite promising outcomes in a highly supportive global economic conjuncture when the volume of trade and finance of every kind were expanding, and the price of essential commodities was already beginning to surge, positively benefiting Turkey’s trade balance. Domestically, the conditionality imposed by Turkey’s aspiration for full EU membership and the robust structural reforms already accomplished provided a solid anchor for the government..
To his credit, as the leader of a newly elected new government, Erdoğan’s success in bringing conservative, nationalist, and liberal groups into a unified reform coalition was notable. As mentioned before, reform coalitions are essential to consolidate painful and costly reforms that only bear fruit in the long term. Governments with short-term horizons generally avoid such reforms and rely upon more populist promises. With the engine of economic growth on autopilot, the first period of Erdoğan’s government can certainly be described as the golden age of growth in Turkey during his 20-year reign.
While Turkey’s growth during the first period of his government was slightly lower than its peers, it was well above the country’s historical average. Turkey recorded an overall average growth rate of 6.2% between 2003 and 2008, almost one percentage point lower than the comparison groups in the middle-income countries (MICs). Except for Brazil and Indonesia, other EMEs fared better than Turkey (Table 1, Figure 2). Despite that, growth exceeded the long-run average of 5% per annum in Turkey. Thanks to a relatively cheaper foreign currency, in the first six years, according to the World Bank data classification, overall national GDP, in nominal terms, more than tripled from US$240 billion in 2002 to US$770 billion in 2008, and per-capita GDP from US$3,700 to 10,900 in the same period (Figure 1).
Figure 1: GDP and per-capita GDP in Turkey, 2007–2020.
These achievements also underline a visible convergence with developed countries. For the first time in its modern history, the per capita GDP of Turkey reached more than 25% that of the US and put Turkey into the league of upper MICs. More strikingly, despite that relatively superior growth performance, Turkey’s long-term sticky inflation decreased and stabilized at around 10% annually, at a time when global inflation was also on the rise, reflecting not only high global growth but also continuously rising commodity prices in almost all categories (Figure 3).
Figure 2. Growth performance in Turkey and selected regions/groups.
Figure 3. Growth, inflation, and external deficits in Turkey.
Despite surging current account deficits (CAD), the good news was that Turkey was able to maintain fiscal and financial balance (Figures 4 & 5). Fiscal stability in the public and private sectors (household, corporate side, and the financial system) was also under control. Another unusual but good experiences was that high growth associated with improved income distribution. According to the World Bank estimates, Turkey’s Gini coefficient (an indicator of income inequality and wealth) decreased from 0.43 in 2002 to 0.38 in 2008, a significant improvement. Similarly, poverty rates, measuring the proportion of people with per capita GDP consumption of below US$5.50 per day, also decreased significantly in the same period. The creation of inclusive institutions and the changes in the sources of growth played a decisive role in this improved distributional equity in Turkey.
Figure 4. External deficit in Turkey and similar countries, 1997–2019.
In that regard, the rise in TFP and significant technological upgrading in the real economy are noteworthy. According to various calculations, TFP growth during 2002–2006 was between 3.1% and 5.2%. Calculations show that 54–68% of Turkish growth in this period came from improvements in TFP. Acemoglu and Ucer’s reverse projection shows that without TFP growth, Turkish GDP would have grown no more than 3% per annum. These achievements were driven by reform bonuses in the post-2001 crisis era, that addressed the EU membership, alignment with global institutions, and the principles of good governance.
To conclude, Erdoğan—who came into power in 2003 promising to alleviate corruption, repression, and poverty—leveraged the economic rebound and a diplomatic pivot to the West to oversee a decade of prosperity.
Figure 5. Financing of the current account deficit (moving total).
From Reform to Populist Authoritarianism
Over time, Erdoğan’s domestic and global image as a “model reformer and democrat” has shifted markedly towards “the creator of the 21 century populism.” Perhaps this is hardly surprising, since, as Cook notes, “Erdoğan is, after all, the man who declared when he was mayor of Istanbul in the 1990s that democracy is ‘a vehicle, not a goal,’ implying that one could disembark whenever it suited one’s purposes.” However, on the way to the 2003 elections, Erdoğan promised that he and the co-founders of AKP had abandoned their former political commitment to the Islamist and autarkic and anti-globalist principles of the Millî Görüş and had become true democrats and champions of liberal democracy.
When reminded of his past anti-Western, anti-democracy rhetoric, many critics warned that Erdoğan harbored a secret Islamist agenda when he first assumed power in 2003. Notwithstanding, Erdoğan tried to clarify his earlier remarks cautiously, noting, “essentially, democracy is a tool for human happiness and well-being.” Later, he went on to legitimize his transformation as “a process of progress through learning.” In a way to further support his pro-democracy change, in one of his speeches at an international conservatism and democracy symposium in 2004, organized by his party, he noted that “top-down social engineering is already passé. Rather than Turkey’s path-dependent tutelary democracy under the gendarmerie of the Turkish élite, a real democracy experience where pluralism, harmony, and tolerance cohabitate, must be established.” He also openly refused to follow religion-centered politics. All these consistent efforts introduced Erdoğan to the international community as a respectable reformist leader, similar to any Western European leader, and opened the door for Turkey’s final membership negotiations with the EU.
However, the following analysis points out how opportunistic and authoritarian Erdoğan is and the total absence of a consistent body of thought in his political and economic policy-making. A fork in the road was reached in 2007 when the reform coalition from different political traditions Erdoğan had successfully assembled began to come apart. Two significant referendums in 2007 and 2010 on constitutional changes put Turkey on a path to institutional chaos, although this was scarcely seen at the time. Rather contradictorily, on the one hand, these reforms improved the quality of democratic representation and judicial standards. On the other, they helped consolidate Erdoğan’s power, allowing him to pivot back to his earlier religious conservatism, which soon showed itself incompatible with modern governance.
Erdoğan’s increasingly authoritarian turn can also be blamed on the failure of the establishment to react shrewdly to Erdoğan’s transformation. For example, until 2007, the tutelary regime firmly resisted to delegate the required authority to him that the constitution guaranteed to an elected leader. For instance, bureaucratic elites at the top of the system tried to prevent, stop, or manipulate Erdoğan’s appointments to the top-level bureaucracy, such as the Central Bank. The same oligarchic structure turned the presidential election in 2007 into a crisis of insecurity and representation when Erdoğan nominated Abdullah Gül as the ruling party’s candidate for the Turkish presidency, which became vacant that year. The establishment balked at this because Gül’s wife wears a headscarf, which the secular elite see as an affront to the country’s secular values. However, when the AKP took the issue to the country in a snap poll, the party won, and Gül assumed the presidency. The establishment responded in turn, and a case was brought before the Constitutional Court to close the party for “anti-secular activities.” When in 2008, the Court ruled by a slim margin of the justices that the AKP could remain open, the battle lines were laid bare. Still, having barely survived this threat to their political existence, Erdoğan and the AKP seemed to lose their reformist zeal and became a party of the status quo.
In Michael Gunter’s words, “in some ways, Erdoğan’s ongoing struggles and crises remind one of the fevered situations Mao Zedong created during China’s Cultural Revolution in which one erstwhile supporter after another was ‘revealed’ to be an enemy.” Like that, Erdoğan and his close cadre, which found themselves under the threat of death or life wars, seem to have developed a new strategy to change and seize “autonomous institutions and structures completely.” As discussed above, when the doctrines, ideological basins, and mental codes that Erdoğan grew up in are taken into account, it is hardly a surprise that Erdoğan is so skeptical of autonomous institutions, the modern division of labor, and the delegation of authority to professionals.
After the near loss of power in 2007–2008 and experiencing of a devastating global economic crisis Erdoğan went on to win a decisive victory in the 2011 elections. In a column I wrote for Project Syndicate in June 2011, soon after Erdoğan’s third major election victory, I attempted to explain the root causes of his successes in economic development since 2003. I ended by posing a critical question: how would Erdoğan use his rapidly growing economic and political power? Then, in a post-election ritual that he would become famous for, Erdoğan came out onto the balcony of his party headquarters in Ankara to address the throngs of party supporters below. To the cheering crowds, he promised that “the tyranny of the elites is over.” Continuing, the president asserted: “Turkey turned a new page and will no longer be ruled by criminals whose direction has split from God’s will and the will of the people,” rhetoric that pointed directly to Erdoğan’s emerging brand of Islamist, nationalist populism.
In other words, the time has shown that the “real Erdoğan” shine through; clearly, he was practicing “taqiyya,” a religious term used in Islam that legitimizes concealing one’s true belief to protect oneself from bodily harm or attack, but throughout time has become a deceptive political tactic. The 2011 elections thus saw Erdoğan’s transition from reformer to “inventor of 21st-century populism,” as Soner Çağaptay has put it. In my opinion, Erdoğan deserves such a “compliment” not because he is very creative in this regard. Instead, it is because he has learned lessons from the authoritarian populists who have come before him globally and applied them successfully in Turkey. Given the subsequent inconsistency between his apparent religious devotion and his repressive politics, it is worthwhile asking the extent to which his particular interpretation of Islam is “abetting” his brand of Turkish populism.
Although the AKP once held out the promise of a marriage between the rule of law, democracy, and Islam, the party has betrayed this vocation. Having denied the fact that Turkey’s positive image both in the Western and Islamic world throughout the 2000s was closely tied to the country’s skillful harmonization or amalgamation of democracy, Muslim identity, and economic development in a free-market context, Erdoğan has succeeded in branding Turkey as a nationalist, Islamist, and authoritarian country that makes trouble for its neighbors and is hard to work with. Accordingly, the government has pursued policies that furthered the country’s Islamization at the expense of individual freedoms and rights. The post-2011 break with the reformist past is arguably best summarized in a speech by Aziz Babuşcu— then chair of the AKP’s Istanbul branch—to a confidentially selected group of community influencers, civil society leaders, religious leaders, bureaucrats, and business people in 2013. Babuşcu’s speech on the intended future course of the Islamicists in power to this “new coalition” of AKP supporters is worth quoting here at length:
Those who supported and cooperated with us [i.e., liberal stakeholders] during the first ten years of government in power will not be our partners in the next ten [i.e., to 2023, the centenary of the Turkish Republic]. That is because the future will be subject to a period of reconstruction, and that era will not be as they [i.e., liberals, modern-secular, Western-oriented people] wish. Considering their ideological stance, we must part ways with our former allies and walk the road much more determinedly and firmly than yesterday. The AKP governments have done a lot on behalf of the ‘great silent majority,’ living in the periphery during the republican era by transforming the regime. Nevertheless, unless these achievements and the next steps are ingrained in the institutional memory of the state, they may not be consolidated deeply as permanent characteristics and might be quickly reversed. Therefore, the AKP must remain in power for a long time… The 2014 local elections will be the ‘fight to the death’ as they will mark the turning point in the struggle between the center [i.e., elites, the oligarchy] and the periphery [the “pure people”). If we can overcome that decisive threshold, achieve success in the next presidential election, enact constitutional reforms, and win a general election, we will be triumphant. However, should we lose even a percentage point of support in the electorate, dire political consequences will ensue for the AKP, which we cannot countenance.
The entire story since 2011 shows how Erdoğan has quite skillfully alienated and scapegoated his “enemies” in the interests of political survival and achieving the above-mentioned long-term targets. Because of deteriorating economic performance, declining per-capita GDP since 2013, systemic corruption scandals, fragile social peace and integration, the AKP lost its parliamentary majority for the first time in the June 2015 general elections. While a coalition government was undoubtedly possible, Erdoğan rejected this option outright, instead opting to call fresh elections, which were duly scheduled for November.
In the run-up to the November 2015 elections, several high-profile terrorist attacks occurred, contributing to a climate of fear and insecurity, and the general perception was that the government (in the form of the intelligence services) was playing some role in fomenting the chaos. Against this backdrop of insecurity, social anxiety, and uncompromising electoral tactics, it is scarcely surprising that the AKP secured a parliamentary majority in the November poll, allowing it to form a single-party government.
The following year was a true watershed in Turkish history. Late in the evening on July 15, 2016, elements in the Turkish military launched a coup attempt to topple the AKP-led government. Some Western media reports in the period after the coup pandered to conspiracy theorists, likening the event to the infamous Reichstag Fire in 1933, which Adolf Hitler famously used as a pretext to enact emergency rule and exert complete control over Germany. While the comparison is scarcely credible, Erdoğan himself only fueled speculation with his public assertion that the failed putsch was a “gift from God.” He quickly declared a sweeping three-month state of emergency, which for two years was repeatedly renewed, giving him the power to rule the country by decree, effectively bypassing the duly elected parliament. Since then, Erdoğan has purged more than 150,000 public servants through the presidential decrees without due process, put more than 350,000 people in jail (many of whom have been subject to torture), and upended the lives of millions of citizens just to silence the society.
The most significant step in the evolution of Erdoğan’s populism to authoritarianism was abolishing the parliamentary system and replacing it with an executive presidential system in 2018. In arguing for the concentration of executive power in the hands of the presidency —something not even advocated by Turkey’s first president and the “founding father” of the republic, Mustafa Kemal Atatürk—Erdoğan skillfully blended nationalism and the state’s official ideology with the orthodox interpretation of Islamic religion. Moreover, he claimed that uniting authority in one administrative structure would speed decision-making and allow for better policy-making for the Turkish people.
The AKP put its proposal for an executive to the people in an free but unfair, non-transparent constitutional referendum in April 2017, and the changes were approved by a narrow majority of the voters (51.41%). The shift hammered the last nail into the coffin of the democratic, secular Turkish state. It transformed the country from a parliamentary to a presidential system that concentrated significant powers in the hands of a directly elected president. As a recent European Commission report evaluates,
“the constitutional architecture continued centralizing powers at the level of the Presidency without ensuring a sound and effective separation of powers between the executive, legislative, and the judiciary. In the absence of an effective checks and balances mechanism, the democratic accountability of the executive branch remains limited to elections.”
Erdoğan’s presidential system was sealed at the 2018 elections when he was returned with 52.5% of the vote. However, according to observers, the poll was plagued with serious irregularities and malpractice on the part of the governing parties.
Against this backdrop, Babuşcu’s speech in 2013, mentioned earlier, seems very prescient in laying out the mentality of the AKP’s central authority. The anticipated “period of reconstruction”— effectively underway since the “judicial reform” in 2010 and the AKP’s success in the 2011 general elections—accelerated considerably after 2018. Signs of the post-2018 order were seen during the Gezi Park protests and the massive corruption operations on December 17–25, 2013, after which Erdoğan parted ways with liberals and the AKP’s erstwhile allies in the faith-based Gülen movement. It is also notable that by 2015, the peace process with the Kurds the so-called “Kurdish Spring”—had come to a grinding halt.
Figure 6. Countries with the most authoritarian tendencies.
As Figures 6, 7, and 8 summarize, under his “one-man rule,” Erdoğan’s populism has evolved into full-blown authoritarianism, and Turkey has fallen further into repression and violence. Since the constitutional referendum and 2018 presidential election, in the absence of robust checks and balances, an unaccountable president has controlled all executive authority, set of economic and foreign policy, through his sweeping appointment powers, Erdoğan has already massively expanded executive power, reduced political pluralism, and removed de jure and de facto constraints on political discretion.
According to the World Press Freedom Index report by Reporters Without Borders, Turkey ranks 154 out of 180 countries in terms of press freedom, behind even Venezuela, Honduras, Brunei, Bangladesh, and the Democratic Republic of Congo.
Figure 7. Trends in governance quality in Turkey.
Moreover, the Cato Institute’s 2020 Human Freedom Index puts Turkey 125th out of 162 countries for personal freedom. In its Economic Freedom Rankings, Cato notes Turkey has fallen from 67th to 99th since 2008. Additionally, in V-Dem’s 2019 Academic Freedom Index, Turkey ranks 135 out of 144 countries, ranking lower even than China. Finally, the World Justice Project (WJP), in its Rule of Law Index 2020 report, ranks Turkey 107 out of 128 countries, behind Niger, Mexico, Madagascar, Mali, and Kenya.
As a part of his “divide and rule” strategy, Erdoğan’s exclusive and majoritarian-oriented governance has deeply polarized society into two opposing camps and thus jeopardized social peace. As Figure 7-8 show, Turkey has become a hybrid regime and exhibits a dramatic decline in democratic values and governance. As a result, the Freedom House put Turkey in the “not free” category in its most recent report on civil liberties and political rights.
Figure 8. Rule of law and sub-index in Turkey.
Erdoğan began his career in power in 2004 by organizing an international democracy symposium with a reformist identity and drawing attention to himself. However, after his full-blown authoritarian turn, he has studiously avoided championing democracy on the international stage. Turkey’s populist-authoritarian turn has also had far-reaching consequences for Turkey’s international relations. Relations with the United States have rapidly deteriorated, Turkey’s EU accession negotiations have stalled, and its bilateral relations with several individual EU member states have worsened. For example, Erdoğan failed to attend the summit for democracy organized by US President Joe Biden in February 2021, who declared in his speech opening the summit that “democracy does not happen by accident. We have to defend it, fight for it, strengthen it, renew it.”
The Economic Consequences of Populism
As mentioned, Turkey’s economy performed relatively well in the first period of the AKP government in 2003–2007. Nevertheless, the seeds of later problems were sewn by the government in that period. Indeed, despite its relative success, toward the end of the period, the economy showed signs of overheating. First, growth began to decline from its peak of 9.4% in 2004–2005, falling to 6.9% in 2006, 5% in 2007, and a meager 0.8% in 2008 (Figure 2-3). Second, after stabilizing in the early 2000s, the current account deficit began to rise to unprecedented and unsustainable levels (Figures 3 and 4).
In addition, reform fatigue set in, with the AKP government convinced that it had worked an economic miracle. This perception became entrenched when “home-grown” policy responses to the 2008–09 Great Recession proved highly effective. As a chief economic advisor to a business association in 2008, I was also personally involved in developing Turkey’s response in the form of “emergency proposals” to head off the crisis. Our proposals focused on prioritizing targeted policy interventions and government funding of small and medium-sized enterprises (SMEs), labor training, and employment supports in crucial areas, unlike the Turkish corporate sector and the trade associations, which counseled a rapid austerity program under the auspices of the IMF to attract sufficient liquidity. The “home-grown” proposals we proposed required no additional external resources.
The government — in our view wisely — implemented our proposed measures, although the Turkish economy did see significant falls in economic growth, as did all economies during the crisis. However, the relative success of the short-term emergency measures gave Erdoğan the entirely wrong message and instilled in him a dangerous self-confidence that he could simply “invent unorthodox/heterodox tool kits” superior to mainstream economics at will. The short-term emergency measures we proposed were precisely that—emergency measures. They had to be followed by a subsequent round of more far-reaching microeconomic reforms, which would help Turkey return to a sustainable growth path in the long term, positively decouple from other EMEs, successfully graduate from the middle-income trap (MIT), and therefore, continue its recent convergence to the developed countries. To that end, in 2010, I submitted an additional report on the needed reforms. Nevertheless, rather than implementing the proposed reform measures, Erdoğan took quite the opposite direction.
After 2010, Turkey’s EU accession process ground to a halt, and the country lost one of its critical anchors of economic and institutional reform (the other being the IMF and the WB). This only exacerbated reform fatigue and anerosion of good governance, which had been secured only after long, costly, and painful reforms after the 2001 crisis. Thus, by 2010, an institutional vacuum had opened up.
Instead of institutional reform, Erdoğan’s regime resorted to crony capitalism, AKP-led clientelism, and a renewed commitment to dirigisme and contingency policy-making, undermining the hard-fought establishment of a free and open, transparent, accountable, rule-based, and competitive economy. Seemingly “winning” against all manner of crises after 2007, Erdoğan felt emboldened to double down on his commitment to creating a so-called “native and national” regime. Accordingly, he increased control over the regulatory agencies, impairing their autonomy through several de facto or de jure changes. Figures 6 and 8 summarize the World Bank’s assessment of changes in various dimensions of Turkish economic institutions since 2000. The indices of voice and accountability, government effectiveness, the rule of law, and control of corruption, which all improved during the AKP’s first period, have been drastically reversed, leaving Turkey well behind its EME peers.
In our view, the “root cause” of the economic problem in Turkey is the ever-rising need to finance growth in unsustainable ways, in the absence of structural reforms and transformation of the economy through market-friendly strategies with a long-term vision. Tragically, instead of completing these needed reforms, Erdoğan has reversed what hard-won gains had been achieved, undermining institutional structures and replacing merit-based appointments and professional rationality in public administration with rank clientelism.
What we now see is a vicious cycle of three reinforcing dynamics that threaten to severely cripple the Turkish economy and wipe away all the welfare and income gains of the past few decades:
Unsustainable growth, financed through debt and monetization, which fuels rampant inflation;
Corresponding high rates of interest that crowd-out real private investment and therefore depress TFP in the longer term, and;
An inevitable currency shock that continues to threaten livelihoods and the stability of the entire Turkish economy.
Growth Without Wealth Creation
As discussed before, unlike the so-called “golden age” of growth in the early 2000s, when income distribution improved and poverty levels decreased significantly, the recent Gini Index shows (Figure 9) that inequality has started to rise since 2011 and accelerated since 2013, wiping out the gains made in the previous period. The coefficient now stands at 43, an indictment of the government’s performance (Figure 9). The reversal has been caused by a large number of factors, most of which have been induced by reckless government policy, including slower economic growth, rising unemployment, wage repression (mainly due to emergency measures), a failure to invest in workforce training and skills, an influx of Syrian refugees numbering in the millions, the COVID-19 pandemic, and foreign currency shocks that have driven up prices of everyday commodities and the cost of living of the poorest households. Erdoğan has supported firms’ efforts to suppress collective bargaining through presidential decrees, meaning wages and salaries have not kept up with inflation. The major victims have been construction workers, followed by manufacturing and trade and services workers. Finally, the labor share of national income has fallen from almost 37% in early 2019 to just below 33% as of mid-2021.
Figure 9. Income inequality (selected countries).
Quite paradoxically, this strategy of suppressing wages is undermined by the government’s own populism, which is hostage to quite short electoral cycles. Thanks to election pressures, wages have been allowed to chase past inflation losses, leading after some time into a wage-inflation spiral. Still, inflation is winning. While the minimum wage increased by 21.56% in 2021, the official inflation rate reached 36%, and 49% in January 2022 (alternative statistics suggest the real rate is more than twice those). In December 2021, the government announced another minimum wage increase of 50% for 2022. Since minimum wage increases are taken as a reference, a similar increase in the salaries of civil servants and retirees is inevitable under elections pressures. Likewise, general wages other than minimum wages will be subject to a similar alignment. Considering exchange rate effects, production, and inflationary rigidities throughout the economy, and the underlying inflationary spiral already in train, “wage increases for 2022 could also reverse the recent improvement in the current account (forecast to halve to 2.5% of GDP in 2021) and increase in external financing pressures.”
Figure 10. Total external national debt (selected countries).
Ultimately, economic stability in Turkey cannot be achieved without fundamental reforms to address market rigidities and build long-term productive capacity. Due to resource constraints, any level of economic growth above 5% triggers deterioration in the macro-prudential framework, with ballooning external deficits, rising national debt, and foreign exchange shocks. This problem is hardly new. For many decades, governments have failed to address the underlying issues, leading to seemingly endless “boom and bust” cycles, the 2001 crisis being arguably the worst. However, the situation has deteriorated severely since 2018.
First, there has been a marked decline in “greenfield” FDI (Figure 5) and short-term portfolio investments, which have financed Turkey’s growth in the past. FDI flows (excluding real estate), which increased from almost zero in the early 2000s to 3% of GDP during 2006–2007, have fallen precipitously and stood at just US $5.8 billion in 2020, compared with a peak of more than US$19 billion in 2007.
Second, in a way to substitute dried foreign sources, there has been a dramatic expansion in consumer credit, largely substituting long-term investment in fueling growth. The World Bank data shows that during the presidential era, the external national debt has reached almost US450 billion dollars, exceeding 62% of GDP (Figure 10) as of mid-2021. As a result, Turkey’s overall debt to GDP ratio rose from less than 30% in 2006 to above 62% in 2021, a worrying 70 % increase, and thus has become a significant source of instability, triggering currency shocks combined with other instabilities and policy inconsistency.
Furthermore, currency composition and the rate of depreciation of the Turkish Lira vs. the US dollar are other sources of economic instability and is primarily driven by clientelist public-private partnership model that the AKP has built up as part of its crony capitalism. Meanwhile, the currency share of central government debt has grown from 39% in 2017 to 60 % in October 2021, chiefly driven by the lira depreciation. Finally, a significant part of the corporate foreign debt has been shifted to the public sector, reaching 60% of the total debt as of October 2021, up from 39% in 2017.
Not surprisingly, this level and structure of national debt has put Turkey at the top among its peer developing countries and triggered a severe currency shock. Turkey’s experience in the recent decades shows that multiple large currency devaluations could be ripe for some type of external debt crisis as well. Reflecting that fact, the costs of insuring Turkish debt against credit default (CDS), a financial instrument permitting investors to “swap” or offset their credit risk with that of another investor, nearly tripled to 600 basis points at the end of 2021 (Figure 11). Analyzing a sample of 25 EMEs, a recent report from Wells Fargo puts Turkey amongst the most vulnerable countries that includes Argentina, Chile, Indonesia, Turkey, and Venezuela.
Figure 11. Risk premium in Turkey and similar countries.
The Assault on Autonomous Institutions and the Inflationary Illusion
As discussed above, populist leaders do not favor delegation of responsibilities to professional and autonomous institutions through expertise and merit-based division of labor. Worse still, populists attack and discredit professional and autonomous supervisory or regulation institutions and destabilize them, often using them as scapegoats for poor policy. However, empirical studies show quite the opposite. For instance, central bank independence is indispensable to combat inflation and establish price stability as it helps prevent the kinds of discretionary, arbitrary, and contingent policies populists are known for.
Price stability (or the lack thereof) has been a perennial problem in Turkey. It increased steadily after the 1980 military coup and liberalization measures in the 1980s, reaching 50.7% on average between 1980 and 1989. Then, it spiraled out of control and reached an average of 72% in the 1990s, eventually triggering a severe economic crisis in 2001. From the longer-term perspective, the gist of the problem is that over time, inflation has somehow become “baked in” to Turkish economic management (including to inflate budget coffers), which is reflected in pricing behavior and the overall sense that it is just something that will always be a feature of the Turkish macroeconomic landscape.
This supposedly changed with the post-2001 crisis reforms under the auspices of the IMF and the World Bank. Specifically, the reforms established the needed autonomy for the Central Bank of Turkey (CBRT), made price stability its foremost legal responsibility, and prevented using its reserves as a source of funding for the state treasury. Granting legal independence to the CBRT was a turning point within the state structure as it aimed at the institutionalization of an anti-inflationary approach to macro-economic policy. However, during the presidential era, these hard-won gains have been radically reversed, and the interventions on the autonomous institutions such as the CBRT, the national statistical institute of Turkey (TURKSTAT), the competition board, and the court of auditing (Sayıştay) have been highly disruptive. Finally, the government’s use of inflation as a source of finance and indirect taxation has returned, and, therefore, the situation has spun out of control, with inflation driving the overall macroeconomic fragility. According to TURKSTAT data, since 2018, when the presidential system was inaugurated, consumer inflation climbed from 44% to 92%, whereas food inflation from 55 % to 111%, in cumulative terms.
Besides low TFP and supply-chain challenges during the COVID-19 pandemic, inflation in Turkey has been exacerbated by reckless expansionary monetary policies such as credit and money supply expansion. Expanding the money supply to boost growth has once again come to the fore. The stated goal has been to ensure liquidity in the financial system and help firms manage the pandemic-related shock with targeted liquidity facilities. In addition, the primary dealer banks have been allowed to sell domestic debt securities purchased from the Unemployment Insurance Fund to the CBRT for a temporary period. As a result, the supply of money in the narrow category of M1 has increased by 231% in the last three years. This level of monetary expansion stood out among all the EMEs except for Argentina, and, in turn, triggered an exchange rate pass-through effect and uncertainty-driven negative expectations.
The loosening of monetary policy has left the country as an outlier. For example, the US Federal Reserve is preparing to tighten monetary policy in 2022. Unlike Turkey, the major EMEs like Russia, Brazil, South Africa, Poland, and Mexico have gradually raised policy rates amid inflation pressures. With consumer inflation standing at 36% and producer inflation at 80% at the end of 2021, and further climbed to 49 % and 94 % respectively in January 2022, Turkey’s rates do not even compare to average inflation rates in other (medium or upper) MICs or EMEs, where inflation fluctuates within the 5–7% range annually (Figure 12). Nevertheless, the government and the CBRT continue to hue to an official annual inflation target of 5%, the benchmark set in 2005 but never actually reached. Neither the self-fulfilling prophecies of President Erdoğan, such as his eccentric “interest rate theory,” nor his pliant CBRT or the TURKSTAT, have any credibility.
Figure 12. Inflation in Turkey and similar countries and income groups.
The most traumatic issue is the government’s denial of the proven transmission mechanism between rising inflation, the necessary interest rate adjustment, and the money illusion that comes with the rise in nominal income due to wage adjustment. Among others, lowering policy rates into profoundly negative territory caused foreign exchange (FX) denominated deposits in the banking system to increase to 63% of GDP in December 2021. In that process, foreign investors have been fleeing the Turkish market in all categories.
In turn, administered low interest rates, the increase in the volume of money emissions to partly compensate the FX shortage, and the challenging of subsidized credits through a credit-rationing mechanism to the most favored corrupt insiders have not only seen inflation spiral out of control but also caused demand for FX to increase rather than triggering investments in an environment of increased uncertainty and narrowed decision-making horizons.
In the final analysis, the vicious circle between “deficit and debt driving financing-interest rate-inflation adjustment, and currency schok” reflecting Turkey’s chronic structural problems in its modern history has fully returned. While the credit rating agencies have constantly lowered the country’s credit ratings, some global investment banks have even decided not to share their information notes and investment recommendations regarding the Turkish lira because of its recent “free fall.”
Figure 13. Effective real real exchange rate in Turkey and similar countries.
As a result, Turkey’s rating on the CPI-based, real effective exchange rate (RER) index reached a historical low of 50 at the end of 2021 (Figure 13). However, as experience confirms, structural problems that prevent trade from growing and deficits closing mean an RER of this level does not guarantee the country’s overall competitiveness will improve. Indeed, as the famed international economist, Rudiger Dornbusch once noted, “currency crises take longer to occur than you might have thought. However, when they do occur, they do so at a very much faster rate than you would have thought possible.”
We can conclude this section by drawing attention to Dani Rodrik’s recent discussion of the role played by heterodox alternative policies in challenging orthodox, conventional policies in economics. He notes that economics is not a science like physics with its “immutable” laws but a set of principles that require constant testing. Thus, “trial and error” and “learning by doing” in economics are often required. However, this does not mean known cause-effect relationships in scientific methods and theoretical consistency can simply be discarded, whereby the field of economy cedes ground to a political mysticism that works on the basis of “let’s just try this and see if it works.” Erdoğan’s so-called heterodox approaches or “experiments” fall under the category of “milking the bull.” 
Back to the Middle-income Trap Under Erdoğan’s Authoritarianism
As discussed before, thanks to a favorable set of external economic circumstances until the Great Recession in 2009, many EMEs—including Turkey—achieved unprecedented convergence in terms of their per-capita GDP to developed economies. Nevertheless, the 2008–09 crisis brought new challenges, such as stagnating global finance and trade flows, putting the future course of their development in doubt.
The post-2009 turbulence in EMEs has again returned analysts’ attention to the challenges many developing countries face in escaping the so-called Middle-Income Trap (MIT). Coined by the World Bank in 2006, the term refers to the challenge faced by countries once they reach a certain level of economic development in which their cost-competitiveness in traditional labor-intensive industries begins to deteriorate (as wages rise) without a commensurate improvement in their quality-competitiveness in high-value sectors (such as technology or advanced manufacturing) on a par with the developed countries. The main drivers of the MIT are weak human capital, reliance on low-quality exports, low TFP, urban agglomeration that favors low-tech, labor-intensive production, and poor-quality governance institutions. Getting out of the “trap” requires fundamental reform, but this is difficult due to the aforementioned dilemma in which reform coalitions are hard to sustain since the costs are high in the short term, but the rewards accrue only at the end of a successful transition.
Turkey is a textbook case of a country caught in the MIT. After the aforementioned reforms after the 2001 crisis, the country’s per capita GDP increased from US$4,000 in 2003 to $12,500 in 2013, and the country saw an (albeit modest) income convergence. As a result, it became an upper-MIC. Had Turkey maintained that performance, it likely would have reached the goal of becoming a high-income country with an official target of US$25,000 per capita income by 2023.
This will not happen, reflecting the aforementioned reform fatigue and the post-2011 populist-authoritarian turn. The bitter harvest of Erdoğan’s misguided policies is clear for all to see, with economic indicators regressing to 2003 levels (the year he became prime minister) and human rights and rule-of-law indicators regressing to levels not seen since the 1990s.
Indeed, in 2015, I predicted that Turkey’s growth potential over the upcoming decade would fall to below 4%, pulling Turkey back into its chronic MIT. Indeed, much as I predicted, Turkey’s average annual growth rate declined to 3.2% between 2012 and 2020 (Figure 2-3). Although the MIT literature suggests that such a growth performance would be sufficient for a country like Turkey to escape the trap, the prolonged economic turbulence and currency shocks from 2018 through to the present have clearly wreaked real damage. For example, Turkey’s per capita income, which went up to $12500 in 2013, declined uninterruptedly for the next seven years, falling to $8500 in 2020.
Moreover, currency crises are a staple for MIT countries such as Turkey since the trap implies a heavy dependency on imports and external financing, the accumulation of unsustainable foreign debt, and stagnation in overall macroeconomic indicators. As it has been at many points in its economic history, Turkey is again confronted by the perils and the promise of a weaker currency, with the prospect of an export-led recovery, but only if the policy settings were lined up correctly. As Erduman and colleagues have rightly noted,
“by implementing structural reforms Turkey can benefit from foreign trade by improving local input content of production; improving price stability through restraining the exchange rate pass-through to domestic prices, and better managing financial stability through reducing external financing in the medium term.”
A recent OECD Economic Survey on Turkey makes the same observation: “A package of reforms could lift Turkey’s GDP per capita level by more than 10% over ten years compared to a scenario with no policy changes.”
Pandemic Populism and Further Disruption to the Economy
Against a backdrop of the currency crisis and macroeconomic instability in train since at least 2018, the arrival of the COVID-19 pandemic in late 2019 has dealt a body blow to the already weak Turkish economy. In the context of populism in Turkey and elsewhere, the key issues are the lack of transparency, rationality, and scientific grounding in the government’s approach to the quality and sustainability of its response to the pandemic. Unfortunately, albeit not surprisingly, the AKP government’s pandemic policy, active measures, and support of affected sectors have been inconsistent, incompetent, disrespectful to science and expertise, arbitrary, and driven by ideology and the need to placate cronies.
The fundamental issues can be summarized as follows. First, the timing of both lockdown and normalization decisions has been poor. The government adopted multiple containment measures relatively late (March 11, 2020) to address the pandemic, but they were lifted far too quickly (May 4, 2020). Following the second wave of infections, containment measures were reintroduced in September and tightened again in late-2020. Lockdown measures included mandatory masks in public areas, stay-at-home orders, curfews, closures, or limited hours for retail shops, closing pre-schools, and restricting gatherings. Once again, after a gradual reopening in early March 2021, following the third wave of infections, restrictions were tightened again, and a complete “lockdown” was announced in late-April 2021, extending into May. Finally, the government announced a phased return to normal in mid-May and June 2021.
Second, activepolicy has been inconsistent and ineffective. Adding insult to injury, the incompetence of the government’s handling (poor governance, severe working conditions for healthcare workers, low wages, the discrediting of scientists and their recommendations) has accelerated an ongoing and severe brain drain from Turkey. By 2020, almost 5,000 medical doctors had left Turkey in cumulative terms and almost 8,000 have resigned due to the mentioned negative factors.
As for the vaccine, the initially favored Chinese vaccine (SINOVAC) was not only ineffective, but there was also an appalling lack of transparency around the costs and how the acquisition and distribution tenders were allocated. Moreover, Turkey’s vaccine drive was both late and showed far too much tolerance for vaccine opponents, with government officials legitimizing resistance to the vaccine in a country where people are already given to conspiracy theories, denying facts, excessive risk-taking. Most egregiously, as he has always done, Erdoğan encouraged supporters to congregate in public settings at the opening ceremonies for new mosques and other high-profile infrastructure projects, as well as funeral gatherings and party congresses, sacrificing public safety for populist mobilization.
Third, and most damaging, there has been a lack of transparency and loss of trust and social integrity.The meager COVID-19-related death rate became a source of controversy in the highly polarized domestic environment and abroad. The sharp discrepancies in the number of COVID-19-related deaths reported by TURKSTAT and the Turkish Health Ministry versus independent accounting have been telling. For instance, in mid-2021, the Ministry of Health announced that the number of COVID-19 infections in Turkey in the 18 months since the first outbreak in March 2020 exceeded 6 million, with 53,000 deaths. However, alternative research has found the actual death toll more than twice the official figures. For example, Onur Başer, a professor at MEF University, told DW Turkey of his findings that the actual number of COVID-19 deaths between March 17, 2020, and August 1, 2021, was closer to 112,000.
There is much anecdotal evidence of political pressure on officials to underreport deaths, and the 2021 death count of 83,000 is likely a significant underestimate. According to a statement by the Turkish Medical Association (TTB), the World Health Organization (WHO) has criticized Turkey for not properly announcing the death toll because of Turkey’s method of reporting coronavirus deaths actually underreports real numbers.
In terms of fiscal support since the pandemic began, the IMF estimated that between January 2020 and April 2021, total support worldwide has risen to nearly US$16 trillion or 19% of world GDP. That amount comprises around US$9.9 trillion in additional spending and foregone revenue and US$6.1 trillion in liquidity support (e.g., for public equity injections, loans, asset purchases, debt assumptions, and state guarantees). Turkey spent below the world average, with support amounting to some 12–13 % of GDP, and the measures were not directed effectively or efficiently. Only 2.5% provided in terms of direct supports, and the rest were mainly in the form of contingent liabilities. Rather strikingly, Erdoğan announced a national donation campaign to provide funds to fight against the COVID-19 pandemic.
The problem regarding the pandemic supports in Turkey is that the country entered the pandemic without completely eradicating the deep wounds of the 2018 economic crisis, which was triggered by domestic and international political tension. The main challenges were the recurrent chronic external deficits, inflation, heavy debt burden, and currency shock. During the pandemic, the measures taken to resume the economy left no more room for maneuvers on monetary and fiscal fronts. Lockdown measures during the first three months of the pandemic led to a significant decrease in labor force participation, and the unemployment rate within the non-agricultural sector increased from 11.8% in January 2018 to 14.7% in September 2020. With awareness of the high amounts of debt accrued, mainly by public enterprises, and the growing rate of bad loans risking bankruptcy, the government announced the most comprehensive debt restructuring package in recent history in October 2020. Although the need for an influx of foreign capital to boost economic growth and credit expansion was obvious, it has not happened for the reasons explained before. The fiscal management and policies presented in detail above caused inflation to skyrocket and the national debt burden to accumulate further; finally, that process resulted in a sharp currency shock.
As Ümit Özlale has noted in a recent article in Foreign Policy, before and during the pandemic, the lion’s share of public resources went to Erdoğan’s cronies. These funds have been dispersed via tax amnesties, direct supports, subsidized credits, or corrupt infrastructure projects. All these events resulted in the deterioration of income distribution and an increase in poverty and hunger. Pandemic statistics convincingly recommend that, in Turkey, populism displayed in both the 2018 economic meltdown and the pandemic environment increased the cost of the crisis compared to non-populist countries.
Turkey’s Erdoğan provides a textbook case of how a populist performs in opposition and in power. This article proposes six lessons.
The first lesson is his successful instrumentalization of populism as a tool of diplomacy in Turkey’s foreign politics. The rise of the multipolar world and the emerging hybrid global conjuncture have allowed him to leverage alternative rules and norms. Even though Turkey is in the European periphery, it has increasingly challenged the supremacy of the liberal rules-based multilateral order and started to undermine its normative foundation. The support by outsiders, such as Russia, China, and some oil-rich regional countries, has also enabled Turkey to maneuver in international geopolitics.
Second, reflecting his distrust of local and global institutions, Erdoğan has adopted an informal deliberation, which occurs through the interaction between strongmen regimes, lacking transparency and accountability. Such a transactional or give-and-take—what he calls a “win-win” approach— foregrounding decision-making pattern through individualized interaction between influential leaders of critical countries weakened multilateral governance institutions outside and created a further democratic deficit inside.
Third, like all other populists, he initially pretended to be a conscientious and reformist leader although offering easy and fast solutions to chronic problems such as poverty, corruption, and repression. However, starting from 2007, he has maneuvered deftly to exploit political opportunities and, even worse, provoked many fault lines, exploited sensitive cultural, religious, and nationalistic touchpoints to “divide and rule.”
Fourth, depending on the situation, he has instrumentalized the deficiencies of mainstream hyper-globalization and created scapegoats and enemies inside and outside to overhaul and transform the existing governance mechanism under the slogan of rejecting an irrelevant “one-size-fits-all” model that comes with liberal globalization. Instead, he promulgated a never-tested bizarre indigenous model, what he prefers to call “native and national model,” symbolizing his former Millî Görüş ideology. He has abandoned the reform agenda and gone away from the EU membership negotiations using such excuses.
Before and after the presidential system, Erdoğan changed and rewrote the rule of the game that brought him to power. In such a hybrid and contingency system, the same rules apply differently to the incumbent administration, “more equal among equals,” and “the others,” by far the great silent majority. Parallel to the rising economic and political challenges inside and outside, Erdoğan’s emphasis has shifted from the sovereignty of the people, which is executed through free and fair elections to a seemingly free but virtually unfair election, if not directly “open vote, secret count.” As the last local elections in Istanbul 2018 showed, Erdoğan is preparing to re-run elections until he wins. Erdoğan uses the well-known appeals of all authoritarians that “enemies are sabotaging the country,” and “we are fighting a new war of liberation,” and therefore, “we cannot leave the country’s fate to the treasonous opposition.” In conclusion, by making it clear that he no longer intends to leave power, Erdoğan has shown that the inevitable end of populism is authoritarianism.
Fifth, besides politics, he has employed unusual policies (i.e., so-called heterodox policies like using extra-budgetary resources and linking high inflation to high interest rates) in economics through paternalism and kleptocracy. That regime allowed Erdoğan and his business oligarchs to become rich and powerful through corrupt activities such as stealing from society but distributing some to the electorate in return for the vote.
Sixth, Erdoğan’s discrediting of science, expertise, and autonomous professional institutions and ignoring resource constraints promoted fast growth through expansionary monetary and fiscal policies and resource transfer to the politically favored segments of the society. The result has been rampant inflation, domestic and external deficits, resulting in unsustainable national debt, leaving Turkey at the top of the list of most fragile countries and triggering a deep currency crisis.
The more Erdoğan’s imperial presidency, which places all power in the hands of a single man, gives priority to emotion over reason, conflict over compromise, and polarization and division over unity, the busier he becomes attacking imaginary enemies, reducing the parliament to a rubber stamp, and leaving an entire state captive to his whims and temper. After 20 years under his rule, Turkey had returned to the same vicious circle it was in at the start of his tenure, when the EU described it as “too big, too poor, and too unstable.”
Rather than having a “strong man,” Turkey should solve its chronic problems by discovering and implementing the right institutional mixture, policies, and culture under credible leadership.
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Deindustrialization and deeper European integration seem to be two of the several hazardous factors leading to the development of populism in Europe. Considering that neither deindustrialization nor European integration is expected to cease, populism will likely remain on the political spectrum.
By Daniel H. B. Gamez*
This article focuses on two postulates and, making use of extensive literature, tries to shed some light on the reasons for the increase in support of populism in Europe. The first postulate is that if industrialization in Europe has brought democracy support and stability, then, deindustrialization could contribute to the rise of populism and political instability. This postulate rests on modernization theory, which suggests a causal relationship between economic development and democratization (Liñán, 2017).
The second postulate has to do with political internationalization and deeper European integration, considering that many populist movements have opposed the European Union (EU) (Rodrik, 2020). In other words, the more we advance in economic and political international integration, the more vertical leadership and less direct democratic control are required, and the more likely populism will emerge.
Deindustrialization and international integration are two fundamental issues for democracy and stability in the EU. Because both are currently threatened by populism, the importance of these themes as an object of study becomes all the more significant.
The first postulate of this research article rests on the modernization theory, which suggests that “a gradual differentiation and specialization of social structures that culminates in a separation of political structures from other structures makes democracy possible” (Przeworski & Limongi, 1997). In other words, progresses in several areas such as industrialization, education, communication, mobilization, and the like, prepares society for democracy (Przeworski & Limongi, 1997). However, the assumption here is not that those countries that become economically rich will become political democracies. Rather, that economic development and industrialization are crucial to maintaining democratic support among the population, provided they have already achieved democracy.
As a matter of fact, Przeworski and Limongi have demonstrated that per capita income is a good indicator of democratic stability (Przeworski & Limongi, 1997). This is partly because the richer a country becomes, the more it is likely to invest in the education of its citizens, and more educated people are more likely to develop democratic values (Przeworski & Limongi, 1997). Moreover, poor countries that have established democracy are more likely to slide back into authoritarianism than those who have reached a certain threshold of per capita income, after which the chances of democratic survival grow significantly (Przeworski & Limongi, 1997). However, they also found out that the economic crisis remains the most common threat to democratic stability, and that democracies, particularly poor ones with weak institutions, are extremely vulnerable to bad economic performance (Przeworski & Limongi, 1997).
Moreover, over the last two centuries, industrialization has significantly reduced economic inequality and boosted political liberalization (Boix, 2015: 264). Society has also become healthier and, thus, life expectancy at birth has increased considerably (Boix, 2015: 264). Research suggests that it was industrialization along with liberalism that has “contributed to the gradual democratization of European politics, but that neither would have been sufficient by itself,” (Congleton, 2004). Support for democracy has remained remarkably stable throughout the EU. This lends credence to the notion that industrialized countries with established democratic institutions are more likely to maintain support for liberal democracy (Congleton, 2004).
Nevertheless, considering that there is already a deindustrialization process underway in certain parts of Europe, it is crucial to understand precisely what role industrialization plays in developing support for democracy in the first place. Researchers such as van Noort suggest that industrialization is central to the institutionalization of liberal democracy; it seems that a large industrial workforce tends to induce democracy (van Noort, 2020).
However, deindustrialization expands the share of the service sector in the economy. This and other factors consequently disrupt political stability. For instance, economies dominated by services face either increasing low-wage employment or a high level of unemployment (Hahn & Kodó, 2017). Yet, as the service sector increases in size, trade unions, which have long supported democracy, see their influence reduced (Rowthorn & Ramaswamy, 1997). Moreover, if there is a loss of bargaining power in a fast-paced environment led by technological change, it becomes almost impossible for the unions to negotiate wages on reasonable terms (Rowthorn & Ramaswamy, 1997).
In other words, the protection offered through collective bargaining is not available through the market. Consequently, the greater the coverage of this social protection, the fewer the risks of inequality and economic crises on workers (Keune, 2015).
Interestingly, Kaltwasser and van Hauwaert’s research on the populist citizen shows that citizens are more populist in Latin America (significant inequality and weak democratic institutions) than in Europe (Rovira Kaltwasser & van Hauwaert, 2020). Moreover, European citizens do not have a strong belief that the world can be divided into a binary of “good” people versus “corrupt” elites (Rovira Kaltwasser & Van Hauwaert, 2020). Instead, while being very interested in politics, they are rather indifferent to political parties (Rovira Kaltwasser & Van Hauwaert, 2020). Additionally, populist supporters prefer democracy over any other form of government. Their decision to look for populist parties indicates that there is a significant dissatisfaction with the current way democracy is currently functioning in Europe (Rovira Kaltwasser & Van Hauwaert, 2020).
In sum, we see theoretically that deindustrialization and automatization produce a relative expansion in the scope of the service sector, which due to several correlated factors, such as economic grievances, provokes political turmoil in turn. Having established this, we can now observe empirical cases of five countries to test these assumptions.
Although populism in France has been present since World War II (Ivaldi, 2019), the actors have changed, and so have their demands. Nowadays, two parties dominate the populist scene in France, namely the Front National (FN) and La France Insoumise (LFI) (Ivaldi, 2019).
Regarding the FN, it can be said to be the typical radical right-wing populism. Its leader Marine Le Pen claims that the party authentically represents the will of the people and fight for France’s freedom from globalization and the EU (Ivaldi, 2019). On the other hand, the LFI’s leader Mélenchon adopts a discourse and ideology that presents the left as an alternative to the neoliberal hegemony (Ivaldi, 2019).
Both populist parties argue against economic globalization and neoliberal capitalism. They oppose capitalist elites and financial institutions. Furthermore, both parties try to gain Eurosceptic voters (Ivaldi, 2019). For instance, the FN discourse describes the EU as a totalitarian prison that impedes the expression of the genuine will of the French people, especially when it comes to immigration and the control of borders (Ivaldi, 2019). On the other hand, LFI’s Euroscepticism is driven mainly by economic concerns and a desire to support those left behind by globalization.
Ivaldi’s research has shown that the rise of populist parties in France has been fueled by economic instability, inequality, and the electorate’s discontent with mainstream politics. Moreover, the data shows that young people that vote for FN favor authoritarianism and that the probability of voting for Le Pen decreases with age (Ivaldi, 2019). Lastly, young people that have a strong democratic ideology are more likely to vote for Mélenchon. Her research also shows that people with higher education are also less likely to support FN (Halikiopoulou, 2020). This corroborates what has been mentioned above concerning the modernization theory- namely more educated people are more likely to develop democratic values.
Greece has also seen a rise in left- and right-wing populism in recent years. However, when we look closer at the data from the 2015 election, we can see a significant decline in support for the mainstream parties (New Democracy or ND and Pasok), the triumph of the radical left Syriza, and the far-right Golden Dawn entering parliament for the first time.
This shows that the electorate wanted to punish mainstream parties for their failure to manage the effects of the crises(Halikiopoulou, 2020). In fact, the following election in 2019 saw the defeat of Syriza to mainstream party ND (Halikiopoulou, 2020).
Halikiopoulou has also shown that the reasons for the rise of Syriza are the prevalent inequality, austerity measures, and the challenging economic conditions affecting the working class (Halikiopoulou, 2020). Despite the support for the far-right group, it can be observed that most of the Greeks preferred a more democratic approach as an alternative to mainstream politics. Similarly, Golden Dawn’s presence also shows that a violent and authoritarian populism can emerge where there are weak democratic institutions (Halikiopoulou, 2020). As stated before, established democratic institutions are essential to maintain support for liberal democracy.
Since 2000, Italy has borne witness to the rise of the anti-establishment Five-Star Movement (M5S) and the right-wing populist Lega party (formerly Lega Nord or the Northern League). The study of the last elections clearly shows that as greater inequality goes along with lower participation in the election, the dissatisfied and undecided voters are crucially targeted by populist parties (Pianta, 2020).
This is possible because, in recent decades, income inequality has been bringing with it disaffection with politics in general and, thus, mainstream political parties (Pianta, 2020). Moreover, the adoption of policies that protect the wealth of the higher classes while harming the working class has also impacted the political landscape (Pianta, 2020). Cleverly, the League abandoned its regionalism stance to adopt a more state-wide anti-Europe and anti-elite attitude to win the unsatisfied (Vampa, 2020).
Finally, the case of Italy shows that income and wealth inequality can have significant political consequences (Pianta, 2020). That is why events such as the widening of the service sector, which favors the better educated classes and the decline in the industrial workforce due to deindustrialization are so significant.
The rise of Podemos in Spain offers a practical example of populism as a discursive logic rather than as an ideological formation (Zarzalejos, 2016). Apart from that, Zarzalejos identifies the existence in Spain of factors that benefit populism, namely, inequality, high unemployment, declining middle- and working class, and shrinking incomes. Similarly, the financial crisis and the highly public corruption cases have aggravated the already weak trust of the people in mainstream politics (Zarzalejos, 2016).
Furthermore, as Podemos established itself, VOX, a far-right populist party, started to make gains with the electorate. Research into the April 2019 Spanish election shows that Podemos was more successful in provinces characterized by levels of deprivation and big cities, as well as those with an independent ideology (Vampa, 2020). In contrast, VOX succeeded where there was economic difficulty and a lack of independent ideological discourse (e.g., Murcia region) (Vampa, 2020). Considering that Podemos joined the Socialist Party to form a government after the elections, it can be observed that the Podemos vote came largely from voters seeking a bottom-up approach as an alternative to neoliberalism.
The United Kingdom
Analyzing the United Kingdom local elections in 2016 and the general election in 2017, it can be observed that the UK Independence Party (UKIP), a Eurosceptic and right-wing populist party, helped the conservatives to victory by splitting the opposition vote. This forced the incumbent prime minister, David Cameron, to make good on his promise to hold a referendum on EU membership(Fetzer, 2020).
Although much has been researched on the misleading and deceiving “Leave” campaign promises, it is important to consider that the UKIP party managed to convince working-age adults to vote for it to protest mainstream politics (Fetzer, 2020), especially around the issues of wages and working conditions, and of course, migration.
Fetzer claims that Brexit is a product of the specific features of British economic and political history but also adds that the erosion of unionization and collective bargaining, precarious employment, unemployment, and weaker employment protections were also relevant (Fetzer, 2020). These, it should be noted, are all effects of the process of deindustrialization and automatization.
Countries where populism has had electoral relevance
Rise of inequality
Decrease in wages
Disappointment with traditional parties
Support for Democracy of populist electorate
Support for authoritarianism of populist electorate
Ruling party or part of coalition government
These five European countries have served as empirical examples to test the postulates that deindustrialization fosters populism. The analysis shows that by generating economic grievances, especially in the middle and working class, deindustrialization has significantly contributed to the rise of populism in Europe. Indeed, inequality, loss of wages, de-unionization, automatization, precarious employment, mistrust, and dissatisfaction are among the effects of deindustrialization that have pushed electorates to vote for populist alternatives.
Moreover, Vlandas and Halikiopoulou have shown that social policies can reduce support for the far-right among those exposed to social vulnerability. In other words, it is not only absolute impoverishment that drives people to turn to populism but also the perception of economic decline (Vlandas, & Halikiopoulou, 2021). Nevertheless, the government has the tools to shape political outcomes by addressing the right social policies (Vlandas, & Halikiopoulou, 2021). Similarly, Boix (2019) argues that while deindustrialization, automatization and technological change are inevitable, voters and governments can step in to apply policies that offer transfers to those left behind or permanently unemployed. Again, democratic institutions and elections enable voters to impose high-tax transfers to the affected groups (Boix, 2019).
In sum, the rise of populism is not so much due to citizens having populist attitudes, but rather to the loss of collective bargaining (social protection) resulting from deindustrialization.
However, let us consider the second postulate-namely, that the increase in international political integration, (i.e., deeper European integration) is partly driving citizens’ dissatisfaction with democracy, leading them to populist alternatives.
Mesežnikov et al. (2008) suggest that there is a falling trust toward liberal parties across Europe, with such parties consistently losing vote share over time. However, when populist parties and leaders are seen as a real threat, liberal parties manage to mobilize more voters (Mesežnikov et al., 2008).
This sheds light on several challenges regarding responsiveness and responsibility uncovered by Mair (2009) -namely, governments are finding it increasingly challenging to be both responsive to voters and persuade them to back their policies. Subsequently, much of public policy today is delegated to state agencies and institutions, which constrains the responsiveness of governments (Mair, 2009). This problem is destined to increase given the integration within the EU and the internationalization of policy parameters (Mair, 2009).
Strøm has pointed out that these constraints can even obstruct representative politics because international parameters (e.g., the UN, the EU, etc.) either prohibit certain forms of agency or force behavior that otherwise would not have been freely chosen (Mair, 2009). Moreover, governments are limited by prior policy commitments, which can be enshrined in national legislation or international treaties.
It is in this context of constraints to deliver solutions that populist parties have influence. Populism tries to occupy the vacuum left by traditional parties unable to provide adequate responses (Rovira Kaltwasser, 2012). Kaltwasser and Van Hauwaert (2020) show that citizens in Europe want to both express their dissatisfaction, and impact decision-making albeit without upending democracy. That means that this current gap between policies, democratic ideals, and their implementation eventually strengthen the rise of populist ideas and influence (Rovira Kaltwasser & Van Hauwaert, 2020).
At this stage, it can be observed that government constraints prevent citizens’ satisfaction and their impact on decision-making. The increasing European integration is working at the cost of the popular will. Rather often, official bodies ratify proposals made by public bureaucracies after these have been discussed with representatives of organized interests without the engagement of the average citizen (Rovira Kaltwasser, 2012).
As Dahl had already explained, the shift from city-states to nation-states meant fewer participatory opportunities in the decision-making for engaged citizens (Dahl, 1992: 271). Similarly, by shifting from nation-states to member states, parties have become less representative of the societies. Conversely, they now rely on regional integration as their source of legitimacy and authority (Bickerton et al., 2015).
As a result, policies are justified in terms of European obligations (Bickerton et al., 2015). Thus, to rule in Europe is to rule through transnational networks of governance. It could be said, therefore, that in Europe, bureaucracies external to the state intervene and assist societies (Bickerton et al., 2015). Consequently, to mobilize against national governments equals to mobilize against Europe. It is in these terms that the rise of Euroscepticism and anti-Europe populist parties can be understood (Mair, 2009). Moreover, by placing their legitimacy on regional integration rather than national sovereignty and citizen participation, nation-states in Europe are challenging the basic notions of democracy. In other words, political internationalization reduces citizen participation and influence in the political process (Lavenex, 2013: 108) and, consequently, undermines state institutions, political accountability, and the like.
Despite the horizontal intergovernmental organization of the EU, where power and authority are established in their relations with one another (Bickerton et al., 2015), there is a great deal of power delegation which increases the verticality between EU states, institutions, and ordinary citizens. Importantly, democratic institutions should prevent the delegation from becoming a total and permanent alienation of control from the electorate (Lavenex, 2013: 133). However, this is what is happening, and this helps explain the growing gap between what citizens want their government to do and what the government can do, given constraints (Mair, 2009: 17).
In all the empirical examples mentioned above, populists have targeted dissatisfied voters with mainstream politics and the EU. For instance, the discourse of Greece’s Syriza emphasized a policy of ending the impositions of the EU and the IMF (i.e., the Troika) to carry out the will of the Greek citizens (Henley, 2015). Thus, Syriza carried out a campaign with different electorates and demands, yet, with a common enemy: the EU. Similarly, Spain’s Podemos came to prominence in 2014, adopting a discourse against the EU’s top-down fiscal rules and in favor of an open government where people can take direct control of major governmental decisions (BBC News, 2015). and more fiscal national sovereignty from the EU (Kadner, 2014).
In the light of what has been argued before regarding the initial two postulates, deindustrialization and deeper European integration seem to be two of the several hazardous factors leading to the development of populism in Europe.
On the one hand, deindustrialization disrupts political stability and harms the middle and working classes. On the other hand, since the political and economic crisis of the 1970s, post-war Keynesian cooperation between business and labor was increasingly abandoned in favor of a neoliberal structural adjustment, thus, weakening national constraints (Bickerton et al., 2015). In doing so, citizens were taken away the promised protection from capitalism’s dangerous consequences that enabled in the past, democracy to flourish (Berman & Snegovaya, 2019).
Furthermore, as political parties become more integrated into Europe, they become less connected to civil society, which questions their authority as they are not able to fulfill their demands satisfactorily. This situation explains the rise of populism as a democratic alternative to either punish traditional parties or avoid liberal solutions.
Finally, this essay’s findings suggest that both deindustrialization and European integration are interconnected when it comes to the development and rise of populism. Not only is deindustrialization caused by the advancement of the economy but also by international economic integration, trade openness, industrial relocation, and the financialization of the economy (Araujo et al., 2021). All these factors have been generated by deeper European political cohesion. Therefore, considering that neither deindustrialization nor European integration is expected to cease, populism will likely remain on the political spectrum.
Daniel H. B. Gamez is a final-year student enrolled in a bachelor’s degree program in Latin American Studies at Stockholm University, Sweden. As an undergraduate, he has developed research interests in political stability and social movements within Latin America and Europe. Being an active student involved with his university, he is editor-in-chief of the Stockholm Journal of International Affairs, a student magazine of the Stockholm Association of International Affairs (UF Stockholm or SAIA). Previously, he has been vice-president of the student council and student representative at the Department of Humanities at Stockholm University.
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This article explores the discrediting and decommissioning of the institutional foundations of the economy by populist leaders and its impact on economic performance in major emerging market economies (EMEs). One situation that justified these attacks that also attracts public support in recent years is argued to be the devastating effects of the global economic and financial crisis on developing countries (DCs) in general.
During the heyday of globalization, since the 1980s, the major emerging market economies (EMEs) not only increased their share of the global gross domestic product (GDP) in terms of purchasing power parity (PPP) but also achieved a remarkable “convergence” (Lee, 2018; Lee, 2013) in terms of per capita GDP to that of the average developed country. Their share increased steadily from 36 percent in 1980 to 58 percent in 2016 (OECD, 2018). However, recent challenges like the Covid-19 pandemic and economic crisis have eroded optimism for the continued convergence.
Around the world, economic problems are attributed to the excesses of globalization. In a crisis like the Covid-19 pandemic or the 2008 economic crash, citizens of nation states might view their plight as being like a small boat sailing through a rough storm; whatever measures they take on the boat will not save them. These perceptions have helped various populist parties ascend to power or become coalition partners all over the world in the recent years. Although different economic, political, cultural, and security concerns shape populism across the right-left political spectrum, in this article, we will explore populism in selected EMEs without making a right-left distinction. We’ll look at the BRICS (Brazil, Russia, India, China, South Africa) countries and the MINTA (Mexico, Indonesia, Nigeria, Turkey, Argentina) countries, all known as both middle income and populist countries—and all candidates to fall into the “middle income trap” (Kyle & Gultchin, 2018). As the main argument of this article, our sample set shows that populism and institutional erosion coexist, with the former causing the second.
After summarizing the major repercussions of hyper globalization on developing countries (DCs) and looking at the domestic political reaction to this process, the third section will focus on the attacks made by populists on institutions, including the visible erosion of governance indicators in the sample country groups. The last part summarizes the main conclusions.
Impact of Globalism on National Economies
The failure of DCs to manage the challenges posed by the rising “multiplex world,” a term recently coined by Acharya (2017), prepared the ground for populism and allowed populist parties to make electoral gains not only in DCs but also in several developed ones. As Rodrik (2018) puts it, to the extent that radical globalization works against ordinary households at the micro-level and violates the independence, autonomy, and sovereignty of nation-states at the macro-level, it fosters feelings against openness, globalization, and also large regional agreements. However, objective and speculative factors in the rising objections should be adequately addressed.
First, as the Great Recession of 2008-2010 showed, because of their weak institutional governance, democratic check and balances, and excessive dependence on external markets, (particularly in finance), DCs cannot isolate themselves from the contagious effects of an erratic crisis in major capitalist countries. In addition to the ongoing harsh global competition, the economic recession of 2008 and subsequent fiscal crises have led to mass unemployment and distorted income distribution; together, they increased the perception of economic insecurity in DCs.
Second, there are also perceptions that large companies or international organizations use free trade and unconstrained financial and fiscal agreements to constrain national governments in legislating socially desirable policies against their perceived interests. For instance, austerity programs implemented after 2008 worked against the most fragile segments of society, those living on a low and fixed income.
Third, new technological shifts of the fourth industrial revolution like automation, robotics, artificial intelligence, cyberspace, big-data, and cloud technology have created downward pressure on the wages of low-skilled workers in non-export and import-competing industries. Capital mobility, which allows businesses and entrepreneurs to move to different countries where factor prices are lower and income and corporate tax are more competitive, creates downward pressure on the wage level of the less skilled labour force and kills local employment capacity. Overall, under excessive globalization and turbulences, income distribution skews in favour of large company owners and highly skilled workers, mainly in the export industries (Li, Hou, & Wu, 2017; WEF, 2017).
Fourth, given these factors, governments in DCs face the challenge of managing the distribution of the cost and benefits of national growth through an appropriate mix of taxes, safety nets, and subsidized public delivery of social services (health, education, low-cost housing) (Gill & Krahas, 2015). For instance, by considering the adverse impact of the pandemic on the poorest segment of society, which could trigger social unrest, the IMF, as the lender of last resort, called on governments to close the income gap between the richest and poorest by taxing wealthy businesspeople and spending more on the poor (The Guardian, April 1, 2021). However, contrary to those expectations, as Krugman (2008) has noted, neither governments nor the “winners” (i.e., entrepreneurs, companies) from free trade compensate the “losers.” The worst is that, as mentioned before, capital mobility or the fear for the so-called “capital flight” would undermine the existing premature efforts for the taxation of wealthy business globally to close existing income gap (Piketty, 2018; Piketty & Goldhammer, 2014). Rather the contrary, as recent experiences under pandemic have shown, the super-rich increased their wealth in many developed and developing countries (Financial Time, May 14, 2021), whereas the most vulnerable segments of the society have received quite unequal and inadequate support. This is because, on the one hand, the capital has various lobbying opportunities to soak up Covid cash; on the other hand, the businessman is “stateless” and therefore triggers the fear of abandoning the country because of more favourable tax privileges and financial supports elsewhere.
DCs have limited capacity to take advantage of the favourable global economic conjuncture and give back their gains before they are consolidated during the crisis. Additionally, they are exposed to the new problems mentioned above. While significant aspects of the negative repercussions are attributable to uncontrolled globalization, national governments are not entirely exempt from responsibility. As a result, the failure of DCs to properly manage globalization causes massive alienation and feelings of abandonment amongst the “silent majority,” preparing the ground for the exaggeration, falsification, and exploitation of problems and, therefore, manipulation of the electorate by populist politicians.
Populism as an Internal Reaction
As Luiz (2016) puts it, intensifying tension between the insiders or winners (the status quo) and the outsiders or losers of globalization determines the course of populism. Mudde (2004, 2007, 2013) and Müller (2016) underline the anti-elitist and anti-globalization characteristics of populist rhetoric. Some authors like Mouffe (2018) and Kaltwasser (2019) interpret populism as a reformist opportunity for democratic correction against the status quo and elites, and therefore, they present it as a member of the democratic club (Canovan, 2005).
Mouffe supports populism because of its potential contribution to “radical democracy” through the mobilization of excluded sectors of society against the status quo. Following the same line of analysis, Jansen (2011, 82) contends that “a political project is populist when it is a sustained, large-scale project that mobilizes ordinary, marginalized social sectors into publicly visible and contentious political action, while articulating an anti-elite, nationalistic message that valorises ordinary people. It is therefore difficult to imagine democratic politics without populism. The dominance of a predominantly anti-populist logic may reduce politics to an administrative enterprise with over-proportionate input from colleges of experts and technocrats.”
By looking at empirical data, it is necessary to question the ultimate goals of populists and to analyse where populist policies will go, regardless of their intentions, because of the “built-in mechanisms” they contain. Populism should be judged by its attitude when it consolidates its power and to changes through free and fair elections, rather than its idealistic and romanticized rhetoric before it comes to power and its actions during its initial years of inexperience (Lewis et al., 2019).
Rosanvallon (2006) argues that populism might take the form of a political expression in which the democratic project allows itself to be eliminated by a non-democratic ideology. With its orientation to make democracy less pluralistic (in political rights) and more inclusive (in the realm of social rights), contemporary populism is a fusion of nationalism (with its notion of the unified people) and authoritarianism (with its lack of tolerance for any alternative discourses). This suggests that populism is not just anti-elitist; it is anti-pluralist—and herein lies its profoundly undemocratic character (Weyland, 2020; Mueller, 2015).
To sum up Norris and Inglehart’s (2019: 445) words, populism is an authoritarian philosophy and style of governance, in which “legitimacy flows from popular sovereignty and vox-populi, superseding minority rights, constitutional checks-and-balances, and decision-making by elected representatives.” Moreover, populists’ “divide and rule” strategy scapegoats marginalized groups, which serves to consolidate the leader’s power, to distract public attention from his failures, or to conceal from the people the nature of his rule or the real causes of economic or social problems (Munro, 2021). In the context of this paper, populism is accompanied with stereotyping and stigmatizing “enemies of the nation”—other nations, international organizations, capitalists, or minorities.
What are the effects of populism on economic development?
The ultimate task in economic development is to achieve an inclusive, productivity-oriented and sustainable growth. Other main objectives include the generation of satisfactory income through employment creation and the prevention of erosion in the overall wage level without sacrificing macroeconomic stability. The question to ask here is, What are the available ideological and economic policy tools at the disposal of populists to manage external conditions and the resulting domestic imbalances properly? What is the capacity of populist governments to ensure sustainable, inclusive, and productive growth vis-a-vis hyper globalization?
Rodrik (2017, 2018) defines economic populism as “anti-establishment orientation, a claim to speak for the people against the elites, opposition to liberal economics and globalization (anti-foreign capital and companies), and often (but not always) an affinity for authoritarian governance.” With a similar approach, several economists who are also interested in economic populism (see Houle & Kenny, 2018; Dornbusch & Edwards, 1991; Kaufman & Stallings, 1991; Sachs, 1989) describe it as an “irresponsible approach” through redistribution of wealth and government spending. One critical issue is the pressure of “short-termism,” which is efforts by populists to meet short-term expectations they create. It is incompatible with the needed time dimension of structural reforms, which are costly initially but fruitful in the long run. The economic policy populists tend to follow is characterized by an initial period of massive spending financed by foreign debt and followed by a second period marked by hyperinflation and the implementation of harsh economic adjustments.
Moreover, quite understandably, populist leaders focus on redistribution policies to improve the living standards of the so-called “silent and pure majority” against the “comprador bourgeoisie” or “corrupt elite.” However, as Pareto-optimality implies, when there are no effective external and domestic compensation mechanisms to make one better off without making someone else worse-off, populism relies on different bargaining strategies, sometimes even coercive policies, via highly politicized resource transfers across social classes. As will be discussed below, the excessive short-termism of populists also ignores inter-generational accounting principles and does not allow circumstances for the needed consensus and reform coalitions that increase productivity through technological transformation and upgrading human capital—and therefore achieving high-quality growth.
Taken together, populism has problems with the principles of good governance, such as pluralism, participation, accountability, and transparency for market-based economic development.
Populism, the Market, and Institutions
In the context of hyper globalization, the motivation of populists to discredit institutions reflects a lopsided view—that these institutions serve the elites, oligarchs, and international interests rather than the citizens. However, this approach does not fully capture the meaning, existence, evolution, and the role of institutions in economic development. As Polanyi (1944), North and Thomas (1973), and North (1997) showed quite succinctly, there is no development without robust institutional design defining the rules of the game. Markets are not God-given, but they are “designed” with the help of institutions.
As North (1990: 3) contends, “institutions are the rules of the game in a society or, more formally, are the humanly devised constraints that shape human interaction. In consequence, they structure incentives in human exchange, whether political, social, or economic.” More recently, Rodrik et al. (2004), Acemoglu et al. (2005), and Acemoglu and Robinson (2012) showed that societies with more flaws tend to have much “worse economic institutions” than those that don’t. This takes us to the role of politics in the design of institutors. As Dore (1986) showed in Japan’s economic development, and more recently, as Wen (2016) proposes quite assertively for the Chinese economic transition, “market creation” needs political coordination and capacity to set proper priorities and reach a workable compromise among the major stakeholders.
To start with, by denying institutional check and balances (i.e., the separation of the legislature, executive, and judiciary) and the autonomy of several key institutions such as the central bank, statistical institutes, court of auditors, and competition board, in the name of sovereignty and people’s self-determination via elections, populists take a strong anti-institutional stance. This stems from their belief that unelected national or supranational institutions serve the interests of the corrupt elite, global companies, and developed countries at the expense of the pure people. Reflecting the same position, populists also oppose the oversight of international anchors over their governance. They go further and also discredit science and scientific evidence/findings as untrustful and declare “folk wisdom” as more valuable.
Such denials of science, professionalism, expertise, and institutions means that populists underestimate the importance of contemporary governance, which strives to bring solutions to conflicts of interest through different institutional designs and innovations that can alleviate problems of collective action and participation. Given the fact that political parties lose importance and elections serve the leader’s authority when populists are in charge, populist opposition to the autonomous institutions in favour of popular sovereignty cannot be easily interpreted as an indication of a “democratic corrective” or a process of “creative destruction” for better outcomes (Peruzzotti, 2017; Edwards, 2010).
However, autonomous institutions, based on professionalism, expertise, and division of labour, play a crucial role in fulfilling citizens’ collective demands through pre-determined and agreed-upon rules and delegation mechanisms such as free and fair elections (Bezes & Le Lidec, 2016). Several uncertainties that come with the weakening of autonomous institutions, and reliance upon ad-hoc rules, arbitrariness, and irregularity, include the lack of predictability and short-sighted decision-making which result in lower investment, misallocation of resources, and finally, lower growth (Acemoglu et al., 2013; Helpman, 2008; Kartik & Sideras, 2006; Rodrik, 2000 & 2012; Yıldırım & Gökalp, 2016).
A striking example of this is the attempt to limit central bank autonomy, which, most of the time, results in the loss of price stability as politicians run expansionary macroeconomic policies to fuel short-term growth at the expense of fiscal and monetary discipline (Edwards, S. 2010; Learner, 2019). The suggestion is that the autonomous but accountable and transparent institutions have the most credibility within modern governments—and therefore, governments should avoid interventions in fundamental institutions, such as the judiciary or Central Bank as well data monitoring agencies, like public statistical institutions that are empowered to produce scientific, impartial, and reliable data.
Table 1 shows how authoritarian populist governments undermine the quality of institutions. It summarizes the broader categories of governance (composed of political participation, rule of law (ROL), stability of democratic institutions, political and social integration, socioeconomic development, monetary and fiscal stability, private property, welfare regime, economic performance, and sustainability) in BRICS and MINTA country groups. Numbers in red highlight an alarming situation and underline an obvious institutional erosion in all these countries, but particularly in Russia, Nigeria, Turkey, and China.
Considering the high level of arbitrariness and one-man rule in populist governments, rule of law evolves as the most crucial parameter for institutional robustness. Therefore, the ROL criteria given in Table 1 is supported by a further sub-set of measures in Table 2. The World Justice Project (WJP)’sROLindex in 126 countries consists of the following aspects: constraints on government powers, absence of corruption, open government, fundamental rights, order and security, regulatory enforcement, civil justice, and criminal justice. This index shows similar resultsfor upper middle-income countries (UMI) as of 2020. There is no single country over $12,535 per-capita GDP with an average WJP score below 0,50. UMI countries exhibit dramatically lower score in the ROL index and appear to be the most probable candidates to remain stuck in the middle-income trap.
Populism signifies a significant deviation from institutionalized governance due to its reliance on a leadership cult of the strong man. Populism has developed partly as a reactionary movement to undisciplined globalization and the destructive impacts this has had on national and local economies. Globalization transmits its adverse impacts onto national economies through several linked threads such as trade diversion, unfair import and superior export competition, erosion of employment and income, distortionary patents, and financial instabilities. Additionally, there are perceptions that also foster the rise of populism—specifically that local bourgeois or “self-serving, corrupt elites” have successfully aligned their interests with global capitalism at the expense of the most vulnerable segments of society. For instance, constraints such as austerity or belt-tightening programs caused by the global economic crisis prevented governments from supporting the most fragile members of society. On the contrary, big companies were given priority and were rescued during the crisis, because they were “too big to fail.” Poorer segments of society felt abandoned and alienated. The result has been the rise of chronic income inequality (Pastor & Veronesi, 2020).
Populists instrumentalize these external impacts and domestic reactions to legitimize their distrust in supranational institutions, which urge national governments to further checks and balances and reforms and strengthen local autonomous institutions. Populists also fear that elites can capture autonomous institutions and therefore discredit their role in economic development.
However, this road leads to low productivity and slow and unstable growth. The divisive rhetoric populists use to seize power causes deep fragmentations across societal fault lines and prevents the formation of national coalitions, which are needed to upgrade the economy through collective action and participation as well as sometimes painful and complicated reforms. Relatedly, the incompatible time dimension in unstable societies also makes politicians highly oriented toward short-term fixes; therefore, long-term structural reforms,with high ex-ante cost but ex-post return, are ignored.
In the absence of institutional checks and balances and reforms and efficiency pursuits, populists give priority to high growth and income redistribution through highly politicized resource transfers. Ignorant of economic efficiency criteria and high growth through expansionary monetary and fiscal policies, populist governments end up with unstable prices, domestic as well as external deficit, and permanent fiscal and financial crises such as currency shocks.
Populists come to power by exploiting global and national grievances and also offer various favours to voters; the process results in worse economic outcomes, which pushes populist leaders to employ even more “divisive” rhetoric and policies through creating “enemies” both inside and outside the country in an effort to hide their incompetence and legitimize their governance. These findings should negate the optimistic view of populism as a democratic corrective against the status quo. The recent assault of populist regimes on democracy and the market economy shows that they are increasingly distancing themselves from democracy and the market economy to become even more authoritarian.
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As compared to the existing top-down and rigid hierarchical governance models, the hybrid governance models (HGMs), which allow loose and minimal institutional structure are in continuous flux, more flexible and adaptable to the external shocks. However, an inherent weakness in that “hybridity” approaches is their equalization of the irregularity, arbitrariness, and uncertainty with “high adaptability,” which invites populism into the discussion.
The limited capacity of the current liberal multilateral order (MLO) to properly address challenges such as successive financial crises, worsening income distribution, increasing migration, climate change, environmental degradation, pandemic, and unbalanced trade structure between different countries and regions have stimulated debates that neo-liberal globalization has reached its limits (Mearsheimer, 2019; Rodrik, 2020). These problems have put the existing multilateral organizations, such as the World Trade/Health Organizations, the IMF/WB, the UN, and the EU, which possess the global public good (GPG) characteristics for collaborative solutions, under immense stress.
On the one hand, excesses of unmanaged globalization have limited nations’ sovereignty, independence, and autonomy. However, global companies have remained immune to proper regulation. Existing mechanisms are not sufficient to motivate them to behave in the benefit of stakeholders. Therefore, mentioned failures have triggered a process of “governance crisis,” populist waves, and the search for alternative governance in the periphery as well as in the centre (Acheria, 2017 & 2018, Subacchi 2020). Increasing number of alternative regional or national cooperation models are emerging with both potentially positive and negative ramifications (Johnston, 2018). As taken together, populism and hybridity increasingly motivate new approaches to the state-economy-market-company relations at the international, regional, national, and even corporate levels (Aiginger, 2020). For instance, different varieties of the “parastatals” are rising recently in the field of state-owned enterprises, sovereign wealth funds (SWFs), and special economic zones (SEZs) (Khanna, 2012).
Under the observation that populist hybrid regimes offer individual, or at best, regional solutions, rather than providing more comprehensive and participatory solutions to existing problems, this article proposes that the MLO should be reformed to make it more participatory, fair and transparent. The view defended here is that the rising hybrid regimes should be effectively amalgamated into the existing MLO to address the underlying reasons that motivated their rise. However, in the absence of a decisive and a benevolent hegemonic leader that requires a “collective leadership” to manage the mentioned “creative destruction” for the upgrading of the rule-based, multilateral liberal statuesque. The recently ratified such comprehensive agreements between Japan and the EU to fill the leadership gap that arose after the withdrawal of the US in the field of global cooperation and even damaging it under Trump’s rule may evolve into a new stage with the return of the Biden government to international cooperation mechanisms after the US elections.
After discussing the nature of emerging populist-hybrid regimes as well as the characteristics of the needed hybrid governance (HGMs), recent attempt of Japan and the EU will be very briefly mentioned to highlight the importance of collective leadership in strengthening the existing MLO and open the door for their reformation finally.
On Hybrid Regimes and Populism
After the hyper-globalization era of the 1990s, when unfettered free markets dominated, the so-called post-Washington consensus came during the 2000s, this time with more emphasizes on macroprudential regulatory institutions (mainly) in the financial, social, and distributional sectors. Finally, a new phase of global (dis)order is emerging, called the age of hybrid norms and fragmented governance. By describing it as “multiplex world”, Acharya (2017: p.7) goes on to identify it as follows: “… [It refers] broadly to formal and informal interactions among states and other actors, at global and regional levels, based on common principles and institutions that are not dominated by a single power or group of powers. Instead, leadership is diffuse and shared among actors that are not bound into a hierarchical relationship linked to differential material capabilities.”
Given these approaches, hybridity represents the absence of a dominant and coherent paradigm advocated by a coherent core. Rather the contrary, competing norms coexist and challenge one another. As Jessop (2013: p.8) underlines, “governance models and structures are characterized by different and changing degrees of hegemony and hierarchy, overlapping spheres of influence, national components and transnational influences, interdependences and pockets of self-containment, embryonic and dying regions, marginal spheres and areas of confrontation.” In such a conjuncture, the rise of pluralistic and diversified governance structures is necessary and unavoidable. As viewed from this perspective, the clash of norms opens up new opportunities for more pluralistic patterns of globalization such as hybrid governance models (HGMs) and carves out precious space for emerging countries (Menard, 2004, 2010).
However, this outlook calls for different institutional responses to cooperation strategies to reflect the proliferation of transnational challenges, the diffusion of new ideas, and the expansion of actors and processes envision. As compared to the existing top-down and rigid hierarchical governance models (i.e., the EU or former Soviet models), the HGMs, which allow loose and minimal institutional structure are in continuous flux, more flexible and adaptable to the external shocks. However, an inherent weakness in that “hybridity” approaches is their equalization of the irregularity, arbitrariness, and uncertainty with “high adaptability,” which invites populism into the discussion. In the given context, it might be fair to define HGMs as populist regimes because of their divisive rhetoric of “we” and “others” and the way they criticise the global order. Both of them strongly express their emphasis on independence, autonomy and national interests. The HGMs seek to legitimize their underlying ideology through “the West versus the rest” rhetoric, and accordingly, they criticize the global establishment as serving predominantly in the interests of developed countries.
Notwithstanding, such legitimate criticisms of the MLO give a pseudo message that both HGMs and their populist ideologies can serve as a “democratic corrective” to the statuesque. On the contrary, again on a pretty legitimate ground, populist rhetoric of the HGMs can be seen as demagogy in a post-truth world towards consolidating the power of the “one-man rule” inside and authoritarian regimes outside through appealing to and claiming to embody the will of the people, nations, and therefore sustaining several authoritarian tendencies (Weyland, 2021). The gist of the point is that in the context of governance, the long-term issue concerns its sustainability. In contrast to the predictable, transparent, accountable, and rule-based institutionalized governance, the so-called HGMs open the door to a heavy populism, which generally attributes domestic problems to the “external enemies” or “imperialists” for the sake of self-legitimation (Öniş & Kutlay, 2020). Conditional upon the political needs and priorities, that antagonism can be easily and pragmatically extended other areas of international fragmentation, such as trade wars and economic protectionism.
A brief reference to China’s state capitalism and its implications on the dissemination of the Belt and Road Initiative (BRI) can help to understand the inherent populism tendencies involved in HGMs. China has so far adopted a more selective approach to globalization in line with its underlying model of authoritarian capitalism. Overall, reflecting the opportunism and pragmatism of China, three dimensions of its political economy can be linked to the HGMs, as argued in this paper.
First, outside, China demands and requests for a greater say in the existing international institutions through modestly reforming the basic institutions of the MLO, such as World Bank, the International Monetary Fund (IMF) and the Asian Development Bank (ADB) to better reﬂect China’s increased economic power and status had encountered rejection and resistance by the US since 2010 until the related reform package passed in 2015. While the vested interest was hindering the long overdue reforms, China’s push for a regional institutions such and the BRI and The Asian Infrastructure Investment Bank (AIIB), within which it would be dominant or at least have considerable impact was a reﬂection of Beijing’s frustration over the Western, especially American, dominance of the existing international multilateral bodies. In that context, reflecting both the emerging global conjuncture and his personality, Xi Jinping’s thought or doctrine has shaped China’s development and global engagement for decades to come, and perhaps longer.
Second, inside, China builds an authoritarian regime under rigid control of the Communist Party, which is facilitated by increasing digitalization of the governance processes. Among other things, it legitimizes several unfair trade practices, which are inconsistent with free and fair trade, including tariffs, quotas, currency manipulation, forced technology transfer, intellectual property theft, and distortionary industrial subsidies to the SEEs. Both the US and the EU have declared that these policies have built Beijing’s manufacturing base, at the expense of its competitors.
Third, the BRI, which evolves at the interface of China’s state capitalism and the liberal world economy, represents a modern form of old-historical tributary realm of influence, with the ultimate objective of expanding China’s influence. In other words, China invents the BRI as a “Chinese way of rule breaking, second stage towards hegemony before the final stage. President Xi states that: “We should not be a bystander or a follower, but an active participant and leader. We need to let more of China’s voices be heard and more Chinese elements to be noted in the process of making international rules, to maintain and expand China’s interests in pursuing development…in the future, the Chinese nation will forge ahead like a gigantic ship breaking through strong winds and heavy waves.”
Notwithstanding, as compared to what other great powers (the UK, the US) did throughout the 19th and the early 20th centuries, when they were hegemonic powers, Chinese way might be more peaceful way of expanding her realm of influence by providing some kind of regional public goods such as infrastructures, security alliances, financial networks and so forth. Since 1980s, when Deng Xiaoping initiated China’s gradual reform and opening era, state economic enterprises’ (SEZ) governance model has been closely supervised and gradually evolved through a “trial-error” and “learning by doing” process. That experience has partly shaped China’s state capitalism both inside and outside. Reflecting all these experiences, through the BRI, China’s expands its foreign economic policies and external reach. It is disseminated by the Chinese leadership as a model Chinese way of cooperation in doing business (Grimmel & Li, 2018).
Recent observations on the functioning of the BRI in infrastructure development across Eurasia and Africa since 2014 show that China’s insistence on an institution-less and contingency model of governance has created many problems. As BRI’s fragmented, multi-centric, multi-layered, and multi-pivotal sub-networks of interconnected and interwoven regional and international contact and diplomacy have not allowed the third parties’ participation with the credibility and experience of international best practices to oblige and engage Chinese companies in a rule-based, win-win game. Therefore, it has failed to fulfil a needed GPG for practical cooperation in bringing solutions to the global infrastructure gap. It neither performs an ex-ante rule-based contracting, for instance, at the stages of tendering, funding, construction, and operation nor an ex-post performance based-analysis to accurately measure the cost-benefits of the services it provides.
It seems that the current harsh competition between the Western paradigm of governance, which supports rule-based, structured, and centralized cooperation, and the Asian (and increasingly Chinese) models that promote flexible and non-structured contingency models would determine the future course of the expected forms of governance.
The EU-Japan’s Cooperation: Balancing Hybrid Governance
China’s efforts to export its systemic aspects through BRI with the mentioned institutional loopholes and implementations have triggered dangerous retaliatory acts from the US, increasing requests from the EU for further reciprocity wide range of economic activities and opposing waves in many developing countries. The BRI case shows that recently evolving HGMs need some transferable institutional lessons from the Western experience of public good provision.
In an environment of fragility created by the US’s withdrawal from multilateral cooperation mechanisms in the Trump administration and China’s efforts to expand its disproportionate and unilateral sphere of influence to fill this gap, cooperation between countries with a shared vision, such as Japan and the EU, is critical in providing the leadership required for the production of Global Public Goods (GPGs). After long years of passive position, both Japan and the EU have taken a more active initiative through several comprehensive agreements to create new opportunities and somehow balance China in the Asia-Pacific region and other critical geographies.
A recent EU-China policy paper clarifies the position of the EU visa-a-vis China as follows: “In different policy areas, China is simultaneously a cooperation partner, with whom the EU has closely aligned objectives. A negotiating partner with whom the EU needs to find a balance of interests. An economic competitor in the pursuit of technological leadership. Finally, a systemic rival promoting alternative models of governance,” (EU-Commission, 2019).
Under mounting lobbying from the industrialists, Germany also pronounced its “strategic industrial policy” to create “national winners,” and Brussel adopted measures to force China for reciprocity and fair competition. It can be argued that eventually, China reacted positively. After almost eight years, the EU and China have finalized the Comprehensive Agreement on Investment by the end of 2020, which was first proposed in 2012 and have arrived at a common language acceptable to European approaches, norms, and values. That shows, if the EU acts as a unified actor, similar to the US, it has an opportunity to exploit international pressure on China (Berkofsky, 2019).
On the other hand, after the highly ineffective “Silk Road Strategy” announced by the Hashimoto government in Japan in the mid-1990s to fill the gaps that emerged after the collapse of the Soviet Empire (Öztürk, 2006), Japan has recently taken a similar position with the EU. Through the partnership for quality infrastructure, Japan offers collaborative opportunities, fair distribution, and a level playing field for all (Pascha, 2020a, 2020b). These similarities motivated two like-minded soft powers to take joint and decisive steps. To that end, Japan and the EU have signed strategic, economic, and digital agreements with the potential of protecting and promoting free trade, multilateralism, and the rules-based order. They want to develop multilateral international cooperation mechanisms in geographies where China has been quite active through its BRI, not only in Asia but also in the Europe-Balkan region and Africa.
Ongoing efforts for inclusive partnership between the like-minded actors, such as Japan, EU and multilateral organizations (i.e., the World Banka, multinational companies, civil society organizations) would create the required synergy for the needed public goods for cooperation with hybrid characteristics provided they fulfil the following properties (Berkowsky, 2020; Söderbaum, 2015).As Evenett and Baldwin (2020) correctly note, there is an obvious need for alternative ‘interface mechanisms’ (i.e., the BRI) that allows different forms of capitalism to co-prosper. Second, global and regional problems require international consensual compliance between different coalitions in creating alternative and more efficient public goods (Kaul, 2013). Third, as they are still needed with their proved performance after World War II, the MLO should be amended through viable reforms rather than thrown aside.
To synthesize these three factors, HGMs with GPG characteristics should be more open, transparent, accountable, and inclusive; on the one hand, and also reflect the facts, figures, norms, and civilizational values emerging in the new geo-strategic geographies, on the other. Having possessed these properties, the new HGMs conserve the West’s contributions while allowing the East’s indigenous contributions.
In that context, by considering the risks, uncertainties, complications, and fragilities of the current global power shift from the West to the East (Allison, 2017), the opportunities and threats in creating alternative HGMs through a comparative institutional approach should be sought. In that context, the EU-Japan cooperation mentioned above might offer a “buffer mechanism” to refrain from a dangerous East-West divide by proposing a more balanced and integrated approach to the needed and desired global governance reform (EU Parliament, 2020; Berkowsky, 2020). The rise of that synergy, however, depends on several factors, ranging from the harmony of cultural texture between Asia and Europe to the ongoing regionalization experiences in Europe, which is passing through new challenges, and in Asia, that has reached a new height with the ratification of recent free trade agreements, such as the Regional Comprehensive Economic Partnership (RCEP, 2020; EU Parliament, 2021).
This article argues that neither the current MLO nor the new populist and ideological approaches that reflect some aspects of “arbitrariness” and “contingency” under the so-called HGMs that are emerging in many countries is capable of solving participation constraints for international cooperation by addressing main principle-agent problems amongst the major stakeholders. The article believes that the creation of alternative GPGs for effective, inclusive, equitable, and sustainable cooperation through relevant HGMs is possible and needed. Provided that they combine the norms, values, and principles of both the West and the East in cooperation, they can more easily address existing challenges in development-related sustainable infrastructure projects such as transportation, communication, cybersecurity, data flow, energy, and industrial locations.
Similar to the transformation of the European Coal and Steel Community (ECSC, 1951) into the current EU over time, it can be expected that a new multilateral cooperation mechanism that starts in a relatively narrow area of infrastructure would eventually reach a tipping point to transform into the expected GPG. Considering the lack of required leadership that has resulted in the current global “reform fatigue,” a comprehensive economic, strategic, and cyber agreement between Japan and the EU, two “like-minded” entities, would help to supply some of the needed and expected GPGs in the manner mentioned above.
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 Parastatals are wholly or partially publicly owned but often privately managed; they include wealth funds, extractive companies, utilities, administrative and judicial centres, export-processing zones, and urban-development authorities that run—with little or no democratic scrutiny—some of the most significant pools of money and sites of growth.
 Known as “Xi Jinping’s Thought on Socialism with Chinese Characteristics for a New Era.” In Chinese, 习近平新时代中国特色社会主义思想.
 On the other hand, despite such an “over-determination” to lead the new stage of global power shift, BRI has not a well-thought and well-prepared architecture. Such developments as global economic crisis, American containment policies, and several domestic economic challenges forced China to announce BRI to stimulate domestic demand and find external export markets in developing countries, mainly, through large-scale overseas (infrastructure) investment. See Jinping, Xi. (2014). A speech at the Collective Learning Session of the Politburo of CPC Central Committee, Dec. 5. The Governance of China. http://english.scio.gov.cn/featured/xigovernance/2018-11/28/content_74217442.htm (accessed on March 12, 2021).