“Populism is the big topic in political science now. The study of the latest re-emergence of populist parties and leaders has managed to attract some of the most talented young scholars. In this rigorously researched book Petar Stankov offers an original theory of populist cycles, focusing on identity, economy and societal fairness. In addition, he offers empirical explana- tions of those cycles and valuable insights into the consequences of populist governance.” Ivan Krastev, Centre for Liberal Strategies, Sofia, Bulgaria, and Institute for Human Sciences, Vienna, Austria “Petar Stankov’s The Political Economy of Populism offers a clear and concise interpretation of how and why populist leaders and parties have emerged across many societies in recent decades. The book examines the consequences of the rise of populism, describing policies and results that typically follow populist ascendancies. Finally, the book explores self-cor- rection mechanisms in mature democracies. Covering a wide range of cases and methods of analysis, the lucid prose and clear explanations will make this a ‘must read’ for every student of our current political moment.” Michael Kevane, Department of Economics, Santa Clara University, USA “Despite the growing academic interest in populism, there is not much research about its relationship with the economy. This book addresses this research gap by offering a detailed analysis of the economic consequences of populism as well as a novel theory of populist cycles. This is a must read for all those who want to understand the economic underpinnings of populism.” Cristóbal Rovira Kaltwasser, School of Political Science, Diego Portales University, Santiago, Chile The Political Economy of Populism The Political Economy of Populism explores the interplay between identity, the economy and inequality to explain the dynamics of populist votes since the beginning of the 20th century. The book discusses the political and economic implications of populist governance using data on populist incumbencies and linking it to historical data on the macro economy and democracy. Chapters draw from the most recent political science, economics and other social science literature, as well as historical data, to explain the long-term causes and consequences of populism. Populism emerges and gains traction when political entrepre- neurs exploit underlying identity conflicts for political gains. As the dis- tributional consequences of both economic distress and economic growth typically favor the elite over the poor and the lower middle class, economic shocks usually sharpen the underlying identity conflicts between the groups. The book provides evidence of significant differences in the ways fiscal and monetary policies are conducted by incumbent populists in Latin America, Europe and the OECD. The work concludes by suggesting avenues through which a 21st century social consensus can be built, so that our society can avoid repeating the mistakes that led to wars and failed economic experi- ments in the 20th century. The Political Economy of Populism marks a significant contribution to the study of populism and is suited to students and scholars across the social sciences, including economics, political science and sociology. Petar Stankov is a teaching fellow in the Department of Economics at Royal Holloway, University of London, UK, and a senior lecturer at the University of National and World Economy, Sofia, Bulgaria. Routledge Frontiers of Political Economy Hayek’s Market Republicanism The Limits of Liberty Sean Irving The End of Individualism and the Economy Emerging Paradigms of Connection and Community Ann E. Davis Profit, Accumulation, and Crisis in Capitalism Long-term Trends in the UK, US, Japan, and China, 1855–2018 Minqi Li Global Imbalances and Financial Capitalism Stock-Flow-Consistent Modelling Jacques Mazier Markets, Community, and Just Infrastructures Nancy Neiman The Informal Economy Measures, Causes, and Consequences Ceyhun Elgin Understanding Financial Crises Ensar Yılmaz The Political Economy of Populism An Introduction Petar Stankov For more information about this series, please visit: www .routledge.com / books /series /SE0345 The Political Economy of Populism An Introduction Petar Stankov First published 2021 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN and by Routledge 52 Vanderbilt Avenue, New York, NY 10017 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2021 Petar Stankov The right of Petar Stankov to be identified as author of this work has been asserted by him in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. The Open Access version of this book, available at www .taylorfrancis .com, has been made available under a Creative Commons Attribution- Non Commercial-No Derivatives 4.0 license. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data A catalog record has been requested for this book ISBN: 978-0-367-36802-9 (hbk) ISBN: 978-0-429-35569-1 (ebk) Typeset in Times New Roman by Deanta Global Publishing Services, Chennai, India To Gergana Stankova and Boris Stankov Contents List of figures xi List of tables xii About the Author xiii Acknowledgments xiv 1 What do we know about populism? 1 2 A theory of populist cycles 9 2.1 Why cycles? 9 2.2 Identity 13 2.3 Economy 19 2.4 Fairness 23 3 Populist cycles: An illustrated history 35 3.1 The data on voting cycles and their correlates 35 3.2 The long waves of extreme voting 38 3.3 The far-left and the far-right: a closer look 43 3.4 The inevitable center-thinning 47 3.5 Empirical evidence: the ausmine triad 51 4 The political and economic consequences of populism 60 4.1 What do populists do? 60 4.2 Data 63 4.3 Models 67 4.4 Results 69 4.4.1 Political consequences 69 4.4.2 Economic consequences 72 x Contents 5 What can we do about populism? 84 Index 91 Figures 3.1 Extreme Voting: 1900–2019 38 3.2 Extreme Voting and Inequality 40 3.3 Extreme Voting and Migration 42 3.4 The Far-Left and the Far-Right: 1900–2019 43 3.5 The Far-Left, the Far-Right, and Inequality 45 3.6 The Far-Left, the Far-Right, and Migration 46 3.7 Centrist Votes: 1900–2019 47 3.8 Centrist Votes and Inequality 49 3.9 Centrist Votes and Migration 50 Tables 3.1 Country and Time Coverage in the ParlGov Data 36 3.2 Vote Share Dynamics: Panel Data Estimates 53 4.1 Cabinets with Far-Left or Far-Right Parties 64 4.2 Democracy with Extreme Cabinets (Freedom House Data) 70 4.3 Democracy with Extreme Prime Ministers (Freedom House Data) 70 4.4 Democracy with Extreme Cabinets (Polity-IV Data) 71 4.5 Democracy with Extreme Prime Ministers (Polity-IV Data) 72 4.6 Real Consequences of Far-Left Parties in Government 73 4.7 Real Consequences of Far-Right Parties in Government 73 4.8 Real Consequences of Far-Left Prime Ministers 74 4.9 Real Consequences of Far-Right Prime Ministers 74 4.10 Monetary Consequences of Far-Left Parties in Government 75 4.11 Monetary Consequences of Far-Right Parties in Government 76 4.12 Monetary Consequences of Far-Left Prime Ministers 76 4.13 Monetary Consequences of Far-Right Prime Ministers 77 4.14 Fiscal Consequences of Far-Left Parties in Government 78 4.15 Fiscal Consequences of Far-Right Parties in Government 79 4.16 Fiscal Consequences of Far-Left Prime Ministers 79 4.17 Fiscal Consequences of Far-Right Prime Ministers 80 About the Author Petar Stankov is a teaching fellow in the Department of Economics at Royal Holloway, University of London, UK, and a senior lecturer at the University of National and World Economy, Sofia, Bulgaria. He has published on the political economy of populism, economic growth and liberalization and the variety of reform outcomes across countries. He earned a Ph.D. in Economics from CERGE-EI in Prague, the Czech Republic. He has taught undergraduate courses on the Economics of the European Union, Institutional Economics, Monetary Economics and Economic Growth, and postgraduate courses in Research Methodology and Evaluation Economics, among others. Acknowledgments I thank Routledge for their exceptional professionalism in dealing with the proposal, the first draft and the revised versions of this book. I would like to express my deep gratitude to the two anonymous referees whose critical comments contributed to the improvement of the first draft. I also thank the Economics Departments at the University of National and World Economy (UNWE) in Sofia, Bulgaria and especially at Royal Holloway, University of London, for providing me natural teaching and research habitats. This work has greatly benefited from conversations with colleagues at both places. A big thanks goes to Deborah Novakova (CERGE-EI) who helped edit the first draft. I am also eternally indebted to theCERGE-EI Foundation for long-term intellectual and financial support through its Graduate Teaching Fellowship and Career Integration Fellowship programs. Naturally, all errors and omissions are mine. Finally, thanks—again—to Geri Stankova for putting up with the rest. You keep rocking, girl. Thank you all. Petar December, 2019 Egham, UK 1 1 What do we know about populism? Politics has polarized people with economic, social, and identity issues at least since the mid-19th century. Wars and deep economic crises have typically been associated with rising polarization. For example, after the relatively consensual pre-crisis decades, the Global Financial Crisis has reinvigorated politics and has unveiled broadening voter polarization in a growing number of countries. Over time, radical political preferences emerge, gain traction, receive representation, occasionally rise to the mainstream, and gradually die out in what appear to be recurring cycles (Edwards, 2019).