POLITICS AND MACROECONOMICS OF POPULISM

IT’S CONSEQUENCES.Diego A. Estévez R.

ECONOMIST BSI BANK GROUP A.G.

International Financial Consultant

INTRODUCTION

The POPULISM is not a new phenomenon.NERO (54-68 A.D.) was the first POPULIST.POPULISM is not a man: it’s a CULTURE ofthe ANTIPOLITICS to take power.The POPULIST leader is not a DICTATOR, buthe is at a STEP to TRANSFORM in it alongtime. This presentation is a brief of the actualtrends.

Singapore, February 2017

Is thisTRUE?

The historic empiricalevidence shows that aftergreat economic crisis, disruptive social, political and institutional movementsemerged in several societies. Many of this imbalancescame with war.

Nowadays, in a more pacificway, this societies searchanother models through theappearence of POPULISMS as the LEADER is beleave as theredeemer that will restore thelost values (values & wealth).

Healthy Democratic Pillars

Institutions (public & private)a. Rule of law; Contracts RESPECTFULNESSb. Real Democracy: two powers and INDEPENDENT JUSTICE (civil & public

rights) Education, formation & training Adequate health system Macroeconomic eviroment

a. Good economic practicesb. Good market efficiency and genuine competitionc. Soundness in the labor marketd. Financial market solid development.

Technological readiness innovation & promotion of creativeness.

Business sophistication & absence of markets restrictions

• UNEMPLOYMENT or employment of low quality• POVERTY and/or inequality• WEAK institutions• Contracts VIOLATION• GAP between the ”POLITICAL CASTA” and the voters• ”Comfort zone” in the PARLIAMENT• CORRUPTION and WEAK JUSTICE• Increase of UNSECURITY and impunity• Existing of political and legal VACCUMS• The BEHAVIOUR of the stablishment

The Seeds of PopulismThe populism is a CULTURE and a methodology to TAKE and managing power.

It’s the ANTIPOLITICS

1. CHARISMATIC leader, in the way Max Weber defined it (1934) Note 1.

2. RELATION OF LOVE between the leader and the followers.3. NO SPECIFIC POLITICAL PARTY: a populist can be either from the left or

from the right.

4. AUTOINFALIBILITY, attribute in his decisions.5. The leader is DISRUPTIVE, BORDERLINE, and a CHALLENGER with the

establishment, the banking & financial sectors, the 'oligarchy", media, and intellectual idiots" (in the terms NASSIN TALEB definition. Note 2

6. The contact has be the most DIRECT way possible between the leader and thefollowers.

7. The contents are filled up during the way, from EMOTIONAL points of view, with EPIC PHRASES.

The X-RAY of a POPULIST12 points Check List

The X-RAY of a POPULIST

8. The contents are PROMISES. The final stage of this chain of promises is the

POPULAR REDEMPTION AND HAPPYNESS.

9. The leader always need a SET OF ENEMIES to 'save' the followers (fallacies).

10. High trust in MEMBERS OF THE FAMILY as advisers and AIDES that support

him ("red circle"). This entourage INSPIRE TRUST among followers.

11. For the leader, the ideologies had died. Only matters the FOLLOWERS

WELLFARE, no matter in what way.

12. The leader needs a high dosis of ENERGY and a "SCREENPLAY" that works as a

roadmap of his acts (iconoclastic symbols). The "SCREENPLAY" is broadcasted

heavily through the SOCIAL NETWORKS & MEDIA.

TAKE OVER PROCESS…

The leader in his campaign identifies local and externalenemy/ies Both of them are the "ANTI-PEOPLE"…..This…. latter, isthe seed for annoyment and hate.

In contrafactics arguments: people are: HONEST WORKERS, FIGHTERS, HONORABLE, etc.

“PEOPLE ALWAYS CHOOSE THE BEST LEADER AND NEVER MISTAKES”, the leader always argues.

As the people and followers get "enchanted" and "enlove" with theleader, they are tolerant with his arguments, his proposals, arbitrarieties, and disruptive languaje. The people perceive a rareincrease of APETITE for JUSTICE.

Once on power …the main drivers forthe "CHANGING TIMES”…

• A call for change the main LEGAL FRAMEWORKS.• Arbitrary moves in the main institutions to allocate "AIDES" :

CENTRAL BANKS, S.E.C., BUREAU OF COMMERCE AND TRADE (to manage prices, tariffs, etc.)

• Reshapping of ARMED FORCES.• Changes in SECURITY FORCES.• Changes in the INTELLIGENCE BUREAU.• Increase the control of the SOCIAL NETWORKS and MEDIA.• Appointment of ”FRIENDLY” Judges and Courts Members• Changes in the SUPREME COURT. • A call for CONSTITUTIONAL CHANGES

OPTIMUN CASE: SWITZERLAND

SEMI-OPTIMUN CASE: USA

POPULISM IN EXTREMIS: VENEZUELA

POPULISM: ARGENTINA

CHART COMPARISSON

Macroeconomics of the PopulismBehaviour of Base Case Initial Stage Intermidiate

StageFinal Stage

Fiscal revenues Under control Increase Start falling Collapse

Fiscal expenditures

Under control Importantincrease

Full increase Explosive

Fiscal deficit Deficit targeted Low increase High increase Explosive

GDP stanflation Increase Stalls Collapse

Poverty &inequality

Moderate to highly

Decrease Increase Explosiveincrease

Real Wages Still Importantincrease

Decrease High speeddecrease

Highly corrupted to keep the”voting machine” supply

Macroeconomics of the PopulismBehaviour of Base Case Initial Stage Intermidiate

StageFinal Stage

Net Capitalmovement

Low+ Low Negative Highly negative

Private invest. Small + Low to neutral Vanishes Dissapear

Public invest. Low+ High + Very high + + Exponential++++

Monetary Base Neutral Grow Increase + Quick increase++

Exponential++++

Exchange rate Stable Soft increase High increase(FOREX Control)

Exponential++++

Inflation Low+stable Increase Increase jump Exponentialgrow ++++

VOICESof

POPULISM

Marine LE PEN (FRANCE).MP French Parliament.Leader of the MOVEMENT FOR THEFRENCH LIBERTY.

" I do not feel either from the right or from theleft; I feel myself french. I defend the frenchinterest "

VOICESof

POPULISM

Nigel FARAGE (U.K.).MP of the EUROPEAN UNIONUKIP Party brexiter..

VOICESof

POPULISM

Beppe GRILLO (Italy). Actor & showman. Leader 5 Star Party.

” The country is at the limit of tolerance; the families income is not sufficient and I'm thinking too in the retired people ".

VOICESof

POPULISM

Nicolas MADURO (Venezuela)PresidentFormer aide of Gral. Hugo CHAVEZ

”Let’s transform our love and loyalty forCHAVEZ, in our daily work and engagement”.

VOICESof

POPULISM

Cristina F. de KIRCHNER (Argentina)Former VICE and PRESIDENT12 years in power.

" This guy has to be killed”… Transcription of an audio tape in reference to the former General Prosecutor. He had sensible proofs of the Kirchner-IRAN connections. He appeared murdered in the morning of January 18, 2015.

There is life after Populism .?

• Many years of hard work.

• CHALLENGE: MENTALITY switch

• FULL Enforcement of the 7/12 Pillars.

• EDUCATION & TRAINING cross the border.

• New JUSTICE• New ECONOMIC

policy.

References and credits

• The WORLD ECONOMIC FORUM. Report 2016 (Graphics). (C.H.).• Institute for Fiscal Studies. (U.K.).• Macroeconomic populism in Latin America. May 1989. Rudiger Dornbusch

and Sebastian Edwards. NBER (U.S.A). (The essay is based in the monetary analysisof the Balance of payments deployed by Harry Johnson (University of Chicago 1976) during the ’70 in LATAM.

• The Protestant ethics and the Spirit of Capitalism (Note 1). 1905. 1934 (printed full version). Max Weber. Germany.

• Skin in the Game…. The intellectual yet idiot (IYI)(Note 2). October2013/2016 Nassin Talleb and Constantine Sandis. Review of BehavioralEconomics. Oxford Books. (U.K.).

• My acknowlege for their valuable coments to: Prof. Rajeev DHAWAN (Georgia State University, USA); Prof. Rodrigo ZARAZAGA (Jesuitic Priest, University of Berkeley, USA); Dr. Enrique Prados (Chairman Ahorro Corporación, Madrid, SPAIN); Prof. Eduardo FIDANZA (Sociologist. University of Buenos Aires, ARGENTINA).

THANK YOU SO MUCH FOR YOUR ATTENTION.