James Farley/Booz, Allen & Hamilton Research Professor; Professor of Managerial Economics & Decision Sciences
In a 2004 referendum that threatened to remove Venezuelan president Hugo Chavez from office, voters opted to keep him by a large margin—that is, if you believe the official results were free from fraud.
Chavez won the election despite multiple signs that some of his populist policies, including redistributive land reform and price setting, were harming average Venezuelans. As outsiders, Westerners in a democratic republic peering into this situation, it is fair to ask what the Venezuelan voters were thinking. Why support a populist leader who espouses policies that hurt most voters? Why do populist leaders like Chavez remain popular even after enacting harmful policies?
A novel explanation to this populist paradox is offered by Georgy Egorov, an assistant professor of managerial economics and decision sciences in the Kellogg School of Management; Daron Acemoglu, a professor at the Massachusetts Institute of Technology; and Konstantin Sonin, a professor at the New Economic School.
Egorov says politicians use populist rhetoric as a signal to voters that their affinities lie with the common working man, not corporations or the wealthy elite. Although he focused his model on explaining the emergence and persistence of populist leaders in Latin America, Egorov says the results could explain the resilience of populist leaders in other parts of the world, such as Zimbabwe’s Robert Mugabe and even Russia’s Vladimir Putin.
“We were looking for a rational explanation of populism,” Egorov explains. “We did not accept the idea that’s been put forth that people are extremely myopic and they just don’t understand that decline in their country might be a consequence of policies conducted by the politicians, or that they may think declines are a result of multinational corporations trying to bring down the regime in power.”
Populism is a term that changes like a chameleon according to the social or political context. It transcends party lines in the political sphere; populist leaders may even cross from the left to the right and back again over the course of their political careers, Egorov says. Part of the problem for researchers lies in defining exactly what populism is. In a working paper that charts a new political theory of populism, Egorov and his co-authors define it broadly as the execution of policies that are supported by a majority of the population but that ultimately hurt the economic interests of this same sector.
“We did not accept the idea that’s been put forth that people are extremely myopic and they just don’t understand.” — Georgy Egorov
The three researchers crafted a set of equations and proofs to explain how Latin American politicians’ policies and rhetoric skew to the left— often farther to the left than they are comfortable with—in order to send a message to voters that they do not support policies that benefit the wealthy elite or corporations. The model describes a society that has unequal wealth distribution and is deeply polarized politically, with the bulk of the population favoring policies that benefit the poor and the common working citizen.
Furthermore, each citizen dislikes it when policies move too far from their ideal “bliss point,” or political beliefs. Egorov says that to explain leftist populism, the model needs to assume that the bulk of the population prefers left-wing policies such as investing in public goods and redistributive measures.
In a society with these characteristics, many voters may fear that a politician has a secret right-wing agenda, especially when it is difficult for them to distinguish between a moderate candidate and a right-wing candidate. In this context, it becomes valuable for a moderate politician to signal to voters that they have no hidden-right wing agenda; they accomplish this by using populist rhetoric and moving even further to the left of where their own bliss point falls naturally.
“Embracing these leftist policies, which would be unacceptable to someone on the right and are probably worse than what the politician truly wants, is a way to signal to a voter that you are not in favor of policies that benefit the elite,” Egorov says.
This exaggerated move to the left also pulls a politician’s opponent to the left, he says. “Even people who are connected to the elite, or to businesses or corporations—they also move to the left because they don’t want to lose, so they must appear as populist as they can afford to,” Egorov says.
If an elite politician starts courting poorer voters, a moderate politician will respond with even more leftist rhetoric. But as the moderate politician embraces the left, the model says, the elite politician will eventually give up trying to appeal to the poor and again cater to their base, the elite voters. “If you are a moderate politician, and the other politician tries to position himself more moderately, then you will try to separate yourself from him by choosing even more leftist policies so that the voters don’t confuse the two of you,” Egorov says. “But the elite politician may choose policy slightly to the left of what he really prefers in order to at least increase the chance of being confused with a moderate politician.”
No matter what the right-wing politician does, the moderate politician’s choices lie to the left of his ideal point. Moving leftward actually nudges the moderate candidate toward election, Egorov says, because voters will realize that he is not aligned with the elite minority. The more the moderate politician moves to the left, the more he pulls the right-wing politician leftward. But if the moderate politician moves too far leftward, the elite politician will “give up,” Egorov says, and choose a policy point closer to his true ideal point.
Driven Left by the Elite
One of the main conclusions of the paper is that the bias to the left and the likelihood that populist policies will prevail are higher when the threat of a politician representing the elite is greater. “So if we are looking at a country with a disproportionate number of politicians coming from the elite, or a disproportionate number of politicians who are corrupt—maybe it’s tradition, maybe it’s a young democracy, maybe the populace is not well educated—you will observe populism as a way to signal that a politician is not from the elite or in favor of the elite,” Egorov says.
A second part of the research examines the value of an incumbent staying in office. If an incumbent cares only about retaining office, they are more likely to move to the left and signal to voters because they are less invested in the particulars of policies than in remaining in office. Egorov says that this is particularly true in cases where the payoff of staying in office, perhaps in the form of bribes or perks, is very high. In this case, elites typically end up worse off overall even though they can bribe officials to get what they want, according to a version of the model, because corrupt politicians may enact leftist policies at the beginning of their term as a way of fishing for payoffs.
Egorov says the paper presents one of the first unified perspectives on how populist leaders and policies emerge and persist. It is also the first to offer a signaling model as an explanation of populism, he says.
Decoding the intentions of politicians has never been easy, but Egorov’s results offer an explanation of why some voters support populist politicians and policies that harbor the potential to harm them economically in the long run.
Related reading on Kellogg Insight:
Engineered Electioneering: The “when” and “what” of candidates’ messages
Do Leaders Matter? The sudden death of a president can trigger sweeping, unexpected changes in a nation’s economy
Acemoglu, Daron, Georgy Egorov, and Konstantin Sonin. 2010. “A Political Theory of Populism.” Working paper, Kellogg School of Management.