Have populists become conservatives ?

There was a time when “populism” was synonymous with governmental financial mismanagement and irresponsibility. Far exceeding budget constraints, the leaders of these groups and realms of thought would empty the public treasury, use up reserves and bring about monetary crises, inflation, capital outflows, recession and even payment defaults. In short, the reigning populists’ disdain for basic economics always ended in tears. The situation seems however to have developed considerably today, so much so that the populists at the wheel might even be accused of being…conservatives!

It is indeed under Viktor Orban that Hungary’s budget deficit was brought back into shape and that the national public debt went from 75% of GDP to nearly 67% in less than 10 years. Poland, in addition, is on an equal footing as Jaroslaw Kaczynski was able to bring the debt-to-GDP ratio down below the 50% mark, also within 10 years. Could you believe that Matteo Salvini is currently promoting a law that aims to reveal the contents of private safers in Italy, offering a flat-rate tax of 15% to those who willingly offer themselves up? Mexico, too, led by Andrés Manuel López Obrador, a left-wing populist, is putting in place a real austerity plan that’s aiming for a budget surplus by 2020.

It is in fact a willingness to free themselves from the constraints of globalisation that has shaped the macroeconomics of populists and that has led them to make the choice of fiscal responsibility. It would seem that the great preoccupation of the populists in power in 2019 is in fact liberation from dependence on foreign capital by putting more and more onus on strictly domestic funding plans to ensure the longevity of their government. Their very critical, sometimes even fanatical opponents to the free circulation of capital (that goes hand in hand with globalisation, as we know) is transforming them into apostles of fiscal and budgetary discipline, allowing them greater autonomy with regards to foreign funding and therefore limiting their country’s vulnerability in the face of the centrifugal force of globalisation.

It is in this light that the energy expended by Orban to reimburse Hungary’s foreign creditors and fund its deficits through the issuing of bonds intended for domestic investors must be understood. Ditto for Poland’s public debt of which only 25% is now held by foreigners, compared to 40% in 2015. Wasn’t the greatest example of this quest for financial independence given by Vladimir Putin’s Russia, built on a model of budget savings and heavily controlled public spending? It’s thus this desire to keep globalisation as well as globalised finance at bay that has fundamentally altered the macroeconomic approach of the populists who have come to power. Their unexpected turn towards orthodoxy and restraint is motivated by their determination to show that they can – and must – count only on themselves.