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The Perils of Populism Christopher Lingle Christopher Lingle is Global Strategist for eConoLytics.com and author of The Rise and Decline of the Asian Century. Populist policies promote divisions between the rich and poor, contributing to social instability and economic destruction. Economic upheaval and street demonstrations can often be traced directly to the rhetoric of populism used by cynical politicians. In the first instance, basing public policy upon populism creates false expectations among the poor that cannot be fulfilled. When public officials suggest that poverty can be decreased or that social justice will be served by taking away from the rich or by passing laws to raise wages, it provides the poor with a sense that their condition can and should be legislated away. Consequently, populism tends to lead to expectations that the government will and should pursue policies of redistribution without rest until there is an egalitarian distribution of income and wealth. In response to these signals, it is understandable that the poor continue to demand to be given more by the government as a right arising from their identity within a group. Constructing a system of group rights is fraught with danger. These dangers arise regardless of whether the group is defined by industrial category, social strata or ethnicity. Basing rights on economic or social characteristics can lead down a path towards the destruction of the rule of law. Indeed, the assertion of group rights over individual rights supported the injustices of apartheid in South Africa and genocide in other parts of the world. By reinforcing a divisive mentality of "them and us," it also undermines a sense of national unity. As it is, the poor feel justified in expressing their grievances through street demonstrations to remind the government of its promises. The resulting chaos and hysteria of social unrest are the wages of the sin of populism. One populist tool is to use a legislative mandate in an attempt to raise wages. Those who believe that wages could be dictated by political legerdemain should not be blamed if they seek to push for an hourly wage of US$1000 an hour. After all, supposedly responsible people encourage them to believe in such a fairy tale. And so, populism promotes the misleading idea that income and wealth redistribution can reduce poverty. On the contrary, poverty is the result of low economic growth due to insufficient capital formation. Poverty in most emerging market economies continues to be problematic because of government policies that create hinder private investments. A better approach to poverty reduction would be to remove barriers against legal activities that create employment. One of the lessons of the global economy is that only private initiatives can create sustainable economic growth and employment. Long-term investment by entrepreneurs will be stunted if there is a fear of capricious actions of a government that is running a populist agenda. Populism further undermines risk-taking associated with starting new businesses because it introduces additional uncertainty by increasing the probability that successful commercial ventures are subject to appropriation through political action. In the end, it is likely that populist politicians suffer from a combination of cynicism with a strong dose of ignorance. (Ignorance reflects the lack of information whereas stupidity is the inability to make sense out of information.) This is evident in the blame that is heaped upon globalization and other outside forces for various economic maladies. Such a ridiculous notion is only understandable when one considers that politics is the art of taking credit for the good and shifting the blame for the bad. Instead of faulting globalization for their woes, poverty-stricken citizens around the world should realize that their economies suffer from failures of governance. Poor policy decisions are being made within an increasingly defective "institutional infrastructure" that lead to frustrations on the part of investors seeking evidence of growth potential. The most basic role of a constitutional democracy is to provide a framework of law defining the limits of actions of individuals or groups in exercising their freedom of association and contract. All individuals should find dignity in their identity within any community they wish as long as the communities do not violate the rights of other individuals. However, membership in such groups should never accord them special privileges. All individuals should be treated equally with no positive or negative discrimination among individuals in apparently similar situations. It is an egregious error to encourage the differential treatment on the basis of ethnicity or religion or class by imposing social engineering or unjustified confiscations. As such, people should not be treated or monitored in accordance with what they demand or are said to deserve on the basis of some community or group status.In sum, populism is a dangerous and destructive game that serves the narrow interests of those who seek to capture or preserve political power. The beneficiaries from such policies enjoy short-term gains of public office that lead to slower economic growth in the future. In the end, the poor and unskilled who are deluded into supporting them bear the greatest burden in not having access to economic opportunities. Featured Articles The Perils of Populism Timeless Poetry - September 1 1939 - Auden on Bin Laden The Food Wars - Fed Up With Too Many Snacks? Wise Words The Digeterati Diet Frustrations? 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