🔮 When populists meet financial globalisation

The recurrent crises that emerged from financial globalisation have fuelled the success of populist parties across the world. Pedro Perfeito da Silva explains how initiatives to curb capital mobility and foreign banking ownership align with the ideological features of different varieties of populism

In their foundational blog piece for this series, Mattia Zulianello and Petra Guasti write that we should not associate populism with specific political positions. However, the undeniably chamaeleonic nature of populist parties does not mean that their policy choices are purely context-based and, therefore, detached from their ideological underpinnings.

Argentina and Hungary are useful examples of how distinct varieties of populism affect the two constitutive dimensions of financial globalisation: the deregulation of capital flows and the penetration of foreign banks into national financial systems.

Varieties of populism and policy choices

According to the ideational approach, populism is a thin-centred ideology that separates society into two antagonistic and homogeneous groups: the corrupt elite and the pure people. Populism is highly context-dependent. Thus, it varies as a result of its articulation with host ideologies, like socialism, nativism, and conservatism.

Like any political force, populists adapt their pledges according to the context. But these competing definitions of 'people' and 'elite' shape policy choices. In the case of social welfare, for example, left-wing populists push for broader social safety nets. Right-wing populists, meanwhile, seek to protect natives by excluding immigrants and the 'undeserving poor'.

Left-wing populists push for broader social safety nets. Right-wing populists seek to protect natives by excluding immigrants and the 'undeserving poor'

In a recent article, I argue that a similar rationale can shed light on populist strategies for dealing with financial globalisation. Ultimately, both left- and right-wing populisms have reasons to take initiatives against financial interests. However, the ideological differences of their positions result in contrasting policy choices.

Right-wing populists regard native entrepreneurs as members of 'the people' and thus deserving of protection. Correspondingly, their financial policies are likely to target only selected foreign actors. Left-wing populists, by contrast, oppose a broader range of business interests. Accordingly, the populist left may need to use financial policies to shield its inclusionary agenda. The exclusionary stance of right-wing populists does not create the same pressure.

Argentina under Kirchner (2003–2015)

Kirchnerism has been the main political force in Argentina since 2003, when the Front for Victory (FpV), led by Néstor Kirchner, won the presidential election. After that, FpV, led by Cristina Kirchner, triumphed in the two subsequent elections and remained in power until 2015. Following a left-wing populist platform that blamed neoliberal reforms for the 2001 financial crisis, FpV pledged to champion the interests of the poor by expanding employment and social protection.

The Kirchner administrations took a number of initiatives to curb capital mobility in relation to financial globalisation. In its first term, to safeguard a competitive exchange rate, the government restricted cross-border financial movements. It also imposed export surrenders alongside a mandatory 365-day unremunerated deposit over 30% of capital inflows. After the global financial crisis, the FpV administration resorted to restricting financial outflows to defend macroeconomic stability.

The FpV administration's financial restrictions shielded expansionary macroeconomic policies that enabled an increase in the minimum wage and social spending

Considering a left-wing populist agenda, the re-regulation of capital flows performed two complementary roles:

Firstly, the defence of capital controls was part of a polarising rhetoric against different 'enemies of the people'. The government targeted financial market operators who resisted external debt renegotiation, alongside primary exporters opposing taxation, and domestic capitalists moving funds abroad.

Secondly, the financial restrictions shielded expansionary macroeconomic policies that enabled an increase in the minimum wage and social spending, the nationalisation of pension funds, and the strengthening of collective wage agreements.

Hungary under Viktor Orbán (2010–)

Fidesz and its leader Viktor Orbán have been present in the Hungarian political debate since the late 1980s. Founded as a liberal party, Fidesz gradually embraced populism to become hegemonic in the right-wing camp. In power since 2010, Fidesz relies on a platform articulated around the recovery of national independence in the wake of the financial crisis.

Orbán sought to reinstate national control over the Hungarian banking system. With this aim, the Fidesz administration took initiatives that directly harmed foreign banks. This included converting foreign currency-denominated debt to Hungarian forints under discounted exchange rates, and a special bank tax deployment. The administration also expanded state-owned credit supply, and increased support for domestic businesses to acquire foreign banks.

Orbán's financial nationalism sought to reinstate national control over the Hungarian banking system, with initiatives that directly harmed foreign banks

Besides being consistent with the rhetoric that blamed foreign banks for the crisis, such financial nationalism empowered social groups that Fidesz framed as productive members of the national community. This included domestic business groups, which increased their access to credit supply and gained them a greater share of the banking sector. It also included the high-earning middle classes, who enjoyed favourable mortgage rates.

In contrast with Kirchnerist administrations, Orbán has not used these policies to reorient the macroeconomic regime. Indeed, his obligation to comply with European budget rules acted as a shield for financial nationalism, maintaining Hungary’s credibility with the financial markets.

Looking ahead

The study of financial globalisation illustrates the different obstacles faced by right- and left-wing populists with respect to policy implementation. In this sense, the redistribution of bank ownership depends on one-off measures that can be discontinued after domestic banks recover their market share. The adoption of stricter capital controls, meanwhile, must be permanent and updated regularly to curb undesirable financial innovations.

This technical difference helps right-wing populists achieve their policy objectives. From technical and political perspectives, a similar rationale seems to apply to social policies. It is easier to exclude ‘aliens’ and the ‘undeserving poor’ from welfare benefits than it is to extend protection to everyone who needs it.

Finally, financial policy analysis indicates that populists gain ground when social democrats move to the centre in the economic debate. In this regard, none of the external financial policies adopted by Argentina or Hungary are populist per se, because they are fully compatible with a social-democratic agenda. However, in both countries, the centre-left coalitions that preceded the triumph of populism did embrace macroeconomic orthodoxy. Their governments have thus made populists the sole custodians of the re-regulation of market forces.

49 in a Loop thread on the Future of Populism. Look out for the 🔮 to read more

This article presents the views of the author(s) and not necessarily those of the ECPR or the Editors of The Loop.


photograph of Pedro Perfeito Da Silva
Pedro Perfeito Da Silva
Lecturer in Political Economy, University of Exeter

Pedro holds a PhD in political science from the Doctoral School of Political Science, Public Policy and International Relations at Central European University.

His research covers topics such as the politics of post-neoliberalism, the macroeconomic effects of financial liberalisation, the role of State-owned banks, the impact of creative industries, and the policy preferences of populist parties.

His work has been published in academic journals including Development and Change, Government and Opposition, Review of International Political Economy, and Third World Quarterly.


He tweets @dasilvapp

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