Populism and Globalization Don’t Mix

Fernando Henrique Cardoso is the former president of Brazil. His comments here are adapted from a conversation with NPQ on March 6.

Sao Paulo—In the past, populist policies in Latin America have led to disaster— inflation, more poverty and inequality and authoritarian reactions by the military to sort it all out. Has Latin America learned the lessons of the past?

Yes, in some cases. President Lula of Brazil is for the poor, but he is not a populist. On the contrary, the fiscal policy in Brazil is very sound. We even require now a certain fiscal austerity in the budget by law. In Argentina, there is a populist temptation at the level of the provinces—but along with the central government they are making progress in getting spending under control, as is also the case in Colombia.

Venezuela is a different story. The government of Hugo Chavez has plenty of money because of oil. So he has the possibility to be populist without fiscal worries. But, in Latin America as elsewhere, oil seems to always lead to the temptation to spend; it feeds that illusion that it is easy to address social problems and economic growth without worrying about budgets, foreign loans or the market discipline of competition.

Bolivia, I’m afraid, doesn’t have enough money to be populist. Evo Morales doesn’t have oil and he doesn’t want inflation. So, what can he do? Ecuador has linked its economy to the dollar, and that prevents populist policies that would inflate the currency.

The fact is that globalization is a reality. And this makes most leaders today realize that populist illusions can’t be sustained before they collapse into stagnation and leave their political supporters deeply disillusioned. You can’t inflate away your troubles or allow mountains of debt to build up if, as a country, you have to make your living in a globally competitive environment. For those who try, it will be tragic.

Building prosperity requires caution and patience. It requires time. Populism is a shortcut that doesn’t work. Most Latin Americans know that by now.