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The Macroeconomics of Populism in Latin America
Again and again, Latin America has seen the populist scenario played to an unfortunate end. Upon gaining power, populist governments attempt to revive the economy through massive spending. After an initial recovery, inflation reemerges and the government responds with wage an price controls. Shortages, overvaluation, burgeoning deficits, and capital flight soon precipitate economic crisis, with a subsequent collapse of the populist regime. The lessons of this experience are especially valuable for countries in Eastern Europe, as they face major political and economic decisions.
Economists and political scientists from the United States and Latin America detail in this volume how and why such programs go wrong and what leads policymakers to repeatedly adopt these policies despite a history of failure. Authors examine this pattern in Argentina, Brazil, Chile, Mexico, Nicaragua, and Peru—and show how Colombia managed to avoid it. Despite differences in how each country implemented its policies, the macroeconomic consequences were remarkably similar.
Scholars of Latin America will find this work a valuable resource, offering a distinctive macroeconomic perspective on the continuing controversy over the dynamics of populism.
Economists and political scientists from the United States and Latin America detail in this volume how and why such programs go wrong and what leads policymakers to repeatedly adopt these policies despite a history of failure. Authors examine this pattern in Argentina, Brazil, Chile, Mexico, Nicaragua, and Peru—and show how Colombia managed to avoid it. Despite differences in how each country implemented its policies, the macroeconomic consequences were remarkably similar.
Scholars of Latin America will find this work a valuable resource, offering a distinctive macroeconomic perspective on the continuing controversy over the dynamics of populism.
412 pages, Paperback
First published November 30, 1988
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Displaying 1 - 3 of 3 reviews
November 28, 2025
Heb mijn best moeten doen om dit niet te lezen als neoliberale propaganda, maar toch heel interessant.
March 16, 2025
This has been one of the books that has shaped my political views the most. I read it during a period in my life when I was searching for a political identity, and it helped reinforce my fiscal conservatism. It also sparked my interest in Latin American economic history and populist movements.
The book is divided into three sections: a short introduction by the curators of the volume, Edwards and Dornbusch, which outlines the economic populist framework; Part I, which expands on the themes covered in the introduction; and Part II, which analyzes case studies from Argentina (under Perón and Alfonsín), Brazil (from Vargas’ presidency to the fall of the military dictatorship in 1985), Chile (under Salvador Allende), Mexico (under Echeverría and López-Portillo), Peru (under Alan García), Nicaragua (under Ortega’s war economy), and Colombia (which, despite its challenges, remained macroeconomically stable).
Macroeconomic populism, as defined by the authors, is a set of policies emphasizing “growth and income redistribution” (p. 9), pursued through real wage increases, exchange rate controls, debt monetization, and direct financing to enterprises, while downplaying “the risk of inflation and deficit finance, external constraints, and the reaction of economic agents to aggressive non-market policies.” (p. 9).
The political goals of populists, as defined by Kaufman and Stallings in the second chapter of Part I, are:
“(1) mobilizing support within organized labor and lower-middle-class groups; (2) obtaining complementary backing from domestically oriented business; and (3) politically isolating the rural oligarchy, foreign enterprises, and large-scale domestic industrial elites.” (p. 16)
Typically, the populist playbook unfolds in four phases:
1. A first phase, where the economy performs well.
2. A second phase, where the economy encounters bottlenecks.
3. A third phase, marked by widespread shortages and inflation.
4. A fourth phase, where an IMF stabilization program is implemented, leading to worsening income distribution and real wages falling below their initial levels.
Coming from a country that was experiencing populism—albeit not the kind described in the book—I found these essays particularly interesting. They almost read like cautionary tales against the excesses of poorly conceived economic policies (such as large wage increases without corresponding productivity growth). They also introduced me to economic concepts I hadn’t encountered before (such as the balance of payments). Moreover, I was unfamiliar with the concept of populism as presented in the book—nowadays, when we think of populism, we mostly associate it with right-wing movements, which, despite their anti-establishment rhetoric and unorthodox economic promises, do not share the same objectives or class structure as traditional Latin American populism.
The only issue I have with this book is its slight anti-leftist bias. For example, in the chapter on Allende, there is almost no mention of the “Invisible Blockade” imposed by the U.S. against Chile or of the obstructionism of the opposition in Congress (which refused to raise taxes), even though the book’s main arguments remain valid. To gain a clearer understanding of the Chilean economy during those years, I recommend reading Allende’s Chile: The Political Economy of the Rise and Fall of Unidad Popular by Stefan de Vylder (which I will probably review in the coming weeks).
Despite this, I highly recommend this book to anyone interested in populism, macroeconomics, economic history, and Latin America—regardless of their political background.
The book is divided into three sections: a short introduction by the curators of the volume, Edwards and Dornbusch, which outlines the economic populist framework; Part I, which expands on the themes covered in the introduction; and Part II, which analyzes case studies from Argentina (under Perón and Alfonsín), Brazil (from Vargas’ presidency to the fall of the military dictatorship in 1985), Chile (under Salvador Allende), Mexico (under Echeverría and López-Portillo), Peru (under Alan García), Nicaragua (under Ortega’s war economy), and Colombia (which, despite its challenges, remained macroeconomically stable).
Macroeconomic populism, as defined by the authors, is a set of policies emphasizing “growth and income redistribution” (p. 9), pursued through real wage increases, exchange rate controls, debt monetization, and direct financing to enterprises, while downplaying “the risk of inflation and deficit finance, external constraints, and the reaction of economic agents to aggressive non-market policies.” (p. 9).
The political goals of populists, as defined by Kaufman and Stallings in the second chapter of Part I, are:
“(1) mobilizing support within organized labor and lower-middle-class groups; (2) obtaining complementary backing from domestically oriented business; and (3) politically isolating the rural oligarchy, foreign enterprises, and large-scale domestic industrial elites.” (p. 16)
Typically, the populist playbook unfolds in four phases:
1. A first phase, where the economy performs well.
2. A second phase, where the economy encounters bottlenecks.
3. A third phase, marked by widespread shortages and inflation.
4. A fourth phase, where an IMF stabilization program is implemented, leading to worsening income distribution and real wages falling below their initial levels.
Coming from a country that was experiencing populism—albeit not the kind described in the book—I found these essays particularly interesting. They almost read like cautionary tales against the excesses of poorly conceived economic policies (such as large wage increases without corresponding productivity growth). They also introduced me to economic concepts I hadn’t encountered before (such as the balance of payments). Moreover, I was unfamiliar with the concept of populism as presented in the book—nowadays, when we think of populism, we mostly associate it with right-wing movements, which, despite their anti-establishment rhetoric and unorthodox economic promises, do not share the same objectives or class structure as traditional Latin American populism.
The only issue I have with this book is its slight anti-leftist bias. For example, in the chapter on Allende, there is almost no mention of the “Invisible Blockade” imposed by the U.S. against Chile or of the obstructionism of the opposition in Congress (which refused to raise taxes), even though the book’s main arguments remain valid. To gain a clearer understanding of the Chilean economy during those years, I recommend reading Allende’s Chile: The Political Economy of the Rise and Fall of Unidad Popular by Stefan de Vylder (which I will probably review in the coming weeks).
Despite this, I highly recommend this book to anyone interested in populism, macroeconomics, economic history, and Latin America—regardless of their political background.
March 31, 2019
"Capital is mobile across borders, but labor is not. Capital can flee from poor policies, labor is trapped"
Displaying 1 - 3 of 3 reviews