Washington’s Dangerous New Consensus on China
Don’t Start Another Cold War
For the last decade, populism has been the dominant political phenomenon across Latin America. The trend was relatively easy to disdain from afar, but then it crept onto the center stage in the most developed nations.
When Donald Trump launched his presidential campaign in June 2015, Time derided it as a “marketing ploy” for his eponymous conglomerate; the Huffington Post relegated it to the entertainment pages. By September, his Republican rivals were openly mocking his foreign policy statement. Following the February 2016 New Hampshire primary, however, the joke turned sour. Now, far from contested, the upcoming Republican convention in Cleveland will be his crowning. Many of those who vowed “Never Trump” are bending the knee. And the latest polls in Florida and Ohio remind all that his message resonates with an electorate even more weary of the establishment than when it elected Barack Obama in the wake of the deepest economic crisis since the Great Depression.
Populism is faring even better in Europe. On that side of the Atlantic, it comes in two flavors. The anti-euro left-wing kind is a byproduct of austerity measures that too often prioritized naked spending cuts that hurt the weakest in society over structural reforms that would have challenged entrenched interest groups aligned with elites. This brand of populism brought the Syriza party into government in Athens last year, followed by a crisis that saw Greece almost accidentally exit the eurozone. It is a similar story with Podemos in Spain, born out of anti-austerity street protests in 2013.
There is an even more disturbing flavor of European populism: the xenophobic, nationalistic kind. Few doubt that its Joan of Arc, Marine Le Pen, will make it to the second round of next year’s French presidential elections. Indeed, a victory for her National Front, the party founded by Le Pen’s father from the ashes of French fascism, is no longer unthinkable. Her enemy is not the European Union; it is globalization and free trade. She promises to protect French industries and bring back stringent border controls under stronger leadership. She thrives in poor towns that were so used to voting Socialist that center-right politicians barely bothered to visit. Similarly, in May’s Austrian presidential elections, an extreme xenophobe lost by less than 0.6 percent of the vote, and anti-immigration Geert Wilders is polling well ahead of any of his rivals for the next Dutch elections. Not even Germany is immune; the energetic right-wing Alternative for Germany party is encroaching on the center-right’s electorate.
Populism may be everywhere, but its definition is elusive. Syriza and Podemos could not be ideologically further from Trump and Le Pen. But populism eludes the Manichean left-right dichotomy. It is not an ideological phenomenon but a social one that involves the rejection of elites and their sacrosanct policy axioms. Born from legitimacy crises, it cuts across the traditional party lines of decaying two-party systems. Philosopher Ernesto Laclau made a career of arguing that populism was the best post-Marxist alternative for proletariats abandoned by elites that deform republican institutions by entrenching privilege and betraying liberal promises. That is why Trump’s message—especially vitriol against “crooked” elites—appeals to Bernie Sanders voters when Panama Papers revelations have made it to the zeitgeist.
Populists distrust globalization, both for what it does to national industry and for what it does to national identity. They reject multilateral credit institutions, such as the IMF and World Bank, particularly when they criticize their unorthodox economics. This is why Trump is already running to the left of Hillary Clinton on trade, a key issue in the Rust Belt. It is difficult to deny that policymakers have struggled to redistribute free trade’s extensive benefits or share the costs that have disproportionately fallen on the shoulders of weaker social groups. (And all this was at issue well before the dawning automation revolution that will eviscerate middle-class jobs.)
Because populists instinctually distrust republican ways, they embrace strong, authoritarian leadership as an antidote to “democratic weaknesses.” Strongmen in their eyes are redeemers and liberators. They have found a patron saint in Russian President Vladimir Putin, not just rhetorically but also often financially.
This populist advance might seem ubiquitous. But it is not. Over the last 15 years, populism has been most closely associated with Latin governments from Buenos Aires to Caracas. Yet as the phenomenon ascends in developed societies, it is dying out in South America. And its demise has more to do with legitimacy than with economic fortune.
Breaks in a system usually originate in crises; the emergence of Latin populism—the so-called pink tide—is no exception. It began with a legitimacy crisis that called into question traditional republican institutions and, in particular, their elites. Hugo Chávez first achieved prominence in Venezuela in 1992 as a photogenic colonel attempting a coup d’état. He was cloaked in the revolutionary rhetoric that once inspired liberators against the Iberian colonial yoke. He failed and also failed to go away.
Venezuela was the kind of republic that political scientists deem a low-intensity democracy, meaning that its institutions are not rooted in civil liberties; this makes systems whose rules change all too often less resilient in the midst of illiteracy and extreme poverty. In the 1990s, like today, oil prices led to spending cuts. Chávez led a democratic “movement” that cut across a waning two-party system. He won the 1998 election and did not leave power until his death in 2013. In the intervening years, the constitution changed for the 26th time in Venezuela’s history (and with it term limits), the power of the legislative branch ebbed and flowed (depending on Chávez’s legislative needs), and the judiciary was usurped by “loyalist” magistrates; only the president remained.
In Brazil, after two terms of market reforms under Fernando Henrique Cardoso, the electorate rewarded union leader Luiz Inacio Lula da Silva’s fourth attempt at the presidency. Beginning in 2002, his Partido dos Trabalhadores (Workers’ Party, PT) ruled over a deep transformation underwritten by Cardoso’s reforms—most of which Lula did not reverse—and boosted by a commodities super-cycle. The PT had plenty of wealth to redistribute, which Lula did through pioneering social programs, including the Bolsa Familia and Minha Casa, later emulated in other latitudes. A few years after Goldman Sachs’ Jim O’Neill termed Brazil a BRIC, money flowed into the “country of tomorrow” like never before. During Lula’s presidency, the country brought tens of millions of citizens into the middle class and his party won four straight presidential elections, an unheard-of feat.
Around the same time, Evo Morales rose to prominence in Bolivia with an anti-establishment message decrying elites literally and figuratively detached from the wider public. In a country where over 80 percent of the population has indigenous roots, all presidents had hitherto come from all-white backgrounds; Morales’ Movement for Socialism party changed that in 2005 and then changed the constitution to remain in office beyond two terms. In 2013, a pliable supreme court ruled that his first term did not “count” toward term limits because the constitution had since been modified.
Ecuador’s story under Rafael Correa is analogous. Another charismatic Chávez ally with a penchant for constitutional conventions, Correa’s late 2015 amendments did away with term limits altogether.
Nowhere was the rise of populism more spectacular than in my home country, Argentina. During the 1990s, Argentina was a market darling, an economic basket case in 1989 that turned around with a heavy dose of Washington consensus policies. Peronist president Carlos Menem privatized inefficient state companies and pegged the country’s currency to the dollar to kill off hyperinflation. Growth returned and investments flowed in, but corruption did not disappear. Budget deficits persisted, and when the privatization windfalls ended, debt spiraled. By 2001, Argentina was in a deep economic contraction that graduated into depression after elites refused to give up the peg.
Friends left my Catholic school because their parents could no longer afford tuition. Unemployment rose to almost 25 percent. With nothing close to European safety nets, poverty climbed to almost 50 percent. My parents lost 90 percent of their net worth, a fate shared by many of the middle class families that had backed Menem. Yet we had it easy. In a country deemed the “granary of the world,” malnutrition and infant mortality spiked to levels unseen for decades. Every Argentine will still remember “Barbarita”—a toddler filmed crying of hunger—as vividly as they will recall the televised helicopter exit of President Fernando de la Rúa, who resigned in late 2001 as street protestors demanded “all politicians out.”
Politicians hardly left, but populism arrived. The power vacuum was filled 18 months later through a runoff election that pitied Menem against a former protégé, Néstor Kirchner. Uneager to lose his flawless electoral record, Menem stood down; the neoliberal-turned-populist Kirchner became president with 22 percent of the vote. Like Chávez, Kirchner denounced liberalism, free trade, and the IMF. When a colleague asked him about his newfound leftist creed, he is believed to have replied, “The left gives you immunity.” Kirchner reversed market reforms, snubbing former U.S. President George W. Bush and his Free Trade Area of the Americas. Latin populists promised new, unorthodox ways to integrate Latin America but in their Unasur have done little more than talk.
This populist advance might seem ubiquitous. But it is not.
From within Peronism, Kirchner redefined the political game: he poached rivals and implemented an impressive human rights agenda, deftly adding pillars to his edifice of power. Expensive commodities underwrote a recovery. By the time a scholarship allowed me to trade Buenos Aires for college in Boston, Kirchner’s control of the political field was absolute. He did not leave power until his sudden death in 2010; by then, his wife Cristina Fernández de Kircher was president. After Néstor’s death, Cristina won the 2011 elections with 54 percent of the vote; her closest rival drew 16.8 percent. Populism, elites like to forget, is popular.
Observers could have been forgiven for looking away for a decade. By early 2015, Kirchner was still popular and in power in Argentina. Morales was holding out in Bolivia, as was Correa in Ecuador. Chavismo was in power in Caracas through Chávez’s hand-picked successor, Nicolás Maduro. And the PT was in power in Brazil after Dilma Rousseff won reelection in a closely-watched race.
A year on, however, things have changed radically—and the pivotal moment was the 2015 Argentine presidential election. The victory of Mauricio Macri and his center-right Cambiemos coalition has been explained in almost purely economic terms. That explanation is tempting but incomplete. Since the death of her husband, Kirchner’s unorthodox economics have become radicalized: she imposed capital and foreign currency controls, nationalized the country’s largest company (YPF), eviscerated the central bank’s independence, and manipulated inflation statistics to understate the effects of these policies on the very poor, whom she vowed to protect. Only the public sector continued to grow, creating a vicious cycle linking bigger fiscal deficits with monetary printing and runaway inflation.
One way or another, all three presidential candidates with shots at the presidency in 2015 promised economic change. And for almost all of the campaign, the candidate closest to Kirchner, fellow Peronist Daniel Scioli, was expected to win. He led the polls and accumulated support from business leaders eager for an “orderly” transition. The center-right Macri trailed not just Scioli but, for part of the campaign, also Sergio Massa, another Peronist.
Not a single poll raised questions about Scioli’s ability to win the first round; the only doubt was whether he would have to face Macri in a runoff or not. In any event, almost all pollsters expected Scioli to win that, too. He pre-announced his cabinet. On election night, October 24, many Argentine celebrities made an appearance at his campaign bunker, ready to uncork the champagne.
Yet as populism ascends in developed societies, it is dying out in South America.
But something went wrong. Official results took their time. Some received smartphone screenshots from the Interior Ministry, where workers whispered that their bosses had delayed the results. Reporting began to arrive well after midnight, three hours later than in the previous election. Scioli came first, but the margin of victory was far slimmer than expected, giving Macri momentum for the runoff. If one watches that night’s speeches, it is obvious that not even Macri had expected such a result.
Peronism performed within expectations in most of the country, yet it had an Achilles heel: for the first time in 25 years, it lost in the Province of Buenos Aires—35 percent of the electorate—that Scioli had ruled over for eight years and where he was well regarded. So what had happened?
As divisive as he is inevitable, Jorge Lanata is Argentina’s most famous journalist. Two months before the decisive election, his widely watched investigative journalism TV show released a scathing report on Aníbal Fernández, Kirchner’s chief of staff, a loyal senator, and a gubernatorial candidate for the province. In it, perpetrators of a heinous triple murder accused Fernández of masterminding their crime as well as being a key linchpin in the drug-trafficking underworld. They also connected him with football corruption and money laundering.
Suddenly, public interest in Kirchnerite corruption skyrocketed. Uncomfortable questions were raised about cases that had languished in courts for years. Two years before, Lanata’s team had revealed now-proven testimonies of money laundering in the country’s largest public works conglomerate, owned by a partner, supporter, and friend of the Kirchners, Lázaro Báez. Perhaps it is no coincidence that the report came out mere months before a legislative election that prevented Kirchner from proposing a constitutional reform that would have allowed her another term.
The 2015 hit on Fernández (and Kirchner) was so substantial that, in a moment of bitter honesty, Fernández accused Lanata of single-handedly spoiling his gubernatorial election. (As a result of the reports, prayer groups had even been set up in the province to pray for his defeat.) The drama, in turn, trumped Scioli’s presidential campaign.
Six months since the election, public interest in corruption remains sky-high. Courts are stuck in overdrive: the two largest private-sector conglomerates accused of being fronts for Kirchnerite corruption (Austral Construcciones and Grupo Indalo) are on the brink of collapse. Baez sits in jail, asking the judge to investigate government officials; Indalo’s owner has been revealed to have evaded 8 billion pesos in taxes ($550 million), allowing him to build a conglomerate spanning from casinos to media. Kirchner’s last vice-president, Amado Boudou, has been twice indicted and barred from leaving the country. Last month, Kirchner herself was indicted and faces investigations on four high-profile cases. Last week, her long-serving public works secretary José Lopez was arrested with $9 million in cash, a rifle, and a shovel while literally burying the evidence at a Catholic monastery. This is the stuff of magical realist literature. So at a time when Macri’s popularity has held at over 60 percent in spite of painful economic reforms, Kirchner’s disapproval has ballooned. It has yet to find its ceiling with 63 percent of people believing that she knew about Lopez’s dirty dealings.
In Brazil, too, it was not economics that buried populism. The PT survived many economic challenges, including the financial crisis, a deep recession, and the very kind of fiscal retrenchment that Rousseff twice ran against. It was only because of a corruption scandal that Rousseff’s impeachment lit a fire under a Congress more tainted than the president. She has been suspended and is awaiting judgement on charges involving the manipulation of budget numbers that months ago would have seemed laughable; 68 percent of Brazilians approved of her impeachment.
Brazil’s anti-corruption crusade far transcends Dilma. It has led to the imprisonment of one of the country’s wealthiest businessmen, Marcelo Odebrecht, and has tainted Lula’s reputation. Easily the most charismatic politician of this generation, Lula left office with a staggering 83 percent support. These days, street protesters carry a large effigy of him in prison clothes. Interim president Michel Temer fares no better; he is unpopular and judicially barred from running for the presidency. After taking over from Dilma, he lost two ministers in a fortnight to corruption probes, including the minister of transparency and control.
In Venezuela, meanwhile, Maduro has ruled over the implosion of the regime’s economic strategy, if it can be called such. There has been an enormous increase in violent crime, the inflation rate has become the world’s highest, and citizens face shortages of essential food and medicines. Subpar economic results are nothing new to Chavismo, which oversaw impressive anti-poverty relief but squandered the commodity boom, buying off support among poor neighbors with free oil.
Reports of the regime’s corruption inside and outside the country have eroded its legitimacy among its core constituencies, the same classes who once saw Chávez as a liberator against crony elites. As in in Lampedusa’s masterpiece The Leopard, the old elites were merely replaced by new, Chavista elites. They tout Instagram shots of Miami shopping escapades; the military smuggles oil to Colombia to procure dollars issued by the “evil empire.” Chavismo’s power behind the throne, Diosdado Cabello, now stands accused of drug trafficking by a former bodyguard, a story that barely registered in the foreign press but made a splash in Caracas.
It should not have been surprising that, last November, parliamentary elections went to the opposition by a landslide, forcing Maduro to rule by decree. Since then, the opposition has amassed many times the required number of signatures for a recall referendum. Maduro’s legitimacy is as depleted as the shelves in Venezuelan supermarkets.
A skeptic of this argument could point to Bolivia and Ecuador, where Morales and Correa are still in power. They would be right, yet both leaders are in decline. In February, Morales lost a referendum that would have allowed him a fourth presidential term. He had expected to win by a landslide, but days before the vote, the local press revealed details of the president’s relationship with a woman who worked for a Chinese firm that had been awarded dubious construction contracts. Morales claimed not to have seen her for years, only to be confronted with evidence that they celebrated Carnival together last year. His government has also found it impossible to cover up corruption at the Fondo Indígena, a fund set up for the very rural communities that Morales ran to defend. His rule now has an expiration date.
When the Soviet Union revealed itself as a totalitarian dictatorship rather than the Utopia of socialists’ dreams, situationist philosopher Guy Debord coined the idea of a “society of the spectacle”; he described the double curse of a proletariat oppressed not merely by those above but also by false messiahs depriving them of their identity. Thus, corrupt Bolsheviks were even worse than capitalist pigs; they exploited the lower classes while claiming to defend them. And so it goes for Latin populists: the tale of crusading for the weak does not bode well with kickbacks, shovels, and a preference for fine Swiss watchmaking usually reserved for conservatives.
The tide that came in on a crisis of legitimacy is ebbing on another one. Although it is tempting to blame the populists’ decline on the failure of their economics (or a much-maligned commodity super-cycle), this explanation is insufficient. In both Argentina and Brazil, populism survived economic crises but could not overcome corruption scandals that revealed the vacuity of its core political message. Cornered by shortages of both medicine and legitimacy, Maduro looks unlikely to finish his term and Morales’ days in office are numbered. Even Correa’s grip on power has loosened; he could run for yet another term, but for the first time, he might not win it.
In his final Federalist (85), Alexander Hamilton wrote to defend a Constitution specifically designed to protect the American republic from authoritarianism: “No partial motive, no particular interest, no pride of opinion, no temporary passion or prejudice, will justify to himself, to his country, or to his posterity, an improper election of the part he is to act [to ratify the Constitution].” Ultimately, populism is neither unavoidable nor unstoppable. Battling it requires coherence as well as introspection from the elites who are supposed to guard republics rather than entrench their status. The failure to live up to the challenge brought Latin America over a decade of leaders who were all too eager to put themselves (and their crony friends) ahead of institutions; as the world’s most developed nations face the challenge, they would do well to remember it.