Story Details - Alumni - Harvard Business School

01 Sep 2020

Navigating the Populism Phenomenon

Q&A with Professor Rafael Di Tella and Associate Professor Vincent Pons

Re: Rafael M. Di Tella (William Ziegler Professor of Business Administration); Vincent Pons (Associate Professor of Business Administration); By: April White

Topics: Government and Politics-Political Elections Globalization-Cross-Cultural and Cross-Border Issues Society-Civil Society or Community

Juan Perón served as president of Argentina from 1946 to 1955, then again from 1973 to 1974. Photo credit: Keystone/Getty Images

Rafael Di Tella
Photo credit: Neal Hamburg

Vincent Pons
Photo credit: Russ Campbell

HBS professor Rafael Di Tella says he saw firsthand the downside of populism and the economic hardships of Peronism while growing up in Argentina. The country—and Latin America more generally—has a tradition of populist politics, he explains. His HBS colleague, Associate Professor Vincent Pons, recalls growing up in France—a country with less of a history of populism—and voting in his first presidential election in 2002, having to choose between a right-leaning candidate and a far-right populist. For both faculty members, these personal experiences have fueled their research interests, penning numerous HBS case studies and research papers on populism in democratic countries from Bolivia to France to the United States.

“Populism seems to be on the rise everywhere,” says Pons. “It’s a phenomenon that is urgent and important to understand.” In this interview, he and Di Tella, the William Ziegler Professor of Business Administration, discuss this development and its effect on democratic societies.

What is populism?

Rafael Di Tella: There are so many different definitions, but at its core, populism is not about being on the left or on the right; it’s about having unusual beliefs that challenge the way things have traditionally worked.

Vincent Pons: In populist discourse you often have this idea that a country has been governed by a political and economic elite hurting the interests of the people. If you systematically oppose a corrupt elite and a virtuous people, it’s easy to believe that the ideas the elite present are not universal and true but, in fact, are designed to serve their own interests.

Why are we seeing a surge in populism?

Making Democracy Work

VP: The rise of populism takes different forms, but it has reached many countries recently, so there must be some common causes. A big one is globalization—the movement of goods and people—which has been increasing since World War II. We’ve seen a cultural backlash against globalization—against large numbers of immigrants—but perhaps even more important to the rise of populism is the counteroffensive against economic change. Globalization has created some losers, such as workers facing decreased wages or losing their jobs.

RDT: The elite, in general, have overclaimed the advantages of economic globalization. For example, in trade, globalization is potentially helpful for everyone, but for that to be true, there needs to be a lot of redistribution of wealth, and the winners have not always compensated the losers. That has generated a backlash against those who are perceived to be cheerleaders for globalization. A mistrust—or paranoia—of the elites has emerged.

How has populism played out in democracies?

VP: Different countries have different political institutions that lead to different translations of changes in attitudes and beliefs. For example, in the United States, there is little space for third parties, so the rise of populism has taken place within the mainstream parties, including the Tea Party and the candidacy of Donald Trump in the Republican Party. In a country like France, the multiparty system has enabled new populist parties to emerge on the far right or on the far left.

RDT: In the United States, we’ve been reminded of how fragile some aspects of democracy are in the face of populism. That’s why when populist leaders succeed, they’re able to destroy countries that were relatively successful. And that’s certainly true around the world.

How does this trend affect businesses?

RDT: The rise of populism affects the business environment even in places where the government itself is not populist. If a government is operating against a populist opposition, facing accusations of “being in the hands of the elite” or “catering to special interests,” it is constrained from implementing a lot of policies business leaders might find optimal.

VP: And when populists do come to power, they tend to implement the policies that they have been advocating for, which can be very unorthodox and generate economic disasters. In addition, their effects are very hard to predict because they have not been tested. The resulting uncertainty can also be costly to businesses.

What strategies can business leaders use to navigate this populist environment?

RDT: Anticipating future policies and the future path of economic variables is crucial in business, so when operating in a populist environment, it’s vital to understand the distinction between “what I like” and “what’s going to be bad for the economy.” For instance, I personally think that capital controls are, in general, a disgrace because they limit people’s freedom. But if you asked me are they effective, I have to report that in many circumstances, they have allowed governments to achieve their goals.

VP: It’s also important to understand what form this trend will take in a specific country. What is the platform put forward by the populists? For example, in the United States, populism has embraced climate change skepticism, but we see very little of that in European populist parties. That means European countries are unlikely to have the kind of dramatic changes in environmental regulations that the United States has seen recently.

Has populism shaped responses to the coronavirus and calls to reopen the economy?

VP: We’re studying that now. I’ve been working with Rafael to understand the extent to which paranoia toward the elites has affected people’s views about the coronavirus and about policies, such as lockdowns, that governments have adopted in response to the pandemic.

Is the populism trend likely to continue?

RDT: The fundamental reasons for it—the mistrust of the elites and the unhappiness about the redistribution of economic gains—are likely to persist.