Marek Tatala// 5 March 2019

In 2017 the Cambridge Dictionary proclaimed “populism” the word of the year. This phrase is defined in many ways and arouses great emotions. One of the definitions of populism in politics was proposed by the Swedish think tank Timbro. In the 2019 edition of the Authoritarian Populism Index, which has just been published, populist parties are characterised by, among others, the creation of conflicts between “people” and “elites”, strong nationalism, tendencies to remove institutional restrictions on power, and anti-capitalism. Not all of these characteristics need to be shared, but the combination of several of them, according to Timbro, poses a threat to the model of liberal democracy in Europe.

Should businesses, entrepreneurs and other taxpayers be afraid of this populism? The dangers of anti-capitalism are obvious. In the European Union, we see differences in the level of economic freedom between countries, but all economies are still based on the capitalist model. The situation in Venezuela reminds us today of the real costs of anti-capitalism. May this serve as a warning against the implementation of some of the demands of groups considered to be radical left-wing parties.

Strong nationalism can also be a threat, as it is rapidly turning into protectionism in the economic dimension. Although in the short term it may seem attractive to a narrow group that politicians decide to “protect”, the dispersed costs of protectionism are borne by almost everyone. Most economists agree that free trade means mutual benefits for sellers and buyers. In economics, in this case, we are talking about a positive sum game, which can be threatened by the protectionist actions of populist parties.

From the perspective of Poland and other countries of Central and Eastern Europe, it is particularly dangerous to remove institutional restrictions on power. The authors of the populism index, in which Hungary ranked first and Poland fourth, show that populist parties have often a narrow understanding of democracy as the will of the majority only, without attaching importance to democratic institutions such as the separation and limitation of power or other principles of the rule of law. The index highlights a particularly dangerous trait of populists, the phenomenon of majority rule without speed-bumps, which can be particularly harmful for entrepreneurs.

Such a speed-bump is for example a sound legislative process, with real regulatory impact assessment and public consultation, which can and often should be time-consuming. In Poland common and administrative courts, the constitutional court, the central bank, the Ombudsman, as well as other institutions important for the economy, isolated from the current party politics, such as the UOKiK (Office of Competition and Consumer Protection), URE (Energy Regulatory Office) or GUS (Central Statistical Office) count as such speed-bumps.

Studies on barriers to business development in Poland highlight legal instability and the poor quality of law making, and law enforcement as the primary problems to grow. The dismantling of various speed-bumps by populists who want rapid change is a real threat to entrepreneurs who need stability in the legal and institutional environment.

The last convention of Law and Justice, the ruling party in Poland, was a festival of many expensive promises, and that is not a coincidence in a year of multiple elections. It is the interest of all entrepreneurs and taxpayers to avoid falling into the trap of the populist bidding of politicians. A good economic situation will not last forever, and the reality caused by the irresponsibility of a narrow group of politicians will eventually catch up with all voters.

Marek Tatala is the Vice President of Civil Development Forum (FOR), a leading Polish think tank and member of EPICENTER.

The article was first published in Polish by “Rzeczpospolita”.