Macroeconomic populism: A formal representation and a suggested interpretation of the Peruvian experience (1985–90)

Abstract

This paper investigates some reasons for the recurrence of populist governments. When a populist experience is viewed as a political compensation for economic inequalities, the analysis of the emergence of populist government must focus on the interplay of economic and political determinants. A political-economic model with three social groups and three candidates is proposed. It explains the emergence of populist candidates as the result of the existence of a wide informal sector in a polarized society, where pro-labour and pro-capital candidates pursue the exclusive interests of their constituencies. The conditions that make the elections of a populist candidate more likely include the size of the informal sector, the electoral rules, the polarization of the political conflict between left and right and the permanence of the informal sector, notwithstanding past populist experiences. A brief historical outline of Alan Garcia's government in Peru (1985–90) shows that the existence of a wide informal sector in the economy was one of the key features for his electoral platform, for his election and for the theoretical justification of the ‘heterodox’ policies he implemented.