Macroeconomic populism

Macroeconomic populism is a term coined by Rudi Dornbusch and Sebastian Edwards in a 1989 paper. The term refers to the policies by many Latin American administrations by which government spending and real wages increase in a non-sustainable way leading to inflation, then stagflation an ultimately an economic collapse that drops real wages to lower than were before the populist period began. The paper cites as examples Salvador Allende in Chile (1970-1973), and Alan García first term in Peru (1985-1990). In 1991, Dornbusch and Edwards edited a book titled The Macroeconomics of Populism in Latin America which analyzed more cases like Argentina between 1973 and 1976, Mexico between 1970 and 1982, and Brazil.

In 2014, Paul Krugman cited Argentina's policies under Cristina Fernandez de Kirchner and Venezuela as new cases of macroeconomic populism. In 2014, during a lecture he said he did not endorse the attacks on Argentina nor what it looks to him as a "somewhat out of control fiscal and monetary policy".

The definition of macroeconomic populism in the original paper states as follows:

The start of a populist cycle is generally after a stabilization program. The economy has idle capacity and the budget and external balance has room left for a expansionary policy.

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