Identifying a Correlation Between Economic Downturn and Rising Populism

Jose Garcia
Jose Garcia
Undergraduate student at Boston College studying Political Science, Economics, and Spanish. I am a member of the Boston College Economics association and the Investment Banking Association. My focus in my academic interests is on International Relations with a concentration on the projection of soft and hard power within the dynamics of state-to-state relations.

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The Economics of Populism

Over the past decade, there has been ample evidence to support a strong correlation between economic crises and successful populist candidacies. Once certain turmoil occurs in economies, faith in democracy wanes, creating a vacuum for populist politicians to fill by blaming certain people for the issues that affect the lives of citizens all across a nation.

Minority, non-citizen, and elitist groups have become the targets populist candidates exploit to mobilize a base of support against a shared enemy. Economic issues have given wiggle room for populism to rise, posing a direct threat to democracy worldwide. A report released by Freedom House revealed that for the 17th consecutive year, global freedom retracted instead of expanded, and the Economist Intelligence Unit reported in the organization’s annual democracy index that in 2021 global democracy continued its declining trend.

Within the past 15 years, nations such as Portugal, The Netherlands, India, El Salvador, Peru, Thailand, France, The Philippines, South Africa, Australia, and even the United States have witnessed a rise in populist movements that have at least partially threatened the institutions upholding democracy. The surge in populist movements around the globe is heavily intertwined with the recent decline in global liberty. It is not plausible to suggest that populist movements are the only cause, but they hold significant weight in the growing threat to democracy’s capacity within the international order. According to Dani Rodik, an Economist at the Harvard Kennedy School, economic uncertainty and insecurity are two factors that are embedded in the relationship between populism and a decline in democracy.

Connecting the Dots

Economists Rogoff and Reinhart were the first to present empirical evidence to support the analysis that increased financial globalization is correlated with increased financial crises. Currently, “the world is experiencing the most severe democratic setback since the rise of Fascism in the 1930s,” according to Foreign Affairs. Donald Inglehart, a well-respected political scientist, emphasized that this report revealed that the main underlying factor that drives voters away from democracy is their sense of security.

This analysis intertwines with the Sussex Institute’s research revealing that insecurity and economic uncertainty are two factors that threaten a citizen’s sense of stability. The report also mentions how researchers have understood that inequality is incompatible with democracy.  The domino effect, in this case, starts with the economic downturn, the populists giving the disaffected people a group to blame, which leads citizens to believe their ‘sense of security’ is threatened, resulting in mass support for populist candidates making false promises.

If citizens are made to believe that their sense of security is threatened by insecurity and economic uncertainty, then inequality will consume the future.


An uptick in international commodities arriving and domestic stimuli spending pulled Brazil out of a recession in 2014. However, the following election cycle proved that stability would be short-lived with 8 percent of the country’s GDP lost in two years, as reported in a Project Muse report. Additionally, the mismanagement of government capital, evident in the Lava Jato investigation pushed the country into another economic crisis that partially stemmed from previous financial globalization.

The result was support for democracy in Brazil falling by 70 percent between 2015 and 2018 which was also revealed by the Project Muse report. At the same time, Bolsonaro took office in 2019 and is currently categorized by credible sources, such as the Financial Times, as a populist actor.

Here it is clear that there is a potential and real domino effect starting from economic instability to then a decline in democratic faith, which led to a political vacuum that a populist took advantage of.


According to the Financial Times, India’s GDP growth rate dropped by 4 percent between 2016 to 2019, while the burden of a new sales tax hurt business performance in the Indian Economy in 2017. Additionally, unemployment has risen by 5 percent and the wealth inequality gap has grown significantly.

Even though India’s economy is expected to grow, according to the IMF, all of these economic issues have occurred under the populist Modi’s servitude as Prime Minister. He has held that position since 2014, which means that India’s economic problems have not been resolved through Modi’s promises of success to improve the lives of citizens.

In this particular case, it is clear that the world’s largest democracy is susceptible to populist manipulation since Modi exploits Hindus as a group to blame for problems in the country. Using Inglehart’s reasoning, India’s current state of operation reveals Modi’s populist policies have only increased the level of inequality, weakening the position of democracy in the region. It is important to mention that Modi has just lost the most recent election, providing evidence that Populism is not necessarily more powerful than traditional democracy


The Financial Times consistently categorized Portuguese politician and Chega party leader Andres Ventura as a right-wing populist, but a major issue that he must tackle is the cost of living crisis which has made it much more challenging for the average Portuguese citizen to pay for residency. Chega is essentially acting as both a right-wing and left-wing populist because he attacks ethnic groups, but his most pressing matter of business is the economic crisis facing the Portuguese population. For left-leaning populists, their focus is on economic inequality and insecurity.

The Ventura campaign is unique because he plays on both sides of the populist spectrum. As evident in the history of Populist rhetoric, right-leaning populists traditionally exploit an ethnic or minority group to rally their base of support around a common enemy. Conversely, left-wing populists have historically targeted a nation’s elite class as the enemy of the masses.

The Chega party’s claims that certain ethnic minorities had been the cause of exploiting the welfare system hold no validity since Ventura has provided no direct evidence linking those two points. Specifically, Chega is blaming immigrants from Pakistan, India, and Bangladesh, whom Ventura vows to limit access to welfare benefits.

The most important statistic to analyze in this specific example is that “it is not the case that 18 percent of Portuguese are racists, but there are many angry Portuguese,” according to the Financial Times. It was assumed that Chega’s supporters were racist because the leader used xenophobic rhetoric, but the truth is that the 18 percent of Portuguese people who voted for him were found to be “angry” and not racist. This underlying factor has a direct correlation to the economic problems facing the nation which is the main cause of distress among the populace.

Additionally, the previous Prime Minister’s resignation ignited a massive corruption scandal which was the reason to call for a new election in the country. The investigation revealed that there was major mismanagement of government funds supposedly going toward investment projects. Also, it has been confirmed that the current cost of living crisis is a direct result of an influx of foreign buying.

Ventura has made promises to cut taxes, raise public pensions, and get rid of the black market. These proposed policies run parallel with the Democratic Alliance plans which is another interesting piece of the populist puzzle for Ventura’s campaign. His policies are not focused on immigration but on solving the influx of foreign buying of property in the country and attacking the corruption that plagued past administrations. It is evident through the reports about him, that Ventura is promising left-wing populist actions while using right-wing populist tactics to gain support.

Key Takeaway

Inglehart, Rodik, Rogoff, and Reinhart laid the foundation for the correlation between economic downturn and the rise of populism. Brazil, India, and Portugal provide insight into those political scientist’s reasoning and theory, which reveals one consequence of interconnected financial globalization. These populist leaders have not dismantled the democracies in which they hold power, but their control should not be dismissed as a passing phenomenon. Populism has existed for many decades and will continue to as long as economic struggles continue to create vacuums for alternative solutions against traditional democratic norms.