The Harmful Effects of Populist Policies

Strategy and Finance Minister Yoon Jeung-hyun has raised fears over the side effects of populist policies. “Utopian voices saying you can enjoy benefits without paying the price are growing,” he said. “Populist policies are not easy to reverse once carried out, and also has negative effects on other areas because of the people’s learning effect.” He was apparently referring to the growing number of populist pledges ahead of the June 2 local elections, such as offering free meals at public schools.

Populist policies that ignore the financial burden often result in disastrous consequences. Argentina, once a wealthy nation in the early 20th century, walked down the path of decline due to the populist doctrine “Peronism.” Certain European countries facing financial difficulty like Greece are in a similar situation.

Yoon’s warning of the problems populist policies can bring is not enough. His comment came out after President Lee Myung-bak criticized the pledge of free school meals at a senior staff meeting Tuesday last week. “Why do the government and the ruling party just follow the opposition party’s populist argument?” President Lee said. “Explain to the people that if we use the budget for free school meals in other areas, we can use it more effectively.”

Populism is a threat because people, who benefit from populist policies, are prone to prefer them without much thought about their long-term negative effects. Politicians seek short-term political benefits with populist measures in the name of the public good because their money will not be spent. The ruling Grand National Party has criticized the opposition’s populist measures, but is also guilty of exploiting populism before the local elections. Discerning consistent policies for the people with financial support from unrealistic pork-barrel measure is not easy. This makes politicians from both sides more irresponsible. Then, the government must work harder to remove populist measures that will cause side effects and consequences. It should persuade the people that populist policies are sweet but short and poisonous to the people in the end through specific, substantial and consistent explanations.

Former GE CEO Jack Welch said a leader who pioneers reform must explain to his members his idea and direction consistently and make them understand clearly, adding just talking about it once or twice is not enough. Business management requires such persuasiveness, and the government needs this quality for administration.