What populists actually do in power? Economic policy-making and institutional change in Hungary

Economic populism is a highly contested concept in the social sciences. The salient characteristics of the original concept of economic populism such as highly redistributive policies and unsustainable public finances, can hardly be detected nowadays in advanced economies with populist governments. By focusing on Hungary, the paper demonstrates that although unsustainable macroeconomic policies might not be on the menu of populist incumbents any longer, governments can still actively intervene in the economy. As opposed to the original version of the concept of economic populism adopted in the unique circumstances of Latin America, Hungarian populists seem to shy away from manipulating macroeconomic policies, opting to redefine the incentives systems of the economy instead. The paper demonstrates that, in the name of the people, the Hungarian government vehemently tries to alter the institutional landscape of the Hungarian economy with the aim of tracking down the (former) elite and cementing its own economic power. As a consequence, while macroeconomic sustainability is indeed not threatened in the short term by incumbents, the cost of reshaping economic institutions can significantly lower the country’s potential for economic growth in the longer term. The paper shows how the Hungarian experience can be generalised in order to better understand populism in power.