Populism and State Capture: Evidence from Latin America

• In Event: Comparative Approaches to the Study of Populism

Abstract

Scholarship on populism spends considerable time on its definition and causes but pays much less attention to the political transformations it introduces, or the legacies it creates once it comes to power. While it is important to know what enables the rise of populist leaders, it is also of critical importance to understand the medium- to long-term impact that populism in power has on the quality of democratic governance. Some students of left-wing populism extol their participatory and inclusive traits. Others are more skeptical and point out that, regardless of the nature of populist discourse, populist leaders tend to erode democracy. Many populist leaders come to office promising an end to “politics as usual,” to “drain the swamp,” and these promises are attractive in a context where “state capture” has become a growing and global concern. Indeed, state capture – a phenomenon where private (and public) sector actors systematically influence the rules of the game in their favor through illicit mechanisms and private payments (Hellman, Jones, & Kaufmann, 2000) has increased exponentially alongside corruption ever since the dawn of the neoliberal era, the opening up of the world’s capital circuits, and especially after the fall of the Soviet Union (Rose-Ackerman & Palifka, 1999). State capture has been studied in a multitude of contexts such as Russia, after the collapse of the Soviet Union (Hellman et al., 2000), and the United States (Karl, 2019). Francisco Durand (2019) examined state capture in Latin America, where the presence of business and corporate actors exerts an outsized influence in fomenting state capture. However, what all of these studies lack is a systematic examination of the role of populist leaders in fomenting state capture. Putin can be argued to have been a populist, at the start of the transition away from the Soviet Union, although later cementing his rule into downright authoritarianism. Trump in the context of Karl’s (2019) piece was an avowed right-wing populist. Meanwhile, many of the countries surveyed in the work of Durand (2019) in Latin America also experienced populism at one point or another. Thus, while business actors and oligarchs have been given the majority of the blame for fomenting state capture, studies up to this point have failed to analyze the role of populism in power in fomenting state capture in the presence of business/oligarchic power. Do business/oligarchic actors wield greater influence in a traditional democratic setting or are the impacts of business power greater whenever a populist leader is in office which therefore contributes to greater state capture? The answer to this question is crucial for the sake of equitable democratic governance as we move into the 21st century in a region of the world that is already abundant with extreme economic inequalities. Therefore, our paper studies the impacts of populism in power on state capture to better understand what drives state capture. We argue that to properly analyze the effect of populism in power on state capture, we need to have a better understanding of populism in power, identifying its main varieties. Carrión (2022) distinguishes between unconstrained and contained populism in power. He shows that unconstrained populism in power has severe consequences on democratic indicators, whereas contained populism has little to no effect on them. Given their avowed calls for “draining the swamp,” one would expect that state capture would be curtailed under populism in power. However, we argue that the severe curtailment of checks and balances that occurs under unconstrained populism creates conditions that facilitate state capture. The weakening of the judiciary and the concentration of power in the hands of the chief executive generate incentives for private sector actors to unduly influence policy making for their own benefit. Thus, we hypothesize that unconstrained populism is associated with increased levels of state capture. By contrast, we expect no significant impact of contained populism on existing levels of state capture. The conceptual challenge we face is the operationalization of the varieties of populism. In this paper, we argue that unconstrained populism will be characterized by the significant decline on both legislative and judicial checks and or constraints on the executive. Contained populism would exhibit no significant decrease in these constraints. We operationalize state capture by using the World Bank’s Control of Corruption index. To test our hypothesis, we use a pooled time series cross-sectional design using data from Latin American countries. Our main determinants of interest are the interaction terms of years of the populist president in office and V-Dem Legislative Constraints on the Executive Index, and years of the populist president in office and V-Dem Judicial Constraints on the Executive Index.

Authors

• Julio F. Carrion, University of Delaware

• James Guy Korman, University of Delaware