President Trump?

Ferguson pointed out that populists may be either from the left or the right of politics. He noted that Juan Peron of Argentina was a populist of the Right. On the other hand, Hugo Chavez of Venezuela was a populist of the Left.

Populists tend to have three major components in their economic program. The first is protection against imports. This is often achieved through import tariffs.

The second is restrictions on immigration. Trump has famously promised to build a wall on the Mexican border paid for, he says, by the Mexicans.

The third element of populism is usually expansion of the Federal Budget deficit. Budget deficits are expanded to provide favours in return for the support of the populist president.

What are the results?

Import barriers tend to result in demand switching. This means that demand is switched from imported product and services to domestically produced goods and services. This increases domestic demand but decreases the long term incentive for the economy to compete.

Restrictions on immigration tend to support real wages in the short term. In the long term, they reduce the availability of skills and labour to allow the economy to grow.

Expanding budget deficits also increases demand in the short term. In the long term demand is reduced as the debt has to be paid back.

What we can see from each of these elements is that populism can be very successful in the short term. Yet it is short term success purchased at the cost of great long term damage.

Donald Trump, if elected to conduct his populist agenda, may actually be successful and popular in the short term. Unfortunately, this success and this popularity may be purchased at the cost of long term damage for the US economy. The name emblazoned at 401 Wabash Avenue may recall disasters equal to those of early American history.