The Early Success of the Demagogues

The Early Success of the Demagogues

By: Erreh Svaia

“You demagogues are like the fishers for eels; in still waters they catch nothing, but if they thoroughly stir up the slime, their fishing is good; in the same way it's only in troublous times that you line your pockets.”

Aristophanes

Few people expected a sudden wave of optimism to happen right after the announced triumph of Donald Trump in the USA elections, but somehow, it is happening, of course, there are rational explanation for this, and is not a matter of magic, let's not forget what happened in Mexico in 2012, right after the elections and after the return of the PRI (Revolutionary Institutional Party) to the presidential seat, many were in shock wondering why the Mexican society voted again for the corrupt, authoritarian, and near dictatorial party, in an act equivalent to Germans building the Berlin Wall all over again, at first it looked like the whole country was doomed, then, first Mexicans assured themselves that if they survived 70 years of PRI rule, they could survive 6 more years, a parallel with Russia after the disintegration of the USSR, and then the global markets started to react, positively, the next thing we knew, people were talking about the "Mexican Moment" and hailing president Enrique Peña as the "savior" of the country, there were pretty high expectations on the "New PRI". 

4 years passed after that, and the Mexican economy is far from saved, the "Mexican Moment" is now a distant memory, but the country is still growing at a slow, but steady pace, why does the markets and investor bet on México despite the gloomy promise of the PRI? The answer was homogeneity above heterogeneity, markets love homogeneity, while the PAN (National Action Party) ruled the county for 12 years, the PRI acted as a strong opposition, holding reforms and the county progress to a halt in order for the PAN project to fail, and the PRI succeed, after the triumph of 2012, markets and investors understood that with the PRI as the official party, despite ineptitude and corruption, the country would move forward, without strong opposition, and it just happened that way, until ineptitude and corruption blew it all away, the trick worked for a couple of years, created an illusion of progress and then it all came down, and that might be exactly the future in thr USA, considered how the Republicans firmly opposed every initiative by Barack Obama, investors know that for a short period of time, a Republican president, a Republican Senate and a Republican House of Representatives will work in an homogeneous way, even tax cut as Trump promised will help in the short run, but it won't be a permanent momentum. 

Curiously, another demagogue is having a good time on the other side of the world, as Philippines was recently announced as one of the most successful economic stories in South Asia, with economic growth of 7.1% surpassing China's steady 6.7%, this while Japan's and South Korea's slowdowns have opened a chance for the current government of big mouth Rodrigo Dutertre whose autocratic and controversial style of government is just starting to reveal, first his open strategic use of death squads in order to stop drug trafficking and drug used in the country, which in short time has apparently gave security to the country, then his anti USA rhetoric, which looks more like words without true intentions, apparently markets and investors are responding well to Dutertre crusade against crime, the problem comes when Dutertre starts to sideline along with China and Russia and then you know that autocracy is about to erupt there, and just in the case of China and Russia, corruption and violation of human rights are about to appear in big scale, let's not forget that growth is about money, investment and markets, not exactly human wellbeing, those enthusiastic about Trump's and Dutertre's early good luck must not forget the human tragedies behind Pinochet's Chilean "miracle", or the "Fujishock" therapy in Peru.