How Welfare Populism Destroys Prosperity: The Populist Challenge to Economic Freedom – a report from the Economic Freedom Network Asia Conference 2012 PDF Print E-mail
Monday, 19 November 2012 10:00

In times of great financial and economic crises populism and populist demands from politicians are omnipresent. But is populism a phenomenon, which a stable democracy can cope with easily or is it a serious danger for prosperity, political and economic freedom?

This question and possibilities how populism can be confronted effectively were discussed by more than 130 participants at the Economic Freedom Network Asia Conference 2012 which took place between November 6th and 8th in Hong Kong. The conference dealt with the question “How Welfare Populism destroys Prosperity: The Populist Challenge to Economic Freedom”. It was organised by the regional office of the Friedrich Naumann Foundation (FNF) for Southeast and East Asia together with the Lion Rock Institute of Hong Kong. Both are partners in the Economic Freedom Network (EFN) Asia, a network that includes organisations, think tanks and individuals, who advocate liberal values and economic freedom in Asia.

H.E. Abhisit Vejjajiva, the former Prime Minister of Thailand and current chairman of the Democratic Party Thailand, opened the conference with an initiating address. In his speech Abhisit pointed out the danger of populism in politics: “Populism is widespread in all ideologies. It can appear as left- or right-wing populism, in developed or undeveloped countries. We see here and there an increase – and that’s because we have political leaders, who act opportunistically and take advantage of a rising dissatisfaction of the general public – caused by economic poverty and recession.” With his political knowledge Abhisit Vejjajiva was able to give the participants a good insight – based on the example of Thailand - to the threat caused by populism.

Welcoming the delegates to the conference, Dr Rainer Adam, FNF Regional Director for Southeast and East Asia, underscored the significance of this year’s EFN conference topic. He pointed to the problem of economically unsustainable policies in Europe and Asia which solely benefit the vested interest of a few political actors but ultimately lead to immense economic damage: “Populism undermines the competitiveness of a nation und erodes the foundations of a society. Therefore, it is indispensable to face populist challenges in politics and economy, and to come up with solutions.

In his welcoming speech, Dr Wolf-Dieter Zumpfort, Deputy Chairman of the Board of the Friedrich Naumann Foundation, alluded to the mistakes the German welfare state had committed and criticised that at present there was no chance in winning an election without having any welfare promises in the party platform. The German welfare state already ads up to a third of the German gross domestic product and this has disastrous consequences. A nation’s welfare evolves from economic success, not from populist reallocation promises.

Like last year, Fred McMahon, Director of the Center for Trade and Globalism at the Canadian Fraser Institute, presented the Economic Freedom of the World (EFW) Index 2012 at the EFN Conference. Suitable to the venue, a special Hong Kong edition of the EFW was prepared. Hong Kong was placed first in the EFW ranking of 144 surveyed countries. Germany took position 31 in the ranking.

The Hon. John Tsang, Financial Secretary of Hong Kong, warned about welfare populism, referring to the Argentina example, which had been the sixth biggest national economy one hundred years ago, but subsequently lost this position. The economic decline of the country was mostly caused by welfare populism. John Tsang also mentioned the example Greece, in which welfare populism embosses the political events since several decades.

To record the findings of the conference, the participants composed a statement, in which they critically reject populism and its negative effects. “Populism is counterproductive for the public well-being and the progress, which is seen by the economic declines of many countries, in which populist plans were implemented.”

But the participants were also optimistic: “We are confident that people will reject populist politics, as soon as they know about the real expenses.”

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