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Does Populism Lead toProtectionism, Really?
Sota Kato
Tokyo Foundation for Policy ResearchInternational University of Japan
April 20th, 2018

Why Protectionism? (１）Premise of economists: Free trade increases net
economic welfare.
Two contrasting questions:

Why the minority interests overwhelm the majority
interests in a democratic process?
Interest group protectionism
Why the mass who should suffer fromprotectionism supports it?
Populist protectionism

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Why Protectionism? (2)Interest group protectionism
Small and well organized interest groups politicallyoverwhelm numerous but dispersed consumers.
Trade issue is not highly salient.
Why?: Free riding on public goods. Agency problem ofpoliticians and/or parties.

Populist protectionism
The majority or the median voter prefers protectionism
over free trade.
Trade issue is highly salient.
Why?: Limited information, redistribution problem,irrational voters.

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Recipes for Protectionism
Recipe for Interest group protectionism
Recipe for Populist protectionism

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Recipe for Interest Group Protectionism (1)Can Trump and Sanders shake their hands?

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Recipe for Interest Group Protectionism (2)Trump;“The establishment, the media, the special interest, the lobbyists, thedonors, they’re all against me. I’m self-funding my campaign. I don’t owe
anybody anything, I only owe it to the American people to do a great job.
They are really trying to stop me.”

Sanders;“Today, we stand here and say loudly and clearly that enough is enough.
This great nation and its government belong to all of the people, and not toa handful of billionaires, their super PACs and their lobbyists.”

Populism can be, by its definition, a recipe for interest group protectionism.

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Recipe for Interest Group Protectionism (3)Japanese case for TPP:
Abe administration’s strong leadership.
Public support for TPP constantly exceeded opposition in polls(mass support).
Japanese voters have little anti-globalism sentiment because of
constant current balance surplus and limited immigration.

Abe Administration’s strong emphasis on public approval rate
allowed PM Abe to overcome special interest opposition fromtraditional LDP constituencies.
(In contrast, PM Abe postponed consumption tax hike twice in row
when he could not gain support from the mass public).

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Recipes for Protectionism
Recipe for Interest group protectionism
Recipe for Populist protectionism

8Recipe for Populist Protectionism (1)Economists’ puzzle for populist protectionism;
Free trade will increase overall welfare gain. Why can’tvoters understand?

Possible answers;
Redistribution problem (Katzenstein 1985; Rodrik 1998;
Gozgor & Anjan 2015)
Voters are uninformed (Achen & Bartels 2016; DelliCarpini & Keeter 1997)
Voters are irrational or even fool. (Converse 1964)
Economists are fool (Anonymous 2018).
And Institutions…

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Recipe for Populist Protectionism (2)Possible answers;
Redistribution problem (Katzenstein 1985;Rodrik 1998; Gozgor & Anjan 2015)
Voters are uninformed (Achen & Bartels 2016; DelliCarpini & Keeter 1997)
Voters are irrational (fool). (Converse 1964)
Economists are fool (Anonymous 2018).
And institutions…

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Recipe for Populist Protectionism (3)Open economies have bigger governments(Katzenstein 1985; Rodrik 1998).

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Recipe for Populist Protectionism (4)Open trade and redistribution
Small European states “complement their pursuit ofliberalism in international economy with a strategy ofdomestic compensation.” (Katzenstein 1985)“[T]he social welfare state is the flip side of open economy.”(Rodrik 1997)

Even if a state can realize overall welfare gain by adopting
free trade, if the gain from trade is unevenly distributed, freetrade might not be able to earn mass support.
Free trade should accompany proper redistribution plan toearn mass support and overcome populist protectionism.

12Recipe for Populist Protectionism (5)Possible answers;
Redistribution problem (Katzenstein 1985; Rodrik
1998; Gozgor & Anjan 2015)
Voters are uninformed (Achen & Bartels 2016;
Delli Carpini & Keeter 1997)
Voters are irrational (fool). (Converse 1964)
Economists are fool (Anonymous 2018).
And institutions…

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Recipe for Populist Protectionism (6)14Recipe for Populist Protectionism (7)In any advanced democracies, careful empirical research reveals thataverage voters have very limited amount of political information.
Voters are rationally ignorant (Downs 1957).

An average voter is unlikely to possess enough information to soundly
decide whether free trade or protectionism is good for her economic wellbeing.
Voter ignorance is a highly debated issue in political science. At least, thegovernment should not call a referendum for issues such as Brexit.
The role of parties, media, and thinktanks as an information mediator is
critical for democratic success.

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Temporal Takeaways
Populism does not automatically lead to protectionism. Political power ofmass public from which populists’ power derives might even crack interest
group protectionism.
Populist protectionism might prevail when trade issue becomes a highly
salient issues that bring about mass public’s attention.
Redistributing welfare gains from free trade to the median voter (or themass public) is critical to avoid populist protectionism.

The role of Information intermediaries such as parties, media, thinktanks,
and academics is crucial for the median voters to acquire enough politicalinformation to make sound decisions on trade issues.

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