Explain how an economic populist regime usually progresses

Question

What will be an ideal response?

Answer 1

Early in the populist regime, there is a vindication of the policies of reactivating, redistributing, and restructuring. The economic stimulus of government expenditures and newly created money leads rising growth rates and rising wages. Soon, however, bottlenecks begin to appear. Prices begin to rise, and the budget deficit grows. In the next stage, inflation begins an extreme acceleration, and shortages become pervasive throughout the economy. The budget falls into serious deficit as policies become unsustainable, and wage increases cease keeping up with inflation. In the final stage, countries experience massive capital flight as fears of a devaluation develop. The flight of capital out of the country depresses investment and further depresses real wages. In the end, real wages are often lower than before the cycle began.