Passage
Populists abhor restraints on the political executive. Since they claim to represent “the people” writ large, they regard limits on their exercise of power as necessarily undermining the popular will. Such constraints can only serve the “enemies of the people” – minorities and foreigners or financial elites. This is a dangerous approach to politics, because it allows a majority to ride roughshod over the rights of minorities. Without separation of powers, an independent judiciary, or free media – which all populist autocrats, from Vladimir Putin and Recep Tayyip Erdoğan to Viktor Orbán and Donald Trump detest – democracy degenerates into the tyranny of whoever happens to be in power.
Periodic elections under populist rule become a smokescreen. In the absence of the rule of law and basic civil liberties, populist regimes can prolong their rule by manipulating the media and the judiciary at will. Populists’ aversion to institutional restraints extends to the economy, where exercising full control “in the people’s interest” implies that no obstacles should be placed in their way by autonomous regulatory agencies, independent central banks, or global trade rules. Start with why restraints on economic policy may be desirable in the first place. Economists tend to have a soft spot for such restraints, because policymaking that is fully responsive to the push and pull of domestic politics can generate highly inefficient outcomes. In particular, economic policy is often subject to the problem of what economists call time-inconsistency: short-term interests frequently undermine the pursuit of policies that are far more desirable in the long term.
A canonical example is discretionary monetary policy. Politicians who have the power to print money at will may generate “surprise inflation” to boost output and employment in the short run – say, before an election. But this backfires, because firms and households adjust their inflation expectations. In the end, discretionary monetary policy results only in higher inflation without yielding any output or employment gains. The solution is an independent central bank, insulated from politics, operating solely on its mandate to maintain price stability. Another example is official treatment of foreign investors. Once a foreign firm makes its investment, it essentially becomes captive to the host government’s whims. Promises that were made to attract the firm are easily forgotten, replaced by policies that squeeze it to the benefit of the national budget or domestic companies. But there are other scenarios as well, in which the consequences of restraints on economic policy may be less salutary. In particular, restraints may be instituted by special interests or elites themselves, to cement permanent control over policymaking. In such cases, delegation to autonomous agencies or signing on to global rules does not serve society, but only a narrow caste of “insiders.”
Part of today’s populist backlash is rooted in the belief, not entirely unjustified, that this scenario describes much economic policymaking in recent decades. Multinational corporations and investors have increasingly shaped the agenda of international trade negotiations, resulting in global regimes that disproportionately benefit capital at the expense of labor. Stringent patent rules and international investor tribunals are prime examples. So is the capture of autonomous agencies by the industries they are supposed to regulate. Banks and other financial institutions have been especially successful at getting their way and instituting rules that give them free rein. Independent central banks played a critical role in bringing inflation down in the 1980s and 1990s. But in the current low-inflation environment, their exclusive focus on price stability imparts a deflationary bias to economic policy and is in tension with employment generation and growth.
Such “liberal technocracy” may be at its apogee in the European Union, where economic rules and regulations are designed at considerable remove from democratic deliberation at the national level. And in virtually every member state, this political gap – the EU’s so-called democratic deficit – has given rise to populist, Euro skeptical political parties. In such cases, relaxing the constraints on economic policy and returning policymaking autonomy to elected governments may well be desirable. We should constantly be wary of populism that stifles political pluralism and undermines liberal democratic norms. Political populism is a menace to be avoided at all costs. Economic populism, by contrast, is occasionally necessary. Indeed, at such times, it may be the only way to forestall its much more dangerous political cousin.
Question for 100 RCs for Practice Questions- 48
Try yourself:In the context of the passage, which of the following has been identified as being more dangerous than economic populism?
Explanation
The last paragraph of the passage states the answer explicitly. “We should constantly be wary of populism that stifles political pluralism and undermines liberal democratic norms. Political populism is a menace to be avoided at all costs. Economic populism, by contrast, is occasionally necessary. Indeed, at such times, it may be the only way to forestall its much more dangerous political cousin.”
His point of view is that while political populism is to be avoided at all costs, economic populism is necessary at times, and sometimes economic populism may be the only way we can avoid political populism which is dangerous. Thus the answer is option 4.
The fourth paragraph talks about multinational corporations when its states that, ‘Multinational corporations and investors have increasingly shaped the agenda of international trade negotiations, resulting in global regimes that disproportionately benefit capital at the expense of labor’. However, this domination of multinational corporations has not being compared with the state’s economic populism. Also, it has not been implied that this disproportionate control of corporations is worse than economic populism. Hence, option 1 is eliminated.
Majoritarianism is a political philosophy or agenda that asserts that a majority (sometimes categorized by religion or some other identifying factor) is entitled to a certain degree of primacy in society. The passage states that ‘popular will allows a majority to ride roughshod over the rights of minorities’. However, it has not been compared with economic populism. Hence, option 2 is incorrect. ‘Religious sectarianism’ is a form of discrimination or hatred arising from attaching inferiority to people belonging to a particular religion. The passage does not dwell on Religious sectarianism. Hence, option 3 is irrelevant.
Hence the answer is option 4.
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Question for 100 RCs for Practice Questions- 48
Try yourself:All these are advanced as reasons to justify the restraints on economic policy EXCEPT:
Explanation
Option 1 is correct. Stringent patent rules and international investor tribunals are advanced as examples to explain why restraints have to be eased in economic policy. They will help the multinational corporations, and investors at the expense of labor. Since this is an EXCEPT question, retain option 1.
Option 2 is incorrect. That political leaders may pursue discretionary monetary policy (to print notes to boost production and employment in the short term before elections) in order to temporarily please the constituency and gain votes is a real danger in a an economic policy without the restriction imposed by independent regulatory bodies. Eliminate option 2.
Option 3 is incorrect. Option 3 is given as an example of short term measure that a politician might resort to, to win an election. By printing more money to create surprise inflation, the politician might harm the economy in the long run. This is a situation that would justify restrictions. Hence, eliminate option 3.
Option 4 is incorrect. The second half of the third paragraph cites the example of the problem that foreign investors may face global trade rules are not adhered to or changed. After wooing the investors to invest, the government may go back on its promise and create an environment conducive to local industry to favor special interests. This will be protectionism. Such policy making should be restrained. Eliminate option 4.
Hence the correct answer is option 1.
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Question for 100 RCs for Practice Questions- 48
Try yourself:The central idea of this passage is that:
Explanation
The passage makes two major points. One is that political populism in which political leaders – examples given are Putin, Trump, Recep Tayyip Erdogen, and Victor Orban) end up becoming autocrats as they abhor institutional restraints. Hence political populism ought to be avoided at all costs.
The other major point is that while restraints on economic policy may be desirable, economic populism may be desirable under certain circumstances in which relaxing constraints on economic policy and returning policy making autonomy to elected governments (instead of independent central institutions like the Central Bank) may also be desirable. Hence economic populism is not always harmful like political populism. These points are captured in option 3. Option 1 is incorrect. It does not include the point about the desirability of economic populism under circumstances. Eliminate Option 1. Option 2 is incorrect. Similar to option 1 it presents only one point of view, the defense of economic populism is not mentioned. Eliminate Option 2. Option 4 is incorrect. Option 4 highlights only the economists’ view about the need for independent regulatory bodies in an economy. It doesn’t capture the political populism aspect. Eliminate option 4. Hence the correct answer is option 3.
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Question for 100 RCs for Practice Questions- 48
Try yourself:With respect to “discretionary monetary policy”, the writer is of the view that …
Explanation
Option 1 is incorrect. The second paragraph almost defines ‘discretionary monetary policy’ as determined by the push and pull of domestic policy resulting in long term ill-effects. Option 1 which states that it is isolated from such the influence of domestic policies is contrary to the passage. Eliminate option 1.
Option 2 is incorrect. In fact, under certain circumstances the writer would prefer economic populism and ‘discretionary policy’. Hence it is incorrect to say to say such policy “always” backfires. Eliminate option 2.
Option 3 is correct. The writer explicitly states in the third paragraph that cure for “surprise inflation’ to boost output resorted by the executive as a populist measure finally backfires. And “the solution is an independent central bank, insulated from politics, operating solely on its mandate to maintain price stability.” Retain Option 3.
Option 4 is incorrect. The passage states that discretionary monetary policy undermines sacrifices long term interests for short term interests. Hence option 4 is contrary to the passage. Eliminate option 4.
Hence the correct answer is option 3.
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Question for 100 RCs for Practice Questions- 48
Try yourself:Why does the passage refer to minorities, foreigners and financial elites as ‘enemies of the people’?
Explanation
The first paragraph of the passage states, “Populists abhor restraints on the political executive. Since they claim to represent “the people” writ large, they regard limits on their exercise of power as necessarily undermining the popular will. Such constraints can only serve the “enemies of the people” – minorities and foreigners or financial elites.
It is the populists’ view that their leader represents the will of the people, hence should be given complete freedom without any restraints to impose his/her will on the state. These restraints on the supreme leader will only help the minorities (w.r.t. their civil and political rights), foreigners (with respect to their investments in the economy) and financial elites (against w.r.t their wealth and businesses) – hence these people become enemies of the people at large. In truth, they are not. Hence it is an ironical reference to the misguided belief of the populists that there should be no check on the populist leader.
Hence option 1 is correct.
Option 2 is incorrect because the passage does not imply that minorities ‘assert excessive power not commensurate with their numbers’.
Option 3 is likewise incorrect. Though a disapproval is implied, the reference to minorities etc. as enemies of the people is not from the point of view of the suppression of minorities.
Option 4 is contrary to the writer’s point of view. He does not believe that minorities etc. do not have any political relevance in a democracy.
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