Populism, Markets and the Law: Understanding the Commercial Consequences

Introduction

Populism is both historical and newly visible. Although it has existed for centuries in Latin America, its modern resurgence continues to shock political and commercial observers. With Donald Trump securing a second term in 2024, populism has returned to the centre of global debate. Yet its commercial consequences remain under-examined. Politics, economics and law cannot be neatly separated, and populism demonstrates how deeply these spheres intertwine.

Defining Populism

Populism is notoriously difficult to define. Its flexibility lets it adapt to different contexts, earning it the description of a chameleon. At its core, populism divides society into two groups: the virtuous people and the corrupt elite. Populism imagines the people as a unified collective whose interests only the populist leader represents. The elite are framed as a hidden enemy controlling political and economic structures. As the self-appointed voice of the people, the populist leader undermines institutions that obstruct their political goals.

Populism and Commerce

Populism harms economies even when it appears beneficial in the short term. Its commercial effects include corruption, reduced societal cohesion, economic protectionism, macroeconomic mismanagement, rejection of expertise, nationalisation of strategic industries, and attacks on perceived financial elites. These outcomes arise because populist economic policies serve political objectives rather than fiscal responsibility.

Nayib Bukele and El Salvador

Nayib Bukele offers a clear case study of populist economics. On the surface, his impact on El Salvador appears transformative. The country once had a homicide rate of 102 murders per 100,000 people. Through mass incarceration and the removal of habeas corpus, Bukele reduced this figure to 7.8 per 100,000 by 2022. His use of social media and millennial branding has generated unprecedented approval ratings, particularly among younger voters.

However, the long-term risks are significant. El Salvador now has 1.7 per cent of its population in prison, raising concerns about sustainability. Bukele’s disregard for the rule of law has weakened institutional checks on executive power. Businesses may enjoy short-term certainty, but their property rights and revenue streams are vulnerable to sudden political shifts.

Bukele’s COVID-19 response relied on heavy spending and human rights violations, adding to an already severe national debt. His cryptocurrency experiment is even more concerning. In 2022, El Salvador held 2,400 bitcoins worth approximately $48 million. The Bitcoin Law is poorly drafted, Bitcoin City remains speculative, and business confidence in cryptocurrency is extremely low. Eighty-six per cent of corporations reported never conducting a Bitcoin transaction. Populism can create an illusion of financial success while concealing profound instability.

Trump’s Second Term: Commercial Implications

Taxation and Deregulation

Trump has emphasised tax cuts as a solution to economic stagnation. While appealing to voters, reduced taxation threatens fiscal stability and the ability to manage national debt, currently at 122 per cent of GDP. His embrace of deregulation and alignment with Elon Musk signals a pro-business stance, including relaxed limits on artificial intelligence. Musk’s promise of $1 million to voters in swing states reflects a blend of clientelism and welfare-for-votes seen in other populist systems.

Economic Protectionism

Trump’s America First agenda includes reducing corporate tax to keep businesses domestic and attract foreign capital. However, renewed tariffs on China could raise consumer prices and disrupt business planning. His anti immigration rhetoric and intention to deport approximately 11 million undocumented individuals would significantly reduce low-cost labour and increase operational costs for businesses.

Conspiracies and Climate Policy

Trump’s scepticism toward climate science continues to shape his policies. He plans to expand hydrocarbon use and prohibit offshore wind. These decisions benefit oil and gas corporations but undermine the United States’ ability to innovate in clean energy. Failing to prepare for hydrocarbon depletion could harm both domestic and global economic systems.

A Note of Caution

Predicting the future of a populist administration is inherently uncertain. Populism thrives on the gap between rhetoric and reality. Its adaptability makes it hard to forecast, and its unpredictability can damage market confidence. What is clear is that populism casts a corrosive shadow over law, commerce and entire economies. Corporations and legal practitioners cannot ignore it.