Economics of the populist backlash

Dani Rodrik pours his wisdom on the hot issue:

The populist backlash may have been predictable, but the specific form it took was less so. Populism comes in different versions. It is useful to distinguish between left-wing and right-wing variants of populism, which differ with respect to the societal cleavages that populist politicians highlight and render salient. The US progressive movement and most Latin American populism took a left-wing form. Donald Trump and European populism today represent, with some instructive exceptions, the right-wing variant (Figure 2). What accounts for the emergence of right-wing versus left-wing variants of opposition to globalization?

I suggest that these different reactions are related to the forms in which globalisation shocks make themselves felt in society (Rodrik 2017). It is easier for populist politicians to mobilise along ethno-national/cultural cleavages when the globalisation shock becomes salient in the form of immigration and refugees. That is largely the story of advanced countries in Europe. On the other hand, it is easier to mobilise along income/social class lines when the globalisation shock takes the form mainly of trade, finance, and foreign investment. That in turn is the case with southern Europe and Latin America. The US, where arguably both types of shocks have become highly salient recently, has produced populists of both stripes (Bernie Sanders and Donald Trump).

It is important to distinguish between the demand and supply sides of the rise in populism. The economic anxiety and distributional struggles exacerbated by globalisation generate a base for populism, but do not necessarily determine its political orientation. The relative salience of available cleavages and the narratives provided by populist leaders are what provides direction and content to the grievances. Overlooking this distinction can obscure the respective roles of economic and cultural factors in driving populist politics.

Finally, it is important to emphasise that globalization has not been the only force at play — nor necessarily even the most important one. Changes in technology, rise of winner-take-all markets, erosion of labour market protections, and decline of norms restricting pay differentials all have played their part. These developments are not entirely independent from globalisation, insofar as they both fostered globalization and were reinforced by it. But neither can they be reduced to it. Nevertheless, economic history and economic theory both give us strong reasons to believe that advanced stages of globalisation are prone to populist backlash.

Fascinating as always..

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2 Responses to “Economics of the populist backlash”

  1. vikramml Says:

    Any discussion of any form of populism is meaningless if one doesn’t recognize and acknowledge the massive amount of corruption of all forms in the so-called elite today.

    The elite blame the phenomenon of populism on issues like globalization. But, the problem is not with globalization per se. The problem is that globalization occurs at the cost of ethics, values, human rights, etc. The problem is that globalization does not occur with a common set of rules and one side can take advantage of another legally, but not fairly. Globalization has led to many benefits that we are all aware of, but many regressions that are not highlighted by the elite at all, as they have a conflict of interest.

    This article touches on this fleetingly:

    “Sometimes international trade involves types of competition that are ruled out at home because they violate widely held domestic norms or social understandings. When such “blocked exchanges” (Walzer 1983) are enabled through trade they raise difficult questions of distributive justice. What arouses popular opposition is not inequality per se, but perceived unfairness.”

    Similarly, anyone who says that immigration opposition is due to right-wing racism is a doofus, because the problem isn’t just immigration per se, but the corruption of that process because of various rent-seekers (who are today’s elite by the way).

    The elite needs a purge. They have become fat and corrupt and are in fact greater purveyors of fake news. The focus on the “ordinary men” driven to populism is wrong at this point in history. When the elite behave like an elite should, they can complain about populism.

    I don’t want to start sounding like a Taleb fanboy, but I can’t resist pointing this out. It is fun and it is indicative of how the elite (Dani) will label Taleb as an immigration “nitwit”, inspite of Taleb’s position on immigration being a completely logical and correct position. You will not receive an argument on why the position is wrong, just an ad hominem.

    • vikramml Says:

      That twitter link is truncated. This one’s in full. It is a perfect example of how the debate on immigration, globalization, etc goes these days.

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