Is the populist tide going out? The last fortnight has given democrats everywhere reason to cheer – or at least to sleep a little better.
For starters, Donald Trump’s bid for the US presidency is being buried by a cascade of damning revelations, including that he has not paid any federal income tax for perhaps two decades, and that he feels entitled by his fame to assault women – call it droit de célébrité. Many Republican leaders have finally had enough, repudiating their party’s presidential nominee in an effort to preserve its House and Senate majorities.
In Hungary, Prime Minister Viktor Orbán’s anti-immigrant referendum failed to attract sufficient turnout. Orbán says that he will nonetheless seek to constitutionalize the result; but the fact that more than half of the electorate stayed home suggests that his Svengali-like hold on voters may be slipping.
And in Poland, enormous nationwide protests, led by women, forced Jarosław Kaczyński’s Law and Justice (PiS) party to withdraw a bill that would have criminalized virtually all abortions, even in cases of rape or incest. After a year of hollowing out Poland’s institutions and concentrating power in his own hands, Kaczyński, the unelected master of Polish politics, may have overreached, as he did in 2007, when he was Prime Minister.
Of course, populism is hardly a spent force, as Colombian voters recently showed. Following a campaign that rivaled the United Kingdom’s Brexit debate for mendacity, a razor-thin majority rejected a peace deal with the Revolutionary Armed Forces of Colombia (FARC) that promised to end more than a half-century of guerrilla war. But, while the New School’s Nina L. Khrushcheva rightly worries about a return to “the violent abyss of never-ending war,” only a week later President Juan Manuel Santos was awarded the Nobel Peace Prize for his efforts, putting the agreement’s opponents, led by former President Álvaro Uribe, back on the defensive. With the world standing behind him, Santos may yet be able to prevent renewed violence.
Even Brexit – the lodestar of populists worldwide since the June referendum – has fallen on hard times. In early October, after British Prime Minister Theresa May explicitly embraced “hard Brexit” – an approach to leaving the European Union that emphasizes controlling immigration over retaining access to the single market – the market response was brutal. Sterling fell to a 31-year low, and a number of Conservative MPs broke with May over her curt rejection of any role for Parliament in shaping the Brexit talks.
Despite these setbacks for populists, many Project Syndicate commentators are unconvinced that the genie can be put back in the bottle. They may be right: populism is an enormously complex phenomenon, and some of its avatars – such as Philippine President Rodrigo Duterte, who boasts of murdering drug users – are more brazen than ever. Nonetheless, growing resistance appears to be shortening their leash.
Markets Vote, Too
May’s move toward the Trump/Orbán/ Kaczyński camp has shocked many, particularly those Conservatives who dreamed that Brexit would bring about some second Elizabethan age of economic openness and creativity. Instead, says the LSE’s Philippe Legrain, May has “adopted a deeply illiberal vision for the UK’s future, consisting of economic intervention, political nationalism, and cultural xenophobia.”
No surprise, then, that financial markets have been voting with their wallets. Market participants like Mohamed A. El-Erian , Chief Economic Adviser at Allianz, are acutely aware that as “bad politics crowds out good economics, popular anger and frustration will rise, making politics even more toxic.” Unless “enlightened political leadership takes the reins in time to make the needed mid-course corrections voluntarily,” he adds, “unambiguous signs of economic and financial crisis” will “force policymakers to scramble to minimize the damage.”
The UK, Legrain suggests, is now feeling the heat of that dynamic. “The pound has duly plunged on currency markets, anticipating the economic harm of a hard Brexit: costly trade barriers – customs controls, rules-of-origin requirements, import duties, and discriminatory regulation – will divide UK and EU markets and affect nearly half of Britain’s trade.”
But can markets really be relied upon to provide a robust barrier to demagogy? In the 1920s and 1930s, after all, fascism was elevated to power in Italy and Germany on the back of big business. One reason why markets are behaving differently nowadays may be that they are more global than ever: businesses that compete in a globalized economy cannot afford parochial nationalism. And parochialism is what May, increasingly following the lead of her cabinet’s most strident Brexiteers, is now offering when she condemns anyone who considers himself or herself “a citizen of the world.”
And it’s not just markets that are turning on May. In pushing for a hard Brexit, she has been running roughshod over the actual desires of the British people and the representative institutions designed to channel those desires. But democratic institutions are starting to protect themselves. Opposition Labour, Liberal Democrat, and Scottish Nationalist MPs are joining forces with a large number of disgruntled Conservatives to insist on Parliament’s right to scrutinize May’s approach to Brexit. More importantly, perhaps, Britain’s highest court is now hearing a case challenging May’s appropriation of the “royal prerogative” to deny Parliament a say over Brexit. The case, being heard before the Lord Chief Justice of England and Wales, Lord Thomas, is almost unprecedented, offering Britain’s supreme court an opportunity to rein in the executive and establish the power of judicial review within Britain’s unwritten constitution.
Baskets of Deplorable Elites
The post-referendum trajectory of May, a quiet denizen of the “Remain” camp prior to the Brexit referendum, suggests that populism can be as much a matter of political logic as of political sociology. No one, argues former Polish finance minister and deputy prime minister Jacek Rostowski, should be surprised by May’s decision to seize upon hard Brexit, despite fears for Britain’s economic future and the preferences of most referendum participants.
“Under normal circumstances,” Rostowski says, “one would expect the government’s policy to reflect the majority’s preference, and to aim for a ‘soft Brexit,’” which would imply maintaining some form of membership in Europe’s single market. Instead, “a classic revolutionary pattern has emerged,” because the Brexiteers in May’s cabinet, having campaigned on a promise to “take back control,” would face “political disaster” were they “seen by voters as the supplicant in negotiations with the EU,” as they “inevitably would be, no matter how often May denies it.” The simplest way to avoid that “embarrassing unmasking,” Rostowski points out, is by “[w]alking away.”
Nobel laureate economist Joseph E. Stiglitz blames elites in another way for many voters’ willingness to play “Russian roulette” with their economies and societies. He attributes Trump’s rise to “simplistic neo-liberal market-fundamentalist theories that have shaped so much economic policy during the last four decades.” As a result of this agenda, Stiglitz argues, in the US “median income of full-time male employees is lower than it was 42 years ago, and it is increasingly difficult for those with limited education to get a full-time job that pays decent wages.” Not surprisingly, “those whose standard of living has stagnated or declined have reached a simple conclusion: America’s political leaders either didn’t know what they were talking about or were lying (or both).”
But Harvard’s Joseph S. Nye admonishes readers to “be wary of attributing populism solely to economic distress.” After all, “Polish voters elected a populist government despite benefiting from one of Europe’s highest rates of economic growth, while Canada seems to have been immune in 2016 to the anti-establishment mood roiling its large neighbor.” Nye cites a study of European populist parties’ supporters by the political scientists Ronald Inglehart and Pippa Norris, who “found that economic insecurity in the face of workforce changes in post-industrial societies explained less than cultural backlash.” And Nye believes that their conclusion – that “populism is a reaction by once predominant sectors of the population to changes in values that threaten their status” – applies to the US as well:
“In the US, polls show that Trump’s supporters are skewed toward older, less-educated white males. Young people, women, and minorities are under-represented in his coalition. More than 40% of the electorate backs Trump, but with low unemployment nationally, only a small part of that can be explained primarily by his support in economically depressed areas.”
The cultural critic Ian Buruma agrees – but only up to a point. He is similarly skeptical of the idea that populist politicians can be defeated solely by policies aimed at promoting their supporters’ economic welfare. Many “don’t seem to care much about reasoned argument – that is for the liberal snobs.” For them, “[e]motions count more, and the prime emotions that demagogues manipulate, in the US and elsewhere, are fear, resentment, and distrust.” And this, Buruma argues, “is at least partly the result of leaving education too much to the market: those with money are highly educated, and those with insufficient means are not educated enough.”
Geography is Destiny
Populism, however, has become a powerful force even in countries with more egalitarian education systems. Jean Pisani-Ferry, Commissioner-General of France Stratégie, refines and extends Buruma’s argument, suggesting that education is part of a form of geographical determinism that affects how people vote.
“Regional or local voting patterns are as old as democracy,” Pisani-Ferry notes. “What is new is a growing correlation of spatial, social, and political polarization that is turning fellow citizens into near-strangers.” Voters “in traditional manufacturing districts caught in the turmoil of globalization” have become “multiple losers: their jobs, their housing wealth, and the fortunes of their children and relatives are all highly correlated.” Thus, “US districts where the economy was severely hit by Chinese exports have responded by replacing moderate representatives with more radical politicians – either from the left or the right.”
Here, Pisani-Ferry is highly pessimistic, because growth in modern economies “puts a premium on agglomeration, which is why larger cities tend to thrive, while smaller cities struggle.” As a result, “[o]nce an area has started losing skills and firms, there is little hope that the trend will naturally reverse.” More often than not, aggregate economic expansion simply “means even more prosperity and dynamism in the better-off cities, and little, if any, gain” for voters elsewhere. Indeed, Pisani-Ferry’s stark conclusion that “[g]rowth itself has become divisive” captures perfectly the geographical voting pattern evident in the Brexit referendum and in support for Trump. For many people in these bastions of populist support, unemployment “can quickly become the new normal.”
Rage at this new normal has turned trade into a bellwether issue for populists. And in a crucial sense, says Daniel Gros of the Center for European Policy Studies, the populists are not to blame for this. “Blind faith in globalization led many to overhype it, creating impossible expectations for trade liberalization,” he argues. Rather “than acknowledge the role of commodity prices in bolstering both trade and growth in the early 2000s, most economists and politicians attributed those positive trends to trade-liberalization policies.” That “reinforced the notion that ‘hyper-globalization’ was the key to huge gains for everyone.” Not surprisingly, when those gains failed to materialize, “many people felt duped and rejected free trade.”
It’s Not the Populists, It’s Us
Instead of addressing the economic and cultural factors driving populism, governments and other institutions sometimes reinforce them by devoting too much energy to protecting their own turf. While globalization, argues Princeton economic historian Harold James, “is beleaguered partly because of decisions made by governments under the auspices of an open international order,” the larger problem consists in “judicial and quasi-judicial decisions to impose large financial penalties on foreign corporations,” a pattern that is “now straining transatlantic relations.”
James cites some telling examples. “After the EU announced that it would require Apple to pay €13 billion ($14.6 billion) in back taxes” that Ireland’s government should have collected, he notes, “the US fined Deutsche Bank, a German company, $14 billion to settle claims relating to its mortgage-backed securities business prior to the 2008 crash.”
To be sure, James continues, such measures could be regarded as an “effective response in a world where multinational corporations have become extremely skilled at reducing their conventional tax liabilities.” But, “unlike normal taxes, fines against companies are not predictably or uniformly levied, and must be haggled over and settled individually in each case,” through negotiations that “are often politicized and involve high-level government interventions” in which domestic firms have the upper hand. “Market economies,” James concludes, “cannot operate when their established rules are haphazardly enforced, which is what happens when national and international regulators turn into advocates for local enterprises and enemies of foreign businesses.”
The absence of uniform and predictable rules is wreaking havoc on debt-distressed governments as well. As Harvard’s Ricardo Hausmann and Mark Walker of Millstein & Co. point out, Venezuela is now paying a heavy price for rule changes that are blocking any international plan to restructure the country’s vast liabilities. “Argentina’s 15-year legal battle with its creditors – in which holdouts did measurably better than creditors who had years earlier accepted a debt exchange – destabilized the international financial architecture and generated a new set of rules.” And, as Hausmann and Walker note, “Venezuela will be the first country to navigate” those rules.
Hausmann, a former Venezuelan government minister, is a trenchant critic of the populist mismanagement that has left the country’s economy in ruins. At bottom, Venezuela’s crisis is “of its own making.” Nearly a generation of skewed policies and priorities, he and Walker argue, “led to a collapse in oil production, because the national oil company PDVSA failed to maintain its productive infrastructure and defaulted on payments to key contractors in order to pay its bondholders – thereby killing the goose that laid the golden eggs.” Nonetheless, “Venezuela will need to restructure its existing debt,” which will be impossible without a strategy to undermine holdout creditors. Indeed, the absence of such a strategy might well preclude any “restructuring at all, which could mean chaos or even a failed state.”
Don’t Look East
In sharp contrast to Venezuela’s Chavista leaders, China’s government has long been considered a model of wise and consistent economic policymaking. In fact, says the University of California, Berkeley’s Barry Eichengreen, China’s ruling communists can be as misguided and self-serving as political leaders anywhere. He takes aim at their successful campaign to have the renminbi included in the basket of currencies that make up the International Monetary Fund’s unit of account, Special Drawing Rights, calling it an effort that was “more about symbolism than substance.”
Chinese officials, Eichengreen notes, argue that inclusion in the SDR currency basket “is one of a series of steps to encourage use of the renminbi in international transactions.” But they have been putting the cart before the horse, believing “that relaxing capital controls and allowing financial capital to flow more freely in and out of the country will force financial market participants to up their game.” In fact, so long as “Chinese banks and firms are slow to adjust, liberalizing international capital flows will lead only to more volatility, fewer offshore deposits, and less reliance on the renminbi for settling merchandise transactions – exactly as has been the case recently.” Instead, Eichengreen concludes, “the most important steps” the authorities “can take to foster renminbi internationalization are to strengthen domestic financial markets, modernize regulation, and streamline contract enforcement.”
But China’s policy mistakes pale in comparison with those of Pakistan, where decades of portraying India as an existential threat have nurtured a xenophobic, fearful citizenry and a state that is making life ever worse and more precarious for its people. Clearly, any effective challenge to this dangerous, long-entrenched dynamic, whereby the Pakistani military’s powerful Inter-Services Intelligence (ISI) agency has for years supported terrorist groups and helped them to coordinate attacks on India, will have to come from outside. And, as Shashi Tharoor, an Indian MP and former Minister of State for Foreign Affairs, and Brahma Chellaney of the Center for Policy Research in New Delhi, argue, that challenge may have begun in late September.
According to Tharoor, India’s “‘surgical strikes’ across the Line of Control (LoC) in Kashmir” proved highly successful. The operation “destroyed terrorist ‘launch pads’ and “eliminated significant numbers of militants poised to cross over for attacks on the Indian side, as well as some who were protecting them (presumably Pakistani soldiers).” More important, although India has conducted such strikes in the past, the strikes in September were “the first to be announced publicly, providing a clear signal of intent and a bold statement that business as usual – Pakistani pinpricks followed by Indian inaction – is no longer to be expected.”
Chellaney goes further, suggesting that India’s turn away from appeasement could have a significant effect on global security, because “Pakistan is ‘ground zero’ for the terrorist threat the world faces.” Many attacks in the West, he points out, have had Pakistani footprints, “including the 2005 London bombings and the 2015 San Bernardino killings,” while Ahmad Khan Rahami, the suspect in the recent bombings in New York and New Jersey, “was radicalized in a Pakistan seminary located near the Pakistani military’s hideout for the Afghan Taliban leadership.”
But India can’t rein in Pakistan alone, and Chellaney is sharply critical of Pakistan’s foreign enablers, particularly the US. “Yes, even after finding the likes of Bin Laden on Pakistani soil,” he laments, “the US – the country that has spearheaded the so-called War on Terror – not only continues to deliver billions of dollars in aid to Pakistan, but also supplies it with large amounts of lethal weapons.” The implication is clear: the US should use its “leverage to ensure that the Pakistani military is brought to heel – and held to account.”
Attack on All Fronts
In the effort to halt and reverse the populist advances of recent years, there is no magic bullet. It is a battle that must be waged on many fronts: economic, electoral, legal, cultural, and, where appropriate, military. But, however challenging that battle may be, what is increasingly clear is that it must be joined without delay. As Project Syndicate commentators have indicated, in a wide variety of countries and contexts – from the UK to Latin America and Asia – those who would jeopardize their own countries’ prospects and place global security and prosperity at risk can be knocked back on their heels. The task for the world’s political leaders, including the next US president – who will not be a populist – is to keep them there.
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