The Populist Uprising and its Victims
There is a famous passage in The Economic Consequences of the Peace1 where Keynes, writing a year after the end of World War I, paints a vivid picture of a globalized world at the pinnacle of the gold standard. He nostalgically reminisces of the time when his countrymen, through the convenience of the telephone, could order various commodities around the world, invest in foreign lands, purchase precious metals, and arrange for foreign travel. In a post-war era, Keynes was afraid of a period of economic turbulence and rising protectionism among countries. History would prove his concerns valid.
Exactly a century later, today Keynes would have similar concerns with the modern world if he were alive. The era of unfettered globalization is as precariously poised as it was in his time, with a growing cacophony of voices railing against the established economic order of neoliberalism. Until now, global economic policies had been shaped by the so-called Washington Consensus, which emphasized liberalization, deregulation, and privatization. However, the system has increasingly left behind substantial segments of the population and created a widening economic rift across society.
Figure 1 shows how the level of income has varied across society since 1980 and the extent of disparity has increased across income groups. The bottom 90 percent in the Western nations have witnessed the lowest rise in their incomes. An expected resentment with the status quo has, thus, developed as a result.
This backlash against globalization has materialized in the resurgence of the idea of populism. Populist parties have effectively tapped into this anti-globalization sentiment. The election of Donald Trump based on invoked themes of nationalism and anti-elitism; the vote of Britons to leave the European Union, which was primarily driven by the narrative against immigrants; and the decisive victory of far-right Jair Bolsonaro amidst economic turmoil and political chaos in Brazil are some of the notable examples of the rise of the populist phenomenon. Populists have also been similarly successful in countries like the Philippines, Turkey, Hungary, and Finland. The Guardian estimates that in 2019 more than two billion people around the world are living in countries that are led by leaders that are “somewhat populist.”2
What is Populism?
Conversations around populism have become so commonplace that references to it are typically made in popular media without an explanation of the term. Political scientist Cas Mudde provides the understanding of the concept of populism most quoted in recent years: “Populism is a thin centered ideology that considers society to be ultimately separated into two homogeneous and antagonistic groups, the ‘pure people’ and ‘the corrupt elite,’ and which argues that politics should be an expression of the volonté générale (general will) of the people.”
There are three essential features that constitute the core of populism. First, people are locked into conflict with outsiders. In the words of sociologist Rogers Brubaker, people are depicted as “morally decent… economically struggling, hard-working, family-oriented, plain-spoken, and endowed with common sense.” These people are in conflict with “elite group” referred to as the outsiders, who do not belong to the moral, hardworking group.
Second, populist leaders are known to worship “people” and believe that nothing should constrain their true will. This idea of people-centrism or anti-elitism, stems from the narrative that elites have no idea what common people want, and they only represent their own interests. The emphasis on the power of the people and the negativity towards the elite leads to the message that “ordinary citizens” must be given their voices back and that people should therefore have more influence on the political decision-making process.3
Third, “the people” is a homogenous identity that can mean many different things to different populists. It can refer to the electorate, to the nation, or to no fixed group at all. However, this does not mean that “people” is a meaningless term; it simply suggests that how you interpret the term depends on the circumstances.
It should be noted that unlike liberalism or socialism, which are holistic economic concepts, populism just describes the relationship between the common people and the elite and has no particular backing of a social or economic doctrine. The leaders who are identified as populists have different political ideologies. Hugo Chavez from Venezuela is considered a left-wing populist as he on expanded health coverage, nationalized corporations, welcomed immigrants, and embraced ethnic or racial minorities. On the other hand, the policies pursued by Donald Trump – limiting immigration, dismantling universal health coverage and cutting corporate tax rates makes him a right-wing populist leader.
These examples are illustrative of the fact that populism manifests itself differently in different circumstances. However, both left- and right-wing populist leaders apply the same principle – bring together a crowd around a political idea in order to shape the “people” against “elite.” The concepts used to define these groups are radically different.
Types of Populism
Source: Kyle, J., & Gultchin, L. (2018). Populist in Power Around the World
The above table shows that there are three broad notions used by populist leaders and parties for demarcating the people and the outsiders: cultural, anti-establishment, and socio-economic. The central element of the socio-economic populism is the “us” vs. “them” conflict between the economic classes. The “pure people” belong to a specific social class, not constrained by national borders, while the outsiders are the capital owners. The socio-economic populists focus on class based political exclusions and bring previously excluded segments of the society into the political debate. For instance, Evo Morales became the public face of poor Bolivian peasants who had been making a living by growing coca for centuries. The U.S. law enforcement authorities, concerned about rising cocaine production, supported the Bolivian special troops in their war against coca farmers. Morales sided with the coca farmers and prompted support for his cause by arguing that Bolivian peasants were being robbed of their livelihood because capitalistic outsiders were using the coca for illegal cocaine production.
The leaders who invoke cultural populism emphasize ethnicity, race, or religion. They are of the view that outsiders – which can include refugees, religious minorities, or immigrants – pose a threat to native members. They argue that the state cannot support natives and non-natives simultaneously, and, thus, the focus should be on the native population. Eastern and Central Europe has been a stronghold for cultural populists in recent years. Political scientist Ben Stanley argues that the collapse of the one-party system and communist state allowed the revival of ethnic rivalries, which were exploited by cultural populists to gain support.
The anti-establishment populists view corrupt political elites as the outsiders who are the enemy of the “honest, hardworking” citizens. A prime example of the anti-establishment populism is Italy’s Silvio Berlusconi, who won the elections in 1994 following a wave of anti-corruption allegations against the established political order that was dominated by Christian Democrats. Berlusconi portrayed himself to Italians as a self-made businessman who can serve as an anti-corrupt leader and provide a break from Italy’s corrupt past.
Similarly, India also experienced its share of anti-establishment populism with the rise of the Bharatiya Janata Party (BJP) in 2014. The right-wing party won a majority in the Indian Parliament on its own – the first time for a party to do so in three decades. Their win was the result of rising public rage against the spate of corruption scandals within the Congress Party that has ruled the country for a major part of its 70 years of independent history. BJP’s leader Narendra Modi led with a narrative of eradicating the system of political corruption and giving back control to the people.
However, these trends of populism that the world is experiencing are not new by any standards for the political world. The idea of populism has been around for over a century. What is new is its sudden upsurge and its migration into newer places.
Populism through the Times
We can trace the origin of the term populism back to agrarian protests in the late 1800s in the United States and Russia. During the late 1880s, a series of droughts hit the United States. To add to farmers’ woes, the McKinley Tariff of 1890 was applied, which was one of the highest that the country had ever seen. This high level of agrarian distress led to the birth of several farmer movements, including the Farmers’ Alliances. The purpose of the alliance was “to unite the farmers of America for their protection against class legislation and the encroachments of concentrated capital.” While the local political action groups saw some regional victories, they were unable to make an impact at the national level. Thus, the leaders of these farmers discontented by falling agricultural prices, crop failures, and poor marketing and credit facilities sought relief through political action by forming the Populist Party, or the People’s Party.
In Russia, the evidence of populism is attached with the movement by students and intellectuals who idealized rural peasants and believed that they should form the basis of a revolution to overturn the Tsarist rule.4 The movement gained momentum due to the dissatisfaction with Alexander Emancipation Manifesto of 1861, which favored the landowners, opposed to the peasants, in the redistribution process.
In the early 1900s, the idea spread its footprint in Latin America, starting with Brazilian leader Getúlio Vargas assuming power in 1930. Vargas remained in power for fifteen years, first as a dictator, then as an elected leader, and then again as a dictator. He ruled Brazilian politics for such a long period because he understood the breakdown of relations between workers and owners in the expanding factories of Brazil, and because he projected workers as the new political power.
Next door to Brazil, populism also fueled the political movement that developed around Argentina’s Carlos Menem. Menem promised to carry out a productive revolution that struck a chord in people who were agitated due to years of economic crisis under the Radical Party President Raul Alfonsin. Towards the end of the century, populists came to power in Argentina (again), Venezuela, and Ecuador, by playing on what the scholars term as the “lost decade” of the 1980s, when growth had stagnated, and income had plummeted. The election of Néstor Kirchner in Argentina, Hugo Chavez in Venezuela, and Lucio Gutierrez in Ecuador marked the shift of the populism discourse from anti-establishment to socio-economic in Latin America. Yet, until the 2000s, populism was a limited phenomenon. Figure 2 illustrates the number of countries with populist leaders in power for the period 1990-2018. A slight rise – from four to seven populist countries – occurred in early 1994 due to the election of Alexander Lukashenko in Belarus, Silvio Berlusconi in Italy, and Rafael Caldera in Venezuela. All three leaders took to power by relying on anti-established politics rather than socio-economic or socio-cultural politics. They created anti-elitist narratives and positioned themselves as the “true representatives” of the common people, abandoned by the corrupt elite class.
It is also clear from Figure 2 that the recent evidence of populism we see in the headlines is not unexpected; rather, it has been building up for the last two decades. Since 2000 the number of populist leaders has more than doubled. Presently, populism exists in Bolivia, Bulgaria, the Czech Republic, Greece, Israel, Poland, the United States, and Venezuela, among others. This mix of countries includes not only developing economies but also developed countries. The global rise of populist leaders is altering the established political order in what had previously appeared to be stable democracies. In order to understand how the rise of populism will shape societies in future, it is critical to identify the deep reasons why populists, in the last few decades, are celebrating success all over the world. Why is it that citizens are falling out of love with their current political system?
Explaining the Rise
In his famous “political trilemma of the world economy,” Harvard economist Dani Rodrik put forward the interesting proposition that international economic integration, the nation-state, and democratic politics cannot co-exist.5 Any two of the three can be combined, but never all three of them simultaneously. In a world that is deeply economically integrated, we can either have a strong nation-state, in which case the dynamics of national politics has to be severely restricted, as we see in China, or we can have a strong democracy, where the nation-state will have to be sacrificed for global federalism, as experienced most notably by the European Union.
When the people want a strong nation-state, the choice is between democratic politics or international economic integration. The world today is experiencing the former. The pendulum is swinging away from globalization towards individually stronger nation-states, and the rise of populist parties, a sign of a dynamic democracy, is a product of this movement. We can trace the factors driving this shift back to the decades of building resentment among the masses and their disillusionment with the established global economic order due to trends of wage stagnation and rising inequality across the world.
In the decades following World War II, the world experienced a phase of unusually strong economic growth, which came to be known as the Golden Age of Capitalism. The global growth rate averaged almost five percent per annum. During this period, which ended with the 1973-75 recession sparked by the oil crisis, the state also complemented markets in a way that had widespread benefits throughout the economy.
In the United States, for instance, the G.I. Bill initiated a massive effort to educate returning war veterans that helped the country build a healthy stock of human capital. Congress also created the Council of Economic Advisors that encouraged an activist countercyclical approach where the government increased spending and reduced taxes in times of recession and the opposite in high growth periods. Meanwhile, Europe, which was reconstructing itself after the devastating effects of the War, also witnessed fast-paced economic growth aided by the U.S. under the Marshall Plan. A system of progressive taxation across these countries also played a vital role in ensuring equitable distribution of wealth during this period.
However, after growth slowed in the 1970s, the world economies began looking for avenues to kick-start the growth process again and turned to globalization. The United States and European countries initiated liberalization at home and deeper economic integration with one other. Over time, the developing economies also opened up their markets. The benefits, however, were not as expansive as they were in the post-War era. Globalization did extricate the highest number of people out of poverty in human history, but the developing countries were the biggest beneficiaries. The Western world, in contrast, hardly benefitted from the process of globalization. In the U.S. economy, for instance, middle class income stagnated, as Figure 3 demonstrates. While worker productivity continued to grow after 1973, the growth in their compensation stagnated. A similar trend existed throughout the developed world.
Wage growth stagnation can be attributed to two specific factors. First, the advent of technology has had a leading role to play in widening the gap between productivity of the economy and the compensation paid to workers. The technological revolution since the early 1980s that pushed economies towards automation and higher use of computers has disproportionately benefitted those with higher skills. Moreover, many low-skilled jobs have vanished over time due to technological interventions.
Second, as the world moved towards higher globalization after the mid-1970s, corporations in the developed world found it profitable to shift labor-intensive jobs abroad into developing countries, where labor was cheaper. Unskilled workers in the United States and Europe further lost out in the process, making disenchantment with the idea of globalization virtually inevitable.
Starting in the early 1980s, wage stagnation for the working-class population in the West also resulted in a rise in income equality. Figure 4 shows how the income share of the top percentile across the Anglo-Saxon countries has unambiguously grown at a rapid pace in the last four decades. The deregulation of the financial markets that began in the mid-1970s fueled inequality further. As only the better-off sections of society held capital assets, which saw an increase in returns, the disparity across economic class widened even more.
Figure 3: Stagnation of wage growth since 1973 for the US economy
Note: Data are for compensation (wages and benefits) of production/nonsupervisory workers in the private sector and net productivity of the total economy. “Net productivity” is the growth of output of goods and services less depreciation per hour worked.
Source: Economic Policy Institute
Figure 4: Income inequality in Anglo-Saxon countries, 1910-2010
Note: The share of top percentile in total income rose since the 1970s in all Anglo-Saxon countries, but with different magnitudes.
Sources: See piketty.pse.ens.fr/capital21c.
Despite rising inequality across the developed world since early 1980s, the final straw that broke the camel’s back for the segment of population that was left behind was the financial crisis of 2008. It was a crisis created by the rich, yet they were bailed out and suffered the least due to it. Those who had not benefitted from the boom bore the consequences disproportionally in terms of joblessness and lack of economic opportunities. To address the crisis, central banks across the developed world kept the internet rate near zero and bought trillions of dollars in bonds to encourage spending. But instead of creating employment and fueling wage growth, much of that money ended up driving the value of financial assets upwards. Since the rich own such assets in higher proportion, inequality has only accentuated since the crisis and furthered the disenchantment of the people.
Thus, while an integrated and interdependent world has increased overall wealth over time, not everyone has managed to obtain a fair share of the ever-increasing pie. Some segments of the society are, in fact, losing out in the process. The rise of populism is a protest from communities that have witnessed growth for everyone around them, but not for themselves. It is a sum total of all the discontentment against the established world order, which seems rigged against them. The political class around the world has managed to tap into this developing sentiment among people, which has manifested in the form of rising populist parties as mainstream ones were unable to cater to popular demand.
For more than a generation, the elites around the world had settled into a consensus on a wide range of economic issues – from the benefits of free trade and open markets to less regulation and more privatization. Globalization – and “neoliberalism” in a broader sense – had become an accepted goal that was to be pursued for greater prosperity since the 1970s. But all that the world got was a broken system of economic governance. Inadvertently, neoliberal policies skewed the world economies in favor of the few at the expense of the masses at large.
The populist movement that we are witnessing today is an outcome of these deep-rooted structural fallacies within the economic system of the modern world. It is also in a sense an expression of powerlessness – not just the powerlessness of the people but that of the established political class who do not seem to have the answer to fix the rigged system. As a result, the people have begun to rest their faith on populist movements and leaders who have promised to restore control in their hands.
But, as Jan-Werner Müller has argued in his well-acclaimed study What is Populism?,6 even though populists claim to represent the people and are usually voted into power by the majority, there still remains cause for concern with their rise. Even when they are a product of democracy, he warns that they carry dangerous anti-democratic impulses. This is being increasingly seen around the world today as populist leaders display authoritarian tendencies and justify it as a necessity in their fight against the establishment. Trump and his dislike for the institutional checks and balances are a case in point.
Democracy has grown impressively from 1970s and democratic values were proving to be remarkably resilient until recently. However, with the global rise of populist leaders, trust in democratic institutions seems to be fading away. Populists are using their position to weaken democratic norms and institutions as they feel that the current system is fundamentally flawed and has failed to benefit the people. In such a scenario, the traditional parties and mainstream politicians should focus on offering alternatives.
Globalization will, therefore, become only an innocuous casualty of the rising populism that we are witnessing nowadays. Democracy is a more concerning institution that needs to be protected. The field of economics has to rise to the occasion to present an alternative to the status quo and address the discontentment of the masses just as Keynes did after the Great Depression of 1929. Until such a time, populism and populist parties are here to stay.
Dr. Amit Kapoor, 2019
Keynes, J. M. (1919). The Economic Consequences of the Peace. London: Macmillan.
- Keynes, J. M. (1919). The Economic Consequences of the Peace. London: Macmillan.
- Lewis, P., Barr, C., Clarke, S. (2019, March 6). The Rise and Rise of Populist Rhetoric. The Guardian. Retrieved from https://www.theguardian.com/world/ng-interactive/2019/mar/06/revealed-the-rise-and-rise-ofpopulist-rhetoric
- Rooduijn, M. (2014). The Nucleus of Populism: In Search of the Lowest Common Denominator. Government and Opposition, 49(4), 573-599.
- Kyle, J., & Gultchin, L. (2018). Populist in Power Around the World.
- Rodrik, D. (2000). How Far Will International Economic Integration Go? Journal of Economic Perspectives—Vol. 14, No. 1, 177-186.
- Müller, J. W. (2017). What is populism? Penguin UK.