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Feb. 18, 2017, 8:32 a.m. EST

Populist leaders aren’t likely to make your income great again

Nationalism and protectionism may reduce, not improve, living standards

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By Satyajit Das


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Brexit, the election of Donald Trump, and the rise of non-traditional left and right parties in Europe lend themselves to different interpretations. Pollsters and analysts have labeled the phenomenon “populism.” This diagnosis is misleading.

Populism is an oxymoron. Democracy inherently requires popularity, with majority or, at least, sizeable support needed for political power. The reality is more mundane, being driven by four concerns:

First, a significant portion of voters are responding to the deteriorating outlook for jobs, wages, housing affordability, education, and health-care costs, post-retirement finances and reduced prospects for their children. They blame the decline on globalization, especially international competition and off-shoring using global supply chains. There are concerns about bifurcated labor markets, where a few skilled workers, especially in finance, technology and entertainment, earn high incomes while most employees compete for low paid jobs with limited opportunities. There is discontent with both income and wealth inequality, as well as dissatisfaction with trickle-down economics.

Second, following 9/11 and several other high-profile attacks, immigration and the freedom of movement is seen as an economic and security threat. Third, there is concern at a perceived loss of sovereignty, national autonomy, ethnic and cultural identity.

Fourth, a significant proportion of the population resent being told how to think about issues which affect them by an intellectual elite and experts, who rarely have first-hand experience of their problems. In 1994, Pat Buchanan succinctly described these tensions: “…it is blue-collar Americans whose jobs are lost when trade barriers fall, working- class kids who bleed and die in Mogadishu…the best and brightest tend to escape the worst consequences of the policies they promote…This may explain …why national surveys show repeatedly that the best and wealthiest Americans are the staunchest internationalists on both security and economic issues…”

Advocates of Britain exiting the EU, President Trump, France’s National Front and others have skilfully exploited these elements, triangulating to take advantage of differences between groups for political advantage. On economic matters, they play on the fears of the disenfranchised and those whose livelihoods are threatened. On immigration, they have sought to create coalitions of vulnerable workers and cultural conservatives under the guise of patriotism. On cultural matters, they appeal to the social conservatism of groups with different income, wealth, educational, ethnic, and religious backgrounds.

But these “forgotten” men and women are lost in nostalgia. Support for extremist candidates and policies is rooted in a hope that a golden age of prosperity, security, and largely homogenous societies with shared values can be restored.

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President Trump’s supporters, for example, believe his promise to “Make America Great Again,” although it is unclear exactly what this entails and if it was ever true in the first place. Meanwhile, Brexiteers want to recapture Britain’s former trading and political standing. Japanese Prime Minister Shinzo Abe is seeking to reverse Japan’s economic weakness and restore its status as a first-ranked country. In France, candidates are vying for election on the basis of bringing back Les Trente Glorieuses (the 30 years of post-World War II growth).

The nostalgia is mixed with support for a “strong” leader who promises to deliver simple and painless solutions. Trump persistently argued that he alone could fix America’s problems. This parallels recent trends in post-communist Russia and Eastern Europe exemplified by the rise of President Vladimir Putin, who is admired by many including the U.S. president. The desire for strong leadership is exemplified by German Chancellor Angela Merkel’s nickname “muti” (meaning mother), symbolizing reliance.

But populist leaders and parties are unlikely to be able to bring back the past. Nationalism and protectionism may reduce, not improve, living standards because of higher import costs and lower export income as trading partners retaliate. Preventing immigration will limit access to both skilled and un-skilled workers necessary for growth. Deregulation may decrease wages, job security and workplace safety. Higher wages will make business internationally competitive and encourage automation — reducing jobs even where production is re-shored. Multi-ethnic populations may be difficult to resegregate.

The inability of governments to meet such expectations may drive the next phase of the current political crisis. To date, the process has been conducted within existing institutional settings in a largely peaceful though not always dignified or polite manner. But that may change. Citizens may be tempted increasingly to turn to more extreme alternatives and methods.

The attitude of the increasingly disillusioned middle classes is crucial. In his analysis of the French Revolution, 19th-century historian Alexis de Tocqueville argued that the Revolution did not occur when conditions were harshest but when improving conditions created further expectation of progress and change. Today, the fragile middle classes in developed countries fear that their hard-won improvements are at risk.

In the 1930s, the disaffection of ordinary people who had lost their jobs, savings and hope in the Great Depression gave rise to fascism. This loss of stability caused the once-respectable middle classes, in the words of historian A.J.P. Taylor, to become “resentful . . . violent and irresponsible . . . ready to follow the first demagogic savior . . .”

Without serious and beneficial political and social change, a repeat of that history should not be discounted.

Satyajit Das is a former banker. His latest book is “The Age of Stagnation” (published internationally as “A Banquet of Consequences”). He is also the author of “Extreme Money” and “Traders, Guns & Money.”

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