peter a. hall harvard university · six theses about contemporary populism peter a. hall harvard...
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Six Theses about Contemporary Populism Peter A. Hall Harvard University GEM Conference, April 19 2017
1. Where populist causes or candidates win, it isalways on the back of a broad electoral coalition
• A core constituency: older, white, working-class men
BUT Trump Clinton
• Among 18-24 yr-old whites: 48% 43% • Those earning over $50,000/yr 49% 47% • Male college graduates 54% 46% • Protestants 59% 38%
2. The roots of populism lie, not in economics or culture, but in the interaction between them
Change in subjective social status of working class men and women
3. Populism highlights the spatial dimensions of politics
Vote for Brexit by Region (red = leave) Vote in US election by residence
Contemporary patterns of politics parallel patterns of economic development in the knowledge economy
More than half of US GDP is produced in 30 metropolitan areas
4. Populism is a ‘revolt against globalization’ only in the broadest and vaguest sense of the term
• Economic insecurity and job losses follow from a general economic transformation linked to technological change
• Thus it is difficult to provide the ‘losers’ from globalization with ‘compensation’
• They want ‘decent jobs’ rather than further social assistance
• And it is difficult to generate decent jobs, especially for the low-skilled
Occupational growth rates in the US, 2001-2012
5. Populism has political roots in the convergence of party platforms – ‘no one is listening to us’
Movement of OECD party platforms on an ‘economic liberalism’ scale
Populist issues drive a wedge through the electoral coalitions of the mainstream left and right
• Middle class voters committed to universalist values but hesitant about state intervention
• Working class voters more supportive of state intervention but hesitant about universalist values
6. Populism poses genuine threats to democracy
• The divisive nationalism of populist movements undermines the tolerance and solidarity essential for well-functioning democracy
• Scorn for experts and a penchant for ‘fake news’ drains all political discourse of its credibility, feeding distrust in politics
• In more recent democracies, populist leaders dismantle the checks and balances on which liberal democracy depends
Jaroslaw Kaczynski
Victor Orban
Globalization and the backlash of populism – Will a changing sense of identity pull the world apart or bring
it closer together?
Mark Blyth Eastman Professor of Political Economy
The Watson Institute for International and Public Affairs, Brown University, USA
The Harvard Global Empowerment Meeting, April 19th 2017
Two Economic “Regimes”
The Cold War Era - 1945-1980 • Full Employment • National Economies • Restricted Financial Markets • COLA Contracts • High Taxes and Transfers • No One Knows who Runs the
Central Bank
The Neo-Liberal Era 1980-2008 • Price Stability • Globalization • Open Financial Markets • Flexible Labor Markets • Low Taxes and Lower Transfers • Everyone knows who runs the
Central Bank
And when it Failed there was a System Reset
• The Rise of ICBs and Globalized Labor Markets
• The Rise of Neoliberal Politics
Into the Gap Between Wages and Profits
Source: International Monetary Fund, International Financial Statistics and data files, and World Bank and OECD GDP estimates
US Consumer Credit 1960-2017 Euro Area Consumer Credit 1996-2017
And If Wages are Tied to Productivity, They are Going Nowhere
Productivity Slow Down Across Regime 2 (OECD Data)
-0.5 0 0.5 1 1.5 2 2.5
Canada
France
Germany
Italy
Japan
Netherlands
Spain
UK
US
EZ
2008-2016
1990-2007
Misunderstanding the 1970s: Interest rates over the Very Long Run
Source: Kazuo Mizuno (the former Japan Cabinet Office Economic Advisor) and Capital World Investors via Tomonori Tani.
Add all this together and you get Populism
• Debts too High, Wages tooLow, Inflation too Low
• Left Response: BlameCapital/Globalization
• Right Response: BlameImmigrants/Globalization
The Results are Creditor Vs Debtor Stand-Offs Played Out in Party Politics
Losers
Creditors: Real value of debt goes up but ability to collect goes down
Result: Death of Traditional Center Left Parties: Vote share collapsing New left parties seen as mortal threat to existing left parties
Winners
Debtors: Can’t pay - Won’t pay – will vote – Welcome to Populism
Result: Rise of Populist and Right-Nationalist Parties: Renationalizing Markets, anti-globalization, anti-trade/Euro, anti-Immigrant
As Seen in the Decline of Social Democracy – Europe heads Right
Index based on the simple and population-weighed average vote share for social democratic parties in the old EU15 from 1946 until the end of 2014. The base year for the index is 1970
Source: Matthew Goodwin, University of Kent
Social democracy in the polls in 2017
Latest Polls Change on last election
Norway 38% +3Denmark 25.9 +1Austria 27% -2Spain 17% -5Germany 20% -5Britain 24% -6Sweden 24% -7France 12% -17Netherlands 10% -28
Source: Matthew Goodwin, University of Kent
Transition happiness gap - very low levels of life satisfaction • Life in Transition Survey (2006, 2010, 2014) • People in central and eastern Europe much
unhappier compared to countries with same GDP • Precursor of what was to come • Some early hope: People thought their children
would be better off
What explains low levels of life satisfaction? (Guriev and Zhuravskaya, 2008)
• Two levels: – Level of GDP – Level of public services
• Two shocks – Shock to GDP (volatility) – Shock to human capital
• Explains most of the variation (only Hungary not fully explained)
Consumption hit harder in the East
0
10
20
30
40
50
Reducedstaple food
consumption
Reducedconsumption
of luxurygoods
Reducedconsumption
of alcoholand smoking
Postponed orskipped visits
to doctorafter
becoming ill
Delayedpayments of
utilitiesShar
e of
hou
seho
lds r
epor
ting
cons
umpt
ion
resp
onse
to c
risis
Western Europe
Transition region
1. Large actual crisis shocks (job losses, bankruptcies, wage reductions …)
2. Official safety nets not very effective
3. Larger use of less effective informal borrowing
4. FX borrowing exacerbated the impact in crisis-hit countries
4 drivers of crisis-induced consumption fall
Why did households hurt so much?
Why did attitudes change?
1. Those hit harder by the crisis turned away from democracy, markets
• New EU countries hit harder
2. Those who experienced more severe past crises turned away less from democracy, markets
• CIS countries saw harder hits after 1990
3. People “turned against the system they had”
• New EU countries turned against markets, democracy, CIS countries vice versa
3 key drivers
1
2
3
What does LITS 2014 tell us?
• Not only about perceptions: people born around transition shock 1 cm shorter – same as living in a conflict zone
• Now relative life satisfaction caught up, but not for everyone: more than half of population not seen incomes catch up
• No longer convinced their children will be better off
Cumulative income growth in post-Communist countries since 1989 by income decile
Not everyone has fared the same
Source: EBRD Transition Report 2016
Cumulative growth in Russia since 1989 by income decile
Source: EBRD Transition Report 2016
Not everyone has fared the same: Russia
The demand for and supply of populism (Guiso et al., 2017)
• Populism – short-term protection without regard to long-term costs
• Demand for populism: (1) direct effect through decline in economic security and trust in political parties – but this also lower turnout; (2) indirect effect by reducing trust in political parties
• Supply of protectionism: (1) when demand accumulates; and (2) when checks and balances are weak and political fragmentation high
• Non-populist parties accommodate platforms – magnifying effect
Conclusions
• Two serious shocks – one massive and one large • Affected life satisfaction and attitudes (trust,
democracy, markets) • But also height – transition cohort 1cm shorter • Fed populism with a lag – as elsewhere • Demand for populism from decline in economic
security and trust in parties (which in turn deteriorates from loss in security)
• Supply for populism in countries with weak checks and balances and political fragmentation