The new rise of populism isn't about economics

Economic theories of populism are dead, we Americans just don't know it yet. Recently, two countries have brought populists to power, but in both cases those places have been enjoying decent economic growth.

Mr Andrej Babis' party dominated the Czech election on Saturday, and he is almost certain to become the next prime minister. Mr Babis has been described as "the anti-establishment businessman pledging to fight political corruption while facing fraud charges himself" - sounds familiar?

Yet in 2015, the Czech Republic had the European Union's fastest growth rate at more than 4 per cent; earlier this year, it was growing at 2.9 per cent, with potential seen on the upside.

Negotiations in New Zealand brought Labour Party leader Jacinda Ardern to power, with populist firebrand Winston Peters in the coalition government. Ms Ardern wants to cut immigration, possibly in half, and place much tighter restrictions on foreign investment. Although New Zealand's economic growth has been slowing, it's mostly been above 2 per cent since the end of the financial crisis.

Among emerging economies, the Philippines moved from being an Asian growth laggard into some years of 8 per cent growth. Voters responded by electing as president Mr Rodrigo Duterte, one of the most aggressive and authoritarian populists around.

In Eastern Europe, Poland has been seeing an average of 4 per cent growth for more than 25 years, yet the country has moved in a strongly nationalist direction, flirting with sanctions from the EU for limiting judicial independence.

Hungary, Slovakia, Slovenia and now the Czech Republic all are much wealthier than 20 years ago and mostly have been booming as of late. Yet to varying degrees they too have moved in nationalist, populist and possibly even anti-democratic directions.

Although these countries have rising inequality, their growth rates have elevated a wide swathe of the citizenry, not just a few extremely wealthy people.

Even the United States fits this mould of prosperity and populism more than many people realise. For all the talk of stagnant wages, poll data indicated that President Donald Trump's supporters in the Republican primaries had a median income of about US$72,000 (S$98,000). Wages and household median income have started to rise once again.

The trend continues outside the world's democracies. China has continued to see robust growth, even if few people exactly believe the published statistics. The Chinese government has become more nationalistic under President Xi Jinping, and has moved away from liberalising reforms. Poll data in China can be unreliable, too, but Mr Xi seems fairly popular.

Ethiopia is the star growth performer in Africa, arguably with a decade of 10 per cent growth. The country nonetheless has moved in a strongly authoritarian direction, while most of Africa has remained democratic.

Latin America is one part of the world that, unfortunately, hasn't had many growth miracles lately. It has, however, held populist and nationalist movements at bay, the earlier case of Mr Hugo Chavez's socialist Venezuela aside.

It's time to admit that the nationalist turn in global politics isn't mainly about economics or economic failures. Instead, the intellectual, ideological and cultural battles in some countries have led to these new political directions under a wide variety of economic conditions, some of them quite positive.

One obvious explanation for populism and nationalism is that many countries are globalising with more immigration, trade and foreign investment. It's a cultural crisis more than an economic one, as citizens see their national identities shifting. Some electorates respond by wanting to turn back the clock or at least hinder its acceleration. That said, I don't think we yet know why some countries or regions are more shaken than others by these globalising processes. In Europe, it is often the central and eastern countries, with relatively low immigration levels, that are the most upset about immigration.

The explanation for populism and nationalism may have some nested features, with economic factors still playing a role. If citizens fear for cultural cohesion, relatively small pieces of bad economic news may take on an outsize importance in their minds.

Both the subpar economic results and the cultural shifts are taken as signs that the political elites are not to be trusted, and an entry point is created for more radical alternatives. We're also living in an era when autocratic regimes seem to be enjoying the most relative success, and that too may help spread illiberal ideas.

So the next time you hear material discontent cited as driving electoral results, just remember that economic data are usually interpreted through a cultural lens.


•The writer is a professor of economics at George Mason University and writes for the blog Marginal Revolution. His books include The Complacent Class: The Self-Defeating Quest For The American Dream.

A version of this article appeared in the print edition of The Straits Times on October 26, 2017, with the headline 'The new rise of populism isn't about economics'. Print Edition | Subscribe