Monday, November 4, 2019

Some Thoughts about Populism

"Populism" is remarkably slippery to define, but many people claim to know it when they see it--and to worry about its resurgence. Here, I'll offer some thoughts about the current populist moment. I've spent some time thinking about this lately because the Journal of Economic Perspectives, where I work as Managing Editor, published a four-paper "Symposium on Modern Populism" in the Fall 2019 issue. The papers are:
Also, the Centre for Economic Policy Research in London has started a Research and Policy Network on Populism, and recently published four short and readable essays on the topic at its VoxEU website:

Defining Populism? 

Definitions of "populism" are sometimes very broad. For example, the Merriam-Webster definition is that it refers to a party "claiming to represent ordinary people."  This has an element of truth, but it's difficult to think of a successful political party which would not make such a claim! Other definitions focus on a party that wants to redistribute to the poor. Again, this has an element of truth, but it seems overly broad.

The politicians who are commonly referred to as populists do claim to represent the ordinary people and the poor, but they also have an us-vs.-them edge. It's not just wanting to  help the poor, but also a broader narrative that ordinary people are being ill-treated by identifiable villains. Sometimes the designated villains are economic, like big corporations and the rich. Sometimes the designated villains have a foreign tinge, like those who allow imports of foreign products or a surge of immigrants. Populism typically involves both an economic claim that ordinary people are being left behind or mistreated, and also a broader political/cultural dimension that elites don't understand and are taking advantage.

Part of what makes "populism" hard to define is that it is often used as a criticism. The implication is that populists aren't just people who would advocate higher taxes on the rich or on corporations, but people who would demonize or practice confiscatory policies toward those groups. Populists wouldn't just argue for lower imports or enhanced border controls, but would describe these changes in terms of gross unfairness, plotted by the few against the many.

In short, the concern is that populists aren't technical analysts, arguing over the costs and benefits of shifting some policy parameters to help ordinary people or the poor. Instead, populists are whipping up surges of emotion to gain political power, while making political and social divisions worse and making policy promises that either can't be kept and won't work. Once populist emotions are fully roused, the polity may become disdainful of boring and irrelevant ideas like constraints on executive power, or an independent judiciary, media, and central bank. As the populist policy prescriptions inevitably fail, it may just feed the fire of populism further--by supposedly showing that the enemies of the ordinary people are even stronger than suspected, and must be countered with even more strong-handed interventions by a charismatic and authoritarian leader.

Economic Manifestations of Populism

For economists, perhaps the classic view of "populism" is based on a common pattern in Latin America, described in work by Rudiger Dornbusch and Sebastian Edwards back in the 1990s. They argued that populist regimes used a variety of policies--protectionism, agrarian reforms, controls and regulations, and the nationalization of large companies--but they argue that perhaps defining theme was a strong rise government spending.

At first, this rise in spending of often stimulated the economy, and in some cases a populist leader also had good economic luck --like an oil-exporting economy experiencing a rise in the price of oil. At this stage, there was often a lot of preening about how the populist prescription worked. There are often price controls to assure that everything remains affordable, and inflows of imported products as well. But as government budget deficits climb, the inflow of imports increases trade deficits, and the price controls and regulations and nationalizations start to choke off economic flexibility, problems start arising: shortages of goods and black markets, wages not keeping up with soaring inflation, macroeconomic problems repaying debt. Of course, a populist leader can use all these problems  to claim that even more extreme policies are needed, but economics is not a subject that greatly respects one's wishes. Eventually there is a crash and a clean-up.

Venezuela, or perhaps Greece, offer some recent examples of this kind of populism. But when talking about economic roots of modern populism, most commenters have in mind something less extreme. They are talking about communities that suffered economically during the Great Recession, or that suffered from the China import shock of the early 2000s, or that feel that their jobs and local cultural patterns are threatened by a surge of immigrants. As a result, the argument goes, they are motivated to vote for leaders who certainly aren't the same as classic  Latin American populists like Juan Peron in Argentina or Hugo Chavez in Venezuela, but for politicians and causes that seem to have a populist tinge: for Brexit in the UK, or the Alternative für Deutschland in Germany, the Sweden Democrats in Sweden, or for Donald Trump in the United States. The JEP essay by Italo Colantone and Piero Stanig goes through the connections from economic disruptions to support for populist parties in the context of European countries.

Cultural Manifestations of Populism

The economic roots of populism clearly have some explanatory power, but one can raise legitimate questions about whether they are the core driving force of modern populism.

For example, Yotam Margalit in his JEP essay points out that a number of studies focus on, say, how many votes for Brexit or President Trump and be traced to communities that were most severely hit by the China import shock or the Great Recession. One can often make a case that these economic events shifted  few percentage points of the vote, and so in a close election, they may have tipped the balance. But as Margalit notes, saying that a negative economic event changed voting patterns by a few percentage points doesn't explain the entire rest of the vote. When explaining support for populism, it seems important to consider not just the economic factors that affected 2-3% of the vote and tipped the balance in an election, but also the other 48-49% of the vote which did not depend on those economic factors. From this viewpoint, economic factor matter, but they are far from the entire story.

Concern over immigration is clearly a major issue uniting many modern populist parties. But it's not obvious that the economic consequences of immigration are the real issue here. It turns out that anti-immigration sentiment is often stronger in areas that have experienced negative economic shocks --whether or not those area have actually experiences more immigration. It also turns out that in public opinion surveys about immigration, anti-immigration sentiment is often much stronger if the questions specifically ask about immigrants who don't speak the language of the new country or who come from countries with different cultural or religious contexts. Margalit describes an alternative to a view that emphasizes economic causes as the roots of populism:
On this view, long-term structural social developments— increased access to higher education, growing ethnic diversity, urbanization, more equal gender roles—have led to greater acceptance of diverse lifestyles, religions, and cultures. These changes, and the perceived displacement of traditional social values, have caused a sense of resentment among segments of the population in the West, particularly among white men, older people, conservatives, and those with less formal qualifications. Increased exposure to foreign influences that comes with globalization, and even more so the effects of waves of immigration, has exacerbated the sense of a cultural and demographic threat. As a result, formerly predominant majorities have felt their social standing erode and have become increasingly receptive to populist charges against a disconnected, cosmopolitan elite that has turned its back on them. They have also bought into the populist nostalgia for a “golden age” of cultural homogeneity, traditional values, and a strong national identity. Hard economic times undermine the perceived competence of the economic and political elites and thus help fuel the populist distrust in them. Yet by this account, adverse economic change is a contributing factor and possibly a trigger. However, is not the root cause of widespread populist support.
Is Modern Populism Left or Right?  

In a US context, my sense is that populism has some appeal on all sides of the political spectrum, albeit in different ways.

For example, President Trump sounds populist notes with his "Drain the Swamp," "Fake News," and "Build the Wall" rhetoric. He seeks to build an image of himself as working on behalf of the ordinary people, who have not had their interests protected by international trade agreements and a lack of border enforcement. Populist leaders often seek to borrow and spend to stimulate the economy, and believe that the central bank should subordinate itself to this agenda. Trump follows these paterns. Populists often try to expand executive power, and take whatever actions they can by fiat, while lashing out at other institutions like Congress and the media. Trump has a PhD in lashing out.

But it seems clear that many Democratic politicians are offering appeals with a populist tone, too.  For example, the rhetoric from Senators Warren and Sanders about protecting the ordinary people from the predations of capitalism, corporate management, Wall Street, and the global economy often has a Trumpian tone. If populism is defined in part by politicians who promise dramatically higher spending, Warren and Sanders fit the bill. If populism is about expanding executive power, President Obama was the one who memorably stated "I've got a pen, and I've got a phone," meaning that he would advance his policy agenda without working through Congress or the court system. Just as Trump has use executive authority to undo a number of the Obama administration pen-and-phone directives, Warren, Sanders, Biden, and others are promising to use executive power reinstate them and to add others of their own. When Democrats suggest packing the Supreme Court, ending the electoral college, and monitoring or limiting what political commentary will be allowed online or in advertisements, they are pushing back on  some of the established institutional constraints on power.

Of course, none of this is to say that leading Democratic candidates are "just like" President Trump. (No prominent American politician in my lifetime, of any party, is "just like" Trump.) For example, it seems plausible to argue that the Democrats are more likely to enunciate their views in the language of  economic populism, while Republicans are more likely to enunciate their views in the language of cultural populism. But there is some overlap here, and my point is that some deeper elements of the populist stance attract public support across party lines.

Is Modern Populism a Sign of a New Political Divide? 

For much of my lifetime, it has been common to characterize the main US political divide as labor vs. capital, or workers vs. corporations. But the divisions of modern populism don't quite work in this way. Colantone and Stanig describe the shift in this way:
[T]he recent political shifts may reflect a structural realignment of social groups and parties along new political dividing lines, which might be here to stay. In the half century after World War II, the politics of advanced western European democracies were structured to a large extent by a conflict between labor and owners of capital, and took the form of choices between more reliance on markets and deeper state intervention in the context of European economic and political integration. In the coming years, political conflict might capture a fundamental contraposition between winners and losers of structural changes in the economy, and may be centered mainly on a cosmopolitan versus nationalist conflict. The result could well be a credible restructuring of current traditional parties or the emergence of new parties that might assemble social constituencies in favor of inclusive globalization and technological progress. As such changes occur, the representation of vulnerable segments of society is not bound to be a prerogative of economic nationalist and radical-right forces. The challenge for believers in liberal policies is how to popularize a version of embedded liberalism that will be responsive to the current challenges of slow growth and structural economic shifts. 
Other writers have touched on a similar theme, but focusing on how modern societies are being sorted into urban areas where people live in a multicultural and international day-to-day world, often with socially liberal values, and who are reaping many of the benefits of economic growth, and those who are living in smaller cities and rural areas and see their local economy as stagnating and their place in society as diminishing.

The fundamental challenge is that we are living in a time of powerful underlying changes: in technology, communication, globalization, corporate structure, jobs, geographical sorting, marital sorting, an aging population, environmental dangers, and others. The stresses created by these changes are real, and addressing them is hard. But the populist impulse, whether it arrives from the right or the left, is rooted in would-be authoritarian executives who stoke us-vs.-them social divisions while trumpeting their unrealistic or harmful policies as an easy answer.