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The Deadly Cocktail:
Nationalism, Populism, and Inequality
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By Jørgen Ørstrøm Møller
The current political system and economic model are both in deep crisis. The political system is rapidly losing its last shreds of public confidence, while the economic model continually demonstrates impotence in dealing with a crisis brought about by flaws in its design.
None of this should come as a surprise. Any political system and economic model respond to the challenge of the dominating worldview in the given era or age of civilization. Industrialization gave birth to liberal democracy and American style capitalism. As industrialization now fades away, the accompanying political system and economic model do so, too.
We are now living amid the transition to a future system, one whose outline we may just discern in the distance. That transition could be a highly turbulent one, due to three strong and unpleasant dangers: nationalism, populism, and inequalities.
Nationalism
Nationalism is growing in most nation-states.
The explanation is found in globalization’s creation of uncertainties about jobs. Former British Minister and former Member of the European Commission Peter Mandelson puts it like this: “Opportunities for many, uncertainty for most.” Fundamentally, people shy away from sharing jobs, income, and wealth with others outside the circle of common culture and shared values. Growing immigration in countries that used to be unicultural but now see several, sometimes non-congruent cultures inside their borders, accentuates what is fast becoming an identity problem.
Under pressure from economic uncertainty and clashes between cultures, many people seek refuge in nationalism, blaming “foreigners” for the problems that they themselves encounter in their daily lives.
This trend poses a danger to the future of globalization for two reasons.
First, it lures politicians into pandering to nationalist-minded voters and gradually eroding the post-war gains made by free trade, international investment, and more flexible rules governing immigration. The international division of labor does not look so secure anymore. Second, the only way to solidify the ever-deepening international supply chain is through economic integration—which means transferring some political decision making from the national to the international level. But is this possible when people mistrust persons from other countries?
The dialogue between politicians and populations breaks down under the weight of mutual distrust. Gradually countries are becoming ungovernable and must rely more and more on international institutions, international communities, and other countries to bail them out. Such actions serve as proof in the eyes of a large part of a country’s population that foreigners are indeed to blame for the nation’s troubles.
Any attempt to shift the political decision making process onto the same level as the economic and industrial phenomena that it is designed to control runs into nationalism as a barrier. Often, the result is an implacable dichotomy between global economy and national decision-making. The system thus remains impotent.
Populism
The long period of a steadily rising living standards has convinced many people that they have an absolute right to get more every year. Unfortunately, we are now moving into an era where there appears to be less to distribute, at least relatively.
Politicians know they depend upon a mandate given by the people—more clearly so in democracies than in other systems, but basically all political systems need the support of the people. They therefore shy away from presenting unwelcome truths, even though they know them, to the people. And so the merry-go-round starts.
Politicians attempt to circumvent the hard facts by doing two things. First, they encroach upon the future by running up deficits and debts, which we have seen over the last decades. This shifts to future generations the burden of paying for the present one’s chronic overconsumption. It buys some time, but the birds let loose come home to roost very soon.
Our built-up deficits and debts are now demanding painful adjustments. People react by accusing politicians of having reneged on their promises. Politicians, in their turn, attempt to make good on those promises by going ever further down the drain—using future income and hiking up deficits and debts.
Second, the nationalistic card is brought into play. The angry public is told that their problems are due to foreigners or the outside world or to globalization, thus adding petrol to the already burning fires of nationalism.
Whenever politicians fail to explain complicated problems, the whole idea of representative democracy is jeopardized. People have never been expected to fully understand such issues, but formerly there was a higher degree of trust between politicians and populations. The great majority may not have fully understood the issues, but they trusted politicians’ saying that such-and-such would be beneficial for society overall despite the cost.
But no longer. The panoply of new instruments of communication constantly undermines the trustworthiness of politicians and, more important still, it blurs the distinction between politicians and experts. Who is to be believed? The average person ends up believing no one and embraces simple solutions that are often populist.
This can be seen in the U.S. with the Tea Party and with various right-wing parties in Europe and, to a certain extent, in Asia. The result is that “hard” decisions become even more difficult to make. And, even once they have been made by governments and endorsed by parliament, forces outside the parliamentary system quickly move in to delegitimize the measures and reap the resulting harvest of confusion and discontent.
Outside forces, very often populist in nature, use the new communication instruments faster and more effectively than the governing establishment to market simple answers appealing to the public, who may never realize that the wool has been pulled over their eyes.
The political system is forced into a defensive role. It has to respond to all kinds of criticism, claims, and loose allegations that often lack any supporting evidence but nonetheless convey the impression the system is hiding something.
As the perception that the political system cannot be relied upon gradually gains ground, government’s effectiveness crumbles. It is impossible for the established political culture to guess or foresee where and how the next attack will fall because the public is often guided by emotions, while the machinery of government depends upon reason and logic.
Formerly, the debate was steered by political parties. Now it is often dominated by unknown sources, each with its own agenda but without any responsibility for governing the country. It is almost comparable to a military superpower fighting a guerrilla war. One side has all the power to win but does not know where to apply it.
Inequalities
Few dispute that economic globalization in the form of American-style capitalism delivers higher economic growth than any other imaginable model. The problem is that the flow of benefits it generates are not distributed evenly.
The Gini coefficient used to measure inequality has gone up for almost all countries in recent decades. In the U.S., the income share now going to the top 1% of the population is 20%, up from 8% in 1973. Simultaneously, the top 1% owned 33% of wealth, while the bottom 80% owned a mere 15%. For China, the Gini coefficient rose from 32% in 1978 to 50% in 2006. Note that the threshold for raising the red flag is about 40%.
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