Populists have a point, the old system has to change
The economic insecurity and fears about identity that they exploit must be addressed
“A spectre is haunting the world: populism.” Those words date back to an international conference on the subject held at the London School of Economics in 1967. But they could have been written today.
Populist leaders are tapping into anti-establishment sentiment, claiming to represent the real “will of the people”. Whether on the right or the left, their parties are anti-elitist and antipluralist. Anyone who disagrees is an “enemy of the people”, be they judges, academics or journalists. This antipluralist streak is what makes populists a threat to democracy. To counter this spectre, we must address the economic insecurity and fears about identity that populists have been able to exploit.
The combination of technological change and globalisation has seen huge gains for the richest 1% everywhere and the middle class in emerging markets. The lower-middle and working class in most advanced economies have suffered. The McKinsey Global Institute found about two-thirds of households in 25 advanced economies experienced flat or falling incomes between 2005 and 2014, with young and less-educated workers the hardest hit.
Part of the solution lies in familiar policies that many countries have failed to implement adequately — investment in education and skills, infrastructure in poorer regions, and redistribution financed by higher taxation. But governments also need more creative policies that enable their economies to be flexible while giving workers security.
Consider the Danish model of “flexicurity” which allows employers to dismiss workers relatively easily, but compensates those same workers with generous social security and mandatory life-long learning provisions. This model requires unions and workers to shift their focus from “job security” to “income security”. And employers must accept the price of flexibility is higher taxes and more investment in people.
We also need to make part-time work easier, with benefits that are portable. As part-time work becomes more common, these flexible workers must be provided with greater security, as in the Netherlands, where about half of workers are part-time.
There are also familiar, albeit difficult, reforms to make our governments more truly democratic. This includes reducing the influence of special interests, enforcing term limits, encouraging politicians to be honest with the public, and decentralising more decisions to give citizens more real power.
Perhaps the most difficult challenge will be to develop a counter-narrative on identity that defines who “we” are. This has become more complicated in globalised and multicultural societies.
Much of the discussion about identity in recent years has focused on those things that make us different — race, gender, sexual orientation and religion. Things that bind us — shared values, history, food, sport and national events — deserve more emphasis. Consider the impact of the London Olympics or The Great British Bake Off in defining an inclusive sense of Britishness. Or the unity fostered by the diverse French football team at the 2018 World Cup.
Populists are succeeding because mainstream parties have failed to provide a credible vision for shared prosperity, economic security and common identity.
History suggests how this story will play out. Populists will occupy the state, engage in patronage, suppress critics and try to thwart independent judges, regulators and the media. They will also overspend to buy off their supporters, ending in either a fiscal or balance of payments crisis or both.
To ward off the populist threat, we cannot pretend that the old system was fine, but must address the very legitimate grievances that populists identified, while retaining the values of democracy and pluralism that they are trying to destroy.
Shafik is director of the London School of Economics and Political Science
© Financial Times, 2019