Insight
Populism – culture or economics? by John Springford and Simon Tilford 30 October 2017
Are economic factors to blame for the rise of populism, or is it a cultural backlash? The answer is a bit of both: economic weakness strengthens social conservatives’ illiberal views. Can the wave of right-wing, nationalist populism sweeping the developed world be explained by legitimate economic grievances or does it have its roots in a cultural backlash against liberalism and immigration? There is no doubt that poor economic performance provides part of the explanation, but it does not alone explain what is happening. After all, some developed countries that suffered most during the downturn, and which still face serious economic pressures, such as Italy and Spain, have not fallen under the populist spell. Conversely, some of the countries that have suffered least economically over the last ten years, such as Austria and the Netherlands, have experienced strong populist pressures. The behaviour of elites and the readiness of mainstream parties to adopt the policies of the populists helps to explain why some countries have succumbed and others not. Economic developments in the West over the last 20 years have been unprecedented. Growth in real median incomes has slowed sharply, and barely grown at all over the last ten years, at least in the US and the UK (see chart 1). Median income is the amount that divides the income distribution into two equal groups, half having income above that amount, and half having income below it. There is no comparable real median income data for most European countries, but data for mean real wages – which divides the total labour income by the number of employees and hence does not account for changes in the income distribution – confirm the slowdown in overall income growth. The data for Italy, Spain and Germany are striking. Since 1997, mean incomes rose by less than 10 percent in all three and by just 2 per cent in Italy. We know that income inequality rose in all three countries over this period, so median wages will have grown even less than mean incomes.
CER INSIGHT: Populism – culture or economics? 30 OCTOBER 2017
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