Guido Tabellini is one of the world’s leading economists. He was consultant to the World Bank and is past president to the European Economist Association.
On October 29 , 2019 Guido Tabellini was asked by VOX EU to write a lead colomn for their debate on populism, titled: the Rise Of Populism.
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Guido Tabellini wrote this colomn as a lead commentary in the VoxEU debate Populism
October 29, 2019
Despite an increase in economic inequality and a decline in social mobility, today those who are ‘left behind’ seem to care more about immigration and civil rights than they do about redistribution, and sometimes support policies that run counter to their economic interests. This column, part of the Vox debate on populism, offers a potential explanation for this: a shift from the traditional class-based distinction and divide between left and right to a distinction based on cultural attitudes and education. This change is having profound effects on the political systems of advanced democracies organised along the traditional left versus right divide.
The rise of new political movements is transforming the political systems of many advanced democracies. Three changes in particular are taking place.
These changes are related to each other. Traditional parties have found it difficult to position themselves on the new political dimensions, either out of fear of losing their traditional support base, because party insiders would block such changes, or because their policy promises would lack credibility on these new dimensions. As a result, the political vacuum has been filled by new political parties (or in majoritarian electoral systems, where entry of new parties is difficult, by new political leaders). To emphasise their novelty, but also to appeal to a less educated and disappointed base of supporters, the new parties have adopted a populist rhetoric, and in many cases the new politicians are true outsiders not only in the political system but also in labour markets and in social environments (Dal Bó et al. 2019).
Several explanations have been put forward to account for these phenomena. According to the cultural backlash hypothesis, less educated and more traditional voters are reacting to a gradual erosion of their value system in a society that they perceive as too progressive and cosmopolitan (Norris and Inglehart 2018, Fukuyama 2018, Goodhart 2017). Others have suggested that the consensus for the new populist parties is a reaction to economic distress. In survey data and in actual voting outcomes, populist support is systematically correlated with economic insecurity (Guiso et al. 2017), loss of social status (Gidron and Hall 2017), and adverse trade shocks (Autor et al. 2017, Colantone and Stanig 2017, 2018).
It is likely that both kinds of explanation capture important aspects of what is happening. Nevertheless, an important puzzle remains. In the past, economic adversity triggered a demand for protection through the welfare state, and this benefitted social democratic parties and reinforced the trade unions. Now the opposite is happening – adverse economic shocks push voters towards socially conservative politicians that sometimes campaign on platforms of welfare state retrenchment and are not paladins of redistributive economic policies. Despite a large increase in economic inequality and a decline of social mobility, those who are left behind seem to care more about immigration and civil rights than they do about redistribution, and sometimes they support economic policies that run counter to their economic interests. Why?
A possible answer is that this reflects the supply side of politics, and in particular a shift of social democratic parties in favour of socially progressive policies and deregulation, neglecting the wishes and interests of their traditional supporters (Judt 2011). In the absence of other political options, the losers from globalisation and technological advances turned towards the new populist parties. The rise of populism is a global phenomenon, however, and it is unsatisfactory to explain it as the result of policy mistakes by mainstream politicians on the left. How is it possible that social democratic parties everywhere made such a huge political mistake?
In Gennaioli and Tabellini (2018), we propose an alternative answer, based exclusively on the demand side of political systems. Politics is about opposing social groups: us versus them. But who is ‘us’ and who is ‘them’? In the past, this had to do with class-based distinctions and the divide between left and right. As emphasised by Norris and Inglehart (2018), Fukuyama (2018) and others, social and economic changes have increased the relevance of another distinction, based on cultural attitudes and education. Globalisation and technology have enhanced the relevance of this distinction, because winners and losers in the new economic environment are largely partitioned by the educational and cultural divide.
Why is this redefinition of politically relevant social groups important? Social psychologists have documented that social categorisations, while helpful for structuring the social world, come with cognitive distortions. We oversimplify and exaggerate differences between social groups. Moreover, as we identify with a particular social group, we slant our beliefs towards the distinctive features of this group. If ‘us’ is the working class and ‘them’ is the capitalist bourgeoisie, conflict centres on traditional left versus right economic and redistributive policies. A class-conscious left-wing voter exaggerates the benefits of redistributive taxation and of a large welfare state, while his right-wing opponent has the opposite conviction.
When politically relevant social groups are redefined, however, belief distortions and policy attitudes change. If ‘them’ is the cosmopolitan and highly educated urban elite and ‘us’ is the less educated and more socially conservative provincial residents, conflict centres on globalisation, civil rights, and immigration. Now polarisation over these new issues is exacerbated, while traditional left–right conflict over the welfare state is dampened.
Thus, switching social identities and the resulting changes in beliefs and policy preferences can explain why economic distress is associated with waning economic support for redistribution and an increase in social conservatism. Economic shocks hitting socially conservative and less educated social strata have enhanced similarity within this group. The distinctive traits of losers from globalisation and technology are a low education and social conservatism, not being member of a trade union or being very poor. The policies that are demanded reflect these distinctive group traits, and they entail an exaggerated perception of group conflict along the dimension defining the new social identities.
Although the changes described above reflect long-term trends, the rise of populist parties has accelerated rapidly during the last decade or so. This coincides with two important events: the diffusion of social media, and the 2008 global financial crisis. It is very likely that both phenomena contributed to the success of the new populist parties.
The role of social media in explaining the success of populism remains to be studied more carefully (but see Guriev et al. 2019 and Zhuravskaya et al. 2019 for a survey). Nevertheless, it is quite likely that disintermediation of traditional sources of information has amplified the emotional reactions, stereotyping and belief distortions that are typically associated with political extremism. Moreover, by facilitating direct contact between citizens and political leaders, the new digital media have reduced the barriers to entry of new political organisations.
The accelerated diffusion of populism after the latest financial crisis cannot be a coincidence. As shown by Funke et al. (2015) and Mian et al. (2014), past financial crises were also followed by a radicalisation of political conflict and by the rise of new extremist parties. This is not too surprising. A financial crisis can easily be blamed on the political and economic establishment, and this induces a loss of trust in existing institutions and in mainstream political parties, favouring in turn the emergence of new political leaders (Algan et al. 2017). Moreover, populist politicians are very risky, because they are new and untested and because they support more radical and unconventional policies. As suggested by prospect theory (Quattrone and Tversky 1988), this intrinsic riskiness makes populist politicians attractive to disappointed voters, who welcome risk because it gives them a chance to make up what they have lost. Survey data from the German SOEP confirm that voters who have become very dissatisfied with their economic situation tend to become very risk-loving and to switch towards right-wing populist parties (Panunzi et al. 2019).
If the views summarised above are correct, the rise of populism is not a transitory phenomenon but is here to stay. Globalisation and technological advances are not temporary shocks. The educational and cultural divide associated with these structural changes will not reverse; if anything, it is likely to gain further relevance. Likewise, the fall in social mobility and the increased polarisation between prosperous and left-behind regions are likely to reinforce anti-establishment sentiments and economic disappointment.
These changes have profound effects on the political systems of advanced democracies. Almost everywhere, party systems were organised along the traditional left versus right divide. The new dimension of political conflict cuts across this divide. In a proportional electoral system, where the entry of new parties is easier, this change was accommodated by the rise of new populist parties. Under majoritarian elections, such as in the US and the UK, the new dimension of political conflict is splitting existing parties, with outcomes that are hard to predict. In both electoral systems, what was largely a one-dimensional political conflict has now become a two-dimensional conflict: left versus right, and cosmopolitan versus nationalist. This second dimension largely overlaps with being either part of or against the economic and political establishment, and in Europe it also centres on European integration.
Once the dust has settled, is there hope that these changes will be for the good? An optimist might argue that, by giving better representation to neglected political interests, the rise of populism will improve the conditions of the losers from modernisation and will bring about more equitable and inclusive economic outcomes. I am more sceptical, for several reasons. With their anti-establishment rhetoric, populist parties tend to be ill advised and often advocate – and when in office, pursue – policies that are inconsistent or known to be counter-productive. The risk of policy mistakes is enhanced by three factors: first, the bias against redistribution that often accompanies right wing populism; second, the urgency of achieving immediate results, which can easily lead to the implementation of myopic policies; and third, political extremism and the advocacy of radical new policies, which inevitably entails greater risk taking. The lessons from populism in Latin America are not encouraging in these respects.
The spread of nationalism poses another vital threat, not to domestic politics but to the world order. Looking ahead, some of the most pressing policy issues will require global solutions. Nationalist politicians instead advocate or pursue the dismantling of supra-national organisations. Rather than moving forward, they take several steps backwards. Nationalists may have a point when they complain that globalisation and technological advances are leaving too many people behind. But solutions cannot be found by reverting to bilateral negotiations by nation states. On the contrary, supra-national institutions need to be strengthened and to have a much broader scope. This is the biggest danger from the rise of populist and nationalist movements – they want to take the world order in the opposite direction of where we ought to go.
