The Populism Backlash: An Economically Driven Backlash

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Yves here. Please read past the pearl-cultching opening remarks about naive and short-sighted populism and focus on the analysis.

By Luigi Guiso, Axa Professor of Household Finance, Einaudi Institute for Economics and Finance, Helios Herrera, Associate Professor, Department of Economics, University of Warwick, Massimo Morelli, Professor, Department of Policy Analysis and Public Management, Bocconi University, and Tommaso Sonno,Ph.D. Candidate in Economics, Université Catholique de Louvain and London School of Economics. Originally published at VoxEU

There has been some disagreement over the roots of the recent rise of populism in Europe. This column examines variations in exposure to economic shocks and in ability to react to them in different regions of Europe to show that the cultural backlash against globalisation has been driven by economic woes. In regions where globalisation was present but that have benefited economically, there has been no such backlash and the populist message has retreated. The message is clear: if one wants to defeat populism, one must defeat first economic insecurity.

The surge of populism in Europe and the US has often put at the centre stage three ideological actors of society: the people, the elite, and the ‘other’ (foreigners, immigrants) to whom, in the populist narrative, the elite has sold the people out.

Populist policies have often picked convenient scapegoats for economic grievances, while hiding real policy trade-offs. They have mastered the art of ‘follow-ship’ as opposed to leadership, where everything has become more short-term and responsive to instant polls. National short-term concerns have become paramount and states, rather than seeing common good for the long run, have become ‘inward-focused’ both in terms of time and space.

What has caused the rise of populist parties in continental Europe? Are the roots of the success of populist platforms cultural, as some researchers advocate, or are they mainly economic as others – us among them – have pointed out?

Rodrik (2018) distinguishes between left-wing and right-wing variants of populism, which differ with respect to the societal cleavages that populist politicians highlight, and argues that these different reactions are related to the relative salience of different types of globalisation shocks. Colantone and Stanig (2018) analyse the impact Chinese import shock and show that this triggered an increase in support for nationalist and radical right parties in Western Europe.

In a recent paper, we show how different exposure to economic shocks and different ability to react to them in different regions of Europe sheds light on these questions (Guiso et al. 2018). We study how the populist vote share1across European regions responded to two major economic shocks: the globalisation shock (i.e. the ‘China Effect’) and the European financial crisis of 2008-2013. Both shocks, in principle, caused economic distress and insecurity, but not equally everywhere. The China Effect – the increased economic insecurity following the globalisation shocks – is known to have boosted populist support in Europe as much as in the US, but we provide two novel and perhaps unexpected findings.

First, the populist-boosting effect is only present in regions of Western Europe, whereas in the industrial regions of Eastern Europe most exposed to globalisation, the globalisation shock has instead a negative (dampening) effect on populist support and vote shares. In fact, in Eastern Europe globalisation was good news, since it brought job opportunities thanks to the relocation of firms from Western Europe. This strongly suggests that economic winners and losers of globalisation are behind the ups and downs of populist voting.

Second, the globalisation shock has a substantially larger effect on populist support in euro area countries than in other comparable Western countries. This finding may be puzzling as all Western European countries were similarly exposed to China import competition. However, euro area countries were not equally capable of reacting to this shock. Indeed, euro area countries were constrained in their policies by what we call a ‘policy strait jacket’: constraints imposed by the single currency which prevented adopting the ‘best’ domestic policies to counteract the shock, for instance through a devaluation of the currency. We estimate that the policy strait jacket effect explains three-quarters of the greater consensus to populist parties in the euro area compared to Western non-euro area European countries. The role of the policy strait jacket in fuelling populist consensus emerges most clearly during the financial crisis and the European sovereign debt crisis. The financial crisis created populist consensus across the board, but its effects were most dramatic in the euro area and particularly in those countries, like Italy, where the strait jacket was particularly tight. This policy strait jacket amplified the effects of the shock, or at least created the perception that it was in part to blame for the lack of recovery. This, in turn, sparked frustration among voters and disappointment towards the domestic and European elites opening the ground to populist proposals.

Consistent with this interpretation, confidence in European institutions and in the ECB has dropped dramatically in the euro area countries and only mildly in non-euro area countries (see Figure 1). Interestingly, among the former countries the voter frustration was greater precisely where the policy strait jacket was tighter, as Figure 2 neatly documents.

Figure 1 The populist strait jacket and trust…

a) … in the European Parliament


b) … in the ECB


Figure 2 Trust in…

a) … the ECB


b) … the European Commission


The above results underline the fact that the deep cause of populism cannot be culture, it is economics.  This view is confirmed in our complementary study using individual survey data instead based on the European Social Survey (ESS), which maps the attitudes, beliefs, and behaviour patterns of European citizens taking place every two years since September 2002, by means of face-to-face interviews (Guiso et al. 2017). The ESS, besides reporting on voter’s attitudes towards immigration and traditional politics, also asks people whether they voted in the last parliamentary election in their country and which party they voted for. Therefore, it is possible to identify whether a populist party was voted for. A pseudo-panel analysis allows to study changes in individual economic insecurity and changes in attitudes such as distrust in political parties and anti-immigration sentiments, which are often taken as measures of cultural traits.

Figure 3 Economic insecurity and…

a) … trust in political parties


b) … sentiments towards immigrants


Notes: The figure shows the binned scatterplot (20 equal-sized bins) and linear regressions of the change in economic insecurity (x-axis) and the change in trust in political parties (y-axis, left figure, 3,134 observations) and attitudes against immigrants (y-axis, right figure, 3,666 observations) in the synthetic cohorts panel.

We show that the populist drive comes from the ‘barely coping’, who have developed a disgust with the political establishment prompting them to abstain from voting, and a disgust with immigrants that has prompted them to vote populist. However, behind this deterioration in these attitudes is the worsening of economic insecurity: voters who suffer from economic misfortune lose faith in institutions and develop anti-immigrant sentiments (Figure 3). Hence, economic insecurity drives up the populist vote both directly but also indirectly by affecting two key sentiments: anti-immigration and distrust for traditional politics. The directimpact of economic insecurity on the populist vote share and the indirect impact through distrust trust in politics is just through voter apathy: economic insecurity has driven mistrust in traditional politics which, in turn, drove down turnout for traditional parties, indirectly increasing the vote share of populist parties. The indirectimpact, on the other hand, through anti-immigrant sentiments is explicitly though an increase of the populist vote. Economic insecurity has driven the anti-immigrant sentiment among the barely coping, which in turn successfully drove up turnout for populist parties.

In sum the populist strategy of scapegoating immigrants was very successful – the immigration card has proven to be a powerful grievance that could be awakened by economic downturns.  Moreover, countries where a populist party is present have much more anti-immigrant sentiments, which suggests that the populist rhetoric affects greatly these sentiments.

The cultural backlash against globalisation, traditional politics and institutions, immigration, and automation cannot be an exogenous occurrence, it is driven by economic woes. In fact, as we show, in regions where globalisation was present but have benefited economically there is no such cultural backlash at all and the populist message has retreated. The policy implication and take-home message that stems from our results is clear: if one wants to defeat populism, one must defeat first economic insecurity.

Can consensus towards populist forces persist even after economic insecurity has been reabsorbed? This is the key question today. While the documented culture backlash cannot be the root cause of populist success as it is itself borne out of economic insecurity, it may play a crucial role looking forward. If the new identity politics succeeds in reshaping peoples’ beliefs and attitudes, sentiments can acquire an autonomous role and may continue to exert an effect even when their economic cause is gone.

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  1. Eustache De Saint Pierre

    I don’t understand why this is simply not obvious to everyone as there are historical examples aplenty – Weimar at the end of the twenties being the most obvious & the simple fact that when resources become scarce, it rarely brings out the best in us. My suspicion is that policy makers who tend to be true believers looking down from their ivory towers, would rather not be faced with the truth of the consequences of their actions, or really do not give a damn anyway.

    My eighty two year old Mother voted for Brexit & her reasons for doing so, were because she had over the years been witness to a steady decline in her local environment, from what was once a thriving community built around the workplace – my occasional visits over the years only confirm this. You will have to take my word for it, but she has not got a racist bone in her body, but her concerns over immigration were founded on a chat to a local headmistress while picking up her Grandson, who related to her the problems they were having teaching twelve languages, while at the same time having their funding constantly cut – Pakistani taxi drivers using the gable end of her flat as a urinal has also not helped matters.

    She also told me that in her opinion the young do not know what has been lost, as they have no experience of how it once was & the now for them is their everyday normal.

    1. J Sterling

      The article was an exercise in Bulverism. It started with the assumption that the people the author disagreed with were fools, and quickly moved on to an explanation of why the fools might be fools.

      1. Eustache De Saint Pierre

        I suppose that my Mother could live to regret her vote, which came mainly from frustration as she had not bothered to vote otherwise for a few years, as she is correctly of the opinion that the Labour stronghold she lives in has not done anything for those who it purports to support. She lives in a once thriving market town that now only the word dead could be used to describe it adequately. Meanwhile the local Labour politicians have built themselves a plush new HQ in the post modern European style, while leaving perfectly adequate premises to presumably rot.

        Unless they come up with something pretty quick I don’t see any likelihood of a change in the fortunes of the many & I am I believe correct that he does not see any need to question immigration policy, but suggest that Identity Politics might save the day. Perhaps for the young, but from my experience it is presently causing resentment, as with the aftermath of the Rotherham sex scandal when basically nothing had been done as the authorities were in fear of being labelled racist – i share my Mother’s position of people can be good or bad whatever shade they happen to come in.

        I believe that those who are pushing the IP agenda by urging people to come out & dumping extra labour into already stressed areas, are risking an eventual backlash which of course will not fall on them – something which would lead to the instigators of IP shedding crocodile tears, while feeling free to insult & rage against the remaining group of people whose identity apparently now counts for nothing.

  2. Vox Populi

    Politicians are taking clearly side, not for the people who voted them in the office in the first place, but for banks, globalist foundations, cultural marxists, media and big corporations.

    Another world is betrayal.

    But it is for all to see that in the Western world, “foundations” are poisoning the population en-masse and setting up kids against parents, pupil against teachers, black against white, poor against rich and woman against man.

    The aim is chaos and uncertainty for a prolonged period so that at the end the population will, instigated by the media, ask for a strong (paid-off) leader.

    Not sure if you watched the documentary “The Century of Self”: you can enslave the population, throw them in jail, tax them 100%, beat them to pulp, etc. All fine.
    But touch their culture, and you are dead. Just a matter of time.

      1. jsn

        “Cultural Marxism” is a right wing talking point designed to keep the left hopelessly stitched to the feckless liberalism of the Democrat party.

      2. RepubAnon

        As Hagbard Celine would observe, Marxism is the new fnord (for Illuminatus! Trilogy fans).

        In other words, everyone on the right knows that Marxism is bad – so characterizing ideas that they don’t like as “Cultural Marxism” helps tag these ideas as evil encarnate in the minds of their followers and shuts down debate.

        For Democrats, the equivalent would be “Trumpian Culture.”

        1. drumlin woodchuckles

          Maybe that phrase could be re-written to . . . “Cultural Trumpism” for ease-of-saying and snappier sounding.

  3. TedHunter

    Well done. Unlike the economic argument, the more facile cultural argument seems to be more popular, even if wrong. But:

    Can consensus towards populist forces persist even after economic insecurity has been reabsorbed? This is the key question today.

    Eh, no. The key question is if, how and when economic insecurity will decline, if at all. And how the hell can you “reabsorb” economic insecurity?

    1. Carolinian

      Perhaps “culture” versus “economic” is an artificial distinction and the lowers recognize that cultural differences are just an outward manifestation of class exploitation–a kind of uniform or badge. In Pygmalion G.B.Shaw joked that you could give a flower girl a posh accent and she could become an aristocrat too. That works in reverse as well and I suspect one reason Hillary lost was that she so obviously lacked the “common touch.” Boasting about how smart you think you are is not necessarily good politics.

      1. ObjectiveFunction

        “Boasting about how smart you think you are is not necessarily good politics.”

        +3M. Copying the OTT rhetoric of the Stable Genius is a recipe for ruin, especially for the tone deaf smug set.

        TRUMP 2020: THE PIG LIKES IT

    2. RepubAnon

      When times are good, people don’t look for scapegoats. It’s only when times are bad, and resources are becoming increasingly scarce, that blaming their culture’s favorite scapegoats for the problems gets popular.

      I recall a friend of mine who adamantly denied being racist – but would routinely tell racial stereotypic jokes. People know racism isn’t socially acceptable in corporate circles these days, so they deny that they’re racist even as they talk in terms of racist stereotypes.

  4. Watt4Bob

    The policy implication and take-home message that stems from our results is clear: if one wants to defeat populism, one must defeat first economic insecurity.

    Two quibbles;

    1. This guy is Captain Obvious.

    2. How about we decide to ‘cure’ the cause instead of ‘defeat’ the symptoms.

    IMO, curing our economic ills naturally calms the populist impulse. This wouldn’t be an important quibble if it wasn’t for the singularly American tendency to frame our problems as requiring some sort of violent solution. The argument could be made that Americans see every problem as requiring some sort of war, whether starkly ‘real’, involving the military, or metaphorical.

    I would say that the government’s coordinated take-down of the Occupy movement was a perfect example of results of this mindset, and so are the inevitable mobs of ‘security’ personel clad in black, and $10K worth of body armor and weapons deployed to counter the populist impulse.

    Last night’s local news included a piece touting bullet-proof glass as a solution to school shootings, complete with window samples, still embedded with bullets, and six or eight proud, smiling business executives who clearly see school shootings as an opportunity to make some money.

    Need I mention the bat-sh*t crazy ‘War on Drugs’?

    I think we need to start thinking about fixing our problems rather than ‘defeating’ them.

    1. tegnost

      to point 1 yes that was a bit of a hurdle, luckily it’s not too long and does go somewhere in the end

    2. marku52

      I was commenting over at Drums site, and a guy there was “astonished” to learn that areas hurt by globalization was a determinant in voting for Trump.

      Honest, it had never occurred to him.

      So, obvious to us. Not obvious to hard core DNCers. In fact I’m pretty sure they are innoculated not to accept it, as it means their happy little neoliberal policies have helped create Trump.

      No, Can’t admit that.

  5. tegnost

    a little of an aside, but this para ISTM describes the party of the democrats perfectly…

    The cultural backlash against globalisation, traditional politics and institutions, immigration, and automation cannot be an exogenous occurrence, it is driven by economic woes. In fact, as we show, in regions where globalisation was present but have benefited economically there is no such cultural backlash at all and the populist message has retreated. The policy implication and take-home message that stems from our results is clear: if one wants to defeat populism, one must defeat first economic insecurity.

    Also, in the microcosm of the PNW the people who can still afford to live in seattle, not the precariites but the upper crust, mostly hillarites, have no problem with globalisation, while if you get out a little among the downtrodden globalisation is yet another unavoidable tragicomedy so seems to support the authors of the posts point

  6. anon48

    I agree that economics can have a major effect on populist tendencies…but I think to paint economics as the SOLE driver of populist direction is a little too broad a brushstroke. Which is what the article seemed to say to me.

    I think if you went back to the US in the late sixties and early seventies, many of the participants in the anti-war movement , given a definition of populism, would have viewed themselves as participating in a populist cause. A cause that was driven more by a philosophy of nonviolence than by economics…albeit there was anger among some that the sons of the elites could buy their way out of the draft. But from my perspective that was more a secondary reason to eliminate the draft rather than being the primary driving force behind the movement.

    Further, it seems you could make the same case about the civil rights movement. While again I believe economic standing played a significant part, the driving force behind that movement was more about equality. Just look at the nature of the watershed moments that triggered that movement…those moments weren’t about money but inequality.Granted, a case can also be made that the civil rights movement will continue on until economic equality is achieved. But that’s not what carried it forward in the early years, which is what the article would have implied.

    1. Cat Burglar

      TIME magazine used the term populism in 1972 when covering the McGovern candidacy — I remember because as a kid then, and I had to go look up the term. Maybe it had some accuracy because McGovern did represent a state from the historic center of turn-of-the-20th century agrarian populism, and because “the People” was often used to specify the political subject at the heart of the New Left.

      The function of the term is to allow public discussion of the political management problem posed by things like massive militant anti-war movements in the streets, powerful presidential candidates that have escaped elite funding trammels and vetting, or social groups that die too young. The great piece of ideological legerdemain that “populism” performs is that it allows discourse over controlling it without once mentioning the policies proposed by the movements, and so delegitimizes them. It also works for actors that are so socially cut off from the sources of social misery that they are truly ignorant — after all, none of their old college classmates are in trouble, so what is going on?

      Populism is a tipoff that if the cat is misbehaving, the owner needs to think about declawing her, kicking him, putting a shock collar on her, or locking him in a closet, but not letting her out, scooping his pan, or feeding them — that is what I take to be the moral content of the term.

      1. Amfortas the Hippie

        Cat:”…it allows discourse over controlling it without once mentioning the policies proposed by the movements, and so delegitimizes them.”
        aye. it’s a deflection…a red herring.
        anything to avoid that damned mirror.
        and, as someone said above: Captain Obvious wrote this,lol.
        It has been personally painful and disillusioning to watch run of the mill “Democrats” fall into “well they’re all racist, so lets ignore them until they deservedly die”.
        The anti “white”, anti Male, anti rural,and anti-anyone who thinks Economics Matters nonsense makes me not want to play any more.
        Rather than “Divide and Conquer” it’s “Divide, and Divide again, and prevent an Unassailable Majority”(with support beyond little old me, Bernie would have won in my blood red county.)

        1. Cat Burglar

          I live and work in rural red counties, and have seen the same thing — Sanders had big support among Trump voters because of his policies. My neighbor voted for Trump — a postal worker, fundamentalist christian, single mother —and was most angry at Clinton for denying her the chance to vote for Sanders: her kids need health care and college, and she is facing a very austere retirement after 30 years of work. I talked to a motel cleaner who told me, “Bernie just has to win, he has to.” She wasn’t talking about a moral imperative. I know a broken-down logger, still doing physical work, KKK tattoos on his arm from prison, eating his wife’s oxycontin to keep working — he went for Stein in the general election in 2012 because of single-payer.

          Really interesting to see how the Politically Correct (aka Identity Politics) tactic has morphed from something used in far-left political faction fights into a divide and rule tactic deployed by the elite center. The first mention of the tactic I have found was in the autobiography of Dorothy Healy, the Communist, in the 50s. I first met up with it in college in the 70s when the term was used in earnest in almost the original marxist-leninist sense, meaning something consistent with revolutionary politics. Anything that put members of oppressed groups in power was held to be politically correct by definition because their identity as oppressed could only result in revolutionary policy (cf, Obama, Thatcher).

          Pretty soon, the term was used with a wry smile — everyone had experienced people not in any sense oppressed using it as a moral posture tactic to dominate a meeting, or to get what they wanted. It shut people up. But nobody wanted to come out and say anything in those days, because often enough, feminists and people of color using the tactic were often right (and often still are).

          Eventually the term became a joke — I think it was after members of a marxist-leninist group continually blocked consensus during meetings of an anti-nuke alliance as they tried to take it over (they were finally shown the door when someone came to a meeting with copies of their paper showing their party actually supported nuclear power, just not capitalist nukes).

          It was a real education. As one friend told me.” Race, Class, Gender — in a university environment, almost nobody can check all three oppression boxes. So if they hit you with Gender, hit ’em with Race or Class. The important thing is, don’t laugh. You have to look concerned. They won’t know what hit them.” It works with sanctimonious Democrats. The Clintonite hits you with the-most-qualfied-woman-ever; you look concerned and wonder about her service on Wal-Mart’s board, their history of wage-discrimination against women, their workforce of color paid so low they have to go on public benefits or live in the parking lot; they abandon the high ground and start to apologize, say she had to be realistic, etc., etc. You will want to laugh, but keep that straight face — above all, do not give in to the urge to win an argument. These people are well intentioned, as often as not, and have been the objects of a determined propaganda campaign — your goal is to make an ally by persuading them to support single-payer and other policies, and to slowly get them to see they have been hoodwinked. We need them. The opposite of divide et impera is solidarity.

        2. marku52

          This. Anything but admit that their economic policies have benefited to top 10% by mashing the family blog out of everyone below.

          1. JBird

            Yeah, what you said. Which is why water is not wet.

            It’s also painful for me to see sites that I have been reading for years change into hate sites. If I say that maybe, just possibly that Clinton lost and Trump won because of something other than just sexism, racism, or stupidity, I become One of Those People. Socialism is a bad. Neoliberalism is a nonsense label.


            1. FluffytheObeseCat

              Yes. I’ve watched the same thing. The “Liberal Blogosphere” of 2006 is just a haven for preening self-admirers now. Their behavior is so obviously counter-productive it suggests on some level that they may have wanted to lose, rather than deal with the tacky business of governing. Governing would have put a damper on their trending lifestyles. People who govern spend their lives eating more rubber chicken than avacado toast.

  7. Brooklin Bridge

    if one wants to defeat populism, one must defeat first economic insecurity.

    And if one wants to encourage populism,…

    Just a hunch mind you, but I suspect our current masters have figured this out.

    1. John Wright

      One can be cynical and suspect the elites are pricing the cost of rising populism into their cost of doing business.

      If populism leads to more funding for the police or military, that may be a feature, not a bug, as increasing those expenditures tend to be US elite goals.

      So let populism rise, in a “let them eat cake” manner and dampen its effects by political contributions, increased police/military funding or more surveillance.

      If the cost of causing populism to occur as a result of elite policies DOES hit elite lifestyle/pocketbooks, then the USA might see some changes.

      We’ve watched Trump play the populist and the Clinton Democratic party squash the populist interloper Sanders.

      Remember Reagan’s 1980 debate with Carter?

      He asked this question:

      “Are you better off than you were four years ago? Is there more or less unemployment…than there was four years ago?”

      One could argue this is a populist leaning question, but used by Reagan, a long-term servant of the elite, to get elected.

      And he was.

      1. precariat

        Reagan or Trump using populism to get elected is the problem. It is seen as tool by the elites to manipulate and control. And when the populace is so silly as to use it for economic justice the marchers come out with their tiki-torches –calling up the symbolism of the nazis. To smear and divide and conquer. Elites may use it, but you may not take it seriously and effect change. “For me not for thee.”

  8. Thuto

    “…to defeat populism one must first defeat economic insecurity”. Yeah, except defeating populism through a reduction in economic insecurity would require more wealth trickling down to the “insecure” masses from the high tables of the elites and less being funneled into offshore tax havens.

    Therein lies the bind, domesticated, paid-for politicians (establishment politicians that is) would also have to do with a little less in bribes, campaign contributions etc coming their way if they dared to tip, through policy choices, the scales of wealth distribution towards eliminating economic insecurity. I haven’t heard of an establishment politician willing to bite the very hand that feeds them so the prospects look dim unless there’s an uprooting of the very system that creates said economic insecurity in the first place.

    The upswell of discontent driving populism will continue until rampaging mobs tired of the unfairness and exploitation of the system demand “give us economic liberty or give us death” or rather “give us economic liberty or we’ll give YOU death” from the elites. Nothing will change until the elites themselves feel threatened, in a very real way, by the state of affairs, not the current situation where they’re actively benefiting from it.

    As for populist politicians, it’s their charisma and the mastery of their rhetoric that let’s them exploit the gullibility and despondency of the “barely coping”, but as recent examples (e.g. Trump) demonstrate, give them the keys to the top office and they quickly turn establishment.

    1. Thuto

      They turn establishment with regards to making policy choices that perpetuate, rather than eliminate, economic insecurity. Their rhetoric may still be fiercely populist, but their policy choices betray their true allegiance and where it lies

  9. digi_owl

    Been saying it again and again, but the “feminists” don’t want to hear it, that it was impressively tone death to try to run for first female US president on a gender platform in the middle of an extended recession.

    Never mind doubling down on said platform upon losing…

      1. WheresOurTeddy

        with Haspel breaking (the will) of the glass ceiling at CIA, it appears only the worst of the worst will be allowed to fly among the carrion birds of the empire.

        Next up, Kamala “I Love Private Prisons” Harris, who I will be assured is very progressive when the time comes.

    1. precariat

      “…impressively tone death to try to run for first female US president on a gender platform in the middle of an extended recession.”

      The real problem — again obfuscated by ‘identity politics’ — is that the Democrats did not think they were in the middle of an “extended recession.”
      The million-dollar consultants on Clinton’s camapign were not in a recession. It is the rest of us who were and are. Those who like Rove think they make reality will keep getting a rude awakening.

  10. Jim Haygood

    From a John Mauldin email this morning:

    The chart below from Philippa Dunne of The Liscio Report shows the ratio of workers covered by unemployment insurance is at its lowest level in 45 years. What happens when millions of freelancers lose their incomes?

    The likely outcome is a populist backlash that installs a Democratic Congress and president. They will then raise taxes on the “rich” and roll back some of the corporate tax cuts and increase regulatory burdens.

    From 70% of workers having unemployment benefits when the chart begins in 1970, the ratio has now been halved to under 35% in today’s gig economy.

    What it means is that so-called automatic stabilizers such as unemployment benefits, intended to keep household spending going in a recession, have been hollowed out to near irrelevance.

    Mauldin thinks Democrats will retake Congress, and then the presidency from One-term Trump. So do I. Flake-o-nomics don’t pay.

    1. flora

      The likely outcome is a populist backlash that installs a Democratic Congress and president. They will then raise taxes on the “rich” and roll back some of the corporate tax cuts and increase regulatory burdens.

      Like Obama did? Like Hillary probably would have done, given her financial backers’ interests? Mauldin’s hopes for the Dem estab seem antiquated; this is not his father’s Dem party The current Dem estab works for the same wealth centers the GOP estab works for.

      An aside: Two local esteemed academics just published a report claiming Trump populism is cultural and not economic. Good liberal academics know how to sing for their supper.

      1. flora

        adding: wrt job coverage of unemployment benefits dropping from 70% to 35% since 1970 – the Pres and Congress have been held by both parties by roughly same amount of times since 1970. For this drop to happen, one party clearly hasn’t been pulling its weight.

        1. Inode_buddha

          Regardless of who wins the Superbowel, both teams get their paychecks from the NFL….

      2. Lambert Strether

        > Two local esteemed academics just published a report claiming Trump populism is cultural and not economic.

        Got a link? Maybe I should do a takedown. Rip off a few of those suede elbow patches.

          1. flora

            adding – from the newspaper article:

            ‘ “The election study results show that pocketbook worries are common across all boundaries,” says Smith, a professor of sociology at KU. “Trump voters, Clinton voters, pretty much all voters expressed a similar level of pocketbook concern.”

            ‘In other words, financial stress didn’t distinguish Trump supporters from other voters in the 2016 election, says Smith. ‘

            My 2¢: While all voters may have expressed a ‘similar level of pocketbook concern’, after 8 years of Dems doing nothing to relieve that concern – bank bailouts and homeowners abandoned, continuing Bush’s tax cuts, working for a ‘Grand Bargain’ to weaken SS – that a lot of voters gave up on the Dems doing anything meaningful to address their economic concern. When it came to economics, the Dem candidate was a known quantity and the GOP candidate was an unknown quantity – voters took a chance.

            1. flora

              adding adding: In 2016 the identity politics campaign lost to the economic issues campaign.

    2. Felix_47

      Jim that is an astounding graph. That says so much. It should be studied by every voter but it won’t unfortunately. Thank you

  11. David

    IMO, the last two graphs are misleading. The vertical scales are not the same, so it is difficult to compare the two lines. In Figure 3a, the slope appears to be more negative than -2. In Figure 3b, the slope appears to be less than 1. There appear to be more significant factors contributing to the loss of trust in political parties than immigration.

    In 2013, there were 15.9M people with a migrant background in Germany. The AfD (Alternative for Germany political party) received 810,915 votes (1.9% of total) in the 2013 Bundestag election.

    In 2016, there were 18.6M (+17%) people with a migrant background in Germany. The AfD, in the 2017 Bundestag elections, received 5.8M votes (12.6% of total).

    The source for this data is Wikipedia (for the election results) and the German Federal Statistics Office.

    Finally, one of the papers referenced in the paper above (see the link in the article) contains charts showing anti-EU sentiment in individual EU countries between 1999 and 2014. The charts show that, for most EU countries, anti-EU sentiment has been increasing since 2004, long before the current immigrant / refugee issues.

    1. Lambert Strether

      I don’t see the final two charts as being central to the thesis of the post (and in fact “there appear to be more significant factors contributing to the loss of trust in political parties than immigration” supports the thesis, if one of those significant factors is “economic insecurity”).

      I don’t even play a statistician on TV, but I don’t get the point on the slopes. The vertical scales are different, but it’s not as if the slopes are going to flatten our or reverse themselves if the vertical scales are changed.

      1. David

        I guess I take issue with the economic insecurity –> anti-immigrant sentiment –> populist party arguement of the thesis. I would prefer to see the anti-immigrant part of thesis left aside. IMO, it’s a distraction used the denigrate the right wing populists.

        As far as the slopes, yes, the slopes wouldn’t change. As the graphs are currently drawn, the two slopes visually appear to be comparable. If the two lines were placed in the same chart, it would be visually clearer, IMO, that the anti-immigrant sentiment –> populist party support is a much smaller than the economic insecurity –> populist party support.

        I’m not taking issue with the overall thesis, just the importance of anti-immigrant sentiment in that thesis.

  12. precariat

    “If the new identity politics succeeds in reshaping peoples’ beliefs and attitudes, sentiments can acquire an autonomous role and may continue to exert an effect even when their economic cause is gone.”

    Truly, does anyone need reminding of the spectre of Germany in 20s and 30s? Where is the recognition that the effects of economic insecurity discussed above, anti-immigration and anti-‘other’ sentiments, are deliberately *designed and encouraged.* Seems like pieces like this serve to solidify the framing of ‘populism’ as threat to the elites but, really it is a tried-and-true tool.

    Those who are really hurt by the anti-immigrant scapegoating, other than the scapegoated groups, are those in society who focus on the real causes and remedies for economic predation. As designed — divide and conquer.

    1. JBird

      Those who are really hurt by the anti-immigrant scapegoating, other than the scapegoated groups, are those in society who focus on the real causes and remedies for economic predation. As designed — divide and conquer.

      Wasn’t the German Socialist Party that got deliberately crushed by the Nazis and German Communist Party? I think that a large number of Germans prefers the Socialists over the other Parties so it had to go away. The Socialist Party newspaper was destroyed on the first day of the Nazis political victory as it had been very good at exposing them.

    2. Lambert Strether

      > economic insecurity

      FWIW, I don’t think it’s just the effects of “economic insecurity,”* but also of what (following Richard Morgan in “Altered Carbon”) I’ve labeled “organic damage,” damage to the flesh, the body, in terms of death and suffering. If don’t think you can make sense of Germany in the 20s and 30s without taking into account the trauma of World War I. Similarly, I don’t think you can give an account of Trump’s victory without organic damage in the form of opioid addiction and falling life expectancy. When stuff like that is going down, people don’t feel they have much to lose.

      * Not that I’m sure how you’d separate the two statistically.

  13. Altandmain

    The elite know the real reasons why this is happening.

    It’s not that they don’t know how to cure it. They don’t “want” to cure it. They don’t want to give up the wealth they stole from the common citizenry. That is why we have this current crisis. The causes are no mystery. They can see their wealth growing while ours is shrinking as well as anyone.

    I suppose a case could be made for the people who are just willfully ignorant. I think a lot of people in the top 10% fall into this category. They don’t realize or don’t want to realize how badly they have failed the bottom 90%.

  14. Sound of the Suburbs

    When someone comes up and says they have developed a new scientific economics to restructure the world, a healthy amount of scepticism is in order.

    World leaders fell for it.

    The problem is in the economics.

    This gives the intellectual framework that runs the economy for the few.

    Economics was always far too dangerous to be allowed to reveal the truth about the economy.

    The Classical economist, Adam Smith, observed the world of small state, unregulated capitalism around him.

    “The labour and time of the poor is in civilised countries sacrificed to the maintaining of the rich in ease and luxury. The Landlord is maintained in idleness and luxury by the labour of his tenants. The moneyed man is supported by his extractions from the industrious merchant and the needy who are obliged to support him in ease by a return for the use of his money. But every savage has the full fruits of his own labours; there are no landlords, no usurers and no tax gatherers.”

    How does this tie in with the trickledown view we have today?
    Somehow everything has been turned upside down.

    The workers that did the work to produce the surplus lived a bare subsistence existence.

    Those with land and money used it to live a life of luxury and leisure.

    The bankers (usurers) created money out of nothing and charged interest on it. The bankers got rich, and everyone else got into debt and over time lost what they had through defaults on loans, and repossession of assets.

    Capitalism had two sides, the productive side where people earned their income and the parasitic side where the rentiers lived off unearned income. The Classical Economists had shown that most at the top of society were just parasites feeding off the productive activity of everyone else.

    Economics was always far too dangerous to be allowed to reveal the truth about the economy.

    How can we protect those powerful vested interests at the top of society?

    The early neoclassical economists hid the problems of rentier activity in the economy by removing the difference between “earned” and “unearned” income and they conflated “land” with “capital”. They took the focus off the cost of living that had been so important to the Classical Economists to hide the effects of rentier activity in the economy.

    The landowners, landlords and usurers were now just productive members of society again.

    It they left banks and debt out of economics no one would know the bankers created the money supply out of nothing. Otherwise, everyone would see how dangerous it was to let bankers do what they wanted if they knew the bankers created the money supply through their loans.

  15. Sound of the Suburbs

    The 20th century was a minor blip and now it’s back to normal.

    Mankind first started to produce a surplus with early agriculture.

    It wasn’t long before the elites learnt how to read the skies, the sun and the stars, to predict the coming seasons to the amazed masses and collect tribute.

    They soon made the most of the opportunity and removed themselves from any hard work to concentrate on “spiritual matters”, i.e. any hocus-pocus they could come up with to elevate them from the masses, e.g. rituals, fertility rights, offering to the gods …. etc and to turn the initially small tributes, into extracting all the surplus created by the hard work of the rest.

    The elites became the representatives of the gods and they were responsible for the bounty of the earth and the harvests.

    As long as all the surplus was handed over, all would be well.

    It’s been the same ever since, the extraction methods have just got more sophisticated over time.

    Money and capitalism were very handy when belief in the supernatural and religion started to fade.

    The money scam (capitalism)

    You do the work, and we will pay you a wage that will provide a basic subsistence existence and we will take the rest as profit.

    The land scam (feudalism)

    We will let you use this piece of land and leave you with enough to provide a basic subsistence existence and we will take the rest.

    As the money scam (capitalism) replaced the land scam (feudalism) the UK’s aristocracy barely noticed. They lived in luxury and leisure and other people did all the work.

    “All for ourselves, and nothing for other people seems, in every age of the world, to have been the vile maxim of the masters of mankind.” Adam Smith

    They don’t change; every human society is some sort of scam to leave those that do the work with the bare minimum. The archaeologists find the malnourished, well worn bones of those that did all the work; their skeletons show they existed at the bottom of society.

    1. Sound of the Suburbs

      The money scam (capitalism)

      You do the work, and we will pay you a wage that will provide a basic subsistence existence and we will take the rest as profit.

      It was all working so well until the mid 19th century.

      The workers then discovered they could band together to form unions and get more money by withdrawing their labour.

      Those at the top got a bit twitchy after the Russian revolution and the threat of Communism meant they needed to show Capitalism worked better for the average Western citizen.

      Those at the top were really glad to see the back of Communism so they could get back to normal; they just needed to break the power of the unions.

  16. Sound of the Suburbs

    It’s a lot easier than it seems.

    Capitalism – back to basics

    Disposable income = wages – (taxes + the cost of living)

    Employees want more disposable income (discretionary spending)

    Employers want to pay lower wages for higher profits

    The rentiers look to push up the cost of living (essential spending, e.g. housing costs)

    The government take taxes.

    The problem in the West is the high cost of living and with the free movement of capital and free trade jobs move off-shore for higher profits.

    1. Sound of the Suburbs

      Why did the jobs go to Mexico after NAFTA?

      The cost of living = housing costs + healthcare costs + student loan costs + food + other costs of living

      The cost of living is too high in the US, and this has to be covered in wages reducing profit. You can make more profit in Mexico.

      Why does Germany off-shore to Eastern Europe?

      Same thing.

      “Germany is turning to soft nationalism. People on low incomes are voting against authority because the consensus on equality and justice has broken down. It is the same pattern across Europe,” said Ashoka Mody, a former bail-out chief for the International Monetary Fund in Europe.

      Mr Mody said the bottom half of German society has not seen any increase in real incomes in a generation. The Hartz IV reforms in 2003 and 2004 made it easier to fire workers, leading to wage compression as companies threatened to move plants to Eastern Europe.

      The reforms pushed seven million people into part-time ‘mini-jobs’ paying €450 (£399) a month. It lead to corrosive “pauperisation”. This remains the case even though the economy is humming and surging exports have pushed the current account surplus to 8.5pc of GDP.”

  17. TedHunter

    There is a discussion picking up in Europe (recently joined by Thomas Pickety) which I find fascinating (and overdue): the comparison between the productivity and incomes of blue-collar workers in automotive, a highly standardized sector. There are at least two trade unions who are becoming less and less patient: that of the VW plant in Bratislava (SK) and Skoda in Mlada Boleslav (CZ). Article below.

    But even if you discount these two examples, the main argument across Eastern Europe has been at least for the last 10 years that incomes are at Eastern and prices at Western levels. You have to be deaf, blind and dumb to not have heard the argument.

    Which brings me back to the correct main point of the post above: all parties currently running the governments in Poland, Czech, Slovakia, Hungary and Romania have won on the issue of real incomes (aka 60% of the population cannot survive on their incomes). If there are any cultural reasons behind these votes, I could not care less.

    Here’s the article:

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