The rise of populism can be seen as a warning about an underlying dysfunction in European political settlements. Although there remains disagreement over the specific drivers of populist protest, it is clear that economic factors play a significant role.
Much of the debate on the crisis of democracy in Europe has focused on populism, but there is no widespread agreement on what the term means. This is particularly true in the policy debate and mainstream media, where ‘populism’ or ‘populist’ is often used as a synonym for demagoguery or to describe any policy deemed irresponsible. The label has been applied to a wide range of individuals, movements and parties – and even, in the case of Brexit, to a decision. The argument here is that populist actors – ranging from Western European far right nationalist parties to Central European conservative parties and southern European left-wing parties – all share a ‘thin’ ideology that sees society as split between a supposedly ‘pure’ people and a corrupt elite, with a resulting emphasis on popular sovereignty.
There is no doubt that the figures, movements and parties commonly referred to as ‘populist’ have had an impact on democracy in Europe. Voting patterns have changed as the oligopoly of the traditional mainstream parties of the centre left and centre right has been broken up by challenger parties in the context of a fragmenting political landscape. Both in national democratic systems and at the European level, the growing strength of these forces has complicated policymaking. The rise of protest parties has led in particular to conflicts between member states and the EU, the latter portrayed by populist politicians as the embodiment of an establishment, neoliberal, authoritarian or undemocratic form of governance.
However, though the rise of populism is often conflated with the crisis of liberal democracy in Europe, it should not be. As Cristobal Kaltwasser has shown, the relationship between populism and democracy is an ‘ambivalent’ one. He argues that although populism can threaten democracy, it can also provide a corrective to its problems. Some scholars understand the rise of populist forces as a reaction to particular features of policymaking in Europe: an ‘illiberal democratic response to undemocratic liberalism’. The implication is that if the economic policies and behaviour of traditional mainstream parties were responsible for the rise of populist forces, this backlash could in turn push those same mainstream parties to change policy course. In short, what is often seen as a crisis of liberal democracy might just be a crisis of the established mainstream parties.
This chapter examines the role economic forces play in the rise of populism. It discusses the post-2016 debate about the causes of populism, in particular the relative importance of cultural and economic factors. It argues that the two sets of factors interact in complex ways, and that any explanation must account for the heterogeneity of populism in Europe and distinguish between the ‘demand’ and ‘supply’ sides of politics. At the same time, understanding the driving forces behind the rise of populism only goes so far in explaining the crisis of democracy in Europe.
Culture versus economics?
In the immediate aftermath of the UK’s referendum on EU membership and the election of Trump as US president in 2016, there was an explosion of discussion of the causes of populism. The debate quickly coalesced around a disagreement over the relative importance of two sets of motives. At one end of the spectrum was the argument that the explanation was to be found in ‘cultural’ factors. These included: opposition to progressive value change since the 1960s; hostility to immigration; opposition to shifting gender roles; Islamophobia; and racism. At the other end was the argument that the success of populist parties could be explained by transformations such as rising economic inequality and economic insecurity or ‘precarity’.
According to those who argued for cultural factors, the main driver of the populist backlash was an electorate hostile to the rapid social change of recent decades. In this account, a large number of citizens felt increasingly uncomfortable with socially progressive values, seen to enjoy broad support at the traditional centre of the political spectrum. They therefore turned to populist figures, parties and movements. Alienation from mainstream political parties was exacerbated by the fact that political and cultural elites had distanced themselves from large swathes of the electorate, not just in substantive but also in representative terms.
This argument helps to explain why migration, integration and other cultural issues have become a dominant focus of political contestation (traditional mainstream parties have gone along with the trend for strategic reasons). These factors are said to have shifted the main political cleavage from the traditional economic split between left and right to one between competing visions for ‘open’ and ‘closed’ societies. But the problem with the cultural explanation for populist protest is that it fails to account for the strong correlations between voting patterns and many economic indicators such as relative economic growth, exposure to trade shocks and even changes in house prices.
The success of the far right cannot be put down simply to declining working-class support for centre-left parties.
Those who argue for the relative importance of economic motives, on the other hand, understand populism as a backlash on the part of those ‘left behind’ by economic liberalization and trade shocks, particularly in the industrial heartlands of Western countries. Again, there is something to this argument. But it is often wrongly assumed that protest votes are emanating mainly from former supporters of centre-left parties. Working-class voters in Western Europe are said to have been disappointed by their previous social democratic representatives and to have turned to the far right. Yet many working-class people who previously voted for centre-left parties have shifted their allegiance not to the far right but to green and centre-right parties. In other words, the success of the far right cannot be put down simply to declining working-class support for centre-left parties.
There is evidence that relative hardship does lead people to turn away from mainstream politics, and often from political participation more broadly. Some suggest that it is not so much relative or absolute economic decline that drives protest voting but rather structural economic changes, such as in the functioning of labour markets, which leave even those with higher incomes in more precarious situations or worried over their social status. But while this would explain why it is often not the lowest-income groups that form the base of support for populist protest parties, the cohort to which such a theory potentially applies is so large as to limit its usefulness for analysing political divisions.
The complexity of populism
In recent years, the debate about populism has converged instead on an interplay between cultural and economic factors – for instance, by pointing to status anxiety (caused by many of the economic and cultural developments on which other theories focus) as a driver of populist voting. However, even subtle explanations combining cultural and economic factors have difficulties explaining the heterogeneity of populist protest across the continent: in particular, why right-wing protest has emerged in some parts of Europe and left-wing protest is prevalent in others. Any understanding of what has driven these different, but in some ways related, forms of protest politics requires a comparative approach.
Building on Dani Rodrik’s work on ‘hyperglobalization’ – the process of accelerated global economic and political integration since the 1990s – Philip Manow has shown how different types of populist movement in Europe emerge in response to immigration or economic shocks. Manow argues that the particular political impact of shocks associated with hyperglobalization depends on the specifics of a country’s labour market, welfare state and growth model. For instance, countries with well-developed welfare states that attract mainly forced migration, such as the northern European countries, tend to generate right-wing populist protest by labour market ‘insiders’. Meanwhile, in countries with particularistic welfare states – that is, featuring insider-centric benefits but weak provisions for new arrivals – right-wing anti-immigration protest has been less potent. Here, the economic shocks associated with trade-related and financial hyperglobalization have instead led to stronger left-wing populist movements, most visibly in the post-eurozone crisis years in southern European countries.
This theory of differentiated economic drivers of populism does not dismiss cultural factors altogether. Because hyperglobalization involves the removal of barriers to the movement of people as well as capital and goods, it also has cultural effects in the form of immigration. Manow agrees with adherents to the culturally driven model of populism that migration can drive populist protest as well. But he also makes clear that political-economic structures such as economic growth models and welfare states are vital to understanding such movements, irrespective of whether the latter are responses to economic or cultural shocks.
A final important distinction is between the ‘demand’ and ‘supply’ sides of politics. Demand-side explanations of populism emphasize the role of globalization or other structural economic shifts in shaping voter preferences. Supply-side explanations, meanwhile, emphasize the agency of political actors, including mainstream parties, and how their efforts influence politics. In other words, explanations of populism that emphasize the demand side focus on voter behaviour, whereas those that emphasize the supply side focus on ‘political entrepreneurs’: new parties and politicians challenging the establishment.
On the demand side, there have long been signs of change following the post-war heyday of Western European social democracy and Christian democracy. A first hint was the increasing rates of abstention in most Western European elections in recent decades. To interpret this as quiet contentedness on the part of citizens with the political-economic settlement would be to miss a significant warning sign. Rather, mainstream parties were perceived to have lost touch with their traditional electorates, having abandoned their representative function and retreated into the institutions of the state, creating what the Irish political scientist Peter Mair called a ‘void’.
On the supply side, in turn, political entrepreneurs stepped in to fill this void. These individuals, movements and parties frequently acted as disruptors, positioning themselves as being against the established elites and ‘for the people’. In many cases the ‘supply’ of far-right populist parties seems to have attracted voters back to the polls, in effect satisfying latent ‘demand’. For example, when the far-right Alternative für Deutschland (AfD) made it into the German parliament in the 2017 election, a quarter of its voters, around 1.5 million, had not voted in the previous election. This again illustrates the complexity of the relationship between populism and democracy.
A related factor is how policymaking has become ‘depoliticized’, most conspicuously in the economic policy domain as elites have retreated into the institutions of the state at both national and international level. Reflecting this trend, populist rhetoric often focuses not just on how mainstream parties are indistinguishable from one another, but also on how decision-making is kept out of sight and in the hands of ‘unelected bureaucrats’. In particular, the space for contestation of economic policymaking within Europe has been restricted by the EU’s fiscal and single-market rules, as well as by global or regional trade agreements. In this context it can hardly be surprising that political contestation has moved on to cultural grounds. Chapter 4 returns to this issue of depoliticization in more depth.
Beyond populism
There is no settled consensus on the causes of the rise of populism in Europe, except that it cannot be put down to a single factor or process. It is driven at least in part by economics and hyperglobalization. But theories increasingly stress that cultural and economic factors interact in a complicated manner. There is relatively broad agreement that populism is not just a revolt of those ‘left behind’ by globalization, or of those at the bottom of the labour market. Yet nor is it a case of the simple expression of bigoted attitudes in the face of changing societies and migration. Economic grievances can find their expression in cultural conflict, in particular in contexts where there is little political contestation over economic management.
Ultimately, focusing solely on the causes of populism is unhelpful because of the tendency simply to equate it with a crisis of liberal democracy. The rise of populist forces might merely indicate a crisis in the traditional mainstream parties, rather than a systemic problem. Yet the perception that the rise of populism does constitute a crisis of liberal democracy can be self-fulfilling. The danger is that thinking of politics in terms of a binary opposition between centrism and populism – replacing earlier fault lines, in particular between left and right – will enshrine the position of populism in European political systems instead of solving the problems that contributed to its rise in the first place.
The rise of populist forces might merely indicate a crisis in the traditional mainstream parties, rather than a systemic problem. Yet the perception that the rise of populism does constitute a crisis of liberal democracy can be self-fulfilling.
To understand the crisis of liberal democracy, therefore, it is necessary to go beyond the concept of populism. We must examine how changes in very specific areas of economic policy in the last 40 years – and, importantly, changes in the way in which such policy is made – have affected democracy in Europe. By the late 2000s, as the political scientist Jonathan Hopkin argues, liberal democracy ‘had become “neoliberal democracy” in which an open market model was no longer an object of political dispute and key decisions had been taken out of the electoral arena’. As this model went through a fundamental crisis, first with the global financial crash of 2008–09 and then with the eurozone crisis in the early 2010s, a stronger ‘anti-system’ backlash developed.
During this period support surged for many of the populist challengers now widely seen as threatening liberal democracy in Western Europe. From this perspective, populism is at most a symptom of a deeper crisis of both the economic and political systems. The rest of this paper examines this in more depth. Chapter 3 considers how an increase in economic inequality and structural economic shifts have translated into political inequality or ‘unequal responsiveness’. Chapter 4 assesses how the depoliticization of economic management – in effect, the devolution of decision-making to unelected technocrats – has undermined democracy in Europe by ‘encasing’ policymaking and insulating it from democratic control.
