Why inequality threatens European democracy

This interview follows the recent Chatham House research paper The economic basis of democracy in Europe. 

‘Populism’ is often used in a pejorative sense in political discourse. Why do you think this is?

It’s become a bit of a catch-all term for anything or anyone that the author doesn’t like in politics, or anything that falls outside of the traditional mainstream of politics.

But if looked at from an academic perspective, there is a much more set definition, which defines  populism as a political ideology characterized by a seeing society as split between a supposedly ‘pure’ people and a corrupt elite.

This is helpful when thinking through how politics has often become a competition between populist challengers and the traditional political mainstream, and to understand how when the latter go along with that framing, they are actually feeding populist politics.  

I think when people use populism in that pejorative kind of way, what they often really mean is demagoguery. So, there are different things being mixed up when we talk about populism because of differences in what people interpret the word to mean.

Do ‘culture war’ debates detract from important discussions on economic issues, such as the rise in income and wealth inequality over the last 40 years?

To a large extent, they do, which is not to say that it’s not valid to discuss cultural questions in politics. A lot of politics is, and should be, about more than money and redistribution.

We argue in the paper that there is little space left for real debate on economic questions, which have in many cases been outsourced to non-majoritarian, only semi-democratic institutions.

In Europe, this has been constrained even more by the structures and rules of the European Union (EU), including the fiscal rules, and a de facto consensus on many of these issues in the centre of the political spectrum. As a result, there is little point talking about those kinds of issues within the political sphere.

This is why you get debates over really anything else and strong polarization along cultural lines. These debates often don’t lead anywhere because it becomes an ‘us versus them’ kind of politics. A political battle can never be resolved if you’re not really talking about policy.

What is lacking in both the cultural and economic explanations for the rise of populist protest?

Both culture and economics on their own don’t explain the geographical variation in the drivers of anti-system protest. In some places, cultural factors tend to dominate. In others, the economic factors are more obvious.

So, it’s complicated and there is an interplay between the two. Underlying economic factors can also present themselves in what some would call a cultural protest.

This is why the other authors and I think both should be looked at, rather than saying it’s just culture or it’s just economics, which is incredibly unhelpful. This is often missing in the debate, particularly in the wake of the shocks of 2016.

A theme that comes up in the paper is the ‘depolitization’ of policy as a threat to democracy. What do you mean by this?

We understand depolitization of policymaking as a process of technocratically-driven economic decision-making becoming detached from the mechanisms of popular representation and accountability to voters. More concretely, that means a lot of economic policymaking has been outsourced by elected representatives to institutions outside of their direct control.

The obvious example would be the important role played by independent central banks. Their policy choices have real distributional consequences, even more since the global financial crisis as they became even more critical in macroeconomic management. However, there is very limited democratic control over them.

It’s not necessarily these institutions, such as central banks, which are asking for a bigger role and more decision-making power, but it’s often been either a conscious choice to outsource these decisions, or because of political dysfunction, that they land on the doorstep of unelected technocrats.

This is the case for most countries, but in Europe specifically economic policymaking has been constrained by the structures of the EU as well. Rules ranging from the fiscal rules to those governing the single market mean that national politicians have limited leeway when it comes to economic policymaking.

As a result, there’s less of a point to debating some of these questions because they’re not being really made in parliaments or by elected representatives anymore.

Why have some parts of Europe (for example, Hungary and Poland) experienced right-wing populism but other parts (for example, Greece and Spain) have seen more left-wing populism?

That’s the million-euro question but a convincing case is set out by Philip Manow in the Chatham House paper The political economy of populism in Europe. He argues a good explanation can be found in the types of hyper-globalization shocks to hit a specific polity, and by the domestic political and economic structures of those countries in how they respond to those shocks.

The argument is that when it comes to migration, that often leads to right-wing protests. When it’s more economic and trade shocks, you see left-wing protests. But it should be noted that left-wing populist parties remain quite a small phenomenon, and arguably a rather time-limited one in much of Europe.

In Spain, for instance, the big story in the wake of the eurozone crisis was the rise of Podemos, a left-wing populist party, or anti-system party. Now there is the rise of the right-wing populist Vox party which might end up in government at the next elections in May. So, the kinds of protests you see are not static.

The same goes for Italy, which had the Five Star Movement, economically on the left. Now Italy has a government led by the far-right populist Brothers of Italy who can’t be described as left-wing in any way.

How has an increase in economic inequality translated into political inequality?

We reference a lot of academic work looking at whose policy preferences are reflected in political decision-making. Traditionally, this kind of work has been done extensively about the US political system but there is a great deal of interesting work being done in Europe as well. When it comes to how responsive political systems are to the interests of different classes, the situation in Europe is almost as bad as in the US.

It’s the interests of the well-off that are most often translated into policymaking and the interests of those least well-off don’t feature nearly as much. So, as economic inequality increases, so does political inequality.

It’s not surprising that people disengage from the system because they feel they don’t have a say in it. The Brexit vote is a great example; there was suddenly a spike in turnout because it gave lot of disengaged voters an opportunity to make their voices heard.These aren’t voices that are necessarily always pro-something but want to say ‘listen to me, I’m still here as well.’ The only way they can see to do that is to kick against the system so, when that opportunity arises, they do it.

You see that almost everywhere, where a lot of the support for anti-system parties often comes from people previously disengaged from the electoral system and who didn’t vote in previous elections. Another example of this is a large share of the vote for Alternative for Germany. And Donald Trump did the same in the US.

It’s not that everybody who voted for those parties doesn’t have a stake in the system; there are always different reasons of course. But this is definitely a driver. These turnout dynamics are relevant but easy to ignore so people looking to keep the system functioning should pay attention to them.

How can economic policy be ‘repoliticized’ and is this possible within the EU system? The paper talks about some interesting ideas for reform but also explains why reform is an uphill battle.

It’s difficult because many of the choices that led up to where we are now made sense by themselves: the importance of monetary policy, central bank independence, and central banks’ inflation targets. The same goes for some areas of economic policy, which are often outsourced or constrained by rules because it makes for more consistent policy.

Reversing that is difficult and it also benefits the mainstream parties to continue with this cultural cleavage in politics. You see that in the way these elections and campaigns play out is that they choose to engage as the one against the ‘challenger’ and make the election about that.

That creates a big ‘nothingness’ in the middle because they’re not really debating economic or distributional questions while they’re fighting over other things that work for them from an electoral strategy point of view.

The paper gives a few hints at what would be possible in in Europe, such as more discretion for national parliaments, as that’s still where democratic legitimacy lies. To do that they need more discretion on fiscal policy and less stringent fiscal rules from the EU side.