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The Rise of Populism

July 23, 2019

 

Populism is characterized primarily as a political philosophy engaging in supporting the rights and power of the average person in their struggle against the privileged elite. Politicians that call themselves Populists will focus on fostering resentment towards economic, liberal and primarily urban elites, sometimes also referred to as the “establishment”. It is resentment based on the belief that the power must be removed from the elites, which are considered to only be benefiting the top 1 % of the population at the expense of the middle class. Populism is currently a very important, if not the most important, disruptive force determining our political and socio-economic environment. It is crucial to understand it because it threatens democracies all over the Western world. Declining middle class, wage stagnation and extreme concentration of wealth leads people to feel they have been victimized and somebody must be at fault. It leads to the conclusion that those that have succeeded must have rigged the system to do so and must be punished in some way or form: higher taxes imposed on those that are wealthier has been the most common and acceptable way to do so.

 

Generally populism is on the rise when there is discontent amongst the masses. When the pendulum swings too far to favour the wealthy, those that are left behind and cannot even hope to catch up get resentful and their quest becomes about taking the elite down.  Populism has been on the rise in Europe for many years, as for decades the establishment did not pay attention to ordinary people and in particular, the disenfranchised populations (the large Muslin population in France comes to mind). Brexit in the UK is a large example of just how disruptive this force can be to an economy. In the US populism was first introduced in 1992 when Ross Perot entered the race for President. At the time Perot was only able to get 19% of the electoral base to support him but as the movement has grown, this is what eventually led to Trump being elected as a supporter of many of its principles. The irony here of course is Trump cares little for the general population other than whether to convince them to vote for him, so his policies have resulted in putting the elite even further ahead. The 2020 election will be an interesting exercise to see if the base that voted for him in 2016 understands they have been duped.

 

Populism is a philosophy most often associated with the political right. It is generally promulgated by charismatic strongmen representing themselves as the saviours and protectors of “the average Joe” from looming threats which are mostly created to foster fear such as immigration and other countries (or those from other countries) stealing jobs. A form of populism is what brought Hitler to power as the impoverished depression era Germans searched for a way out of economic crisis by blaming others for their plight. In that case it was the Jewish population that became the target of that anger.

 

However on the left wing of politics there is also a form of populism which today could be even more dangerous as it leads to resentment of capitalism and capitalists.  Ordinary people working two or three jobs, 60-80 hour weeks just to feed their families, adopt Populism as they are fed up and full of resentment towards those that appear to be privileged and do not seem to have to work as hard. Regardless of which side you are a populist on, ultimately it leads to the rise in authoritarianism and even dictatorships, and the end of democracy as we know it.

 

Creating resentment in the general population for political votes is certainly not new but it does take on many different forms. For example Trump got elected by feeding off the resentment that rural white older and less educated (mostly male) voters had against those more educated, established, urban elites that were more successful in getting ahead. These “stale white males” as the millennials refer to them, are also resentful of immigrants that they believe disrupt their economic situation by stealing their jobs or are just different from them (ie not white and practicing different religions). Likewise in the US the progressive left part of the party: Bernie Sanders et all, are trying to play on economic warfare against a Republican party that has clearly favoured the 1% and funded their political jobs with corporate money with the offer of basic income and free healthcare, education and forgiveness of student debt for all –at the expense of the wealthy, of course.

 

The problem is that to get votes by fostering anger and rage towards those that are better off, the political cast may ultimately cut their nose to spite their face. If the Democrats go to the extreme left where socialism reigns supreme and characterizes capitalism as being oppressive to the masses, it will ultimately empower the working class and the disenfranchised to do everything in their power to dismantle the current system in favour of freebies for the people at the expense of profitability in corporations. What they miss is without profitable corporations there are no jobs, and without profits at the corporations there are ultimately no tax revenues to be paid to the government to distribute as freebies. So ultimately everybody loses. Admittedly, a capitalistic market based system is not perfect, as inequality tends to be a consequential side-effect, but the fact is the bottom 10% today are living much better off than the bottom 10% 50 years ago or the bottom 10% in controlled market countries. A capitalist system fosters innovation, production and advancement that ultimately create the means to take care of the bottom 10%.    

 

Of course that is not to say that the pendulum has not swung too far in one direction. Tax breaks for the top 1%, and record CEO salaries with peak shareholder profitability, while workers at the bottom of the food chain cannot afford to live on one job is not sustainable. So it is inevitable that the pendulum in the future could now swing too far to the left. It used to be ok to offer universal healthcare and maternity leave and pensions at stable jobs. By not providing any of that, what is demanded now is much more and the overall perception is that capitalism itself is to blame because it has not worked for all. You cannot have 80% of the population living paycheck to paycheck without a couple of hundred dollars to spare and not expect some sort of backlash.

 

The world likes to blame Trump for the rise of populism but as initially indicated in the US it truly started with Perot and in Europe it has been raging for decades. Globalization, the manipulation of social media and economic anxiety was also there well before the Trump era. Trump just happened to make matters worse by promoting himself as a populist while at the same time promoting the wealth of the 1% and focussing on the wants of a minority base at the expense of everyone else. The two biggest stresses in life are health and personal finances. When they both hit the wall for the average guy, something must change or the system will be ultimately brought down, usually by a strong populist wave.

Ultimately, the US is still in the best place to deal with populism because tax rates overall are still low relative to the rest of the developed world. So adding a value added tax and just tweaking income tax rates by a little could help to produce a lot of benefits. Having said that, it does have a lot of mountains to climb given the years of neglect of infrastructure, corruption in politics and a large part of the population fighting poverty to pay either for healthcare they cannot afford or just to survive.

 

The Europeans have had tremendous problems with populism because they have marginalized the minorities and the uneducated to the point of revolt. They do have healthcare and for the most part good infrastructure (albeit with mountains of EU debt that this entailed), but economic inequality not just within nations but across Europe has also created a toxic environment.

 

In Canada those that make a good income are already taxed at over 50% of their income, meaning our percentage of truly wealthy is hardly comparable with that in the US. In fact, those with material wealth are starting to quietly leave the country or discussing ways to do so. Corporations are not choosing to locate here because of taxes and this also makes it hard to attract top talent. To make matters worse, employees of the government not only appear to be making more than their counter parts in the private sector but for the most part enjoy healthy pensions, at the expense of all taxpayers, that would equate to having millions of dollars in the bank at current interest rates. Here we are likely to see the anti populist wave at some point focus on the government sector which seems to lively merrily at everybody’s expense without any thought towards those that are struggling till death, so their government counterparts can retire in comfort.

 

Politics today requires each candidate to be more outlandish than the next in order to be heard. As a consequence, parties in the center are no longer favoured as their views tend to be less outlandish and more grounded in reality. This has created a bar belled political spectrum that will be incapable of any kind of compromise. Regardless of where we look, populist movements reflected by the rapid rise of authoritarian governments and extreme right-wing and left wing movements are now in place. Likely the only way to appease these movements will be with more freebies and handouts so the question for one and all will be how will it all be paid for. It is great when politicians promise us the sun and the moon but never forget that each and every voter/tax payer will ultimately be responsible for the bill at the end. There has never been an instance in history when that has not been the case. Proof of this can be found by going as far back as Plato’s era. Plato believed in a political evolution that led society from monarchy to aristocracy and then to democracy and ending in dictatorship. Excesses of freedom inevitably lead to envy of the haves by the have nots and unavoidable backlash. Such imbalances have existed for well over 2,000 years. What is different this time, however, is how quickly discontent can spread with the use of technology, primarily social media. The rapid change in technology itself has increased the sense of uncertainty particularly when it comes to employment.

 

Ultimately it is questionable and concerning that individuals are resorting to the 20th century experiment with socialism and communism, neither of which worked. The answers to today’s problems do not lie in 150 year old ideas that can only lead to increased human despair.

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