Far-right support has unprecedentedly surged in established western democracies as evidenced by the recent European elections and referenda. The British exit from the European Union as well as the growth of the populist share of votes in countries, such as Germany, Italy, and France have suggested a gradual reversal of the liberal order on the Continent. What could ensue is the withdrawal of the grand promises of the European Union in a vain effort to endow one’s own country with greater prosperity at the expense of others.
Introduction
The rise of nationalistic & protectionist sentiments can be linked to several factors, such as unemployment, mass migration, and rising inequality. Having only begun to recover from the dual recessions of the late 2000s and the eurozone crisis, unemployment has been falling.
Yet, 119 million European citizens, around quarter of the EU population, are at risk of poverty[1]. In 2018, 48.7% of the unemployed[2] were at risk of poverty, compared to 41.5% in 2006. For the unemployed, the risk of poverty is five-times that of the employed, which is at a more modest 9.6%. To make matters worse, the distortion of job growth has resulted in more multi-earner households as opposed to less jobless ones, which translated to higher living standards within such households, thereby widening the gap with the poor. Moreover, the employment of one person per household does not guarantee an escape from poverty, while social transfers and minimum wages have ceased to maintain living standards.
The lack of job security and declining real income have been the key sources of economic distress, but this has been amplified by the influx of immigrants mostly from former colonies a few decades ago as well as the more recent migrant crisis. This wave of immigration has led to societal disapproval, especially among aggravated segments of society such as the old, poor, rural and unemployed.
Such segments are called the “losers to globalization” since they paid the highest adjustment costs for openness and economic integration. This has shifted their focus from socioeconomic class conflicts to inter-ethnic competition for social status and economic resources, fostering hostile attitudes towards immigrants. Due to globalization reducing the effectiveness of the wealth redistribution mechanism, economic nationalism rose as a viable alternative to compensate disadvantaged citizens through protectionist policies that enhance national sovereignty, while restricting immigration and free trade[3].
The Dissolution of the Left-Right Spectrum
Back in the fifties and sixties, left-wing parties were popular among segments of society that now view themselves as disadvantaged in a globalized world, while the right-wing agendas resonated more among upper and middle-class voters. The seventies and eighties were characterized by widening inequality, higher immigration, and educational expansion, which, in turn, led to educated voters supporting the left, while the wealthier elites continued to vote for the right. The result of this was new political cleavages that made class-based voting less prevalent as voting became more dependent of the perceptions of globalization as opposed to class. This meant that the left-right dichotomy became insufficient to map all parties on the political spectrum given the diversity of their positions on non-class-based issues[4].
Perceptions of insecurity by the “losers to globalization” were seized upon by a new category of populist, far-right parties that sought to narrow the gap between their voting preferences and the establishment party platforms, whom in turn embraced identity politics and focused on liberal social causes instead of alarming economic issues. As a result, the populists performed well in areas with high unemployment, anti-globalization views, or xenophobic attitudes.
Figure 1: Populists' Share of the Vote in Various Countries Across Europe (The Economist)
Wealth Redistribution in Theory & Practice
These electoral trends show that the conventional models of wealth redistribution used by political scientists cannot predict the voting behaviour of elections. For instance, the famous “Meltzer-Richard” model[5] claims that low-income citizens should to vote for higher taxation and wealth redistribution given that they should receive the most benefits from these policies; while high-income citizens prefer should low taxation. The model predicts that as the income gap widens between the median and the average voter, the tax rate should be raised to increase the wealth redistribution. Though in practice, empirical evidence from the past century has displayed the model’s failures as wealth inequality has increased, yet income taxes have become less progressive while consumption taxes have become more regressive. Furthermore, governments have also implemented a wide range of austerity measures which worsened the economic situation of low-income voters due to cuts in welfare benefits and the provision of public goods such as subsidized healthcare and education.
“This has been further amplified by stagnant increases in income as Northern European countries experience far faster growth than their southern counterparts.”
The flaws of this model stem from its sole focus on taxation and redistribution, while it ignored globalization. Thus, including attitudes towards immigrants as a secondary factor would help account for their effects on voting outcomes. When citizens feel inadequately protected from globalization, they demand protectionism in terms of immigration controls and trade barriers. Though, it would be expected that if citizens felt that establishment parties provide sufficient means for them to adjust to a globalized world then they would be less inclined to vote for the populists.
Despite the importance of social and cultural factors in shaping attitudes towards immigrants, I believe that the skill set of immigrants is the prime determinant since it correlates with the level of education, income, employment, and personal traits such as openness to change, new cultures and foreigners. Putting ideas into a simple thinking framework, imagine a world where society is divided into citizens and immigrants, and each segment has a skilled and an unskilled worker, we can expect different attitudes and voting outcomes based on each type of interaction. To demonstrate, having skilled immigrants and citizens in the labour market has positive network externalities due to higher innovation and exchange of ideas. Additionally, skilled immigrants earn high incomes, pay higher taxes, and therefore contribute positively to the public finances. Plus, they receive low government transfers, given their high-income positions, thereby putting minimal strain on the welfare system, and generating pro-immigration attitudes. Such setting could be found in tech hubs and financial centres such as San Francisco, New York, and London. In these places, migrants are seen as a crucial means to alleviate the debt load, and should be viewed similarly given the troubling state of affairs of many European countries' sovereign debt. Furthermore, migrants could prove to be a crucial means to revive economic growth in European countries, which have had unspectacular business cycles in the past decade, and are not forecasted to grow too quickly in the next few years.
On the other hand, when citizens are skilled, and immigrants are unskilled, we expect citizens to pay higher taxes and receive lower welfare benefits relative to immigrants, leading to anti-immigration attitudes amongst the voting population most affected by this. But since immigrants fill low-paid positions that locals would be less willing to accept, these anti-immigration attitudes could be dampened. When immigrants are skilled, and citizens are unskilled, immigrants pay higher taxes, contributing positively to social transfers for the unskilled population, attenuating their xenophobic sentiments[6]. Given that most of the voting population is unskilled, we often see the worst-case scenario pan out as in the recent European election results. In this case, a plurality of citizens opposes immigrants, particularly unskilled migrants as they see them as direct substitutes for themselves – a group that they believe will take their jobs away. Furthermore, they see immigrants as putting pressure on public services as the increased populace leads to lower government expenditure per capita, thus reducing the citizens’ access to welfare services, which is becoming increasingly important as the populaces age.
As a result, citizens vote for populist far-right parties that limit immigration as a pre-emptive means to stop any reduction in the government’s redistributive capacity. Even if it partly harms their economic prospects, unskilled citizens would prefer greater redistribution and a reduction in job competition.
A New Political Spectrum?
Unskilled, low-income workers who were steadfast supporters of social democratic and labour-oriented parties, have shifted towards a radical right agenda that embraces economic nationalism when the promise of wealth redistribution lost its appeal. Economic nationalism encompasses isolationism and patriotism, limiting the free flow of trade and immigrants as well as laissez-faire domestic economic policies. The classical unidimensional left-right scope is not well-suited to explain the sudden support of the working class for conservative pro-market policies that seem to harm their economic prospects more than aid them. By introducing a new dimension for openness to the conventional political spectrum, the measure would become more apt at considering the political parties’ stances on trade and migration.
The changes in the political climate have encouraged several parties from across the economic spectrum to modify their platforms and appeal to a wider range of voters, especially as they drift away from establishment parties. Some radical right parties started proposing a chauvinist version of the welfare state that provides public services only to members of the national community to remove the burden that immigrants put on the welfare mechanism and keep government payments constant for citizens. On the other hand, some radical left parties have staked out positions opposing globalism and embracing a fortified welfare state with closed borders, restricted trade and an anti-capitalist rhetoric that focuses on the economic interests of labour. Still, the radical right has succeeded more than the radical left because the left’s welfare state requires higher taxation, which is opposed by the middle-class voters who have embraced the economic nationalism of the right. Another reason is that proposing ethno-racially exclusive policies could alienate the traditional supporters of the left[7].
Concluding Remarks
Despite the shift to more protectionism on the left, isolationism still tends to be a dominant characteristic of the radical right. While this analogy seems plausible nowadays, it is hard to tell whether this trend of political platforms will last or if it is just momentary rebellion against the negative economic outlook, influx of outsiders and the failures of the establishment. Globalization cannot be sustained unless it allows for benefits to be given to those who have experienced a decline in real wages and living standards, lost their jobs and access to welfare services. The outcome of the recent backlash against globalization flavoured by xenophobia and neoliberalism remains uncertain, since populist parties have no prior experience in governance. Alternatives to inefficient wealth redistribution mechanisms, such as investment in the infrastructure and job training are needed to provide better opportunities and living standards for the unemployed and the poor in order to discourage them from supporting populist parties, who feed on sentiments of anger and have no real long-term vision. The reversal of globalization should be seen as a serious threat to democratic institutions and economic growth as it has the potential to make everyone worse off.
[1] Earning less than 60% of their country’s median disposable income after social transfers
[2] Ages 16-64
[3] S. Dehdari, “Economic Distress and Support for Far-right Parties – Evidence from Sweden” (Ph.D. Dissertation, Stockholm University, 2018), pp.1-45.
[4] T. Piketty, “Brahmin Left vs Merchant Right: Rising Inequality & the Changing Structure of Political Conflict”, World Inequality Database, Working Paper Series No. 2018/7, (March 2018)
[5] A. Meltzer and S. Richard, “A Rational Theory of the Size of Government”, Journal of Political Economy, Vol. 89, No.5 (October 1981), pp.914-927.
[6] A. Mayda, “Who is Against Immigration? A Cross-Country Investigation of Individual Attitudes Towards Immigrants”, The Review of Economics and Statistics, Vol. 88, No.3 (August 2006), pp.510-530.
[7] I. Colantone and P. Stanig, “The Trade Origins of Economic Nationalism: Import Competition and Voting Behavior in Western Europe”, Bocconi University (September 2017).
References
S. Dehdari, “Economic Distress and Support for Far-right Parties – Evidence from Sweden” (Ph.D. Dissertation, Stockholm University, 2018), pp.1-45.
A. Meltzer and S. Richard, “A Rational Theory of the Size of Government”, Journal of Political Economy, Vol. 89, No.5 (October 1981), pp.914-927.
T. Iversen and D. Soskice, “Electoral Institutions and the Politics of Coalitions: Why Some Democracies Redistribute More Than Others”, American Political Science Review, Vol. 100, No.2 (May 2006), pp.165-180.
A. Mayda, “Who is Against Immigration? A Cross-Country Investigation of Individual Attitudes Towards Immigrants”, The Review of Economics and Statistics, Vol. 88, No.3 (August 2006), pp.510-530.
I. Colantone and P. Stanig, “The Trade Origins of Economic Nationalism: Import Competition and Voting Behavior in Western Europe”, Bocconi University, (September 2017)
T. Piketty, “Brahmin Left vs Merchant Right: Rising Inequality & the Changing Structure of Political Conflict”, World Inequality Database, Working Paper Series No. 2018/7, (March 2018)
Biography
Ahmed is a rising senior double majoring in Economics and Political Science at NYU Abu Dhabi. He is a research assistant at the NYU Centre of Technology & Economic Development, a senior editor at the NYUAD Journal of Social Sciences, and an NYUDC Global Leadership Scholar. He has worked at the National US-Arab Chamber of Commerce, the Arab Gulf States Institute in Washington, and the Central Bank of the UAE. His paper “Level of Democracy & Quality of Governance: An IV Approach” was published in the Spring 2018 edition of JPIA’s print journal and also won 2nd place in the “Arts & Sociology” category of the 6th UAE Undergraduate Research Competition. After graduation, Ahmed plans to pursue a PhD in Political Science with a focus on political economy and quantitative methodology