Pitchforks & Populism
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Pitchforks & populism: the loss of trust in capitalism and liberal democracy - September 2019 This is a thematic 10-point summary of a recent dinner hosted by New Financial with Matthew Goodwin, Professor of Politics and International Relations at the University of Kent, to discuss his recent book ‘National populism, the revolt against liberal democracy’ with senior executives from across the capital markets industry. New Financial will be publishing a paper on ‘Everything you wanted to know about the crisis of capitalism but were too afraid to ask’ in the next few weeks. 1) Defining national populism National populism is a political movement that values nation, culture and community over economics, and seeks to give a voice to those who feel marginalised by what they see as a distant elite. Populists are driven by a diffuse sense of cultural, economic and political loss. Left-wing populism tends to focus on social class and social-economic inequalities, while right-wing populism typically promotes the interests of an ethno-cultural majority, often centring on immigration and national identity. National populism has grown rapidly in the past few decades in Europe and the US, but governments and mainstream liberals have struggled to understand and respond to this movement. Too often populists are dismissed as a homogenous group of racist, uneducated, poor, angry old white men who will soon be dead, and it is widely assumed that the movement was born out of the financial crisis and may already be on the wane. It’s a little more complicated than that, and Goodwin’s book explores the longer-term history of populism and identifies four key drivers: distrust, deprivation, destruction and de-alignment. 2) Drivers of populism: distrust The perceived elitism of mainstream political parties and institutions is fuelling a rising tide of distrust among voters who feel increasingly excluded, voiceless and unrepresented. Roughly two thirds of people in the UK and US believe ‘politicians don’t care about people like me’ and many people feel that liberal metropolitan values have been imposed upon them. The suspicion that government policy is being driven by the elite for the elite is compounded by the fact that politicians increasingly don’t reflect their voters: in the UK, half of Clement Attlee’s 1945 Labour cabinet had a blue collar background but 50 years later under Tony Blair that had fallen to just one. Two thirds of Boris Johnson’s cabinet went to private school compared with less than 7% of the wider population. The shift over the past 50 years from a nation-state driven model to more remote intergovernmental and supranational organisations has compounded this sense of distance and distrust. 3) Drivers of populism: deprivation Economics and rising income inequality have not caused the rise in populism, but they have helped fuel it. The failure of capitalism to deliver on its promises has undermined people faith in a better future and stoked a deep sense of ‘relative deprivation’: a feeling of being ‘left behind’ and that others are doing better than you. This permeates far beyond the unemployed or poorest parts of society, bridging all cultures, ages and economic backgrounds. The 2008 financial crisis was an important factor in accentuating existing divides but relative deprivation has been growing for decades: The capitalist system that has delivered ever rising GDP growth has also delivered no increase in earnings in real terms for the bottom 60% of Americans since 1970, while wealth and income inequality in the UK and US are back at levels last seen in the 1940s. This sense of relative deprivation is deeply entwined with perceived (and real) issues around immigration, rapid ethnic change in some areas, a loss of identity, political neglect and pessimism about the future. In the UK less than a fifth of people expect future generations to be better off. 4) Drivers of populism: destruction One of the most complex and controversial sides of national populism is a focus on the perceived decline and destruction of national identity as a result of immigration and ethnic change. More than half of people in the UK believe society is broken and many people fear that immigration is threatening their traditional way of life, culture, and values. While these concerns may not always be based in objective reality, they are none the less powerful and particularly potent among western societies that experience rapid demographic change. For example, from 2001 to 2014 the percentage of people born outside the UK in the market town of Boston in Lincolnshire went from less than 10% to 30% (mainly an influx of agricultural workers from Central and Eastern Europe). In 2016, 76% of voters in Boston supported Brexit. While national populism undoubtedly attracts racists, not all populists are racist. Trump won 29% of the Hispanic vote, and one third of black and ethnic minority voters in the UK voted for Brexit. 5) Drivers of populism: de-alignment Deepening dissatisfaction has weakened the bond between voters and traditional mainstream political parties over the past few decades, clearing a path for the rise of populism. In 1963, half of British people felt strongly aligned to the two main parties but by 2015 this had fallen to just one in eight. And since the 1950s, the membership of the Conservative Party has dropped from around three million to just 165,000. Meanwhile, the spectacular growth in support for parties like UKIP, The Brexit Party and Five Star in Italy - or more mainstream movements such as En Marche in France - have underlined the fragility of traditional party politics. Issues like Brexit have challenged party ties: the Labour Party holds the constituency of Doncaster in northern England, which voted 69% Leave, as well as Hackney in London, which voted 78% Remain. 6) Peak populism or end of the beginning? There is a widespread but wrong assumption that populism was born out of the financial crisis, and that the failure of the radical right to make the expected big gains in recent elections in Europe shows that we may have passed peak populism. This approach ignores the longer-term history of populism: Jean-Marie Le Pen came second in the French presidential elections back in 2002, the US People’s Party flourished in the late 19th century, and you can even go back to the Diggers movement in 17th century England. It also misunderstands the impact of populism: while populists may not win elections, they have a huge influence on government. UKIP had just one elected MP yet still managed to force the Conservative government to call the referendum on Brexit, and Boris Johnson’s language and approach to Brexit over the past few months has been influenced as much by the Brexit Party as the Conservative party that he leads. And besides, with immigration likely to grow in future, social and economic inequality (perceived or real) widening, and traditional parties struggling to respond, western democracy could be facing a new era of populist support. 7) Education, education, education One of the key fault lines in the debate around populism is education: a primary indicator of support for populist parties in Europe and in the US is whether or not someone went to university. While 80% of graduates under the age of 34 voted Remain in the Brexit referendum, only 37% of people in the same age group who didn’t go to university voted the same way. This fault line is also evident in support for the radical right in France, Greece and Germany. It is too simplistic to dismiss these people as being ‘thick’: there is a vast gap in the quality of education between different regions and a growing gap in the economic value (and social and political values) of having a degree. For example, nearly a third of state secondary schools in London are rated as ‘outstanding’, more than three times the level of secondary schools in Hartlepool, Hull and Wigan. Wider access to better education will be a key part of any response to populism. 8) Why should the banking industry care? Few industries have as much to lose from populism - and few have done more to provide populists with intellectual and emotional ammunition - as banking and finance. Since the financial crisis, ‘banker’ has become a generic term of abuse for anyone working in and around the industry. Public anger over the bank bail-outs, scandals and lack of accountability over the past 10 years has driven a wider sense of distrust and suspicion that the financial services industry does not have its customers’ or wider society’s interests at heart. This in turn fuels the political debate around regulation and tax: if the industry wants to break out of the painful process of being reformed and wants to fulfil its vital role in society - such as looking after people’s retirement savings - it needs to address this distrust and win over customers who currently see it as part of the problem. 9) The wrong response Mainstream liberal parties in western democracies have failed to understand the rise of populism and failed to respond to it. By framing their response in economic rather than cultural terms - or dismissing the problem altogether - governments are making things worse. The Remain campaign’s focus on the economic risk of Brexit ignored that many Leave voters were far more worried about the cultural and social issues, and has accentuated distrust in experts and the elite. It’s also important to distinguish in any response between ‘how can we put these people back in their box?’ and ‘how can we respond to their underlying concerns?’.