GLOBALISATION, INEQUALITY AND THE RISE OF
POPULISM
BRIAN NOLAN
SSISI, 20 April 2017
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Globalisation, Inequality and Populism
“Rising income inequality is the defining challenge of our times”
(President Obama, USA)
• Seen as driven by globalisation
• And driving rise of populism:
“… rising economic insecurity and social deprivation among the
left-behinds has fueled popular resentment of the political
classes. … made the less secure strata of society – low-waged
unskilled workers, the long-term unemployed, households
dependent on shrinking social benefits, residents of public
housing, single-parent families, and poorer white populations
living in inner-city areas with concentrations of immigrants-susceptible to the anti-establishment, nativist, and xenophobic
scare-mongering exploited by populist movements, parties, and
leaders, blaming ‘Them’ for stripping prosperity, job
opportunities, and public services from ‘Us’ (Inglehart and
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Norris, 2016)
Outline
• What has happened to income inequality across
the rich countries?
• Has rising income inequality been driven by
globalisation?
• Is this responsible for ‘revolt of the angry’/rise of
populism, directly or indirectly?
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Inequality in Rich Countries
Change in Gini Coefficient, 1980-2007
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Inequality in Rich Countries
Change in Gini Coefficient, 2007-13
Fall
No change
Rise
Belgium
Finland
Iceland
Latvia
Netherlands
Poland
Portugal
Romania
UK
Australia
Austria
Canada
Czech Rep
France
Germany
Ireland
Luxembourg
Norway
Switzerland
Denmark
Estonia
Greece
Hungary
Italy
Lithuania
Slovak Rep
Slovenia
Spain
Sweden
USA
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Income Inequality: Top 1%
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Inequality Trends
Striking variation across rich countries:
• In extent and pacing of inequality increase
• In patterns of increase in inequality
• In market income inequality and role of
redistribution
• In impact of Crisis
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Inequality Drivers
• Increasing inequality in market income key
– Increased dispersion in individual earnings, returns to
‘skills’, hollowing-out of occupations
• Globalisation and technology together key drivers
but very hard to disentangle, no consensus on their
relative importance
– Both required for e.g. global supply chains
– Inequality rose in USA and UK well before China ‘shock’
• Underpinned by declining union power and labour
market deregulation, minimum wage compression
• Some role for income from self-employment and
from capital, changing age and household structures
• Reduced redistributive capacity/effortCentral Bank of Ireland - UNRESTRICTED
Inequality Drivers
Distinctive factors at top:
• CEO pay, change in remuneration systems (and
norms?)
• Financial sector size and rewards/financialisation
• Greater returns to ‘superstars’ in global markets
• USA:
– 20% of increase in top 1% share reflects shift from labour to capital
income,
– 20% reflects capital income more concentrated at top,
– 60% reflects labour income more concentrated at top
• Related to greater mobility in capital and labour, but
not simply a reflection of globalisation
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Real Incomes in the Crisis
Change in mean income, 2008-2013 (Annual average)
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Recent Income Growth USA
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Inequality and Living Standards
Countries have displayed very different trajectories:
• Sharply rising inequality and long-term stagnation in median
incomes – USA
• Long-term stagnation in incomes, little increase in inequality
– Japan, Italy
• Some growth in incomes, stable inequality – France
• Some periods of rising inequality and income growth, some
flat inequality and income stagnation – UK
• Substantial growth and stable inequality up to Crisis, collapse
in income and rising inequality - Greece, Spain
• Substantial growth and stable inequality up to Crisis, collapse
in income with stable inequality – Ireland
• Strong income growth including through Crisis, increase in
inequality - Poland
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What Is Populism?
• Current usage can encompass “militarists, pacifists,
admirers of Che Guevara or Ayn Rand; treehugging pipeline opponents or drill-baby-drill
climate-change deniers” (Economist, 2016)
• Populist philosophy is a loose set of ideas that
share three core features: anti-establishment,
authoritarianism, and nativism (Cas Mudde)
• Sees common people as exploited by a privileged
elite, and seeks to resolve this
– ’pure people’ vs ’corrupt elite’; contrast with pluralism
• Perhaps charismatic leader appealing to masses
and sweeping aside institutions, but no set
ideology.
• Hard to operationalise empirically! Central Bank of Ireland - UNRESTRICTED
Inequality and Populism
• Inglehart and Norris (2016): use 2014 Chapel Hill Expert
Survey to identify ideological location of political parties in
31 European countries
• Vote for populist parties across many countries has roughly
doubled in recent decades
• Pooled European Social Survey data 2002-2014 used to
examine who votes for populist parties
• Socio-economic variables have some explanatory power
but much less than cultural attitudes
• Economic insecurity explains less of rise in support for
populist parties in Europe than cultural backlash
– “retro reaction by once-predominant sectors to progressive
value change”
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• French and German regions that have been
more exposed to trade with low-wage
countries have seen larger increases in vote
shares for extreme-right parties (Malgouyres,
2014; Dippel, Gold, and Heblich, 2015)
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Inequality and Populism
• Rise in populist parties in countries with varying
experiences in terms of inequality and prosperity
–
–
–
–
–
Poland: strong income growth, increase in inequality
France: some income growth, stable inequality
Germany: little income growth, some increase in inequality
Austria: some income growth, little increase in inequality
Spain, Greece, (Ireland?): strong income growth and stable
inequality up to Crisis, income collapse in Crisis
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Inequality and Politics
• Decline in trust not robustly related to inequality
• ‘Discontent’ with inequality rises as inequality rises,
but only moderately
– extent of increasing inequality not fully recognised
– some increase in acceptability of higher inequality
– ‘salience’ of inequality varies
• Higher inequality associated with lower civic
participation, lower voting turnout among poor
• Increasing income/wealth concentration => greater
political influence for rich?
– Evidence for USA, but system distinctive
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Inequality and Brexit
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Inequality and Brexit
• Income inequality little altered in last 15-20 years, but a
longer-term divide helped to drive Brexit vote
• Mood affected by generalised slowdown in income
growth since early 2000’s, Crisis, and post-crisis squeeze
• Exacerbated for many by rising housing costs
• Growing divide between living standard of generations
• Coincidence of higher migration in period of
disappointing income performance from 2004
• Localities more exposed to trade with China voted more
strongly in favor of leaving EU
• Education biggest single predictor of the vote, straddles
economics, demographics and culture Central Bank of Ireland - UNRESTRICTED
Inequality and Trump
• White-majority working-class population whose
livelihoods had been negatively affected through
decades in which US economy shed manufacturing
• But cultural and demographic change would have
created some degree of populism
– places where white identity mixes with longsimmering economic dysfunctions
• “It’s a nonurban, blue-collar and now apparently quite
angry population. They’re not people who have moved
around a lot, and things have been changing away
from them, but they live in areas that feel stagnant in a
lot of ways” (Frey, Brookings)
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Inequality and Trump
• Autor, Doorn, Hansen and Majesi (2016): congressional
districts exposed to ‘China shock’ import penetration
disproportionately removed moderate representatives
from office in 2000s and replaced by more extreme
candidates, especially Republicans
• Adverse economic conditions drive support for nativist
politicians; opportunistic politicians employ strategic
extremism to spur participation among core supporters trade shocks raise both voter turnout and individuallevel campaign contributions
• Clinton would have won Michigan and Wisconsin if trade
shock from Chinese imports had been 25% smaller,
Pennsylvania and election if 50% smaller
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Conclusions, Implications
• Emerging ‘grand narrative’ that sustained rise in
income inequality is driving ’revolt against elites’
comes closer to reflecting US experience than many
other rich countries
– though not whole story even there
• Need to learn from range of country experiences
about complex interactions between these processes,
in different institutional and cultural settings
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