The Big Backlash

Not all terrifying political developments in the recent past are connected to economic globalization, nor can all be explained with the negative effects of globalization on the social fabric of Western societies. And yet, it would be silly to deny that the always fragile compromise between capital accumulation and political democracy, between unleashed markets and civil society has got broken over the last twenty years or so, and that the transition towards unleashed global markets played a prominent role. Social disruptions and political discontent came upon as a more of a stealthy process rather than a big bang event, and thus a process that many social scientists plain wrongly neglected. The backlash did not start with Brexit and Donald Trump and will not end with Beppe Grillo, Norbert Hofer or with Marine Le Pen. The Populists arrived in town, and they may stay for quite a while.

The surge of populist and national parties and movements is as much about contagion as it is about the wish of core voters to eventually get some of the benefits the prophets of free markets and globalization were promising them all along. It is also about the hunger for a supposedly safe world like in the past. Populists deliver by offering promises that seem to reconcile wishes and realities. Populists today should not be mixed up with neoliberals of the past. Latter have strong global orientation whereas former combine their anti-elitist propaganda with strong nationalist policies. Economic nationalism is at the core of modern populist movements, and economic nationalism can go hand-in-hand with pro-market as well as with anti-market policies , very much in an transactional manner. Trump, for example, seems to be strong pro-market when it comes to health care, where indeed private actors can make a fortune if markets the insurance markets will get freed up in the way the incoming health secretary is suggesting. Trump is strong anti-market when it comes to international trade where he wants to redraw the range of markets and to subordinate division of labor-arrangements in a way that would satisfy US companies. And he is not hesitating to use state financial resources when it comes to lure US companies to keep their production in the US. His proposed corporate tax program is at the same time a huge gift for national-based companies, and so is his suggestion to get rid of the Dodd-Frank reforms for financial markets.

Obviously, economic nationalism is the great challenge for globalization. And it is the challenge for a global economic order that still has a lot of features of a liberal economic order. Logic tells us that one country that turns to economic nationalism may have the chance to succeed and to get a larger piece of the cake to the detriment of others. If two or more countries turn to economic nationalism, the outcome is probably something close to a trade war. Trade wars trigger extremely negative memories, and rightly so. Economic nationalism that takes the form of uncovered mercantilism by actively reducing imports and favouring exports is no stabilizing force. Nor is it a political project that deals in enhancing ways with the challenges of economic globalization. on the country, it is a invitation for conflict. And this holds for the idea to negotiate trade deals where already in the terms of the agreement one country is supposed to be favoured against others. Multilateralism is already challenged and this sort of trade policy means the kill.

Not all populist parties are at the same time iron-clad nationalist parties, at least not all of them propose a clear-cut version of economic nationalism. However, none of them comes without a degree of economic nationalism. The Five Star Movement in Italy, for example, may lack a coherent program but still proposes a range of policies that usually are the sign of left parties like general basis income, anti-privatization rules, climate policies in favour of renewables and the more. Rather then being strict anti-globalization the party wants to leave the Eurozone but may stop asking to leave the EU. The Front National in France is closer to a populist-nationalistic party and proposes strong anti-EU and anti-globalization policies in combination with strict anti-immigration policies. The FÖP in Austria is in this regard a close ally and so is Geert Wilder’s whose party program is a true mixture of populism and economic nationalism. The situation in Poland and in Hungary where strongly populist parties are already in government differs in so far as in both cases the parties in charge favour additionally a culture war against all liberal features of modern Western societies, not least against women rights.

The new political situation in the US may not be worse in terms of suggested policies than we see them emerging in Hungary and Poland. Still, the repercussions will be much bigger as economic nationalism in the still most powerful country in the world has much stronger repercussions than economic nationalism in the periphery of the global economy.. All those who hint to the strong institutional system of the US and its checks and balances may have to go back to the textbooks, as chances are that the maverick candidate will use maverick methods to fundamentally change the US, and the global economy. At this point in time, contagion is what we have to expect. The trend for economic nationalism just started, and we will see a further rise across many countries in Europe. Time to get warm clothes out.