Brexit and Populism’s new dawn, Emilio Ocampo (24 June 2016)
The first era of globalization ended abruptly in the summer of 1914. The second, which started in 1989, is ending in a much slower and less traumatic way. Brexit is just the beginning. To paraphrase Churchill, it is not the beginning of the end but the beginning of the beginning. In both cases, globalization unleashed the forces that eventually brought about its demise. Let’s not forget that Gavrilo Princip was not a lone madman but a member of a nationalist group that resented foreign influence in Serbia.
It would be a mistake to think that Brexit’s triumph was simply a call by an educated majority for greater transparency or a reaction to the excesses of the Brussels bureaucracy. The Brexit vote was much more representative of Nigel Farage than Boris Johnson, more The Sun than The Spectator. The referendum results in fact show a nation divided by income, education, geography and social position. On average Brexit voters were older, poorer, less educated and in many cases, unemployed. Interestingly 75% of the voters aged 18–24 voted “Remain”. Usually it is the young who want change. Not in this case. The Brexit vote essentially reflects a rejection of globalization.
The second era of globalization happened almost simultaneously with another disruptive force: the technological revolution. The biggest beneficiary of both trends has been China, which thanks to the embrace of some basic principles of capitalism, in a lapse of a generation evolved from being a backward and poor country to an industrial powerhouse. As a result more than 400 million Chinese escaped poverty since 1981.
But the effect of globalization and technological change was not so benign on the advanced economies. Globalization meant a lot of low paying blue-collar jobs moved overseas to countries like India, China and Mexico. At the same time, the technological revolution eliminated a whole set of low skill white collar positions in the service sector, particularly those that could performed more efficiently by computers. The biggest loser was the middle class in the US and Western Europe. As economist Raghuram Rajan has pointed out, the most important force behind the rise of inequality in the advanced economies, particularly the US, “is that technological progress… requires the labor force to have ever greater skills.” The root of the problem is structural: the educational system has not kept up with technological change and as a result there is an excess supply of unskilled labor. But solving this problem takes time. And the people who feel displaced and have seen their standard of living decline have no patience. When the middle-income segment of the population feels closer to the poor than to the rich, a political dislocation is inevitable.
Trump, Brexit and the rise of nationalism throughout Europe are symptoms of the same disease: populism. A similar thing happened after the first era of globalization collapsed. The first signals were felt in the periphery of Europe, with Mussolini’s advent to power. But the disease quickly spread all over Europe reaching its climax in Germany under Hitler. Not even the UK was spared, as proved by the popularity of Sir Oswald Mosley’s British Union of Fascists. It is important to remember that nazi-fascism was a form of populism.
There is no point in joining the debate that the definition of populism generates among economists, sociologists and political scientists. At a basic level, it is simply the easy way out to structural problems imposed by a majority of the electorate when those structural problems open an increasing gap between the ideal to which the majority aspires and reality. The easy way out is simply a form of collective denial. Solving structural problems requires structural reforms. But structural reforms impose costs, particularly in the short and medium term. The populist approach is simply to ignore such costs or to impose them on someone else (usually foreigners, such as the Chinese or Mexican, or easily identifiable racial minorities such as Muslims). This is the reason why all populist movements are essentially nationalistic (the reverse, however, is not necessarily true).
Obviously this form of collective denial requires and finds its own preachers. Populist leaders are extremely good at reading the mood of the majority and even better at persuasively articulating “the easy way” out to the structural problems that burden a nation. Almost 150 years ago Gustave Le Bonexplained how to do the latter:
“To imbue the mind of a crowd with ideas and beliefs… leaders have recourse to different expedients. The principal of them are three in number and clearly defined — affirmation, repetition, and contagion. Their action is somewhat slow, but its effects, once produced, are very lasting. Affirmation pure and simple, kept free of all reasoning and all proof, is one of the surest means of making an idea enter the mind of crowds. The conciser an affirmation is, the more destitute of every appearance of proof and demonstration, the more weight it carries.”
Repetition of a simple slogan in every situation and every context is necessary to firmly implant an idea in the mind of an audience. Contagion is achieved by appealing to sentiment and emotion, the most effective of which are always negative. That’s why fear, hatred and resentment underlie all populist rhetoric.
Mussolini, Hitler and Peron proved the effectiveness of Le Bon’s maxims. Trump, Farage and the populist-nationalists leaders of the modern age are proving their lasting power. A few months after Hitler’s rise to power Bertrand Russell complained that “the fundamental cause of the trouble is that in the modern world the stupid are cocksure while the intelligent are full of doubt.” His warning rings true today. All populist leaders are cocksure. That’s why they are so appealing. It is impossible to predict the next act of this tragedy. Let’s hope history has taught us a lesson and that we will not repeat the mistakes of the past.