Last week we considered the short-term reasons for believing in the rise of left-wing populism. Now, we now turn to the more profound, long term pressures underpinning this shift in the US and, to a lesser extent, the UK.
Why Does the Future Belong to the Left?
• The Unstable Right Coalition: While all versions of left-wing populism are consistent with big government in the economic sphere, on the right, only authoritarianism is (Fig. 1). It appears inevitable that the mainstreaming of left-leaning economics as a solution to inequality will instigate a longer-term conflict within the right alliance. Big government and authoritarianism lie counter to much of the bedrock principles of Anglo-American conservatism. In the US, this alliance is holding strong thanks to the Trump administration delivering on key cultural issues, but over time these violations will become harder to ignore. The right-wing alliance between the anti-EU Tories and Nigel Farage’s working class is even weaker and unlikely to extend beyond a single issue coalition.
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Last week we considered the short-term reasons for believing in the rise of left-wing populism. Now, we now turn to the more profound, long term pressures underpinning this shift in the US and, to a lesser extent, the UK.
Why Does the Future Belong to the Left?
• The Unstable Right Coalition: While all versions of left-wing populism are consistent with big government in the economic sphere, on the right, only authoritarianism is (Fig. 1). It appears inevitable that the mainstreaming of left-leaning economics as a solution to inequality will instigate a longer-term conflict within the right alliance. Big government and authoritarianism lie counter to much of the bedrock principles of Anglo-American conservatism. In the US, this alliance is holding strong thanks to the Trump administration delivering on key cultural issues, but over time these violations will become harder to ignore. The right-wing alliance between the anti-EU Tories and Nigel Farage’s working class is even weaker and unlikely to extend beyond a single issue coalition.
Figure 1: The Populism Chessboard
Source: Gary Licht
• Unambiguous Demographics: It is a long established consensus that increasing racial diversity and social liberalism apparent in demographic forecasts spell doom for right-wing American politics. While reality is more complicated, the underlying data is unambiguous on these points (Figs. 2 & 3), and the timeline suggests peak generational evenness in the current window.
Figure 2: Projected Population By Generation
Figure 3: US Race-Ethnic Profiles for Age Groups, 2015
• Generational Stickiness: To establish a long period of left-wing dominance, the younger generations must maintain their liberal bias as they age. This was certainly not the case for the baby boomers who started out as startlingly liberal in the sixties and have ever since been on an unending shift to the right. There are two reasons we might expect younger generations to have stickier ideologies. The first is the difference in their conception of liberal ideals. The rallying cry for young boomers was freedom while that for the current generation is equality. The other, and more telling reason, is the difference in life experiences.
Age is generally linked to conservatism as the more one accumulates over time, the more one has a stake in the existing system. The boomers of the developed world benefitted from a golden age of growth and it is only natural that they have become more conservative as they have aged. In particular, their formative experience of capitalism has been economic mobility and capitalism’s cold war triumph. Compare this with younger generations who have been shaped by the global financial crisis, sinking mobility, global warming and the rise of China. In this scenario, demographics coupled with sticky ideologies give a default ascendancy to the left regardless of the internal dynamics of the right.
• History and Culture Matter: Edmund Burke was one of the fathers of conservatism and famous for his gradualist theory of change. As a contemporary of the American and French revolutions, he expressed optimism that American democracy would be successful. But he was sceptical about France. Why? American independence was an evolution of colonial self-rule while French democracy came by sudden revolution. American society was equipped to deal with the ‘gentle change’ of independence while France was likely to be ripped asunder by the sudden imposition of freedoms with which its society was not structured to cope. Burke’s theory retains relevance even today: this dynamic has been evident in the Arab Spring and the fall of the Soviet Union.
A lurch to authoritarianism or overt illiberal democracy in contemporary America and Britain is as alien to the identity of these societies as democracy was to 18th century France. This interpretation goes beyond the traditional argument that the institutions of these countries are strong enough to withstand a constitutional assault and, instead, asserts that the individual character of its peoples are unlikely to acquiesce to such efforts. While being wary of hubris, current events in the US congress and UK parliament seem to support this argument.
• Evolution Endures: The lessons of Burke apply not just to the challenges of illiberalism establishing itself in the US and UK but also to the solid base upon which further leftist drift has to consolidate upon. The welfare state is well established in the UK and this move in the US began with FDR and has been long evolving ever since. Additionally, and this is true on a global scale, social attitudes among all ages have been on a decades long drift towards accepting women’s rights (fig 4) and LBGT+ equality. These issues are far from a random sampling and can be interpreted as the antithesis of nationalist (purity) and authoritarian (patriarchal authority) values.
Figure 4: Abortion Access Around the World
What About the Rest of the World?
• Europe: The case for continental Europe is far more nuanced than in the US and UK. For starters, social democracy is well established and the role of big government is readily accepted across the political spectrum. Inequality is also lower and there is less room for drift. Additionally, the demographically instigated default drift to the left is less convincing. Europe’s youth are smaller in size and less diverse than their English-speaking peers. While climate change is pulling them left, they are less constructive on economics (Figs. 5 & 6). Applying Burke’s theory as a defence against illiberalism is also patchy across the continent because the spectre of authoritarianism is still within living memory for many countries. Instead, the EU and its institutional inertia was designed to play this defensive role. Despite some minor recent setbacks and conflict with core Europe, the consolidation of the PiS in Poland and Fidesz in Hungary are examples of this danger.
Figure 5: Age Demographics Of
Respondents in favor of increasing taxes on the rich to support the poor (bars) and who attribute poverty to an individual’s “laziness or lack of willpower” (dots)
Source: OECD, 2018
Figure 6: Europe’s Young And Restless
• Developing World: The above analysis has limited applicability to the developing world. The demographics (fig 7) are different and significant poverty reduction makes for a more nuanced inequality discussion. However, geopolitics and the history of colonialism, the cold war and globalisation suggests that these countries will not be left out of the great changes sweeping over bigger powers.
Figure 7: Population Division
Source: United Nations Population Division, World Population Prospects: The 2010 Revision, medium variant (2011).
Bottom Line
Without the subversion of democracy, the US appears destined to drift towards the left for a host of economic, demographic, and cultural reasons. The case for Europe is far more nuanced with climate change being the strongest force pulling the continent to the left. The applicability of the current framework to the developing world is limited, but history teaches us that smaller powers are seldom able to escape the great changes affecting the larger powers upon which they depend for economic prosperity and physical security.
Gary Licht focuses on emerging and frontier markets, where he has researched and traded a wide collection of countries and asset classes for over 13 years. He also maintains a strong interest in macro, social and development issues.
(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)