Populism is dominating the current political cycle and it looks likely to remain in place over the next one. But where it’s right wing on top now, odds are that the coming wave of populism will be left wing in nature. In this article, we look at the short term forces driving these changes across the US and the UK, and what these insights mean for the rest of the world. Next week, we’ll look at the long-term forces…
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Populism is dominating the current political cycle and it looks likely to remain in place over the next one. But where it’s right wing on top now, odds are that the coming wave of populism will be left wing in nature. In this article, we look at the short term forces driving these changes across the US and the UK, and what these insights mean for the rest of the world. Next week, we’ll look at the long-term forces.
Why Did Right Wing Populism Win Over Left Wing Populism?
• Populism as Protest: Populism is a protest movement with the emotional rejection of the status quo at its core. It gains traction because of how different it looks to incumbents and how well its methods harness that emotion. Nowhere is this more evident that in the ascendancy of nationalist populism over recent years.
• Incumbency Liability: While incumbency is usually a political strength, it becomes a liability in such an environment. Regardless of any internal changes, it is difficult to break the perception that incumbents are just more of the same. Hillary Clinton and Theresa May are both examples of this. Despite being women (and so inherently a break from the past), they were the establishment’s choice and judged as such by the public. Incumbency also makes internal change far harder in the first place. Most governments in developed countries were already left of centre before the rise of populism, and this meant is was harder for left wing populism to gain a presence on these platforms. The prime example here is Hillary Clinton beating Bernie Sanders for the 2016 democratic nomination.
• Anger Asymmetry: Nationalist populism is also better at harnessing emotion. The right emphasizes cultural corruption and focuses on the elite as other, while the left emphasizes economic corruption and focuses on the elite as our own corrupt wealthy. Of course, it easier to be angry with others. There is no doubt that the unrest in Syria and the vivid images of uncontrolled immigration witnessed at European borders played a catalysing role in shifting an already angry and anti-globalist mood further to the right. In fact, if you believe Dominic Cummings, it was decisive.
Why Is This Is Likely to Change Now?
• Slender Margins: It is difficult to overemphasise the slenderness of the margins by which the nationalist movements won the 2016 US elections and Brexit. The US electoral college was decided by a mere 0.06%, while for Brexit it was 1.89%. And remember that in the US the popular vote went against the electoral college outcome by nearly 3 million votes. These numbers highlight the vulnerability of these regimes to even small changes in the electoral landscape.
• Incumbency Liability and Anger Revisited: Nationalists are now subject to the incumbent liability of the protest vote. Furthermore, the galvanizing issue of immigration has cooled with a decrease in numbers flowing into Europe and the US. The left has also become more populist, with inequality and the environment leading the agenda. Importantly, the mercantilist policies of the left are consistent with the still-strong anti-globalization sentiment. Given the slender margins of the nationalists’ rise, any one of these factors could prove enough to topple these movements.
• High Youth Turnout: Another factor that could seal the fate of nationalism is the early indication (via the 2018 mid-terms) of high youth turnout in 2020 US elections. While perennially touted, the young have seldom shown up to punish the right. But millennials doubled their turnout the last mid-terms from 2014 (fig. 1). In terms of eligible voters, millennials and boomers are forecast to stay approximately equal at 27% of the electorate each, while Gen Z should grow from 4% in 2016 to 10% in 2020 (fig. 2).
Figure 1: Millennial Turnout Doubled from 2014 to 2018
Figure 2: In 2020, One-in-Ten Eligible Voters Will Be Members of Generation Z
The sudden increase suggests the youth was motivated by a clash of ideology with the nationalist agenda. It is worth noting firstly that the environment is a non-partisan issue among the youth. Secondly that these post-cold war generations do not share their predecessors’ instinctual antagonism to the socialist label. Witness the current excitement around Alexandria Ocasio-Cortez’s New Green Deal and Bernie Sander’s 2016 run; a populist left candidate will only enhance youth turn out.
What About the Rest of the World?
• Europe: While the high youth turnout and size of the millennial cohort is unique to the US, the other short term factors have been in play globally. Parts of Europe have seen a similarly synchronized political cycle to the US and UK and the liability of incumbency, the cooling of immigration, the rise of environmental issues, the leftward drift of liberals, and the mobilization of the left protest vote have all been evident across Austria, Italy, and Germany.
In Austria and Italy, both nationalist parties have broken from their ruling coalitions – with Austria’s FPO losing more than a third of its support in last month’s elections. The same elections saw Austria’s greens rise by 10%. In Italy, Matteo Salvini’s League party lost its coalition as it underestimated the unity of the opposition in preventing new elections.
Finally, the rise of the greens in Germany is more startling even than in Austria. After collecting only 9% in the 2017 election, national polls now have the greens as Germany’s second largest party with 23% support. In comparison, AfD support is flatlining in the low-mid teens. The obvious exceptions to this dynamic have been Hungary and Poland, where the nationalists have managed to consolidate power (to be discussed in part 2).
• Developing World: From Lebanon to Chile, the developing world is experiencing its own convulsions. While there is some relation between these developments and the cycle so far discussed, the differences are more revealing than the similarities.
Unlike in the case of the developed world’s populist uprising, many of the existing regimes in the current protest countries are centre-right to right wing. In line with the incumbency liability theory, these protests appear animated by left wing populism.
However, these spontaneous and nascent movements lack leadership and organisation, making them far weaker and less likely to succeed than the nationalist movements of the developed world. The demographic pressures are also completely different and, despite the commonality of inequality, the economic and social prescriptions differ as well.
Bottom Line
As we can see, the short term pressures on the ability of the current right wing populists to maintain power over the next election cycle in the US are considerable. In the context of their slender majorities, the most immediate threats are a change in allegiance of protest voters and high youth turnout. Another important theme is the cooling of immigration and warming of climate change as a political issue.
Next week’s Part 2 will deal with the longer term pressures being driven by demographics and the mainstreaming of left leaning economics as a solution to inequality.
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.)