Rising Populism in Europe and the United States: Where Will it End?

Recent elections in Germany, Austria, and the Czech Republic confirm that the ominous growth of right-wing populism in Europe and the United States did not end with the defeat of Geert Wilders in the Netherlands and Marine Le Pen in France earlier this year. The center is not holding.   Social democracy throughout much of the European continent is on life-support. The center-right is moving further to the right. 

Alternative for Germany (AfD) has entered the Bundestag with 12.6% of the vote as both the CDU and SPD have suffered substantial declines in support.  With its best showing since 1999 in the Austrian election of October 15, the  far-right Freedom Party appears likely to enter a coalition with the center-right Austrian People’s Party.  Following the Czech elections of October 21 the populist euroskeptic billionaire Andres Babis is set to become prime minister with 30% of the vote while the social democrats, the leading party for a quarter century, plummeted from first to sixth place with just 7%.  In Hungary (Fidesz) and Poland (Law and Justice) authoritarian nationalist parties have consolidated power and begun to dismantle democratic constitutions. 

Across the Atlantic, the Republican Party of Donald Trump controls the presidency, House, and Senate. Republicans hold 34 (of 50) governorships while 80% of Americans live in a state that is all or partially controlled by Republicans.   Notwithstanding its own alarming dysfunctions and those of its leader, the Republican Party appears capable of retaining control of both houses of Congress in 2018 and the prospect of Donald Trump’s re-election in 2020 cannot be discounted.

While the growth of right-wing populism has been catalyzed by immigration, the underlying cause of its rise is the more fundamental crisis of neoliberal globalization.   After World War II the United States built an international economic order based on the principles of Franklin Roosevelt’s New Deal.  The free market was subjected to state regulation to ensure full employment and social protection.  But the postwar “Golden Age” collapsed during the 1970s amid a crisis of profitability as corporate America executed a project of neoliberal globalization designed to reverse this decline.   The principle of social provision gave way to privatization, de-regulation, the restriction of public services and the welfare state, the weakening of trade unions and labor laws, and financialization.   The global financial crisis that started in 2008 exposed the inherent contradictions and cruel realities of this project, initially celebrated as the “end of history” but now revealed as a utopian fantasy. 

In the United Kingdom and the United States the transition to neoliberalism was legitimized by the charismatic leadership of Margaret Thatcher and Ronald Reagan and the belief that there was “no alternative.”  By contrast, in continental Europe where there is a stronger tradition of socialism and social protection, the transition was justified in terms of a putative united Europe, spearheaded by a monetary union that lacked the redistributive and stabilizing mechanisms of a common budget and fiscal policy. The monetary union has generated  austerity and conflict between north and south and east and west even as it has served German's export mercantilist strategy.

To be sure, Europe as a whole has recovered from the global and eurozone crises, but at the expense of large segments of the population.  The EU’s southern tier continues to experience mass unemployment and poverty, stagnation, and emigration.  Even in Germany poverty and inequality have increased dramatically.  Notwithstanding its vaunted 4% growth rate and low unemployment, Romania is emblematic of Europe’s east.  Heavily penetrated by Western banks and German production chains, Romania in 2011 deregulated its labor market in return for a 20 billion euro bailout package from the IMF and EU.  The new labor code, introduced under strong pressure from the European Commission and American Chamber of Commerce, has proven “catastrophic” to Romanian society as it has greatly reduced union membership, worker's rights, and driven down wages.

In the United States, the stock market  has soared to record heights in 2017.  However, the combination of neoliberal globalization and technological change has produced widespread de-industrialization alongside deep pockets of poverty, unprecedented levels of inequality, and fraying communities.  The result has been a social crisis characterized by alarming rates of suicide, opioid addiction, and an appalling rate of incarceration marked by large racial disparities.

How long can neoliberalism endure, and what will come after?   Writing amid the catastrophe of fascism and world war the distinguished Hungarian economist Karl Polanyi proposed the concept of the “double movement.” When the “free market” becomes disembedded from society and land, labor, and money are viewed as commodities—as was the situation after World War I and again starting in the 1980s-- the result is de-stabilization and crisis from which society ultimately seeks to reconstitute itself.  During the Great Depression this reconstitution in Europe took the form of fascism, while in the United States it culminated in the benign “New Deal.”

At the present time, a democratic “double movement” would require a re-subordination of the market to human and societal needs.  This is now recognized even by the IMF.  Once the champion of neoliberal globalization, it now seeks to address the central problem of growing inequality and calls for significantly higher taxes on the wealthy, including a wealth tax on land and property, increased spending on health and education , and a universal basic income.  However, on both sides of the Atlantic center-left parties have embraced the neoliberal project and abandoned the working class, leaving the field to right wing populists.  Will right-wing populism accomplish an authoritarian break with neoliberalism ?

At the present time, neoiberalism continues to advance even as it acquires  more authoritarian tendencies.  The new Austrian chancellor, Sebastian Kurz, views the Austrian People’s Party not only as a vehicle for anti-immigration policies but also for low- tax populism and reductions in the public sector, a program fully endorsed by the Freedom Party.  In France, Emmanuel Macron economic strategy is predicated on sweeping neoliberal labor reforms that have already sparked massive resistance and will play into the hands of Le Pen, who received 34% of the vote in the second round.  The faint hope that Germany would respond by agreeing to a common European budget and relax its disciplinary supervision of the Eurozone is dampened by the likely entrance FDP in the new German coalition.  Following Brexit, the UK appears destined to reinvent itself as a de-regulated financial and low- tax haven, the preferred policy of the right wing of the Conservative Party. 

A similar situation pertains in the United States.  While the two major parties are polarized with respect to cultural issues, their disagreements over economic policy are largely a matter of degree.  The Democratic Party remains committed to neoliberalism, having presided over the Wall Street deregulatory bacchanal of the 1990s along with the evisceration of trade unions and the welfare state, and dependent on wealthy donors for campaign finance.  Refusing serious introspection, it blames, variously, Vladimir Putin and “deplorables” for its dismal electoral performances. 

Donald Trump proclaims himself champion not only of the disenfranchised white working class, but also middle and upper-middle class whites who resent the loss of their status achieved during the “Golden Age.”  The fundamentally racist appeal—and the identification of scapegoats including minorities, women, and immigrants—paves the way for further neoliberalism.    Trump seeks to implement—albeit incompetently-- large income tax cuts for wealthy Americans,  the reduction of corporate tax rates, sharp cutbacks in healthcare, and to dismantle regulations on finance, fossil fuels, and the environment alongside largely rhetorical (thus far) attacks on trading partners and trade agreements.  This agenda has elicited strong, albeit sometimes discrete, support from corporate America including Wall Street, silicon valley, and the military-industrial complex.  Notwithstanding this agenda, Trump calculates  that he can retain a significant base of support among the white working class not through arresting their descent into poverty, but rather through identifying new cultural battlefields and continuously stoking white resentment. Thus he reprises a strategy that has a long and shameful history in the United States.

If in the short term pessimism is warranted, there are perhaps some grounds for optimism in the longer run. The programs of right-wing populists—including Trump—are incoherent and ineffective; the further growth of these parties and movements is not inevitable.  In Europe, there is evidence that many voters are not strongly committed to these programs and parties, but rather are frustrated with the status quo that finds no other convincing outlet given the center-left complicity with neoliberalism.   The same can be said, although perhaps less confidently, about the United States.  Indeed, the recent campaigns of Bernie Sanders and Jeremy Corbyn, for all of their limitations and contradictions, suggest that more benign alternatives can elicit substantial support.  

Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.