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Nationalism Hasn’t Gone Away

June 22, 2017
Kip Beckman
Principal Economist
World Outlook

Western democracies breathed a huge sigh of relief following Emmanuel Macron’s victory over far-right and anti-euro candidate Marine Le Pen in the presidential elections in France last month. Combined with Dutch voters’ rejection of populist Geert Wilders, the French result quelled fears that the European Union was heading in the same direction as the United States and the United Kingdom. The election of Donald Trump and the Brexit vote last year led to real concerns that the era of globalization and open borders was coming to an end, to be replaced by nationalist leaders vowing to tear up trade deals and clamp down on immigration.

Antonio Tajani, president of the European parliament, boldly declared that the growth of populism had come to a screeching halt following the recent election results. Mr. Tajani has spoken too soon. Around one-third of French voters supported Marine Le Pen. Time’s Ian Bremmer contends that President Macron will face fierce opposition as he attempts to implement much-needed reforms to labour markets to address double-digit youth unemployment rates. Brexit negotiations will prove to be even more difficult after Theresa May failed to garner a majority in the recent U.K. election. Populist leaders in Poland and Hungary are gradually chipping away at their own institutions protecting democratic rule.

But the main reason why the West can’t relax is that it has not addressed the issues that led to Brexit and the rise of Donald Trump.

The emergence of a middle class in China, India, and other Asia-Pacific countries is one of the world’s greatest achievements over the past few decades. Global poverty has declined, literacy rates have soared, and many people in poor countries have access to health and education that they never had before.

But globalization and rapid technological change has eliminated millions of good-paying factory jobs in wealthy countries. Many former manufacturing workers without college educations have been forced to accept far-lower-paying positions in the retail or food services industries. Income inequality has surged as the top 1 per cent gain a higher share of global wealth, while middle-class incomes have barely budged over the past few decades. At the same time, the increase in refugees from the Middle East and elsewhere has sharply increased worries about job losses to foreigners, crime, terrorist threats, and a loss of national identity. The Brexit vote and the election of Donald Trump were simply a reaction to these growing concerns in the West.

Even more troubling, some of the problems leading to the rise of nationalism in wealthy countries are becoming a problem in the developing world as well. Bremmer notes that income inequality is increasing in countries like China, Brazil, and Mexico for the same reasons as they are in the developed world: stagnating middle-class incomes and rising wealth for high-income earners. Technological change is also eliminating some of the jobs in the rapidly expanding middle class in countries like China and India. Over 40 per cent of the population in the Middle East is under the age of 25, and it will be extremely challenging to generate jobs for young people in a world economy characterized by weak commodity prices and low growth due to an aging population.

The difficulty that developing countries have in dealing with nationalist politicians is that institutions protecting the rule of law, the electoral process, and freedom of the press aren’t as strong as in the West. Weak institutions explain why the Russian government controls the television channels and websites where most Russians obtain news. In Turkey, President Erdogan has used a state of emergency following last summer’s coup attempt to tighten the government’s grip on the media and to punish those critical of the government. Conversely, checks and balances on the power of the executive branch in the U.S. prevented President Trump from banning visitors based on religion. Free and fair elections in Europe stopped Le Pen and Wilders from gaining power.

Fortunately, some countries are taking steps to blunt the appeal of nationalism. To help those displaced by globalization and technological change, Finland is experimenting with a guaranteed basic income for unemployed workers. They will be able to receive government payments even if they find a job. The hope is that unemployed workers will take part-time positions that they would have previously refused due to concerns about losing welfare benefits. The government contends that the opportunity to make additional income will attract workers receiving the guaranteed basic income and their additional spending will boost economic growth. Local governments in Scotland, the Netherlands, and Oakland, California, also plan to implement similar plans. In Singapore, the government has developed “individual learning accounts” to provide citizens over the age of 25 with funds to upgrade their education.

These and other innovative policies will be required to help those left behind by globalization. Recent election results in Europe have taken some momentum away from nationalist forces, but the ideology isn’t going away any time soon.

Source

Bremmer, Ian. “The Wave to Come.” Time, May 11, 2017.


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