POPULISM RISING
A closer read of elections, economic data, surveys and history finds little connection
Link between financial crisis and the rise of Trump not as closely linked as you would believe,
Two defining events of the last decade were the financial crisis and the rise of right-wing populists like Donald Trump. Many believe that the first caused the second.
In Crashed, historian Adam Tooze’s ambitious new history of the last decade, there is a direct line connecting them: “Overshadowed by memories of 2008, the 2016 election delivered a stark verdict.”
Steve Bannon, the right-wing provocateur and architect of Mr. Trump’s campaign, agrees: “The legacy of the financial crisis is Donald J. Trump,” he told New York Magazine. “You know why the deplorables are angry? They’re rational human beings. We took away the risk for the wealthy.”
This seems intuitive. If, like Mr. Tooze, we treat the series of crises that include the failure of Lehman Brothers and cascaded through the eurozone as a single event, then this was the worst economic catastrophe since the Great Depression. And since the Depression led to political convulsions like nationalism and fascism, shouldn’t this one?
I used to think so, but upon closer read of elections, economic data, surveys and history, this connection looks exaggerated if not wrong.
This isn’t merely an academic point. By linking the financial crisis and populism too tightly, we might draw the wrong lessons about both.
To be sure, the crisis had political consequences. Practically every political party that governed during a crisis, from George W. Bush’s Republicans to Gordon Brown’s Labour Party, was shown the door. Several studies have found that politics becomes more fragmented and polarized in the wake of crises, and this one was no exception.
But the more relevant question is whether the crisis is responsible for the specific turn politics have taken in the last decade toward the nationalist, populist and often nativist brand that has gained promi- nence under Mr. Trump and many upstart parties in Europe.
In Europe, the correlation between economic catastrophe and support for right-wing populists is weak and perhaps negative. Five eurozone members required international bailouts: Greece, Portugal, Ireland, Spain and Cyprus. Only in Greece did populists come to power, and they were left-wing, not rightwing, populists.
Hungary’s nationalists did exploit resentment at the country’s financial crunch and international bailout in 2008 to take power in 2010. But Poland’s nationalists didn’t form the government until 2015 when Poland was one of the European Union’s best-performing economies. (Like Hungary, it never joined the euro.)
Britain, like the U.S., bailed out its banks in 2008 and suffered a steep recession, but experienced far less backlash. Only the Liberal Democrats, the antithesis of populists, made it a central issue in the 2010 election. The job market had fully recovered by the time the Conservatives, under pressure from the right-wing populist UK Independence Party, called a ref- erendum on membership in the EU. After Britons voted to leave, the UKIP faded.
Scandinavia doesn’t seem susceptible to the politics of economic grievance: Norway and Sweden were largely untouched by the crisis, don’t belong to the euro, and boast high levels of economic equality and social protection. Yet today Norway, Sweden, Denmark and Finland all have right-wing populist parties; Norway’s is part of the governing coalition and Sweden’s just scored its best electoral victory ever.
As for the U.S., the immediate political consequences of the crisis were to deliver the 2008 election to Barack Obama, then give birth to both the Tea Party movement on the right and Occupy Wall Street on the left. Yet neither played a part eight years later in Mr. Trump’s march to the Republican nomination or general election victory. A campaign ad that blamed “global special interests” such as George Soros and Goldman Sachs Chief Executive Lloyd Blankfein for bleeding “our country dry” was mostly memorable for its anti-Semitic overtones; it made no mention of the financial crisis.
Surveys find little evidence for Mr. Bannon’s claim that the crisis drove voters into Mr. Trump’s arms. An exhaustive study of 70,000 survey respondents by Jonathan Rothwell, chief economist at Gallup, found Trump supporters were no more likely than nonsupporters to have suffered a fall in home values, as you might expect if seeing one’s wealth evaporate made you more receptive to Mr. Trump’s message. They were economically no worse off and less likely to be unemployed.
So if the crisis—or more broadly, the economy—doesn’t explain the rise of right-wing populism in Western democracies, what does? The unifying factor is a disenchantment with globalization in all its manifestations: international trade, international institutions (like the EU) and, most of all, immigration.
The crisis probably contributed by discrediting financial globalization and the elites who championed it, but it is not the most important driver. More important were the pressure on middle class incomes (especially outside major cities) from outsourcing, trade and technological change, and the rise in the foreign-born population, and terrorism.
Mr. Trump separated himself from the Republican pack in 2016 by rejecting the party’s traditional embrace of free trade and its post-2012 outreach to immigrants. His uncompromising and inflammatory language about immigrants was the single biggest draw among his supporters. He was helped by ISIS, whose success at radicalizing followers over the internet led to atrocities in San Bernardino, Orlando, Paris and Nice, inspiring Mr. Trump’s call for a ban on Muslims entering the U.S.
A flood of migrants fleeing strife in Syria and Afghanistan and ISIS attacks similarly fueled support for Brexit and right-wing, anti-immigrant populists in Germany, France, Sweden and Italy.
Why does any of this matter? Much has been made of the political backlash to the bailouts that then-Federal Reserve chairman Ben Bernanke, Treasury Secretary Henry Paulson and New York Fed President Tim Geithner engineered to save the economy, which allowed many financiers to keep their jobs and bonuses instead of going to jail. Yet to suggest these events also explain populism exaggerates the political price paid and may deter essential but unpopular interventions in future crises.
History doesn’t show that financial crises inevitably lead to populism and fascism. Cas Mudde, an expert on right-wing populism at the University of Georgia, notes the Nazis “were the only really successful extreme right party of the 1930s” in part because of the unique circumstances Germany faced: the burden of wartime reparations and Nazi-fomented discord over who was to blame for losing World War I.
In the U.S., the closest parallel to the present isn’t the 1930s, but the 1920s, when Republican administrations passed sweeping protectionist and anti-immigrant laws. The Depression swept the Republicans out of power and in the process discredited protectionism, if not nativism. Crises in Latin America in the 1980s and East Asia in the 1990s had widely varying political outcomes, in some cases more rather than less democracy.
Crediting the crisis for populism and its economic aftermath may also muddy the policy response toward issues left over from the crisis (such as the culpability of financiers) and away from more potent drivers such as the stagnation of bluecollar wages, in particular outside big cities, and the economic, cultural and social dislocations that accompany high levels of uncontrolled immigration.
Tidy historical narratives have a way of becoming accepted wisdom with the passage of time. That shouldn’t be allowed to happen with the last decade.