How to Respond to the Authoritarian Populist Challenge Dani Rodrik June 2018

The long history of populism “…we shall answer their demands for a gold standard by saying to them, you shall not press down upon the brow of labor this crown of thorns. You shall not crucify mankind upon a cross of gold.” William Jennings Bryan (1896)

The Roots of Populism Economic explanations Cultural explanations globalization, austerity shocks income distribution, unemployment, economic anxiety Cultural explanations nativism, anti-immigrant sentiment, racism conservative backlash against social liberalism

A reconciliation Demand for populism economic stress and anxieties social, cognitive divisions in society driven by globalization, technology Supply of populism right-wing narrative nativist, ethno-nationalist left-wing narrative targeting banks, corporations, austerity, trade deals

What’s distinctive about populism? A claim to represent and speak for “the people” unified by a common interest, and set against the “enemies of the people” Rejection of restraints on the use of executive authority as long as political executive represents “people’s will” Two dimensions political aversion to institutions of political liberalism, independent judiciary, other agencies of restraints economic aversion to restraints on conduct of economic policy, such as independent regulatory agencies, independent central bank, and external restraints, such as Brussels’ fiscal rules or global trade rules

Not all Populisms are the same Right-wing versus left-wing ethno-nationalists believe the dividing line between “us” and “them” is primordial and immutable left-wing populists aim, in principle, to bridge economic divisions Political versus economic all populist regimes (in economic sense) need not be authoritarian New Deal example

Why Are Populists winning in Europe? We need to understand Europe’s political trilemma

Europe’s trilemma You can pick two of these, any two, but only two European single market Democracy National sovereignty You can pick two of these, any two, but only two

Europe’s trilemma Three possibilities European single market Golden straitjacket Fiscal/political union Democracy National sovereignty Brexit, Euro zone break-up Three possibilities

How real is the tension between democracy and globalization/European integration? European single market constrains domestic policy space, but this on its own does not undermine democracy the principle of democratic delegation External rules can enhance performance of democracies by: limiting power of special interests enhancing the quality of democratic deliberation) But need not do so. How can we tell difference? Distinguish between rules designed to address genuine problems of democratic polities (commitment, time-inconsistency) rules that strengthen bargaining leverage of special (“globalist”) interests over the rest of society, undermining social contracts

What does All this mean for Europe’s future? Either more political integration, or less economic integration if true economic union remains goal, a vision of political union is a must but if political union is viewed as infeasible (or undesirable), economic union will not work, and we must begin thinking of a strategic retreat from it A two-speed Union? a set of core countries committed to deeper political integration a set of countries with greater economic autonomy A planned, strategic retreat much better than a forced, ad hoc, acrimonious one

Why Are Populists winning in Europe? “Because they are the only ones telling the truth about the trilemma” European popular leaders have long maintained you could eat your cake and have it too claiming they retain control while periodically hiding behind EU institutions populists are clear and upfront about their preference for national sovereignty (and popular democracy) over European single market this preference is matched domestically typically with a nativist domestic agenda though it could be matched with a progressive agenda as well

Conclusions International economic integration has produced domestic disintegration Reconstructing healthy polities requires a reintegration of society unlikely to take place with EU-level policies A dose of (economic) populism will likely be necessary e.g., increased public investment, higher corporate taxes, industrial/regional policies, transfers/UBI, employment safeguards, standstill on new trade agreements, financial taxes/regulation,… Economic populism can sometimes forestall its much more damaging cousin, political populism