Global Inequality, Populism And The Future Of Democracy

Werner Raza

The election of Donald Trump to the US Presidency as well as the seemingly inexorable ascendency of right-wing populism in Europe has raised troubling questions about the future of democracy. In his new book, Branko Milanovic (BM) discusses the relationship between global inequality and the future of capitalism and democracy, respectively (a related interview has been published here). Whereas BM thinks that inequality and capitalism can co-exist, he is sceptical with respect to democracy. While he characterizes the American form of plutocracy as “maintaining globalization while sacrificing key elements of democracy” (p. 211), he sees European populism as “trying to preserve a simulacrum of democracy while reducing exposure to globalization” (ibid).

However, the Trump election teaches us that plutocracy and populism eventually go well together. With reference to Milanovic’s famous “elephant graph”, it is straightforward to see why this should happen. Three important observations can be inferred from the graph: firstly, very remarkable income gains in emerging economies, in particular China and India, have led to the emergence of a new middle class in the Global South. Second, income for the middle class in advanced Western countries has stagnated. Thirdly, the income of the Top 1 percentile, i.e. the global super rich, has also grown very substantially, while being still underestimated according to BM.

The elephant, Trump and the working class

Two political interpretations of these facts are obvious. A left narrative would draw the central political conflict line in the EU and US between the working population and the rich elite and call for redistribution from the rich to the middle and lower strata of the population. Clearly, such an interpretation constitutes a threat to the privileges of the plutocratic elites.

The populism of Donald Trump should thus be seen as a Gramscian hegemonic strategy based on an alternative reading of the elephant graph. His brand of populism combines two elements. First, by way of exploiting the correct fact that large segments of the US working class have indeed not benefitted from globalization, he is juxtaposing the US middle class against workers in emerging economies by invoking antagonisms such as “We Americans” against “Mexican immigrants” or “our jobs” against “cheap imports from China”. Thus he reframes an economic issue into one of identity and diverts attention away from class antagonisms between rich and poor. Second, upon that basis Trump has promoted a political project of “America First”, which reconstructs an imaginary community of “hard-working” Americans.

The hegemonic project of populism thus combines a narrative of imagined political community along national, ethnic, cultural or religious dividing lines with limited material promises in terms of more jobs for its members. The political culture becomes marked by dramatization of the cult of leadership, strong-handed demonstrations of authority and ruthless use of language coupled with denial of facts and intimidation of opponents.

Trade-off between hyper-globalization and democracy

So then, what is the prospect for an alternative political agenda that wants to advance an egalitarian project, both between and within nation states? Dani Rodrik has introduced the “political trilemma of the world economy” as a heuristic tool to analyse the political options available under globalization. The three elements of the trilemma are (i) national sovereignty, (ii) hyper-globalization, i.e. deep economic integration of the world economy, and (iii) democratic politics. The trilemma posits that only two out of three elements are compatible. Thus, if one thinks that a substantial transfer of powers to the international level with a view to creating some form of democratic global governance is impossible given the continued prevalence of nation states, and if one thinks that a combination of populist/authoritarian national politics in combination with a deepening of hyper-globalization is undesirable, then the basic trade-off any progressive political project has to face is that between hyper-globalization and democracy. For democrats this choice should be straightforward.

Against this background, the current debate on Trump’s populism appears misguided. In reductionist fashion, the liberal press (see e.g. here and here) portrays the economic core of the emerging populist projects as consisting of protectionism. However, by refusing to sign TTP and criticizing NAFTA, while indicating a readiness to negotiate bilateral trade deals in future, Trump has advanced a mercantilist approach that wants to increase the gains from globalization for the US. Consequently, he initialled a de-regulatory agenda for the highly globalized US financial sector and tax reductions for the corporate sector in general, evidently in order to improve its international competitive position. Similarly, the strategy of populist forces in power in the EU (e.g. in Hungary and Poland) is not directed against economic integration, but against political federalism, i.e. the transfer of power to the supra- or international level, while at the same time eroding the institutional division of powers and democratic participation within their countries. Thus, the strategic focus of populism both in the US and the EU is oriented towards establishing an authoritarian combination of nation state and hyper-globalization. While it is restrictive with regard to the mobility of labour and has a more interventionist policy approach, it is arguably not directed against economic globalization per se, but against liberal democracy and global governance.

Liberal calls on the forces opposing populism to focus their efforts on the defence of hyper-globalization could prove potentially disastrous for the political left. While not denying the heightened potential for conflict, a progressive political project should welcome a multi-polar world order and focus on fighting for democracy by reinvigorating its potential for a more egalitarian and solidaristic society. Besides strengthening democratic participation, upholding human rights and expanding social inclusion and equity, this will involve a more stringent regulation of hyper-globalization. In certain areas, a partial de-globalization and re-regionalisation of economic activities, respectively, for instance in the financial sector, in agriculture or with respect to public services seems warranted. In contrast to right-wing populism, such a project would thus be principled with respect to democracy, instrumental with respect to globalization and realistic with respect to the pro tempore prevalence of the nation state.