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WG Nationalism, populism and the economy Subgroup 3: Populism and Inequality – Oxford-22 Working Group Terms of Reference

Rising inequality is one factor in the recent growth in support for populist political parties, who argue that there are simple solutions to economic problems - these are frequently attributed to external organizations or to disfavoured groups such as immigrants.

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Fide 2nd international congress at Jesus College Oxford will take place next April, on the 4th, 5th, and 6th.

The overarching topic of the congress is Nationalism, populism, and identities: contemporary challenges. In the global context, the growth of nationalism and populism is one of the greatest challenges facing not only Europe but also North and South America and the Asia Pacific. This can be a destructive force if it means that states retreat into an isolationist mindset and away from effective multilateral solutions to perceived cross-border problems.

The congress will analyze Nationalism and populism from a legal and economic perspective. We will cover aspects of the iimpact of nationalist/ populist policies on the funding of South American pension schemes where there have been unexpected calls on funds to deal with the effects of COVID-19

The Congress will also cover other cross-cutting issues, using free-standing panels on EU refugee externalization policies, climate change issues (with specific reference to the outcome of the Conference of the Parties (COP) 26 in November 2021 in Glasgow), and misinformation and free speech in modern democratic societies.

Summary

Economic inequality has increased in many western countries in the last few decades, though the timing and extent of the rise varies. Increasing inequality is linked to declining social mobility, as children born into poverty are more likely to remain in poverty in later life than their parents who were born in more equal societies. Rising inequality is one factor in the recent growth in support for populist political parties, who argue that there are simple solutions to economic problems – these are frequently attributed to external organizations or to disfavoured groups such as immigrants. The evidence to date suggests that populists in power tend to have some effect on inequality – right-wing populists raise inequality, left-wing populists lower it, but at the expense of reduced economic growth overall. We argue that there are alternative 'non-populist' ways of tackling increasing inequality, but that doing so effectively is likely to require a broad range of policies, rather than just changes to specific aspects of, for instance, taxes and benefits.

  1. Definitions
  2. The growth of inequality in the West – and its causes
  3. The rapid growth of the populists in unequal societies
  4. Economic and social implications of populism
  5. The links between inequality, social mobility and perceived merit
  6. The effects of the Pandemic on inequality and populism: first data and trends
  7. Addressing inequality in a non-populist way

Terms of Reference

  1. Definitions

There are long-established and relatively uncontentious definitions of economic inequality – but many different types of inequality that may be of concern, such as income inequality, wealth inequality and inequality of access to services. Populism is a much more contentious term, with a lack of agreement over its meaning and importance. Is it just a term used by mainstream commentators to disparage those with whom they disagree, or is there a more substantive definition that draws out common threads in recent populist movements?

The first task of the Subgroup will be to provide a high-level outline of different definitions of inequality and populism, drawing on recent literature, and to suggest working definitions that will be applied in the Subgroup's work.

  1. The growth of inequality in the West – and its causes

There is considerable evidence that inequality has increased in the US, the UK and the EU over the last few decades. The richest 1% has increased its share of the economy dramatically. The same holds true for the top 10-20%. Meanwhile poverty rates have increased and, most strikingly, the middle class has lost in relative terms, and some argue in absolute terms too. The increase in inequality in the West contrasts with the reduction in inequality at the worldwide level, largely due to the reduction in poverty rates in China and South-East Asia.

What explains the increase in inequality in the developed world? Some argue that it is the consequence of the globalization process, which has driven industry away from western countries to China and elsewhere. Others argue that it has to do with the technological revolution experienced since 2000 and possibly accelerating now. Yet another group considers that the true cause lies in the increase in market power due to lenient merger control and regulatory policies.

The Subgroup will write a document summarizing the findings of institutions such as the World Bank, the IMF, and others in connection with the distribution of wealth and income in Europe and the US. It will summarize the various theories developed by economists to explain the rise of inequality in the economies of the developed world and the empirical evidence in support of the various hypotheses. 

  1. The rapid growth of the populists in unequal societies

All over Europe populist parties and movements are proliferating. Some are extreme right movements (such as Fidesz in Hungary or Fratelli d'Italia in Italy); others are on the extreme left (like Podemos in Spain or M5S in Italy). Their origins, their policies and their strategies are not all the same. Their electoral success also varies across countries.

The Subgroup will write an overview of the development of these parties and movements all over Europe. Most importantly, we are interested in identifying the interaction between their ideologies and policy proposals and inequality – for instance, the extent to which their platforms are based on reducing inequality in various forms. 

  1. Economic and social implications of populism

What are the likely implications for the economy and for society of the emergence of the populist parties and movements analyzed above? Are they likely to address the increase in inequality that has facilitated, if not triggered, their growth? Will they lead to more equal and just societies? Or will they make inequality worse by adopting the wrong economic policies and polarizing society even further? Which social groups stand to win and which ones to lose if the populists achieve power?

These prospective issues will be the subject of a paper, in which the Subgroup will assess the likely implications of the rise of populism on policies aimed at tackling inequality. It will also assess to what extent such policies are supported by (i) other political forces, (ii) academic research, and (iii) have been used (with or without success) in the past.

  1. The links between inequality, social mobility and perceived merit

Debates about poverty and inequality have for centuries been combined with discussions about desert and merit. Are poorer people 'deserving' or 'undeserving' of support? Do high returns at the top of the income distribution reflect individual merits that should be rewarded? The post-Reagan consensus tended to assume that markets should be enabled to work freely, with an implicit suggestion that market returns were merited. This tapped into long-standing norms of self-reliance, particularly in the US, with Americans of all income levels far more likely than Europeans to think that social mobility is high, even if current intergenerational mobility is limited. This consensus has fragmented in various directions since the financial crisis, with technocratic concerns about 'predistribution' accompanied by more populist suggestions that market returns are unfair, for stated reasons including the growth of monopoly power, differential access to education, biases towards particular groups and conspiracy theories of many stripes.

In this paper, the Subgroup will summarize the evidence on changes in social mobility, and the debate on whether the rewards delivered by markets are solely the outcome of the actions of the individual receiving them or also due to the economic circumstances in which they happen to make those decisions.

  1. The effects of the Pandemic on inequality and populism: first data and trends.

There are obvious effects of the COVID-19 Pandemic on public health and the general economy. For instance, for the first time since World War II there has been a decline in life expectancy all over the world, with poorer people often suffering more due to pre-existing inequalities in health outcomes. Most countries also saw significant declines in GDP, albeit with rapid bouncebacks during 2021. However, it is not clear how the COVID-19 Pandemic has affected populist movements. It also remains unclear what will be the effects on inequality of the Pandemic, and specifically of the economic measures taken to tackle it. The subgroup will therefore summarize evidence to date and consider the extent to which initial impacts appear to be temporary or permanent.

  1. Addressing inequality in a non-populist way

How should our societies respond to populism? Of course, the answer depends on whether we believe they will contribute to resolve the socio-economic problems that led to their entry into the political scene or, instead, if we consider that they are not only unlikely to do so but, what is worse cause additional economic and social problems. Is the response a return to the status quo? Which one: the neoliberal order of the late 20th century which collapsed in 2008? Or the ordo-liberal or socio-liberal order which characterized the European societies in the post-World War period? Or should we strive for a different solution, such as that of Republican philosophers such as Philip Pettit and economists such as Daron Acemoglu and James Robinson?

In this last paper, the Subgroup will try to address the questions above and, specifically, consider how to address the increase in inequality without compromising the values ​​of open societies, economic growth, technological progress, and international solidarity.

Jorge Padilla and Joe Perkins for FIDE Foundation

WG Members:

Leader:

Joe Perkins

Senior Vice President and Head of Research at Compass Lexecon based in London.(Leader of the SG)

Constructive Friend:

Jorge Padilla

Senior Managing Director and Head of Compass Lexecon EMEA. Member of Fide's International Academic Council. (Leader of the WG E and constructive friend of this SG)

Hermenegildo Altozano

Partner in charge of the energy and natural resources practiced in the Madrid office of Bird&Bird. Member of Fide's Academic Council.

charles brendon

Academic economist based at Queens' College and the Faculty of Economics, Cambridge 

Francisco de la Torre

Tax Inspector

Cecilia Garcia-Peñalosa

Senior research fellow at GREQAM (Aix-Marseille University) and the Center National de la Recherche Scientifique (CNRS)

Eva Gutierrez

Lead Financial Economist in the Latin American and Caribbean Region of the World Bank 

Julio Veloso Caro

Partner Corporate Finance: M&A & Private Funds

* Important note: All members of the Working Groups and panels participate in an individual, non-institutional capacity, although we reflect each participant with their current position in the different working documents to better identify them.

Oxford Conference /22:

Nationalism, populism and identities: contemporary challenges

Oxford /22: Nationalism, populism and identities: contemporary challenges

Full info on our 2nd international congress at Oxford

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Oxford/22 Next Steps

In the next phase, the Working Groups and Panels continue to work to prepare and present their final conclusions and proposals papers, taking in all the feedback and work carried out during the discussion sessions in Oxford.

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