Must-Read: Dani Rodrik: Economics of the populist backlash

Must-Read: As I say, repeatedly, calling it “populism” is not a good thing—it does not lead to clear thinking. Hitherto “populism” has meant one to two things:

• The rather sensible political program of first the American prairie populists of the late nineteenth century and their successors like Huey Long: attack monopolies—railroad monopolies, energy monopolies, streetcar monopolies, and the gold-standard banking monopoly—and share the wealth, and in order to get that done “nail ’em up!!”
• the less-sensible price-control and macroeconomic expansion programs of left-of-center Latin American governments in the post-WWII era: policies that produced rapid growth and more income inequality in the short run at the price of storing up massive macroeconomic trouble and reducing incentives to invest to boost productivity in the long run.

We have neither here. I think thought is better aided by embracing the historical parallels: call it neo-fascism. And while economic stagnation may have been an element contributing to its rise, economic growth—especially growth that flows to the wrong people, people who are not real Hungarians, real Poles, real Englishmen—is unlikely to tame it. Economic globalization seems to me to be a cause only in the sense of a trigger, a butterfly wing-flap. The real causes lie elsewhere, IMHO at least:

Dani Rodrik: Economics of the populist backlash: The populist backlash to globalisation should not have come as a surprise, in light of economic history and economic theory… http://voxeu.org/article/economics-populist-backlash

…The world’s economic-political order appears to be at an inflection point, with its future direction hanging very much in balance…. The workhorse models with which international economists work tend to have strong redistributive implications… the Stolper-Samuelson theorem…. Economic theory has an additional implication, which is less well recognised. In relative terms, the redistributive effects of liberalisation get larger and tend to swamp the net gains as the trade barriers in question become smaller….

I suggest that these different reactions are related to the forms in which globalisation shocks make themselves felt…. It is easier for populist politicians to mobilise along ethno-national/cultural cleavages when the globalisation shock becomes salient in the form of immigration and refugees…. The relative salience of available cleavages and the narratives provided by populist leaders are what provides direction and content to the grievances. Overlooking this distinction can obscure the respective roles of economic and cultural factors in driving populist politics…