Why Does Globalization Fuel Populism?

Economics, Culture, and the Rise of Right-Wing Populism

134. Globalization figures prominently in discussions of populism. Especially in its post-1990s variant—
which might be better called hyperglobalization—international economic integration seems to have
produced domestic disintegration in many countries, deepening the divide between the winners and the
losers of exposure to global competition.

166. The British proponents of Brexit are normally classified with other populists, and in their opposition
to immigration, they shared a common bugaboo with populists in other nations. But they were also, at
least nominally, free-traders. One of the arguments put forth by Economists for Brexit was that the
European Union was a protectionist bloc, maintaining high barriers to protect its agriculture and
manufacturing (Econ. Brexit 2016). They argued Brexit would enable Britain to reduce those barriers and
reap significantly larger gains by trading at world market prices. What the Brexiteers opposed first and
foremost was the European Union and the supranational rules emanating from it. Restoring national
democratic sovereignty over economic policy would allow Britain to devise its own rules, which in the
case of trade, were expected to be more liberal. The Brexit case illustrates the general principle that
populists are not always and necessarily protectionist.What they oppose are the elites—domestic or
foreign—that they claim override the popular will at home. Their views on the globalization are often
mediated through the relationship of those elites to the international economy

166, 167. The populists in late-nineteenth-century America wanted freer trade because they believed
protection helped the country’s elites and hurt ordinary people. Today’s populists want protection for
the same reason, namely, that globalization benefits the rich and wealthy but harms the middle class.
There are of course many differences between the People Party back then and Trumpist Republicans
today. But in terms of attitudes toward globalization, what has changed in the meantime is not the
nature of populism but the relationship of the American elite to the world economy.

Globalization and Populism Oscar Bajo-Rubio and Ho-Don Yan

230. The ongoing wave of globalization has helped increase growth in the world economy by promoting
specialization and the division of labor, but it has simultaneously brought about social and economic
insecurity. Globalization and its ensuing influences on trade in goods and services, capital mobility, and
labor migration have mostly contributed and at times reinforced the inception of populism.

Ferguson (2016) argues that globalization eventually entails a backlash from popu lism, and based on
historical experience, he suggests five ingredients that lead to populism: (i) a rise in immigration; (ii) an
increase in inequality; (iii) the perception of corruption; (iv) a major financial crisis; and (v) the dema
gogue, since populist demagogues react aggressively against the first four.

232. Globalization can be defined as the process whereby markets liberalize and become more
international, losing their national and local characteristics. In this sense, globalization amounts to
increased integration. The ultimate reason would be the fall in transport and communication costs,
which help facilitate the mobility of goods, services, technology, capital, and people.

233, 234. As in the first wave, the most immediate expression of globalization in the second wave is the
increasing liberalization of trade exchanges, which can be termed as trade globalization. As is well
known, the standard argument holds that, according to the principle of comparative advantage, a
country should export the good it produces relatively more efficiently and import the good it produces
relatively more inefficiently. This will lead to a higher welfare for the country, as compared to the
situation in which there is no trade. Even though the argument acknowledges the possibility that some
countries may win and some may lose, the general principle is still valid as far as the winners can
compensate the losers. However, as emphasized by Driskill (2012), the standard argument in favor of
free trade “is incoherent or makes implicit value judgements in as much as the argument simply says
free trade is good for the nation because it creates a bigger pie, even though some members of the
nation end up with less pie” (Driskill 2012, p. 3).

235. Following the above developments, a new “conventional wisdom” on globalization, in Rodrik’s
(2007) words, has emerged based on the fol lowing points: • Globalization entails growing inequality
and insecurity in advanced countries. • Trade and financial openness do not lead to higher economic
growth by themselves, in the absence of institutional reforms • Globalization therefore needs to be
complemented by a wide range of institutional reforms, in both advanced and emerging countries,
which make possible to fully reap its potential benefits.

247, 248. In particular, we have stressed the role of two main explanations for the rise of populism—
namely, economic insecurity, mostly driven by the increase in inequality, and cultural backlash, as a reac
tion to progressive social changes (Inglehart and Norris 2016). Rising social unrest and the lack of an
effective response by the elites are two fac tors behind the increasing support of populist policies.

On the other hand, the pressing political challenges faced by modern societies are global in origin, and
seemingly exceed the ability of ordinary citizens and individual nation-states to find an adequate
response. This has led to the rise of technocratic institutions that could manifest in different areas of
public policies, such as bureaucracy, banks, courts, and trade trea ties (Mounk 2018). While these
technocratic institutions can promote higher efficiency and professionalization of public affairs, they also
favor the interests of some particular, nonelected groups of people, resulting eventually in a rising
estrangement of ordinary citizens. The EU is a case in point for its proclivity to invoke populism. Its inner
workings exhibit some important flaws in terms of a “democratic deficit”, that is, the per ception that EU
institutions are inaccessible to, and lack accountability to, the ordinary citizens

248. To some extent, Mudde (2015) argued that populism is not without merit, as it represents “an
illiberal democratic response to undemocratic liberalism”, which is less an attack on democracy than a
corrective to a deficit.

The rise of populism can be justified as a response to the discontent present in modern societies that
is associated with the current develop ments of globalization, along with a lack of any convincing
response on the side of the elites. Despite the dearth of a homogeneous characteriza tion of all the
groups labeled as “populist”, the solutions they provide are mostly simplistic and short-sighted. For
the immediate future, the question is whether democratic societies will be able to give an answer to
the chal lenges and insecurities faced by modern societies, without falling into populist
oversimplification. If liberal democracy is to survive, then it should provide an appropriate answer to
the intricate relationship between globalization and populism.