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Part I – “Populism and Economic Dynamics in Europe”

Portrait Karl Aiginger

The blog-article is the conclusion section of a new study about “Populism and Economic Dynamics in Europe” by Karl Aiginger and colleagues at the Policy Crossover center, Vienna. It serves as an incredible valuable and interesting analyses of populism and its impacts. The paper does also put forward a vision of Europe as a role model for high income, low inequality regions, with a new view of globalization, migration, and partnership with neighbors. Therefore, we believe it is an important contribution to better understand the situation but also how to react.

Part I.


Populism is the oversimplified interpretation of a society, misused by a group, a political party, strongmen or the media to gain attention, influence or power. Populism can be just a technique used to make complex problems understandable, but in most cases, it manipulates voters by promising to bring back past glory, a homogenous endogenous population or virtuous values. “My country first” policies are recommended to improve the economic conditions and, if this does not work, sinister foreign forces, migrants or international agreements are scapegoated.  If populism is complemented by an ideology and if this is a radical ideology (authoritarian or nativist), the border between populism and radicalism becomes fuzzy.

Drivers of populism
can be grouped into four boxes, which are however related, and one can be the root cause and others the collateral or all can aggravate each other.

  • Economic causes leading to populism are imports, globalization, de-industrialization and increased inequality. Under the circumstances of low dynamics, missing skills and low mobility this may lead to unemployment, inequality and public debt, but also to “forgotten regions”, emigration and finally “economic distress”.
  • Cultural causes: values have shifted in industrial countries; liberal values became dominant, favoring gender equality, non-traditional family arrangements, and cultural diversity. “Political correctness” requests that everybody accept these changes. Citizens sticking to traditional values and the virtues of past times are receptive to slogans advocating a restoration of the endangered nation or religion.
  • Uncertainty and fears: changes, caused by globalization, new technologies, value shifts, or migration, lead to uncertainty. Fears about status and life chances come up and lead to pessimism. Even if changes lead to improvements for most people, they are never positive for all in the short run, and the costs of adaption can be high. If losers are not assisted by economic or social policy and the media concentrate on negative events, pessimism arises. These fears are aggravated if new migrants, educated women and qualified young people increase the competition for jobs.
  • Policy failures: in a period of low economic dynamics, compensation for losers or assistance to change is expensive. Ifunemployment insurance or retraining is reduced and regional distress ignored, people feel forgotten and look for easy solutions. Globalization does not reduce the need for economic policy; it changes its content and complexity.

Differences and common features between left-wing and right-wing populism

Right-wing populism tends to be exclusive, anti-pluralistic, conservative and xenophobic. It often is authoritarian, calling for tough regimes including strongmen and a military build-up. It opposes peaceful conflict resolution and sometime even requests border changes.

Left-wing populism has anti-authoritarian roots, calling for the “emancipation” of women and the disadvantaged.

Surprisingly, left-wing and right-wing populists do not see each other as the main opponent – both have a nativist and authoritarian component favoring strongmen. The “horse shoe hypothesis” speculates that the extremists need each other. Both right-wing and left-wing populists stick to power if the economic situation worsens and the first enthusiasm of the voters trickle away. They do not hesitate to weaken democracy and dismantle checks and balances. To stabilize regimes, a danger coming from abroad, a foreign power or culture is built up to justify the break of existing rules.

Features of today’s right-wing populism

An important characteristic of populism is the binary distinction between the “people” on the one hand and the “elite” on the other. The first is a large group of ordinary, virtuous citizens; the other is a corrupt, self-serving minority.

Today the illusion of past homogeneity is rising and a large part of the citizens believe that the “elites” underestimate the danger of immigration or even profit from a large number of migrants. They believe that migration and globalization are a danger, worsening the economic situation, but also threatening the own culture and homogeneity, specifically if immigrants come from distant countries and cultures.

Populists favor a renationalization of policy and oppose Brussels (as two decades before the US Tea Party opposed anything coming from “Washington”). Populism defies multilateralism, international organizations and investment agreements. They do not sign them ex ante or exit from humanitarian, disarmament or climate compacts, if their country previously committed.

Part II is published on the 5th of April 2019.

Karl Aiginger,  Director of the Policy Crossover Center, Austrian economist, lecturing at the Vienna Economic University, Managing Editor of  "Journals of Industry, Competition and Trade (JICT)". Main author of the study “Populism and Economic Dynamics in Europe”. Policy Crossover Center: Vienna – Europe. Policy Paper 1/2019
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