"We have entered an age that favours radicalism over moderation"
Economics & Finance Speaker
In Monday’s Financial Times, Wolfgang Münchau wrote a fascinating op-ed arguing that liberal economic policies have laid the foundation for an age of political radicalism. And, perhaps surprisingly given the rise of Trump and right-wing populists in Europe, he believes this context will play mostly into the hands of the radical political left. Below is a brief summary of the article’s key arguments.
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(1) Liberal democracy is in decline in Europe
Liberal governments have not been able to solve problems such as financial instability, insecurity for those on lower incomes, and policy coordination failures (for example on tax avoidance). These problems have arisen directly from liberal policies such as tax cuts, deregulation and fiscal consolidation in the form of austerity measures.
Lower incomes have not only been stagnating over the past 20 years; job security is worse, and access to credit and mortgages has become harder.
(2) Trumpian anti-immigration: the first stage of pushback against liberalism
This context has created a backlash against liberalism, currently in the form of Trumpian- anti-immigration.
While immigration has net benefits, there are those who lose out as a result. Liberal immigration policies may be justified economically, but European leaders, e.g. Merkel, have failed to prepare their countries politically.
But the right wing backlash is limited in its success. Firstly, it is failing on its own terms e.g. Trump’s wall on the Mexico border will not succeed in preventing immigration into the US. Secondly, immigration is likely to be eclipsed by other problems, such as the effect of AI on middle class incomes, increasing poverty, and economic dislocation as a result of climate change.
(3) The next stage favours the political left
These latter issues chime with the language and priorities of the political left, and are beginning to resonate in mainstream politics. Hence, for example, Alexandria Ocasio-Cortez’s proposal for the 70% tax rate is aimed squarely at reversing a 30 trend of lower taxation of high incomes.
(4) What about the radical centre?
Macron showed that centrist movements can succeed. Renzi in Italy is looking to emulate him. But the French electoral system has unique traits that made Macron’s 2017 victory easier. And he has been coming under fire at home, so it’s unclear whether his brand of centrism will succeed.
Germany has remained relatively immune from radicalism so far because of its unique position in the eurozone and its strong industrial base. But if, for example, its car-making industry fails to adapt to electric self-driving technology, this may change.