On November 3, Donald Trump lost. Not as bigly as his detractors hoped and expected, but bigly enough to bury any chance that he would be allowed to play president for another four years. Trump’s loss came as a shock to his vast army of dedicated followers in the United States, and, one might guess, to authoritarian populists such as Orban, Erdogan, Bolsonaro, and Modi. As The Guardian put it, “End of Trump era deals heavy blow to rightwing populist leaders worldwide”.
A few days later, however, a combination of reason and caution returned reflected in Benjamin Moffitt’s levelheaded analysis headlined, “Think Joe Biden’s victory marks the end of rightwing populism? Think again”.
Fact is, Donald Trump lost the election for a number of good reasons, all claims to the opposite notwithstanding. All of them are well-known and have been discussed at great length in the days following the election. Fact, however, is also that Trump’s loss has done nothing to eradicate the deep sociostructural and sociopsychological fault lines that swept him into the White House in 2016.
By now, there is broad agreement among social analysts that the “Trump phenomenon” is more than anything else a symptom, an expression, a reflection of profound malaise that pervades large parts of the American public. For more than four years, Trump catered and appealed to this malaise, yet did little to alleviate it. In July 2020, some 80 percent of the American public thought that the country was going in the wrong direction. Given the fact that in surveys, some 40 percent of respondents thought that Trump was doing a good job, this is quite remarkable.
Be it as it may, what these numbers suggest is that political disenchantment with the “political establishment,” which was one of the driving forces behind Trump’s success in 2016, is not likely to disappear overnight; and neither will the lure of populism. In fact, the socioeconomic fallout of Covid-19 is likely to provide new opportunities for populist entrepreneurs, paving the ground for a new upsurge in populist mobilization across advanced liberal democracies. And with disinformation now thriving on social media, it will likely only exaggerate the factors that contribute to the radical right’s rise.
The Factors That Drive Populism
Two developments come to mind. The first is the shift from trade in intermediate goods and finished products to trade in services. Over the past few decades, international trade happened primarily within the context of global value chains. These are intricate networks of task-oriented step-by-step processes in a global division of labor between advanced and developing economies. A classic example is Apple’s iPod – consisting of components fabricated in a number of countries, assembled in China, then shipped to markets in Europe and North America. More recently, in the wake of the 2008 financial crisis, trade in goods has noticeably slowed down; at the same time, trade in services has significantly increased, albeit from a relatively low level.
There is, however, broad agreement among economists, international organizations, and consulting firms that the shift from trade in goods to trade in services is real and significant. As McKinsey put it last year, “Globalization isn’t in retreat, but it has morphed into a very different phenomenon, increasingly powered by trade in services and by intraregional trade”. According to the World Trade Organization (WTO), during the past two decades, trade in services “has become the most dynamic segment of world trade, growing more quickly than trade in goods”.
Until recently, the tradability of services was somewhat limited. A large part of services are non-tradable, from public sector services to person-to-person services, such as hair styling and massages. Potentially tradable high-end services, such as finance, legal services, design and marketing were largely dominated by advanced economies. This has changed with digitalization. Digitalization allows service providers throughout the world to use online platforms and partnerships with e-retailers to offer their services on a global scale.
This has allowed developing countries to play a significant role in trade in services, “increasing their share in exports of world services from a quarter to one-third over this period”. India, for instance, has developed into a global leader in “knowledge services” ranging from business research to data analysis and management. In 2010, India accounted for 70 percent of the global market in these services; a large part being delivered to the United States. One of India’s flagship knowledge services companies, Infosys, has developed into a global leader in this sector, boasting more than 240,000 employees worldwide.
The expansion of global trade in services is bound to put increased competitive pressure not only on routine service workers but also on service professionals in advanced postindustrial countries. Take, for instance, engineering. Some 15 years ago, a report on engineering services found that between 2000 and 2004, the number of employed electrical and electronics engineers dropped at the order of 100,000, from 444,000 to 343,000. Among top companies in the engineering field, two-thirds reported they were offshoring some of their IT functions; 60 percent financial ones; around 45 percent engineering ones.
Offshoring of services has been made possible by technological innovation and progress. As the engineering report put it, “Technology has been a significant factor that is now making offshoring an economically feasible alternative to domestic engineers, and perhaps a necessity for midsized and smaller firms in the not too distant future”. By now, the not so distant future is no longer distant. It is here. Covid-19 has accelerated the pace of technological advance in ICT fields, such as artificial intelligence (AI), “propelling a new wave of automation”.
Some ten years ago already, Paul Krugman pointed out AI’s potential to perform relatively routine service jobs, such as legal research. “Computers,” he wrote, “can quickly analyze millions of documents, cheaply performing a task that used to require armies of lawyers and paralegals.” Similar developments, he noted, could be observed in certain engineering sectors. This engendered rather disconcerting perspectives.
Most importantly, advances in AI resulted in decreasing demand for highly educated workers, which, in turn, was likely to contribute to a further hollowing out of the medium-wage sector, “the kinds of jobs we count on to support a strong middle class.” A recent report by a leading consulting firm presents a more nuanced picture. Its authors suggest that automation is not only altering “the types of jobs available but their number and perceived value. By replacing workers doing routine, methodical tasks, machines can amplify the comparative advantage of those workers with problem-solving, leadership, EQ (Emotional Intelligence), empathy and creativity skills”. In short, automation not only entails a devaluation of a range of skills but also a further drifting apart of life chances and, in the process, a further rise in socioeconomic inequality.
Neither the secular surge in trade in services nor the acceleration of technological innovation and progress necessarily translates into a significant rise in unemployment. What is more likely to happen is a growing trend of “switching down” – i.e., workers switching to an occupation that pays less and is associated with a lower social status than their current occupation. According to a recent study, over a ten year period (1996 to 2007), in the US downward occupational switching resulting from service imports from China and India increased by seven percent, from 21 to 28 percent. For workers who switched down, earnings fell by roughly 15 percent.
The Middle-Class Squeeze
These trends are reflected in what American observers have called the “middle class squeeze.” A recent Brookings report illustrates the dimension of this squeeze. Over a fifteen-year period (2002 to 2016), the author finds, the median income growth experienced by prime-age Americans (25 to 44) has decreased almost two thirds, from 27 to eight percent; the “middle” middle class has shrunk from 50 to 35 percent; at the same time, downward mobility from the “middle” middle class more than doubled, from five to eleven percent.
An OECD report from mid-2019 shows that these developments are hardly unique to the United States. Across the OECD, the report charges, for many, the middle-class dream has become not more than a dream. Rising job insecurity “in the context of fast transforming labour markets” has engendered rising uncertainty stemming “from fewer opportunities to climb up the ladder for middle-class people and their children than in the past, and higher risks to slide down”.
The results of recent surveys reflect these anxieties among large parts of the public. In early November in the United States. a few days ahead of the election, a whopping 83 percent of respondents in a New York Times poll expressed worries that the next generation would be worse off. One year earlier, in France, 55 percent of respondents said they thought their children would have a worse life than they did.
These and similar findings have important implications for the potential of radical right-wing populist mobilization over the next few years. By now, it is well established that the combination of the shift toward trade in services and the acceleration of technological innovation and progress is going to have a significant impact on a substantial number of workers in developed as well as developing countries. Expectations are that globalization and technological pressures will affect both low- and higher-skilled workers.
In recent months, much has been made of the disruptions of global value chains caused by the pandemic. In the process, in many European countries, there have been calls to “reshore” and/or “nearshore” critical sectors of the economy, such as health care and food. This jibes well with earlier calls by populists such as Trump and Marine Le Pen to bring manufacturing back home and thus reverse deindustrialization. Automation has certainly helped to turn these demands into reality. A recent study has shown that “increasing automation is positively associated with reshoring of production (defined as the return to the home country of production that had been previously transferred abroad, or offshored).” Yet, reshoring has done little for those workers who lost their jobs as a result of earlier offshoring. They have been replaced by robots in the meantime. As the study notes, reshoring “increases employment and wages for high-skilled but not for low-skilled workers. Inequality rises as a consequence of the increasing gap between wages for high- and lower-skilled workers.”
The political fallout is likely to provide new opportunities for radical right-wing populist mobilization. In a recent study, Thomas Kurer has shown that fear of downward mobility and status loss has been a potent source of voter support for radical right-wing populist parties. For the moment, Covid-19 overshadows everything. In this situation, radical right-wing populist parties have generally had a hard time to maintain political traction. This, however, is likely to change once the pandemic has got under control and life returns to a modicum of “normal.”
Normalcy means having to face the new realities that have emerged and taken on form in the shadow of the pandemic. All indicators suggest that for the reasons laid out above, inequality is going to rise even further; at the same time, the life chances of substantial parts of the population are likely to continue to shrink and diminish. Given the enormous amount of debt governments have taken on over the past few months in response to the pandemic, there is little leeway for governments to compensate the victims of the secular developments addressed above.
In the years before the pandemic, the combination of “hyperglobalization,” surging inequality, and pressures on the welfare state has engendered a wave of racial resentment, ethnocentrism, and nativism. There is no reason to believe that this time it will be different. Quite the contrary. Already before Covid-19, governments started to tighten the rules for access to social benefits, primarily directed against migrants and refugees, all in the name of defending and safeguarding the welfare state for the native-born. More often than not, materially-motivated resentment was couched in terms of cultural incompatibility, particularly directed against Muslim minorities. In the face of Covid-19, this type of nativism lost much of its traction. Once the pandemic is retreating, however, nativist sentiments are bound to resurge.
This suggests that the field is wide open for populist entrepreneurs capable of translating the anxieties and resentment engendered by these developments into support at the polls. Under the circumstances, radical right-wing populist parties should not be written off. They might have done badly during this pandemic, Once the pandemic is over, they are more than likely to come back with a vengeance.
Professor Hans-Georg Betz is a Senior Fellow at CARR and an Adjunct Professor of Political Science at the University of Zurich. See his profile here.
© Hans-Georg Betz. Views expressed on this website are individual contributors and do not necessarily reflect that of the Centre for Analysis of the Radical Right (CARR). We are pleased to share previously unpublished materials with the community under creative commons license 4.0 (Attribution-NoDerivatives).