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Income inequality, financial crisis and the rise of Europe's far right

Gerard Julien, AFP | A man looks at a mobile phone beside a woman begging on the pavement in Madrid on December 15, 2015.

Citizens around the world are seeing their national wealth concentrated into fewer and fewer hands. But rather than calls for redistribution, this global trend has prompted many electorates to respond with a surge of support for the far right.

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Income inequality has increased in nearly all regions of the world over the past four decades, according to the World Inequality Report 2018. Since 1980, the global top 1 percent of earners has experienced twice as much of the global growth as have the poorest 50 percent.

While these ratios differ markedly between geographic regions (with the least disparity in Western Europe and the most in the Middle East), the trend toward concentrating wealth among the rich remains constant. And although the bottom half has also experienced gains from global growth overall, the bottom 50 percent received just 10 percent of global income in 2016 versus the 20 percent that went to the top 1 percent.

Such acute economic imbalances can lead to “political, economic, and social catastrophes” if they are not “properly monitored and addressed”, the report’s authors warned.

Notably, Europe and the United States have seen a significant divergence from their relatively equal positions some 30 years ago. While the top 1 percent held close to 10 percent of the wealth in both regions in 1980, by the year 2016 this share had doubled to 20 percent in the United States while Europe saw only a slight increase to 12 percent.

Globalisation has “raised incomes and living standards for everyone in the West, but for some far more than others”, noted Dr. Russell Foster, of the Department of European and International Studies at King's College London, in an email.

“Thus while everyone is better off, the gap between those who have, and those who have much more, is staggering.”

Foster cites the increase in zero-hour work contracts, meagre (or non-existent) pension plans, and the "skyrocketing costs of rent and mortgages” as some of the reasons behind the “severe gulf between the super-rich and the hollowed-out middle classes [and] working classes”.

In Britain today, he said, “the gap between rich and poor is higher now than it has been since the 1860s”.

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And yet despite these stark circumstances, there has not been a notable increase in class consciousness or a renewed solidarity among the have-nots.

Instead, rising inequality has weakened previous class-based alliances, wrote French economist Thomas Piketty in a March 2018 report.

“Given the recent evolution, one might have expected to observe rising political demand for redistribution,” he wrote. However, “we seem to be observing for the most part the rise of various forms of xenophobic ‘populism’ and identity-based politics” – he cites Donald Trump, Brexit and France’s Marine Le Pen, among others – rather than “the return of class-based [politics]”.

World Inequality Report 2018

The rise of the right

In an article for Foreign Affairs magazine, the authors of a 2015 study that compiled data on nearly 100 financial crises since 1870 observed that “far-right parties are the biggest beneficiaries of financial crashes”.

“After a crisis, the share of the vote going to right-wing parties increases by more than 30 percent,” the authors found. Governing then becomes more difficult as more, smaller parties and anti-establishment fringe groups enter national legislatures.

The same phenomenon does not hold true for normal economic downturns, however, because acute financial crises are principally seen as “manmade disasters”.

“People blame elites for failing to prevent them," the authors wrote.

For those seeking to apportion blame, it is “often not hard to find policy failures and cronyism among the rich and powerful, so trust in the political system erodes. This opens the door to political entrepreneurs who try to set ‘the people’ against the ‘ruling class.’”

And yet left-wing parties, which also have a longstanding tradition of criticising elites, do not reap the same political gains following a financial crash.

“Our research shows that the far left’s vote share stays about the same in the aftermath of a crisis,” said the authors. “It seems that when social groups fear decline and a loss of wealth, they turn to right-wing parties that promise stability and law and order.”

While those on the left tend to avoid blaming foreigners and minorities for domestic problems, far-right politicians often choose provocative rhetoric that suggests the national culture is “coming under attack from external forces” – such as a mass migration that could lead to a loss of jobs, noted Dr. Paul Jackson, a senior lecturer in history at Northampton University and a specialist in the dynamics of the extreme right.

“Many who feel themselves economically losing out engage with politics in this way, [and] so economic issues can become very emotive and tied to the idea of defending the nation in powerful ways.”

Foster of King's College London pointed out that in Europe, the 10 years of austerity policies that followed the Great Recession have exacerbated these tensions. He said angry and “disillusioned” voters are increasingly lured into “supporting nationalist parties and politicians who blame peoples' problems on centrists, socialists, or the convenient scapegoats of the EU and immigrants”.

Unequal gains

An April 2018 study of survey data from 16 European nations released by the Economic Policy journal found that not only did economic deprivation increase right-wing populist tendencies, but that unequal gains further fuelled these beliefs.

The authors sought to investigate how far-right populism was influenced by what they called “positional deprivation” – or whether the growth in an individual’s real household income had been surpassed by that of his or her compatriots. The study found this disparity “tends to directly spur, net of other economic and political features, support and voting for radical right parties” as well as parties that exhibit nationalist and autocratic tendencies.

Individuals who “feel economically less well-off” are more likely to be attracted by the far right, Sam van Noort, a co-author of the report, told FRANCE 24.

The study also confirmed what previous investigations had uncovered: that radical right respondents “are more likely to be male, subjectively poorer, less educated [and] younger”.

‘Politically abandoned’

A comprehensive study published in October drew upon 500 door-to-door interviews conducted in disenfranchised regions of Germany and France that have a high proportion of right-wing, populist voters. The study, conducted by Das Progressive Zentrum policy think tank, found that “socio-political conditions – and not factors such as xenophobia – are often the drivers for anger and anxiety about the future”. These concerns include low wages and declines in key infrastructure such as transport.

“Many interviewees feel politically abandoned. They think that neither politics nor media take their worries seriously enough,” said Johannes Hillje, the study’s lead author, in presenting its results.

Hillje underscored that only a tiny minority of respondents repeated populist talking points or made xenophobic or racist comments. Instead, they were preoccupied by immediate and tangible local problems.

“Governments need to regain the trust of voters,” Hillje told FRANCE 24. “Many populist voters believe that politics does not improve their lives. They believe politicians serve private rather [than the] public interest. Politicians need to show that their measures generate public value.”

But in what is some encouraging news for the EU, the study also found that most respondents “saw Europe more as part of the solution than part of the problem”.

Cultural anxiety

Economic uncertainty is not the only emotional component feeding the populist surge, however. Nor is support for the far right the exclusive provenance of the economically vulnerable. The average Brexit voter is not working class but reasonably well-off, Foster noted. And France's anti-immigration Generation Identitaire (Identity Generation) movement appeals to wealthy, university-educated youth "who feel out of place in modern society".

Foster said a “far more significant” factor in the rise of the far right is “a growing sense of cultural anxiety and civilisational decline”.

“For many Europeans, the rapid pace of communication and cultural change in Europe leaves them anxious about what they perceive as a cultural takeover,” he said, adding that far-right supporters tend to place the blame for this squarely on two groups: Islam and domestic "elites".

“For millions of post-industrial Europeans who already feel left behind, there is a perception that the digital, metrocentric (capital city-oriented)[,] xenocentric (foreign-oriented) [and] trendy cultures which dominate the media now do not respect, or actively mock, the traditional cultures of regions and the working classes,” Foster said in an email.

As a result, far-right politicians “can appeal to a longing for belonging, a yearning for identity, and nostalgia, among people who feel out-of-place in an increasingly vast, increasingly soulless culture”.

Amplifying the message

Post-crisis far-right surges are usually temporary, the Foreign Affairs authors noted, and within five years, “voting patterns usually return to their pre-crisis status quo”.

But not this time. A decade after the worst financial crisis since the Great Depression, populists are still making gains, from Brazil and across Europe to the Philippines.

One reason for this may be the advent of social media. Far-right groups have learned from the past, honed their messages and coordinated their actions.

“Populist leaders teach one another how to use TV and social media to create polarization and divisions. This is crucial, since a polarized society is the fundamental prerequisite of populist success,” they wrote.

“They emphasize nationalism, giving a sense of identity to dissatisfied voters. And they use simple language that creates intimacy.”

Many populists have also become better at remaining in power, even being re-elected multiple times.

“They cultivate their image as outsiders, even when they come to dominate the political and business worlds. They gradually erode checks and balances and move to take over the media, all in the name of ‘the people.’”

Ultimately, the surge in far-right populism is “mainly about relative stagnation at the bottom [and] in the middle" of wealth distribution, exacerbated by "large gains at the top”, Moritz Schularick, one of the article’s authors, told FRANCE 24.

Governments “need to do more to keep society fair”, he said. “Public services, taxation, social safety nets – all of these have a role to play.”

National governments may have been slow to respond to the economic struggles of their constituents over the past decade. And yet, addressing those might be the relatively easy part. Tackling the immediate economic issues will not necessarily alleviate the concerns some have that their national culture is under threat, or dispel a lingering weariness with the political class.

“While addressing economic concerns is certainly important, doing more to resolve a more general distrust with the political mainstream is also crucial,” said Jackson.

Inequality can eventually be mitigated by government policies, Foster noted. But “the other causes of far-right support are much, much harder to respond to”.

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