As inequality grows, populism flourishes


Abstract

Is there a relationship between populism and inequality? Trends across the United States demonstrate that populism flourishes in communities that experienced long-term economic and social decay [1]. Trade, offshoring, and automation come with many fruits – but they have steadily reduced the number of available jobs and the wage of industrial workers since at least the 1970s.


This has exacerbated inequalities between depressed rural areas and small cities and towns, on the one hand, and thriving cities on the other. The global financial crisis of 2008 nourished these divisions – as communities already in decline suffered deeper and longer economic downturns than metropolitan areas ­– where superstar knowledge, technology, and service-oriented firms come together to create prosperous and vibrant economies.


This paper argues that populism and rising inequality tend to reinforce each other in the United States. Trade, offshoring and automation have yielded new inequalities that have helped populism flourish.


Discussion

Populism is understood as a philosophy that emphasizes faith in the wisdom and virtue of

ordinary people (the silent majority) over the ‘corrupt’ establishment [2]. Often, populism reflects deep cynicism and resentment of existing authorities, whether big business, big banks, multinational corporations, media pundits, elected politicians, government officials, intellectual elites, and scientific experts, and the arrogant and privileged rich.


Income inequality has surged back in the United States since the 1970s [3]. The top 0.1% wealth share has risen from 7% in 1978 to 22% in 2012 [4]. The combination of rising income and saving rate inequality is fueling wealth inequality. As of 2011, the upper 1% of Americans are now taking in nearly a quarter of the nation’s income every year [5].


The World Banks Gini Index measures the extent to which the distribution of income among individuals or households within an economy deviates from a perfectly equal distribution [6].

A Gini index of 0 represents perfect equality, while an index of 100 implies perfect inequality. In the most recent rating in 2018, the United States received a score of 41.4%, which is a higher level of inequality than in Canada, Denmark, and Japan [7].


Income inequality has nourished populist backlash against economic and political integration. In the United States, regions spoiled by greater exposure to imports from China and other low-wage countries, are more likely to vote for political parties and candidates hostile to globalization [8].


Regions that have experienced job losses and reduced wages because of low-wage imports from developing countries have become more politically polarized since 2000. Legislators in these regions have tended to vote in more protectionist ways, and they were more likely to swing their votes toward Donald Trump in the 2016 election.


Technological change and economic integration are primary drivers of the decline of manufacturing employment. By 2010, automation and outsourcing had reduced the ranks of industrial workers to 10% of the workforce [9]. In the United States, many of the most successful firms and industries are engaged in skill-intensive service activities – while the less-skilled tasks are sent offshore or automated.


High-wage, high skill employment is concentrated in the major cities, which have largely benefited from the fruits of globalization. The economic vibrancy of major cities juxtaposed with the economic deprivation found in much of rural America has nourished populism in rural America.


Analyzing the robust relationship between populism and inequality requires understanding the connections among the location of economic activities, the effects on local communities and economic voting. The relevant literature indicates stronger Trump support in countries with larger declines in manufacturing employment [10].


Deindustrializing communities appeared drawn to Trump’s more populist, anti-globalization campaign. This phenomenon illustrates to use that populism has its roots in the stark geographic inequalities in prosperity and opportunity over past decades.


Conclusion

During the last 35 years, the fruits of economic growth in the United States have gone to those at the top [11]. The less educated experienced declining real income due to changes in trade, offshoring, and automation. These changes happened primarily in rural areas. This has yielded a populist backlash outside of affluent and economically vibrant metropolises. Developing public policy remedies that will help quell inequality and improve quality of life will help suppress populist desires in the United States.


Sources

[1] Broz, J. Lawrence, Jeffry Frieden, and Stephen Weymouth. "Populism in place: the economic geography of the globalization backlash." International Organization 75, no. 2 (2021): 464-494.

[2] Inglehart, Ronald F., and Pippa Norris. "Trump, Brexit, and the rise of populism: Economic have-nots and cultural backlash." (2016).


[3] Piketty, Thomas, and Emmanuel Saez. "Inequality in the long run." Science 344, no. 6186 (2014): 838-843.


[4] Saez, Emmanuel, and Gabriel Zucman. "Wealth inequality in the United States since 1913: Evidence from capitalized income tax data." The Quarterly Journal of Economics 131, no. 2 (2016): 519-578.

[5] Stiglitz, Joseph E. “Of the 1%, by the 1%, for the 1%.” Vanity Fair, March 31, 2011. https://www.vanityfair.com/news/2011/05/top-one-percent-201105.

[6] “Metadata Glossary.” Databank. Accessed October 22, 2021. https://databank.worldbank.org/metadataglossary/jobs/series/SI.POV.GINI


[7] “Gini Index (World Bank Estimate) - United States.” Data. Accessed October 23, 2021. https://data.worldbank.org/indicator/SI.POV.GINI?locations=US


[8] Ibid.


[9] Inglehart, Ronald, and Pippa Norris. "Trump and the populist authoritarian parties: the silent revolution in reverse." Perspectives on Politics 15, no. 2 (2017): 443-454.

[10] Ibid.


[11] Ibid.