The causes of economic nationalism in Europe

The defeat of Donald Trump in the US presidential election might lead us to think that the long wave of right-wing populism and nationalism engulfing the Western world has hit the shore. But in actual fact, the rise of nationalist-populist parties and movements is a long-term phenomenon, not a contingent one, with the first ripples appearing in Europe back in the 1990s. To understand the reasons these forces are winning consensus among the citizens of Europe, we can’t simply look at the more superficial aspects trumpeted in the media. Instead the key is to analyze the underlying political platform and what makes it so attractive to a certain segment of the electorate.

From this standpoint, rather than populism it would be more useful to talk about “economic nationalism.” By this we mean a composite political platform made up of isolationism, conservative economic policies and a nationalist narrative. Isolationism is associated with protectionist policies and hostility toward multilateralism and supranational organizations such as the World Trade Organization and the European Union. Conservative economic policies center more on lowering taxes and cutting welfare programs and less on redistribution mechanisms. Lastly, the nationalist narrative is the ideological common denominator, calling for national sovereignty to be restored and the culture, customs and traditional identity of the country in question to be defended.

To get an idea of the actual extent of economic nationalism in Europe, we conducted a study on the political parties of 15 Western European countries from 1985 to 2015.Utilizing data from the Manifesto Project, we classified these parties into four groups: isolationist left, pro-trade left, pro-trade right, and economic nationalists. This last group includes most of the parties generally described as the “radical right” and “populist.”

Next, we analyzed the election results of the four groups in the period 1985-2015. Isolationist forces that are anti-free trade saw a remarkable rise (from 40% to 60% of overall votes). But this trend did not count only economic nationalists, but left-wing isolationists as well, which encompass political movements that oppose supranational institutions and support redistribution policies. The parties categorized more clearly as radical right and populist saw growth on average in various rounds of elections running from less than 2% of the votes in 1975 to nearly 8% in 2015.

Structural causes underpin the clear trend that has been sweeping over the entire continent. The first one we need to consider is globalization. The opening of the global market - especially imports from emerging economies (chiefly China) - has provoked wide-ranging repercussions on the work force in European countries. The hardest hit are low-wage, low-skilled workers. They’re not only watching their income shrink, they also see a political class that is, for the most part, indifferent to their plight. Continuing in this vein, from an analysis of the regions of Europe most negatively impacted by the rise in imports from China from 1990 to 2007, we find confirmation of the repercussions of globalization at the polling booth. In fact, the years following the “Chinese shock” are clearly marked by swelling support for the radical right.

A second factor is technological change, which has triggered growing polarization in the world of work, driving a wedge between high-skilled, well-paid positions and low-wage manual jobs. To be more specific, in recent years the upsurge in industrial automation has generated negative fallout on employment levels for unskilled workers, sparking what we can aptly describe as “robot shock.” Here too the impact is plainly apparent and clearly quantifiable at an electoral level. In the European regions with the highest number of workers risking replacement by robots, radical right parties have grown their share of support at the ballot box appreciably.

So the electoral success of economic nationalists can’t be explained away as a simple vote of protest. On the contrary, this trend reflects a new rift within European societies, with the losers from globalization pitting themselves against the traditional ruling class, and siding with nationalist movements and the radical right. This new alignment is fueled by hostility toward supranational institutions such as the EU, whose policies are blamed for triggering a negative effect on the national economy. At the same time, this repositioning of the electorate can’t always be justified by real congruence between the interests of the “globalization losers” and the economic recipes advocated by the nationalist right. One unifying factor at a cultural level is anti-immigrant sentiment. We’ve found this to be more common not in the European regions that count a higher percentage of immigrants in their population, but instead in areas that feel the economic effects of globalization and technological change more acutely.

Very often the success of the populist right is interpreted by the European ruling classes as a purely cultural reaction toward change. But this absolutist interpretation does not reflect reality. In actual fact, there are very specific economic dynamics which, while not the sole cause, have contributed substantially to the rise in support for economic nationalists among a considerable portion of the population (the losers in the processes of globalization and technological change).

But recognizing this reality does not mean embracing the proposals of economic nationalism. Till now the political forces of the populist right have had an easy time placing all the blame for the people’s discontentment on the “political establishment.” But when they are called to step up and take on a direct role in their national governments, they do not seem to have much success in offering their constituents satisfactory solutions.

To make up for lost ground, progressive and liberal forces must come up with a new political platform. Along with opening up the world and leaning into change, they need to take an inclusive approach, one that can respond to the imbalances that the globalized economy has created within European societies.