The increasing populism of the new right

India’s Modi shares some similarities with other populists in places like Turkey, Italy and the US.  Here’s a recent FT story:

Tensions between the RBI and Mr Modi have been mounting for months over the central bank’s hawkish monetary policy, use of its mounting reserves and the tough measures taken to clean up bad loans at India’s state-run banks.

Mr Modi has been accused of demanding that the RBI ease back on its crackdown out of fear it will hit economic growth during his drive for re-election, particularly as liquidity in non-bank lenders has dried up after a series of defaults at IL&FS, a high-profile finance and infrastructure group.

At a 10-hour board meeting last month, Mr Patel made a number of concessions under heavy pressure from government nominees, including promising to review restrictions on fresh lending by banks that already have high levels of bad debt. Pressure on the RBI was expected to continue at Friday’s meeting.

Fresh lending from banks that already have high levels of bad debt?  What could go wrong?

As a result of the pressure, Patel announced his resignation today.  (Recall that Raghuram Rajan was let go two years ago, for similar reasons):

“By forcing Mr Patel’s hand, the government has now made it clear who runs the show,” said Eswar Prasad, a professor at Cornell University, adding that the move marks “the culmination of the government’s taking the hammer to a cherished and widely respected institution”.

The Indian rupee fell more than 1.8 per cent against the dollar in the immediate aftermath of Mr Patel’s resignation.

If you look around the world, there is more and more evidence that the left and right are switching position on a wide range of issues:

1.  The populist right is increasingly supportive of monetary stimulus and opposed to central bank independence. (Easy money)

2.  The right is increasingly supportive of protectionist trade policies. (Mercantilism)

3.  The right is increasingly supportive of ramping up “moral hazard” in the financial system. (Easy credit)

4.  The right is increasingly supportive of deficit spending, including entitlements.

Those used to be left-wing positions.  Of course there are plenty of Republican politicians and pundits in the US that still oppose this populism, but this is the way that politics are evolving, all over the world.

I predict this process will continue, with local variations. Many other left wing ideas will flip to the right. The right will advocate a higher minimum wage and more government spending on infrastructure.  Right wing populists will increasingly oppose Silicon Valley type companies.    But this switch on tech firms will be less noticeable in the US, as it conflicts with the desire of nationalists to extract rents from the rest of the world.  In contrast, populists in the other English speaking nations will be less protectionist than in the US, as the costs of protection are more obvious in those smaller trading nations (Canada, the UK, Australia, New Zealand, Ireland, etc.)

Nonetheless, at a deep psychological level, the forces reshaping politics are obviously global.  The Economist has a fascinating article on the recent dramatic changes in Australia’s (conservative) Liberal Party, in which a Trumpian wing is suddenly becoming far more powerful.  Interestingly, the factors that supposedly led to the rise of Trump in America (opposition to imports, the Great Recession, low-skilled immigration, etc.) are largely absent in Australia.  This suggests that the psychological cause of this phenomenon is far deeper that the shallow explanations offered by media pundits.  I have no idea what those causes are, but imagine they will become clearer over time.  Why is misogyny usually a part of the package, for instance?

The Conservative Party in the UK is going through turmoil very similar to what’s reshaping Australia’s Liberal Party.  Unlike in Australia, however, it stays afloat because its opposition is even more loony.  The Australian Liberal Party doesn’t benefit from such a weak opposition, and thus faces a disaster at the next election.

The good news is that all of this turmoil may eventually lead to a US political party that is socially liberal and economically liberal.  I fear, however, that in the short run we’ll have two economically illiberal parties.




26 Responses to “The increasing populism of the new right”

  1. Gravatar of Tom M Tom M
    11. December 2018 at 10:03

    There cannot be peace without, first, a great suffering and the greater the suffering, the greater the peace.

  2. Gravatar of Brian Donohue Brian Donohue
    11. December 2018 at 10:08

    Thoughts on ECB policy? Doesn’t seem like populists have the upper hand there.

    “Populist” monetary policy is insane to me, since almost no one understands monetary policy, and even the experts make grave mistakes, as you have painstakingly documented.

    I prefer when you talk about policy without the political lens.

  3. Gravatar of ssumner ssumner
    11. December 2018 at 10:48

    Brian, Are you saying that populist monetary policy is insane in the sense of foolish, or insane in the sense of impossible? People in Latin America know what it is.

    Maybe I missed your point.

    Regarding the ECB, the problem isn’t so much current policy, it’s the entire regime, which is really procyclical.

  4. Gravatar of Becky Hargrove Becky Hargrove
    11. December 2018 at 10:48

    “…the psychological cause of this phenomenon…”
    It’s more economic, than psychological. As the costs of service sector activity have begun to crowd the revenue generating capacity of tradable sector activity, populists become more determined to make certain that the management of services supply and demand, doesn’t fall into the “wrong” hands.

  5. Gravatar of Salem Salem
    11. December 2018 at 11:19

    Lots of evidence that the right is becoming more economically authoritarian. Don’t disagree there.

    But you present no evidence that the left is becoming more economically liberal. And how could you? They are moving in an illiberal direction too (just from a worse starting point). Far more likely that we’ll end up in a situation like the 1950s, where most countries have two main political parties who broadly agree on most major economic issues, and the fights are more cultural in nature. Indeed, in many European countries that has always been the case.

    If that does take place, then in Anglosphere countries, the more right-wing party will find it convenient to make occasional rhetorical overtures to economic liberty, and so the few politicians who favour the free market will plough their lonely furrows in the right-wing party, faute de mieux. That’s exactly how it was in the 1950s, after all.

  6. Gravatar of Brian Donohue Brian Donohue
    11. December 2018 at 11:22


    Fair enough. There’s a folksy creditor/debtor issue, famously advanced by The Great Populist William Jennings Bryan (BTW- maybe Bryan had a point at the time, maybe populists aren’t always wrong, but surely the farmers knew what he was getting at.)

    But nowadays, the conversation is about macroeconomic stability — highly technical and technocratic NGDP stuff — not a simple creditor/debtor model. Whenever I adopt a winners/losers frame (e.g. homeowners with mortgages have been kicked by the Fed’s policy of not hitting inflation target over the past decade to the benefit of banks and other lenders), you ignore it and talk about NGDP instead.

    So, if monetary policy is the simple late 19th century argument about striking a balance between creditors and debtors, yeah, people understand that. But I never see the topic discussed in those terms, and the framework used is way beyond the ken of most people.

  7. Gravatar of Jeff Jeff
    11. December 2018 at 11:35

    You’re making way too much out of the normal incumbency effect. It’s almost always the case that whoever is currently in power wants easy money and easy lending. Nor is it unusual to see political parties decry deficit spending, but only when they’re not the ones doing it.

    What is different now is that our Trump is openly mercantilist and pays less lip service to free trade than any of his recent predecessors. None of them were really free traders, but at least they genuflected in that direction.

  8. Gravatar of LAurelius LAurelius
    11. December 2018 at 11:46

    “This suggests that the psychological cause of this phenomenon is far deeper that the shallow explanations offered by media pundits. I have no idea what those causes are, but imagine they will become clearer over time. Why is misogyny usually a part of the package, for instance?”

    “Misogyny.” A rejection of academic feminism is one of the first clues as to the non-economic causes, but it doesn’t make sense because you don’t appear to see the issue from the outside.

  9. Gravatar of Effem Effem
    11. December 2018 at 12:12

    This is exactly why it’d be short-sighted to try to replace a long-standing credible mandate (inflation targeting) with something new (NGDP targeting). Once you open that door, politicians will perceive a far greater ability to influence their central bank. Theoretical benefits to some new mandate are nice on paper but could easily be a disaster in practice.

  10. Gravatar of Lorenzo from Oz Lorenzo from Oz
    11. December 2018 at 14:50

    Why not about cultural politics? Economics v psychology seems an odd division.

  11. Gravatar of ssumner ssumner
    11. December 2018 at 15:12

    Brian, Again, I’d recommend talking to people from Latin America, they know exactly what populist monetary policy is. Sure, people here do not, as we’ve had 2% inflation since 1990.

    BTW, I think W. J. Bryan was right.

    Jeff, Yeah, Obama was trashing the Fed every single day in tweets.

    BTW, we’ve never had this kind of fiscal policy during a period of peace and prosperity. Not ever. Do you recall the Clinton years?

    LA, Yes, everyone who prefers that our politicians not make jokes about women who are raped is an “academic feminist”.

    Lorenzo, Yes, it might be about cultural issues. My point is that it’s probably not about the economic issues that American pundits talk about. Because you live in Australia, you may not have seen as much of the “Rustbelt” discussion as an explanation for Trump.

  12. Gravatar of Gordon Gordon
    11. December 2018 at 15:19

    Scott, could it be a decline in manufacturing employment in Australia which is behind the shift in politics there? Jobs in that sector have declined dramatically since 2008.

    This article has an interesting slider which shows the number of jobs in each sector by year in Australia going back to 1985.

  13. Gravatar of Kgaard Kgaard
    11. December 2018 at 15:22

    The poles are changing. It’s no longer so much left v right as nationalism vs. globalism. The French riots are basically all ethnic french from across the political spectrum.

    What you refer to as misogyny is a logical reaction to the weaponization of women against men (by the state). This is obvious in the breakdown of voting by sex (and marital status).

  14. Gravatar of Benny Lava Benny Lava
    11. December 2018 at 16:30

    Perhaps your best insight was seeing that the rise of Trump was not specific to the US and similar forces are at work across the globe.

  15. Gravatar of Benjamin Cole Benjamin Cole
    11. December 2018 at 17:39

    Also now the Yellow Vests in France.

    In broad brush strokes, I think it is because the bulk of working populations in developed nations have lower living standards than a generation or two ago.

    Also, one does not have to be too cynical to conclude that in most developed nations government works at the behest of the most powerful and wealthy.

  16. Gravatar of mbka mbka
    11. December 2018 at 17:42

    I don’t buy the economic causes arguments either, and tribalism is the effect. I just wish I knew the cause. Yes, the cause is cultural, but specifically, what? Especially since the current tendencies including globalism backlash and nationalism, are similar to trends in the 1930s.

    The co-occurrence of misogyny and nationalism makes me suspect it is about loss of privilege. Much of the anti globalism to me seems the fear of losing the automatic rent one gets of having been born in the West. The whole hatred of China in the US, for example, and the fight about IP, is about losing the rents from being the only ones that are rich and powerful. And misogyny is about losing the rents from being a man. It’s like the world (in the mind of the populists) has added a 4th and 5th insult to Freud’s famous listing of the 3 insults to (Western) Man: 1. Heliocentricity (Earth not at center of world) 2. Darwin (Man just another species) 3. Freud himself (Man not a master of himself), now we got 4. (Women just as good as Men) and 5. Chinese just as good as Americans. All of these are a hurt to ego and come with a fear of losing privilege, one’s special place in the universe.

    Problem with that theory is that it works best for the US, or France, but less well for Brazil or India, all places where right wing populism has been strong recently. So maybe it’s simply about losing a special place, one’s reserved space if you will, whether it comes with much privilege or not.

  17. Gravatar of Benjamin Cole Benjamin Cole
    11. December 2018 at 17:53

    Re Modi the RBI and more lending when bank loans are going sour anyway:

    It is a curious paradox: when a higher ratio of bank loans goes sour, the tendency of Western banking systems is to extend even less loans. That action decreases economic activity and somewhat ensures that even more bank loans will go sour. The role of endogenous money is worth pondering in this case.

    The People’s Bank of China, which has little respect for moral hazard by Western standards, buys sour loans from its banking system, thus leaving the banking system solvent and healthy and able to continue to extend loans.

    As China is opaque I do not know if the managers of particular banks pay a price. But as operating entities, the banks tend to get off Scot-free. The People’s Bank of China also buys defaulted bonds.

    While I cannot recommend the Sino system for the US, there remains a troubling question: how do we get banks to lend more into the teeth of a recession? If banks follow good principles, and lend less into the teeth of the recession, you will get eaten by the recession.

    One more recession, and even I will become a “populist.”

  18. Gravatar of P Burgos P Burgos
    11. December 2018 at 19:45


    I wonder if it is simply change due to things like social media and the internet making all sorts of people feel like the world is changing and that scares them.

  19. Gravatar of LAurelius LAurelius
    11. December 2018 at 19:55

    Jokes about rape victims? Sounds like the “believe all accusers with a vagina” sham but ok.

    Obviously there are some misogynists out there (like Elliot Rodger), but tying them to new right wing political movements is pretty tenuous.

  20. Gravatar of E. Harding E. Harding
    11. December 2018 at 21:17

    Sumner, sad, but true, sad but true. These phenomena are far from universal (look at the U.S. Congress, where old ideological lines prevail!), but I can’t deny the reality of their occurrence around the world. 3. and to some extent 4. tho are not features of populism, but of elitism (corporate welfare) that were clearly visible before the populist wave. But even this may be an incidental byproduct of populism, with elite support for populist parties being increasingly concentrated among the most venal and plutocratic elites due to more fiscally responsible elites fleeing leftward.

  21. Gravatar of Becky Hargrove Becky Hargrove
    12. December 2018 at 05:23

    I’m having trouble expressing this in a logical way, in part because of the (existential?) fear involved on my part about the possible long term outcome. The underlying commonality for different nations, is that manufacturing employment is less prevalent than before, and much of the services work available – especially for those who don’t live in prosperous regions – doesn’t fully compensate to the level one can have a responsible and prosperous life in the ordinary sense. If there is anything that seems cultural about this, perhaps it’s the gender factor of services work as less satisfactory for men, at least as it is currently structured. But services work could be transformed into something more satisfactory by sharing intellectual challenge more broadly. If the moderate right isn’t interested in approaching populism as a challenge to innovate and transform free markets for service sector activity, I’m really worried because some among the left have actually been hostile over the years at times to my proposals. Should the left come to basically own “solution” sets (and apply top down planning) because the moderate right found potential responses boring, distasteful, or whatever, what will happen? I’m afraid the moderate political right will disown the possibility of positive economic transformation until it is too late. If moderates on the right find cultural definitions a suitable reason to not worry about economic structural factors as problematic for populist uprisings, free markets could slowly, but surely, be lost. I don’t think this is about history but about shifting resource capacity. Years ago some individuals on this blog compared me to Hegel, but Hegel is all about history and state control. That’s not me.

  22. Gravatar of Christian List Christian List
    12. December 2018 at 06:12

    If you look around the world, there is more and more evidence that the left and right are switching position on a wide range of issues:

    Those used to be left-wing positions.


    the Right might become more like the Left but the Left is still the Left. There’s no switch.

    You could very well argue that the Left became even more left-wing. From Bill Clinton to Sanders and Ocasio-Cortez. From Blair to Corbyn. From Hollande to Melenchon. From Schröder to Nahles/Kühn. From Renzi to Five Stars. From Hu to Xi.

    You are paying attention, right?

    And how does your post even fit in? Few posts ago you said that Neoliberalism is an immovable force. So what is it? Right wing populism on the rise or Neoliberalism as strong as ever?

  23. Gravatar of ssumner ssumner
    12. December 2018 at 09:56

    Gordon, I suppose that’s possible, but mining jobs also appeal to blue collar workers, don’t they? And a fall of 150 thousand isn’t that big in a country of 25 million.

    Kgaard, The French always riot. People are making much too big a deal about the French riots.

    Burgos, That’s been my favorite hypothesis, as it’s one of the few that is global.

    LA, You said:

    “Jokes about rape victims?”

    So what’s your claim? That they aren’t telling rape jokes?

  24. Gravatar of msgkings msgkings
    12. December 2018 at 12:28


    Actually 150K jobs in a country of 25 million is huge. In the US (325 million people) that would be like a loss of almost 2 million jobs.

  25. Gravatar of ssumner ssumner
    12. December 2018 at 14:46

    msgkings. Maybe, but what share of voters would be motivated by that change? And again, don’t forget to include the mining boom.

  26. Gravatar of Prakash Prakash
    19. December 2018 at 03:43

    Hi Scott, I’m not sure if this comment will be of interest coming a week after the post, but nonetheless here it is.

    There are many complicating factors in India’s situation.

    The central bank is also the nation’s banking regulator and has been extremely stingy in handing out new bank licenses through the last few years. This might have been explained away as the typical indian bureaucratic slowness, but it happened under Rajan as well. Rajan had even made a statement that he wanted private bank licenses to be on-tap and makes it surprising that why under him didn’t he simply issue more licenses.

    The reason this rises into prominence is that the credit collapse could have been avoided if there had been enough of institutions with a strong balance sheet that could lend to others who had a strong balance sheet and only liquidity issues.

    The government has been fairly stringent in getting and keeping its fiscal act together, maintaining a fiscal deficit of 3.6%ish. This is a contrast compared to Trump or Erdogan or your points 3 and 4.

    The enhanced scrutiny of the bad loans, most of which were lent under the previous government, has led to a much greater collapse of general credit, which the RBI has to take responsibility for. This collapse of business sentiments adversely affects the job market, which is probably the public’s no.1 reason for discontent with the government.

    There is of course the disastrous demonetization, which is 100% the government’s baby, which is also a great contributor to the lack of jobs (due to the collapse of the trading and credit patterns)

    It might be of interest to you that in the editorials of one of the prominent economic papers in India, a nominal income target was suggested as one of the compromises that the RBI and the government can make so that they stay out of each others hair next time. But India has very recently moved to its inflation target decided by committee and changing to a new target now may not be good in the “meta-sense of trusting the decision making mechanism.”

Leave a Reply