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Trump and The New Capitalism: Old Wine in New Bottle

by CommentariesEconomicsEditor’s ChoiceHomeLeadership & Persona

Trumpism 2.0 marks a fundamental shift in global capitalism, blending nationalist protectionism, corporate oligarchy, and digital feudalism. The US is transitioning from ‘neutral’ state capitalism to a model where government policies explicitly serve dominant private entities, eroding economic democracy and consolidating monopolistic power. This transformation deepens domestic inequality while driving international economic fragmentation, trade wars, and strategic decoupling. Meanwhile, the Global South is asserting greater autonomy, challenging Western dominance, and reshaping economic alliances. If these trends persist, escalating geopolitical tensions, supply chain disruptions, and financial instability may define the coming decades. Yet, this period of turbulence—reminiscent of the 1930s—also presents an opportunity for systemic change, though it raises the risk of large-scale global conflict.

By Ibrahim Ozturk 

Introduction

Despite its apparent economic, political, and social challenges, the US remains a global powerhouse that can profoundly impact the world with even the slightest changes, whether progressive or regressive. Therefore, it is essential to understand and analyze the unpredictability and uncertainties upcoming with Trump’s (dis)order.

To grasp what Trump is trying to achieve, one should step back and take a bird’s-eye view to avoid the chaos and noise generated by him and his team. What do the iconic skyscrapers of Manhattan, such as the Empire State Building and the Chrysler Building, towering above the clouds, tell us?

When one listens to the sounds beneath the clouds, the shining progress emanating from Silicon Valley in northern California—the focal point of American entrepreneurship—whispers of groundbreaking discoveries and a bright future for the US and humanity in general. In Schumpeterian terminology, America’s “creative destruction” is ongoing. The share of the US GDP has reached 27% of global GDP. Although this is just below the 30% recorded in 2000, it is significant compared to the 23% in 2023, marking the United States’ rebound from its trough, driven by the forces of creative destruction. This pace of change in the structure of the US economy also transforms the financial architecture of the powerhouses on Wall Street, including the New York Stock Exchange.

However, the ongoing global competition indicates that this alone is not enough for America to maintain its competitiveness and status as a global empire. China’s rapid advancements in strategic high-tech industries—such as artificial intelligence (AI), quantum computing, semiconductors, 5G, and renewable energy technologies—along with heavy investments in R&D and talent acquisition to close the gap with the US, have reached a critical stage with far-reaching implications.

Moreover, the competition extends beyond the US and China, as Europe, Japan, and South Korea also play vital roles in niche technologies such as EV batteries, advanced robotics, and biotech. The outcome of this race will shape global supply chains, security policies, and economic leadership, ultimately defining the nature of the ongoing global power transition in the coming decades.

Trump Is Emulating Xi Jinping

Photo: Shutterstock.

As Graham Allison has analyzed in historical cases, the key concern now is how the US will respond to this precarious situation. Signals from Trump’s first term and early indications from his newly started second term suggest that the US political economy may be shifting toward a model resembling China under Xi Jinping. In other words, despite its significant economic superiority, America appears to be emulating its rival to defend its interests and contain China’s rise.

This shift toward unilateralism disregards international norms and values, undermines the post-World War II order it once championed, and abandons the institutions and stakeholders that upheld this system. As a result, the US is embarking on a perilous path that extends far beyond China. Increasingly, it is drifting away from the principles of law, rules, and values, instead embracing arbitrariness and raw power—posing a global threat that contradicts its raison d’être.

Meanwhile, the Statue of Liberty, a powerful symbol of American ideals such as freedom, democracy, and opportunity, is slowly disappearing beneath the clouds. As it fades into the distance, so does the American Dream—the long-standing promise of opportunity, prosperity, and success—becoming an increasingly unattainable illusion.These symbols, once synonymous with American greatness, now represent the triumphs of a bygone era.

Accordingly, the country’s status as a world leader in finance, technology, and industry is being redefined, and the old certainties are giving way to a new, uncertain reality.

Having sought to maintain its position by rejecting its past hegemonic sacrifices or leadership and putting a unilateral emphasis on the rhetoric of “America First,” “Making America Great Again” (MAGA) to protect its “greatness” will also reshape the nature of capitalism and globalization. Several questions need to be addressed and examined in this context. This commentary focuses on the new capitalism the United States has adopted to respond to ongoing global power pressures, changing competitive conditions, and potential consequences.

Three Models of Capitalism

Economic systems (such as capitalism, socialism, and mixed economies) are compared based on several key pillars. These include the right for ownership, the role of government, central planning vs competition, the workings of prices and the production mechanism, income distribution, equity, efficiency, and productivity, economic stability and growth, innovation and entrepreneurship, social welfare and public goods, flexibility and adaptability, approach to free trade vs. protectionism or autarky. There are also various hybrid models combining different system elements at different doses. Each economic system has strengths and weaknesses, depending on societal goals such as growth, equity, efficiency, and stability. 

In addition to these differences between economic systems, as J. H. Dunning, D. Rodrik, and J. E. Stiglitz published terrific works on, the world economy has also been characterized by different stages of globalization or deglobalization. These range from mercantilism, a potent form of protectionism, to the extreme form of neoliberal globalization, which went beyond control with severe negative repercussions, and now to new protectionism and civilizational nationalism, along with rising multipolarity and power shift.

Several questions need to be addressed and examined in this context. This commentary focuses on the “new capitalism” that the United States appears to have adopted to respond to ongoing global power shifts, changing competitive conditions, and potential consequences. Whatever form capitalism takes, the debate will always revolve around the market economy, capitalists, big corporations, property rights, and how the state controls and regulates all of this.

Two eminent thinkers, economic historian Fernand Braudel, who focused on long-term structures, and Karl Polanyi, a political economist, who analyzed economic transformations, and anthropologist, provided fundamental critiques of capitalism concerning the state, power, and institutions. Braudel and Polanyi view capitalism as an evolving historical system rather than a static or natural economic order. Through his longue durée approach, Braudel analyzes how capitalism has developed over centuries within specific historical contexts, while Polanyi’s “Great Transformation” illustrates the shift from embedded economies to market-driven societies.  

Both scholars differentiate between market economies based on local trade and reciprocity and capitalism, which operates on a larger scale and inherently tends toward monopolization. Braudel views capitalism as an upper layer of economic activity that never functions under pure free-market conditions, exploiting markets rather than being synonymous with them. Capitalism always seeks privileged access to resources, political power, and monopolies. Thus, Braudel and Polanyi converge in their critiques, exposing capitalism’s reliance on state power and monopolistic control and its disruptive effects on society. Braudel emphasizes capitalism’s exploitative nature, whereas Polanyi underscores the commodification of key economic factors, particularly labor. 

In short, both view capitalism as a threat to market economies and open societies when left unchecked. Capitalism often operates at the expense of broader societal well-being, benefiting elites while fostering instability and social resistance. Most notably, when the economy becomes “dis-embedded” from society and socially disruptive, the adverse effects of non-market processes, such as externalities and monopolization, become apparent. These circumstances call for state intervention to sustain markets. 

However, these two scholars not only explored the state’s crucial role in developing and shaping markets, as D. North demonstrated as an instituted process, but they also showed how state intervention is a double-edged sword and a hazardous process. Given the different allocations of power dynamics, the state’s role cannot be taken for granted.

As shown historically by M. Olson, in the context of development theory by Theda Skocpol, and more recently by C. Jonson during Japan’s rapid post-war development, effective state intervention depends on several restrictive conditions, such as state autonomy and capacity, free from the influence of interest-seeking coalitions. Most notably, Olson explores how special interest groups and coalitions gradually capture state power, leading to economic stagnation. This is also relevant in relatively stable societies, where entrenched interest groups gain influence, creating rigidities that slow economic growth and hinder necessary reforms.

To explore these developments further, I will delineate three evolving variants of capitalism based on ownership structures and governance mechanisms.

State-Controlled Oligarchic Capitalism (Turkey – Erdogan Model)

👉🏿 The private sector’s independence diminishes as the government integrates strategic industries into political control.

👉🏿 State-backed business elites thrive through public contracts, incentives, and preferential credit.

👉🏿 Bureaucrats and politicians hold executive roles in private firms, aligning private enterprise with state agendas.

👉🏿 This model merges authoritarian populism with capitalist oligarchy.

State Capitalism with Strategic Planning (China – Xi Model)

👉🏿 State ownership dominates, yet specific industries operate with market-driven efficiency.

👉🏿 Despite their semi-independent façade, companies like Huawei and Alibaba align with national economic strategies.

👉🏿 The government employs market forces for efficiency while maintaining overarching economic control.

👉🏿 This hybrid model blends centralized planning with capitalist dynamics.

Techno-Feudal and Oligopolistic Capitalism (US–Trump Model)

👉🏿 Traditional neoliberalism is evolving into a state-elite partnership.

👉🏿 Billionaire elites increasingly influence governance, making the state an agent of corporate interests.

Caricature: Shutterstock.

Tech giants like Tesla, SpaceX, Facebook-Meta, and major media conglomerates serve as political tools for mass influence. For instance, in a clear transactional or win-win approach, President Trump appointed Elon Musk to lead the Department of Government Efficiency (DOGE). However, the court blocked his attempt to intervene in the US Treasury and access private data, a case that fueled Trump’s anti-law aggression. Stephen Schwarzman, the chairman and CEO of Blackstone, Ana Botín, the executive chair of Banco Santander, Patrick Pouyanné, chairman and CEO of Total Energies, and Brian Moynihan, chair of the board and CEO of Bank of America, participated in a public dialogue with President Trump at the World Economic Forum‘s 2025 Annual Meeting, indicating a collaborative relationship. Additionally, US business leaders have significantly increased their financial support for President Trump’s second inaugural fund, with contributions expected to surpass previous records. Major corporations such as BP, Chevron, Shell, Google, Microsoft, and Apple have adopted the term “Gulf of America” in their communications following President Trump’s executive order renaming the Gulf of Mexico. This move signifies corporate alignment with the administration’s directives. 

Whatever hybrid forms of capitalist models evolve, they underline the rise of Strategic Capitalism, diminishing market competition, increasing state-business convergence, and greater government control over economic participants. In other words, “state capture by entrenched interest-seeking coalitions” is becoming increasingly widespread and pervasive. Most notably, when capital infiltrates the state—through so-called “legitimate lobbying,” as seen in the US—and effectively merges with the government, a fundamental question arises: On whose behalf does the state intervene in the market? How can the criterion of rationality be upheld?

Besides such domestic political-economy implications of the evolving forms of capitalism, their various configurations are also catalysts for conflict when they attempt to externalize emerging problems and challenges. The main dimensions of problem externalization might take several forms:

Globalization’s Externalities and National-Level Risks: While globalization promotes economic interdependence, it has also resulted in significant negative externalities, such as income inequality, industrial decline, job displacement, and financial volatility. Traditional economic governance models suggest addressing these risks at the national level through various mechanisms:

👉🏿 Wealth redistribution via progressive taxation (such as wealth taxes) to fund social welfare and infrastructure.

👉🏿 Regulatory adjustments through stronger labor protections, improved financial oversight, and enhanced corporate accountability mechanisms.

👉🏿 Fair wage policies to ensure that productivity gains translate into equitable income distribution for the working class.

However, instead of internalizing these costs within their economies, some nations are now externalizing them—shifting economic grievances onto foreign entities, often framed within a civilizational nationalist discourse. This trend has been particularly evident under the Trump administration.

The Shift from National Economic Regulation to External Blame: Historically, economic nationalism has been used as a policy tool to protect domestic industries. However, the new wave of civilizational nationalism reframes economic struggles as existential conflicts between distinct cultural or civilizational blocs. This shift is evident in several key areas:

👉🏿 Trade protectionism and economic sanctions through tariffs and trade restrictions on perceived economic competitors (e.g., the U.S.-China trade war).

👉🏿 Industrial policy disguised as strategic autonomy, supporting vital domestic industries for national security purposes (e.g., the EU’s strategic autonomy, the U.S. CHIPS Act).

👉🏿 Resource and financial weaponization, using energy supplies, commodities, or economic systems as geopolitical leverage (e.g., U.S. dollar-based sanctions, Russia’s energy policy).

👉🏿 Anti-globalization narratives rooted in identity politics, portraying globalization as an elite conspiracy that threatens national sovereignty, thus justifying exclusionary economic policies.

The motivation behind these strategies is to “externalize” the burden of globalization’s side effects—shifting responsibility away from corporations and national policymakers onto foreign nations or civilizational “rivals”—ultimately deepening global fragmentation.

Civilizational Nationalism Increases the Likelihood of Conflict: Economic nationalism has historically led to trade wars and economic decoupling. However, civilizational nationalism extends beyond economics, intertwining identity, culture, and geopolitics into economic policy, making conflicts more intense and less negotiable.

In this context:

👉🏿 The West perceives China as both an economic competitor and a cultural and ideological challenger.

👉🏿 Russia is pivoting away from global capitalism, crafting its own “civilizational” economic model centered on Eurasianism.

👉🏿 The European Union, recognizing the limitations of globalization, is adopting industrial policies emphasizing strategic autonomy.

👉🏿 South Asia and the Middle East are developing distinct regional capitalist models.

👉🏿 Meanwhile, the US, under Trumpism, appears to oppose the “rest” of the world.

In conclusion, by replacing domestic policy reform agendas, such as corporate taxation and labor protections, with blame-driven economic nationalism, governments avoid addressing the root causes of economic discontent and fuel long-term geopolitical instability. If this ongoing trend persists, the world may experience an era of intensified trade wars, economic decoupling, and heightened geopolitical tensions, reminiscent of the 1930s, increasing the risk of large-scale conflicts.

Trump’s Presidency and the Shift Toward Authoritarian Capitalism

Obviously, Trump’s populist authoritarian and pragmatist rhetoric lacks a coherent theoretical foundation. It can be seen as a contradictory fusion of economic nationalism, protectionism, and populism, driven more by emotional appeal than analytical rigor. Unlike traditional neoliberalism, which has grown in the US and promotes minimal state intervention, Trump’s era witnessed the convergence of state power with elite economic interests. As Antara Haltar observes, Trump’s policies – tariffs, tax cuts, de/regulation, and re/industrialization- to “Make America Great” again (MAGAnomics) reject core tenets of neoclassical economics, notably free trade, and efficiency. As M. Mazzucatoputs it, this aligns with techno-feudalism, in which large technology firms exert immense economic and social control. 

What is idiosyncratic and hypocritical is that Trump rose to power by appealing to those experiencing poverty, feeling left behind, and abandoned. However, he has ultimately shaped his policies to further enrich giant capital owners. He not only serves the interests of capital but has gone a step further by directly placing capitalists in key government positions. Even though his protectionist trade wars were framed to protect American jobs and boost employment and income, there is broad consensus among economists that these policies may primarily benefit select corporations at the expense of consumers and citizens. As J. Stiglitz correctly noted, there is already a high degree of market concentration in the US. 

While it remains unclear how he will deliver on his political promises amid the growing challenges of techno-feudalism, these features suggest that Trump’s evolving capitalism, which carries significant global implications, will emerge as a hybrid model combining the following aspects.

👉🏿 Nationalist Protectionism: A more aggressive form of protectionism where the government prioritizes domestic industries and restricts foreign competition. For instance, Trump’s decision to block the acquisition of United States Steel by the Japanese company Nippon Steel created tensions with Japan. Prime Minister Ishiba responded by saying that “the president blocking a takeover is a significant ‘political interference’ and difficult to understand.” This could lead to a more insular, self-sufficient economy, with tariffs and trade barriers becoming more prevalent.

👉🏿 State capitalism: A blend of state control and private enterprise, where the government is more active in guiding the economy. This could involve increased government ownership of key industries like energy, finance, or infrastructure.

👉🏿 Authoritarian Capitalism: A system where the government exercises significant control over the economy, often through a combination of state-owned enterprises, regulations, and repression of dissent. This could lead to a more rigid, hierarchical economy with limited opportunities for entrepreneurship and innovation.

👉🏿 Neoliberalism 2.0: A revised version of the neoliberal ideology that dominated the 1980s and 1990s. This could involve a renewed emphasis on deregulation, privatization, and free trade but with a more aggressive approach to suppressing labor unions and social welfare programs.

👉🏿 Corporate-Friendly Populism: A system where the government prioritizes the interests of large corporations and wealthy elites while using populist rhetoric to appeal to working-class voters. This could lead to a more unequal economy, with greater concentrations of wealth and power.

👉🏿 Hybrid Capitalism: A system that combines elements of different economic models, such as state-led development, private enterprise, and social welfare programs. This could involve a more nuanced approach to monetary policy, focusing on balancing competing interests and promoting sustainable growth.

The actual outcome would depend on a complex interplay of factors, including policy decisions, economic conditions, and societal responses. The impact-response paradigm will also reflect the nature of (i) the state-corporate symbiosis, in which even if Trump does not formally integrate capitalist figures like Elon Musk or Mark Zuckerberg into the government, he might pursue policies favoring elite interests, such as corporate tax cuts. (ii) Media and technology manipulation. Trump weaponizes social media platforms like Twitter (now X) while simultaneously attacking tech giants that challenge his influence. (iii) Regulatory favoritism. Despite public criticism of Silicon Valley, Trump’s administration provided regulatory and tax advantages to major corporations. (iv) Preferential treatment for loyal capitalists. Trump’s government allocated state contracts, tax breaks, and industry protections to politically aligned business figures.

To the extent that corporate feudalism is costly to the economy and society’s well-being, the US will likely turn to asymmetric power, military force, and destructive nationalist and civilizational rhetoric to balance, conceal, legitimize, and make it acceptable to the public.

Strategic Implications of Trumpism Globally

As Nancy Quian emphasizes, while initially seen as just a “trade war” with China, it quickly became clear that Trump’s ambitions were far more extensive. He started imposing tariffs on Mexico, Canada, and the EU, which were promptly met with retaliatory actions. Although it’s still uncertain whether Trump’s actions will dissuade his “strategic competitors,” they have already raised alarm among many European nations—long-standing strategic allies of the US since World War II and throughout the Cold War—along with NATO members and most OECD countries.  

Had he pursued his policies under the banner of democracy, human rights, the rule of law, multiparty free elections, separation of powers, checks and balances, and transparent governance, most of the OECD nations—controlling nearly 50% of the global GDP—might have been more open to closer cooperation with the US. However, Trump’s broad and aggressive stance and his confrontational rhetoric extending beyond trade wars are likely to leave the US deprived mainly of the allies it seeks.  

One reason for this maximalist stance may be Trump’s realization that gaining an economic advantage over China solely through trade wars is impossible. As a result, he has sought to incorporate military, political, technological, and other strategic means to secure a stronger position for the US. However, in doing so, he may have overestimated America’s strength—much like an empire already losing its hegemonic power. Instead of consolidating US influence, this overreach could accelerate America’s decline on the global stage.  

Additionally, should global resistance and retaliatory measures against Trump’s America gain momentum, two key consequences could emerge? First, competitors like China may grow even more potent. Trump’s disregard for international norms and values, his habit of barking orders at partners, and his use of political pressure like a small-town thug could alienate his allies and drive them closer to rising powers like China. Second, increasing costs for US consumers and damage to America’s strategic interests could weaken domestic support for Trump, potentially leading to a loss of the congressional majority in the 2026 midterm elections.

Conclusion

In our age of multipolarity, global capitalism is no longer a cohesive system under US hegemony. There are now competing forms of capitalism with different norms and values. There are three notable issues to underline here in terms of understanding the nature of rising capitalism under Trump 2.0. 

First, despite its contradictions, Trumpism exposes fundamental flaws in post-WWII economic orthodoxy—particularly its failures to address inequality, identity, and the unintended consequences of globalization. Therefore, the strength of Trump’s approach lies in its emotional resonance with voters who feel marginalized by globalization. Trumpism thrives not on traditional economic logic but on perceptions of cultural and economic displacement. 

Second, the fact that politicians come to power using right-wing populist rhetoric and then cede substantial control to capital rather than monitoring, directing, and engaging it in government for the benefit of the people underscores the volatile, elusive, and inherently dangerous nature of populist discourse. Trump’s apparent shift toward oligarchic capitalism (techno-feudalism) through his explicit favoritism toward specific billionaires signals a transition from “neutral” state capitalism to a system where the government actively serves dominant private entities. This shift undermines market competition, reduces economic democracy, and fosters monopolistic tendencies.

Third, rather than adhering to the principle of reforming the existing US system and global multilateral organizations, as Yuen Yuen Ang argues, Trump intends to export or externalize significant problems of the US economy, such as the ever-rising income inequality, chronic and systemic corruption caused by the rise of robber barons, and financial risks, to the “rest” of the world via “beggar thy neighbor policies.”

In this emerging conflict, the digital economy, technology wars, and financial sanctions have become key instruments. However, under Trump’s approach, the current global fragmentation and the new Cold War environment have evolved beyond a simple polarization between the West and the China-Russia axis. The struggle is no longer just between the center (West) and the periphery (Global South) but also within the Global South and the West.

That fragmentation might also lead to: (i) The breakdown of global supply chains as the West tries to reduce its dependence on China, shifting toward a “friendshoring” trade model. As a reaction, expanding BRICS nations are advancing de-dollarization and constructing alternatives to the Western financial system. (ii) A possible economic bloc formation against Western dominance reminiscent of the 1930s increases the risk of economic stagnation and geopolitical conflict. The US and the EU are implementing “Green Protectionism” via carbon tariffs. If these trends persist, the global economy may enter an era of trade wars, financial decoupling, and economic fragmentation. 

Finally, economists must grapple with the systemic issues that enabled its rise rather than dismissing it as an aberration. Until mainstream economics confronts these shortcomings, the populist movement it fuels is unlikely to fade.

Professor Cornelia Woll, President of the Hertie School in Berlin and a leading expert on international political economy.

Professor Woll: J.D. Vance’s Speech Was ‘Quite a Hypocritical Statement’

by AuthoritarianismEconomicsEditor’s ChoiceExtremism & RadicalisationHomeInterviews

In an exclusive interview with ECPS, Professor Cornelia Woll, President of the Hertie School, criticized US Vice President J.D. Vance’s speech at the Munich Security Conference, calling it “quite a hypocritical statement.” She pointed out that while Vance accused Europe of restricting free speech, the Trump administration actively attacks institutions like Wikipedia and NPR. Professor Woll also warned that the US, under Trump, is pursuing policies that align with Russia’s interests, deepening transatlantic fractures. With nationalist rhetoric rising on both sides of the Atlantic, she emphasized that Europe must navigate these challenges to maintain economic stability and security.

Interview by Selcuk Gultasli

In a striking critique of US Vice President J.D. Vance, Professor Cornelia Woll, President of the Hertie School in Berlin and a leading expert on international political economy, described his speech at the Munich Security Conference as “quite a hypocritical statement.” Speaking with the European Center for Populism Studies (ECPS) on Thursday, Professor Woll dissected the contradictions in Vance’s rhetoric, particularly his claims that Europe’s speech restrictions pose a greater threat than military aggression from Russia or China.

“I don’t know if one should even react,” Professor Woll said of Vance’s remarks, pointing out the glaring irony of his accusations. “Everyone in the room—and I was in the room when he gave that speech—was well aware of the hypocrisy.” She noted that Vance’s critique of European policies comes at a time when the Trump administration itself is actively attacking free expression within the US. “This comes at a time when the Trump administration is firing the head of an art institution, the Kennedy Center, attacking Wikipedia, and targeting public radio and NPR,” she explained. “It is a common strategy for the Trump administration to accuse others of doing precisely what they themselves are doing.”

Beyond hypocrisy, Professor Woll argued that Vance’s speech was little more than a domestic campaign statement. “It was a national campaign speech, like many heard during an election,” she said, adding that its delivery at a major security conference reflected “the weakness of J.D. Vance in international discussions.” She suggested that Trump’s broader geopolitical calculations—including talks with Russia and Saudi Arabia—likely influenced Vance’s remarks, forcing him to focus on internal US politics rather than engage in substantive global security discussions.

Professor Woll also raised concerns about the broader implications of US policy under Trump and Vance, particularly regarding Germany. “Let me put it very bluntly: what Elon Musk, J.D. Vance, and Donald Trump are currently doing is supporting Russia’s interests,” she warned. She emphasized that many Germans still see these actions as fundamentally against their country’s security and long-term development, not just because of their history but also due to the risks posed by increasing Russian influence.

This growing divide is not just about rhetoric; it has real consequences for transatlantic relations. Professor Woll pointed out that Europe can no longer count on the US as a reliable partner. “Even though the US is not fully disengaging or explicitly leaving NATO, the uncertainty about whether it can be relied upon is significant,” she said. “Today, who can say with certainty that if Russia attacked a NATO partner, like Finland, the US would intervene. We simply do not know, and that uncertainty is deeply consequential.”

These shifts in US policy are also contributing to a broader geopolitical transformation. Professor Woll noted that a post-Western economic order is already emerging, driven in part by China’s strategic investments and growing sphere of influence. “We already see a stable and strong Chinese sphere of influence, which is now challenging the structure of multilateral institutions established under the Bretton Woods system,” she explained. This raises the question of Europe’s role—whether it will align fully with US interests or attempt to position itself as a third force between China and the US. “In my opinion, the latter would be the better path forward,” Professor Woll concluded.

At the same time, Europe faces internal struggles that could weaken its global standing. The rise of far-right parties like the Alternative for Germany (AfD) has been fueled by economic grievances and anti-globalization sentiments. Professor Woll warned that if the far right gains further power, Europe could see increased protectionism and economic fragmentation. “Every far-right party includes economic protectionism on their agenda, across all domains—whether it is student mobility, economic exchange, or military investment,” she noted.

With nationalist rhetoric gaining traction on both sides of the Atlantic and traditional alliances under strain, Professor Woll’s analysis underscores the fragility of the liberal world order. As the US embraces economic nationalism and European politics become more polarized, the future of global governance remains uncertain. The challenge now is whether European leaders can navigate these fractures while maintaining economic stability and security.

Here is the transcription of the interview with Professor Cornelia Woll with some edits.

The World Returned to an Era of Protectionism

A metaphorical image depicting the US-China trade war, economic tensions and tariff disputes on imports and exports. Photo: Shutterstock.

Professor Woll, thank you very much for joining our interview series. Let me start right away with the first question: In one of your earlier studies, you and Ben Clift differentiate economic patriotism from economic nationalism, arguing that economic patriotism is not inherently protectionist but instead seeks to favor specific actors based on territorial status. You also examine how economic patriotism serves as a tool to balance market liberalization with national political imperatives. How do you see this concept evolving in an era of increasing protectionism, and do you see it as a sustainable strategy in an era of increasing economic fragmentation?

Professor Cornelia Woll: Thank you for that question. When we developed the concept of economic patriotism, Ben Clift and I were interested in how governments defend the interests of their countries in open societies committed to free trade and free exchange while still wanting to protect their national interests.

What I see now is that this is no longer the issue because we have returned to an era of protectionism that is willing to sacrifice an open liberal order with free trade on the altar of national interests. We are essentially back a century ago when countries sought to close their borders, and if their interests were not fulfilled, they would retaliate against trading partners with protectionist measures. To a certain degree, that work is almost outdated because it started with a different premise.

Given the resurgence of state-led economic strategies, do you believe we are witnessing a fundamental shift away from the neoliberal order, or is this merely a cyclical adjustment? In your view, how fragile is the liberal world order today, and do you see a path for its reinvigoration, or are we witnessing its irreversible decline?

Professor Cornelia Woll: I think we are seeing a fundamental shift. It is a break, particularly in the position of the United States, away from multilateral institutions that were built to support a liberal order of the West, one might say. It is also a break away from the political systems that came with that liberal economic order, particularly democracy.

There was this Western combination of democracy and free markets that formed the backbone of the post-war order, which I will refer to as the order of the West. What we see now is a trend in different parts of the world toward more authoritarian systems or illiberal democracies. There is an ongoing debate on the best term for this shift.

I definitely see that it is important for many players, even within Europe—European countries and different political parties—to promote a vision that is quite orthogonal to these ideals. And yes, that is the biggest challenge to the liberal world order and to the governments that support it.

Trump’s Second Term Would Be an Intensified Attack on the Liberal Order

What role did President Donald Trump play in the fragmentation of global governance structures during his first term, and do you foresee a second Trump presidency further accelerating this decline?

Professor Cornelia Woll: I think everyone would agree that Donald Trump did not change his fundamental convictions between his first and potential second term. His approach remains the same and is clearly articulated in the “America First” doctrine—highly self-interested and transactional in nature, both for himself as a person, for the government, and for America’s role in the world.

We saw this during his first term with numerous decisions that opposed multilateral institutions, including his withdrawal from the climate agreements. Now, we see this approach returning even more forcefully because he has learned how to better navigate the system to achieve his goals.

For example, he has become more strategic about avoiding legal challenges. In his previous term, he denied press licenses, whereas now, he simply withdraws access, which is more difficult to challenge in court. Similarly, in dismantling USAID, the development agency of the United States, he is effectively shutting it down without officially closing it—keeping only a handful of staff, making it harder to contest legally.

Everything he is doing in his second term represents an intensified, more systematically executed attack on the liberal order.

Trump to Sacrifice the Liberal Economic Order for His Own Gains

Donald Trump with a serious look as he delivers a speech at a campaign rally held at the Mohegan Sun Arena in Wilkes-Barre, PA – August 2, 2018. Photo: Evan El-Amin.

The Trump administration ushered in an era of economic nationalism, trade wars, and tariff challenges—how much of this shift has been institutionalized within US trade policy, and can it be reversed? Given the protectionist tendencies under the Trump administration, including tariffs on European and Chinese goods, how much do you think Trump’s policies accelerated the erosion of the liberal economic order? Do you see a long-term shift in US trade policy away from multilateralism?

Professor Cornelia Woll: Trump has engaged in an outright tariff war, and as everyone knows, trade wars are retaliatory. If you impose tariffs on goods, you will face tariffs on your own goods from the countries you are trying to exclude from your market. That is what we are currently seeing.

This type of protection for domestic production is one form of defending economic interests. I would say it is a form of industrial policy. We talk about the protection of infant industries, for example, and for a long time, I would have said this is the industrial policy of emerging economies—countries that lack many tools to protect their industries. The US had much sharper, more sophisticated ways of protecting its companies, but now it is reverting to a very crude tariff war, a trade war where one country’s interests are set against another’s.

What will happen next? Most countries have understood that Donald Trump only respects strength and that they must respond in kind and be very clear about where they set their boundaries. As a result, we will see an acceleration of retaliatory measures. However, we have also seen that Trump uses tariffs not just to influence the economy but often as a tool to negotiate deals on entirely different issues.

With Mexico, for example, one of the concessions he secured by threatening tariffs was increased protection of the US-Mexico border. Similarly, regarding the inflow of drugs, particularly fentanyl, the stakes may be different with other countries. Essentially, he uses economic threats to extract concessions on issues that may be related to security, borders, or other policy areas.

This means that, yes, Trump is willing to sacrifice the liberal economic order for his own gains and objectives. The question of what will happen in the medium or long term depends on how extensively he actually enforces these measures. If he primarily uses tariffs as a negotiation tool without fully implementing them, they might prove to be effective bargaining instruments. However, if he puts them into practice and raises the tariffs he has announced, the consequences will be significant.

Since the US is part of an interconnected global economy, these measures will also harm the US economy. For example, American car manufacturers—whom Trump wants to protect—would lose access to steel and aluminum imported from abroad. Technology producers might face disruptions in their supply chains due to components manufactured in China, and the list goes on.

Economists analyzing this issue are now trying to estimate the impact on US GDP, which will translate into economic pain for American consumers and producers. The key political question is: how long will Trump be willing to impose that kind of pain, and at what point will it start to hurt him politically? He knows that if gas prices rise in the US, even his base will be unhappy. He has stated on television that people will tolerate some level of hardship if they believe it serves their interests—but for how long?

At this point, we do not know exactly how long this will continue, because we do not yet fully understand the economic consequences and fallout—but there will certainly be an impact.

We Are Entering a Multipolar World of Fragmented Economic Influence

With the resurgence of mercantilist policies and protectionism, particularly in the U.S. and China, are we witnessing the end of globalization as we know it? What alternative economic models might emerge?

Professor Cornelia Woll: I don’t think an alternative economic model is emerging. What we are seeing instead is an alternative geopolitical model. Simply put, we previously lived in a world where economies were connected through structures created by the West, particularly the US, after World War II. It was a Western-led system of economic interdependence across markets. Today, the US is deeply concerned about the rise of China as an economic superpower and seeks to either shut itself off or at least reduce its rivalry with China by blocking certain aspects of Chinese economic development. This leads to greater fragmentation—both geopolitical and economic. China has been highly effective at forging partnerships and economic interdependencies around the world, creating its own sphere of influence. That sphere has now grown significantly.

The key question is: What kind of economic relationships will exist in a world increasingly dominated by China’s sphere of influence? What portion of global trade will remain within the US sphere of influence? And where will other countries position themselves? What role will Europe play between these two giants? What direction will Latin America take? Will what is sometimes referred to as the “Global South” develop into an independent trade bloc that avoids having to choose between the US and China? We are currently witnessing the emergence of a multipolar world with fragmented zones of economic exchange and influence. That trend is certainly to continue.

How has the EU responded to the deterioration of transatlantic relations under Trump, and do you believe these fractures are temporary or part of a long-term geopolitical shift?

Professor Cornelia Woll: I am quite certain they are part of a long-term geopolitical shift. The news cycle was filled with images from the Munich Security Conference, particularly Vice President J.D. Vance’s speech at the conference, which was a clear criticism of Europe at a time when much is at stake in international security and the global order—Ukraine, the Middle East, and many other issues where the transatlantic partnership is central.

The fact that none of these concerns were addressed in the Vice President’s speech, and that he explicitly criticized European partners, while at the same time the US was organizing peace talks for Ukraine with Russia—without inviting other stakeholders—signals that the EU can no longer count on the US as a reliable partner to support European concerns both on the continent and beyond.

I believe these fractures are real and will persist. Even though the US is not fully disengaging or explicitly leaving NATO, the uncertainty about whether it can be relied upon is significant. In security matters, guarantees and trust are crucial. Today, who can say with certainty that if Russia attacked a NATO partner, like Finland, the US would intervene? We simply do not know, and that uncertainty is deeply consequential.

European leaders have repeatedly stated that they have heard the wake-up call and understand the need to become more self-reliant. The challenge, however, is that this realization has come very late. Organizing military capabilities requires significant investment, is extremely costly, and must account for the diverging opinions of the 27 EU member states. Moreover, Europe has only a limited window—just a few months—to organize itself in response to the ongoing conflict in Ukraine and other potential crises.

This geopolitical shift is real and long-term. Where Europe ultimately positions itself will depend on the ability of European governments to coordinate effectively and forge a united path forward.

Far-Right Parties Turn Economic Grievances Into a Political Weapon

The rise of the far right in Europe, particularly the Alternative for Germany (AfD) in Germany, has been fueled in part by economic grievances and globalization backlash. How much of this is a structural trend versus a temporary political wave?

Professor Cornelia Woll: Economic grievances are always very important to address, and it is crucial to ensure that both mainstream and fringe parties recognize the challenges faced by different parts of the country. Globalization, as we know, has created both winners and losers. There is a highly mobile, urban elite that sees no flaws in global interconnectedness, and then there are other parts of the population—perhaps more disconnected or more concerned about the industries and regions they depend on, such as the automobile sector or others. These concerns must be central to political debate.

The rise of the AfD, in particular, is not solely fueled by economic grievances but also by how political leaders have been able to mobilize around these grievances. There is an element of political entrepreneurship at play—this is, in many ways, a political game. The key question for many countries, including Germany, is to what extent the far right is able to dominate the discourse and shape the terms of debate.

One issue that often emerges alongside economic grievances on the far right is migration. Economic concerns quickly become linked to migration, which in turn leads to discussions about internal security—an issue that currently dominates political debate in Germany.

A central question now is: Are we safe? Following Chancellor Merkel’s decision to welcome a large number of immigrants into Germany, many of whom have not been successfully integrated, some are now being linked to violent incidents in public spaces. How to address this issue is a major challenge.

The most emotionally charged and dominant topics in recent political discourse have been attacks in cities like Aschaffenburg and now Munich, carried out by individuals who initially came to Germany seeking refuge. As a result, migration has become an even more prominent issue than economic grievances. This trend is evident in all countries where the far right has gained significant influence.

In an interview you gave to Greece’s To Vima newspaper, you emphasized that protecting democracy in Germany requires centrist parties to focus on economic stability and security rather than engaging with the far-right AfD’s populist rhetoric. How can governments effectively address voters’ economic anxieties—such as deindustrialization, energy costs, and labor market access—without legitimizing the nationalist economic narratives of parties like the AfD?

Professor Cornelia Woll: That’s a good question. I do think it is important to address economic grievances. And, of course, for any government or any party running for office, it is essential to have a clear vision of where they want to take the country and its economy.

What is striking about far-right parties is that their rhetoric is often more focused on social and identity issues rather than purely economic concerns. They link economic grievances to broader themes of migration and national identity.

What I would recommend—because we have seen that it does not work in other countries—is that centrist parties should avoid adopting the identity-based language of populist parties. When centrist politicians begin to frame economic well-being in terms of who should be considered German and who should not, they risk legitimizing the far right’s rhetoric and giving it a more central place in political discourse. Most of the time, this strategy ends up benefiting the far right by increasing their support rather than drawing voters away from them.

This is ultimately a question of the best electoral strategy. My recommendation would be to focus on economic development and well-being: How do you address deindustrialization? How do you ensure energy costs remain manageable? How do you expand and improve access to the labor market for all? These economic issues should take priority over engaging in the identity politics promoted by the far right.

Europe Must Rely on Itself as the Transatlantic Divide Deepens

EU flags in EU Council building during the EU Summit in Brussels, Belgium on June 28, 2018. Photo: Alexandros Michailidis.

With the rise of economic nationalism in the US, Germany, and across Europe, coupled with shifting global alliances, do you foresee a deeper transatlantic divide between the US and the EU on trade and economic governance? How might the world navigate these fractures, particularly as it balances economic autonomy with its reliance on global trade?

Professor Cornelia Woll: Yes, we do see these fractures, and for European countries, it is quite clear that they will be cut off from some of the resources they previously relied on. Take Germany, for example. I may be oversimplifying, but Germany essentially outsourced its defense capabilities to the US and relied on Russia for cheap energy. It structured its economy and investments around the assumption that these needs could be met through external partnerships rather than domestic restructuring.

Now, Germany must find a way to provide for its own defense with less reliance on the US. It has also struggled in recent years to reduce its dependence on cheap energy from Russia, and this process will need to continue. For Europe, it is clear that the only viable scale for addressing these challenges effectively is the European market rather than individual national markets.

It is quite clear that in a world where two giants, China and the US, dominate the game—and where Russia is also an important player—Germany alone is not enough. France alone is not enough. Certainly, Belgium is not big enough. What we can do is leverage the market power of the single European market and use it as a still very important economic space, not only for Europe but also for other countries with which we aim to remain on equal footing.

This means we must move toward a European project that is less focused on overregulating every minor detail and more focused on answering the key question: How do we provide peace and stability within the region? By fostering an integrated economic space, Europe can actively participate in global discussions and remain on par with the world’s major powers.

Given the recent rise of the far right in both Germany and France, the traditional engines of European integration, do you believe these internal struggles will hinder the EU’s ability to advance industrial and defense strategies? Could leadership on these issues shift to other European actors, and if so, what role might Germany still play in shaping the future of European economic governance?

Professor Cornelia Woll: It is certainly true that both Germany and France have struggled domestically to provide leadership for the EU in recent years. Let me be an optimist here. I think France is slowly making progress. They have now passed the budget, even though the government remains fragile. A vote of no confidence is not imminent as it was in the past.

Germany is approaching an election this weekend, and there is still hope that the outcome will be less fragile than the three-party coalition of recent years. Perhaps a two-party coalition will emerge, allowing for a return to more stable leadership. So, I remain optimistic that both Germany and France will regain some footing.

On foreign policy, France has a strong presidency. Emmanuel Macron can take initiatives that are less constrained by internal debates. For example, he recently invited European countries to discuss defense and their position on Ukraine at the beginning of the week. Initiatives like this remain important in the security domain. Europe cannot move forward without France and possibly the UK as key drivers of decision-making.

Germany, meanwhile, remains crucial for any funding decisions. There will need to be significant shifts in how investments are financed, possibly through common borrowing or changes to the European budget. These decisions cannot happen without both France and Germany.

That said, other countries also matter and will take on leadership roles, which is a positive development. The traditional Franco-German axis is certainly less central than it once was, and in the future, forming strong coalitions of willing partners will be key.

Italy and Poland are hugely important players. There has been a divide between Western and Eastern European countries, and bridging that gap is crucial for many of these issues. The Franco-German axis will not necessarily be essential if a coalition of other countries can be built. If another country steps up to take leadership, that would be good news for Europe.

A Far-Right Surge Would Bring Further Protectionism and Economic Fragmentation

What are the economic risks if the far right gains further power in Europe? Could we see increased protectionism and economic fragmentation within the EU itself?

Professor Cornelia Woll: Yes, I think the answer is quite simple—yes. And I’ll give you one example. Every far-right party includes economic protectionism on their agenda, across all domains—whether it is student mobility, economic exchange, or military investment. So, it is quite a clear tendency.

With China, Russia, and other powers seeking to establish alternative economic alliances, do you see the possibility of a post-Western economic order emerging? What role, if any, will Europe play in this transition?

Professor Cornelia Woll: Yes, a post-Western economic order is emerging, and it has been for quite some time—over the past 20 years, I would say. If you look at the economic connections China has built through its initiatives to establish new trade routes across Asia and toward Europe, it is quite clear. The same is true of its investments in Africa and its support for countries struggling with sovereign debt. Many of these nations now turn to China as a lender of last resort, a role previously played only by multilateral institutions.

We already see a stable and strong Chinese sphere of influence, which is now challenging the structure of multilateral institutions established under the Bretton Woods system. As a result, these institutions must be redesigned and revised to continue playing a role in global economic cohesion. However, they are struggling to fulfill the functions for which they were originally created.

What role can Europe play? The reason, for example, that the International Monetary Fund (IMF) is not as inclusive of Chinese interests as it should be is not due to European opposition but rather to opposition from the US. I believe Europe must decide whether to align entirely with US interests, which are strongly anti-Chinese, or to position itself as a third force in the geopolitical struggle between China and the US. In my opinion, the latter would be the better path forward.

Trump, Vance and Musk Are Advancing Russia’s Interests

Matryoshka dolls featuring images of Vladimir Putin and Donald Trump displayed at a souvenir counter in Moscow on March 16, 2019. Photo: Shutterstock.

US Vice President J.D. Vance and Elon Musk have both lent support to the AfD, which is surprising given that they come from the US—a country Germans have long thanked for putting an end to a deeply shameful period in their history. Do you think this approach signals the end of bilateral relations between the US and Germany as we know them?

Professor Cornelia Woll: Well, it certainly makes clear to Germans that the US, even with its capacities in government, will pursue objectives that are contrary to what Germany considers its own security and national interests. Let me put it very bluntly: what Elon Musk, J.D. Vance, and Donald Trump are currently doing is supporting Russia’s interests. I think the majority of Germans still believe that this is not in Germany’s best interest or in the best long-term development of the country. This is not just because of Germany’s own history and the National Socialist period, but also because of what it would mean for Russia’s influence in Germany.

And lastly, Professor Woll, in his speech to the Munich Security Conference, J.D. Vance called Europe’s restrictions on speech a greater threat than a military attack by Russia or China, comparing them to those imposed by the Cold War Soviet Union. What is your reaction to this statement?

Professor Cornelia Woll: I don’t know if one should even react because everyone in the room—and I was in the room when he gave that speech—was well aware of the hypocrisy in J.D. Vance’s declarations about incidents in Europe. This comes at a time when the Trump administration is firing the head of an art institution, the Kennedy Center, attacking Wikipedia, and targeting public radio and NPR. It is a common strategy for the Trump administration to accuse others of doing precisely what they themselves are doing. So, it was quite a hypocritical statement.

Beyond that, his remarks were purely national in scope. It was a domestic campaign speech, similar to many others heard during an election cycle—nothing new.

The fact that he delivered it at a security conference, however, was, I think, a sign of J.D. Vance’s weakness in international discussions. Trump had just stated his intention to negotiate with Russia and was preparing talks with Saudi Arabia. I believe the last thing he wanted was for his Vice President to make any statements that could be considered newsworthy or that might contradict Trump’s own diplomatic efforts. As a result, J.D. Vance had to deliver a speech that was purely focused on domestic politics and did not address the security concerns of anyone else in the room.

As for the content, the attacks were so obviously false that I don’t think it is even worth deconstructing. Free speech is under far greater threat in Russia than in Europe. The anecdotes he cited—half of which may not have been as accurate as he claimed—do not change this reality. I won’t go into the details because doing so would give too much credit to the fake news bubble that J.D. Vance was catering to.

3D illustration: Lightspring.

The Economic Meaning and Consequences of Trump’s Trade Tariff Wars

by CommentariesEconomicsEditor’s ChoiceHome

Populist US President Donald Trump’s self-proclaimed favorite word, “tariff,” has far-reaching implications beyond simple taxation. In this insightful analysis, Professor Eser Karakaş dissects the economic distortions and welfare costs associated with protectionist trade policies. He examines how tariffs disrupt relative price structures, reducing efficiency and shifting wealth from consumers to producers, ultimately leading to net societal losses. Drawing on economic theory and Mancur Olson’s “Logic of Collective Action,” Karakaş explains why seemingly irrational tariff policies persist in political decision-making. He further explores Trump’s tariff war with China, its impact on global trade, and how it could weaken the US economy in the long run.

By Eser Karakas*

After being elected US president, Donald Trump declared that his favorite word in English was “tariff.” Tariffs refer to taxes and duties imposed on all goods and services subject to international trade. It is evident that the prices of tariffed goods and services will rise in the markets where they are offered to consumers. However, from an economic perspective, the most crucial issue is the change in the relative price structure between these goods and services and their substitutes, or more technically, the distortion of the relative price structure. This distortion in relative prices has significant implications for both efficiency and distribution. It can disrupt the natural functioning of markets, leading to inefficiencies in resource allocation and creating different economic consequences for specific industries and consumer groups.

At a certain stage in their careers, professional economists often share a well-known joke among themselves. Students who begin their economics education take a two-semester Introduction to Economics course in their first year of university. This course is built around a fundamental textbook, and the higher the quality of this book, the stronger the foundation for the student’s career in economics.

During our youth, Paul Samuelson’s textbook was widely used. Today, Gregory Mankiw’s book is the primary choice in many universities. Daron Acemoglu has also authored a highly contemporary and comprehensive introduction to economics textbook. However, for the author of these lines, the personal preference remains Mankiw.

As students progress, the level of economics courses becomes more advanced, leading to graduate and doctoral studies. A thesis is written on a specific field of economics, an academic career begins, and over time, one moves toward becoming a professor. As the years pass, one realizes that if the Introduction to Economics textbook studied in the first year of university was well-taught and well-learned, it provides significant insights into understanding global economic issues. In fact, I would go even further—half-joking, half-serious—and say that this book alone is often sufficient.

Let’s approach the meaning of the word “tariff” (customs tariff), which Trump has claimed to be his favorite, through a first-year Introduction to Economics textbook. However, towards the end of the article, I will reflect on the concept of tariffs through Mancur Olson’s The Logic of Collective Action and take the discussion to a more advanced level within the framework of endogenous growth theory.

Now, let’s consider Trump’s tariff policies. For instance, imagine he imposes a 30% tariff on automobiles produced in the EU, affecting brands like BMW, Mercedes, Audi, and Citroën. In the US market, importers of EU cars will pass on this additional tariff to consumers as much as they can, making EU-manufactured vehicles approximately 30% more expensive. As a result, the relative price structure between US-made and EU-made automobiles will be distorted. 

This distortion will have economic costs in terms of both efficiency and distribution. Because the most important factor in economics is the maximization of consumer surplus. However, the imposition of tariffs will reduce the surplus of US automobile consumers while increasing the producer surplus of domestic car manufacturers. This transfer of surplus (from consumers to producers) will grow even larger as tariff rates increase. Let’s not forget, surplus means welfare; therefore, as consumer welfare decreases, producer welfare increases.

As I mentioned above, the economic consequences of tariffs are not merely distributive. In other words, the issue is not just the transfer of consumer surplus or welfare from consumers to producers. Tariffs introduce significant efficiency costs to the extent that they distort relative prices. The practical implication of these efficiency costs is that the decline in consumer surplus (welfare) exceeds the increase in producer surplus (welfare). This is inevitable and results in an absolute welfare loss for society as a whole—including consumers, producers, and the state.

Just like balancing a shopkeeper’s ledger, when evaluating the effects of tariffs, one side should account for the increase in producer surplus and the tax revenue generated by tariffs (government revenue)—these represent the gains for certain segments of society. On the other side of the ledger, one must include the reduction in consumer surplus or overall consumer welfare. Theoretically, the losses will outweigh the gains. In other words, tariffs have a net negative impact on overall societal welfare. This decline represents the efficiency cost arising from the distortion of relative prices due to tariff policies. 

Therefore, as early as the 18th century, Adam Smith’s phrase “laissez-faire, laissez-passer” emphasized the need to allow the free movement of goods and services in international trade. It was argued that tariff barriers inevitably have negative effects on welfare, and thus, such restrictions should be avoided.

Trump’s statement, “I will close the US budget deficit by significantly increasing tariffs,” is narrowly correct, as it would lead to higher public revenues. However, on a broader scale, it is incorrect because, despite the increase in government revenue, overall societal welfare would decline due to these tariffs. At this point, we can ask a fundamental question: Although the welfare effects of tariffs—largely negative—have been well understood in economic theory for many years, why are they still implemented, at least to some extent, in every country and economic union, even if not as aggressively as Trump suggests?

Today, even the European Commission, which adopts a more liberal and Smithian stance on tariffs compared to the United States, imposes a Common Customs Tariff (CCT) on third countries and uses these revenues to finance a significant portion of the EU budget. However, it should be noted that these tariff rates are not at levels that would cause substantial welfare losses. Nevertheless, economic theory operates under the same fundamental principles everywhere and at all times.

Let’s delve a bit deeper into the negative effects of high tariffs with an example. Suppose the US imposes high tariffs on automobiles originating from the EU. As a result, American consumers will purchase fewer automobiles. Due to the distortion of relative prices, they will shift their consumption preferences toward domestically produced vehicles. However, it should not be overlooked that, thanks to these tariffs, US automakers, freed from import competition pressures, will be able to raise their prices and generate profits beyond normal levels. Additionally, as the competitive pressure from EU automobiles diminishes, the quality of US-produced cars may also decline. This situation presents a striking example of the distributive effects of tariffs.

Readers of this article can compare the quality and quantity of the Turkish automotive industry before and after the 1996 Customs Union and recall the welfare, efficiency, and distributional effects of tariffs and their removal (with a low common external tariff). As a result, due to the high tariffs Trump intends to impose on EU-origin automobiles, US consumers will be forced to purchase fewer and lower-quality vehicles at higher prices. Meanwhile, US automakers will be able to sell more expensive and lower-quality cars in greater numbers compared to the pre-tariff period. The winners and losers of this process are evident. The overall society experiences a welfare loss, and demographically, the number of those who lose from this policy far exceeds the number of beneficiaries.

So why, despite this reality, do political movements—such as the US Republican Party, even if not Donald Trump himself—dare to make such politically irrational decisions as they have to go an election? Could seemingly irrational actions, both politically and economically, actually be more rational than they appear? This question has long intrigued economists throughout the history of economic thought. However, one of the most significant contributions to this issue came from the renowned American economist Mancur Olson (1932–1998). Olson was a key figure in the public choiceschool of economics, which applies the fundamental philosophy of methodological individualism to group decision-making processes in a highly effective manner. Economists have coined the term “Olson Paradox” to describe his theory. In this brief article, I do not intend to delve deeper into this concept.

In the case of tariffs imposed on EU-manufactured automobiles, which I have attempted to outline above, the number of individuals experiencing welfare loss far exceeds those benefiting from the policy. However, despite their numerical superiority, these affected groups struggle to organize collective action to protect their interests. In fact, from a theoretical perspective, such collective action is nearly impossible. This is because an individual member of the large group suffering welfare loss seeks to maximize their potential gains from the group’s collective success while contributing as little as possible to the effort. This creates a paradox: the larger the group, the stronger the incentive for each individual to minimize their contribution. As a result, coordination costs rise, further discouraging collective mobilization. Consequently, due to this reluctance to bear even minimal costs, collective action fails to materialize.

In contrast, the small group that benefits from increased welfare faces minimal coordination costs. Their gains are larger and more tangible, making collective organization much easier. When considering the mechanisms of political financing in the United States, it becomes clearer which groups will take the lead in campaign donations and lobbying efforts. The logic of collective action is riddled with paradoxes, yet understanding these dynamics is crucial for making sense of the political and economic processes we experience today.

Now, let’s turn to the broader issue of Trump’s tariff wars and their impact on international economics. Earlier, we used the EU automobile industry as an example. Here, I would like to focus on the Chinese economy and its consumer goods sector as another key example.

The world’s annual value-added production—or global income, if you prefer—is approaching $120 trillion. The US economy, with a population of 350 million (compared to a global population exceeding 8 billion), accounts for more than a quarter of this global production. In the US, per capita income is approaching $100,000, whereas in China, it stands at approximately $15,000 at current exchange rates. This disparity in per capita income is crucial to our analysis. At this stage, in my view, Trump makes a critical mistake by imposing high tariffs on Chinese goods. But why do we see this decision as misguided—not only from the perspective of economic theory but also for the US economy itself? There are several reasons for this.

As long as Chinese consumer goods entered the US market tariff-free, an American worker with $100 in their pocket could walk into a mall and leave with a large basket of consumer goods. From an economic perspective, this means that even if nominal wages (in dollar terms) remained constant, the real wages of American workers would increase significantly due to cheaper goods. This scenario would have also benefited American employers, as the pressure to increase wages would have eased, allowing the US economy to gain efficiency in global competition. It is difficult to understand the logic behind a policy that deliberately increases the cost of wage goods within the US, thereby forcing monetary wages to rise inevitably. Beyond this, the services sector—which produces non-tradable services—would have also gained significant momentum as a result of rising real wages.

There is also the dimension of controlling and shaping the Chinese economy in this equation. As mentioned earlier, China remains a low-income economy in per capita terms, despite its massive population of just under 1.5 billion people. Given this reality, China is highly susceptible to significant employment challenges, making it a country prone to labor market instability in such a scenario.

As long as the US consumer goods market remained open to China with zero tariffs, the vast and wealthy American market’s high demand for consumer goods would have naturally shaped China’s economic priorities. In such a scenario, not only would China have had an interest in a cooperative US administration, but it would also have been compelled to prioritize consumer goods production to meet US demand. It is crucial to remember that, like every economy, China operates under the principle of limited resources. This means that the Chinese government, in its effort to create employment for its massive population, would have had to align its economic structure—at least partially— with the consumer goods demand of the US economy.

You may recall Trump’s fixation on bicycles, frequently questioning, “Why don’t we manufacture bicycles like we used to, instead of importing them from China?” This raises an important question: Within the framework of comparative advantage theory, which applies to the US economy as well, and considering the reality of limited resources, does it make sense for the US to allocate even a small portion of its labor and capital to bicycle production—an industry whose production techniques have remained largely unchanged since the 19th century? Would such a decision be economically rational for a nation with far more competitive and high-value industries?

One doesn’t need to be a Nobel laureate to recognize that eliminating tariffs on Chinese imports would create comparative economic structures that ultimately benefit the US. Instead of focusing on bicycle manufacturing or internal combustion engine cars, the US government should prioritize high-tech industries, driving economic expansion through endogenous growth (Paul Romer, 2018, Nobel Prize). By boosting national income at an increasing rate, the US government could then redistribute this growing wealth using the Hicks-Kaldor compensation principle, effectively mitigating social discontent and ensuring broad-based economic prosperity.

Paul Romer, half-joking yet half-serious, suggests that as long as major mistakes are avoided, the economy could continue growing for five million years. However, Trump appears to be doing the exact opposite—and is likely to continue on this path. These policies will have severely negative effects on both efficiency and income distribution within the US. Moreover, and perhaps equally significant, they will weaken the US in global economic relations, particularly with China, leading to relative economic decline and shifts in the balance of power. For now, I’m far from convinced—but let’s wait and see. Maybe they know something we don’t.

(*) Dr. Eser Karakas is a retired Professor of Economics from the University of Strasbourg, where he taught Law and Economics and the Economics of Public Issues at the Institut d’Etudes Politiques. He is also a member of the Advisory Board at ECPS. His primary research interests include public economics, public choice, public finance, European finances, public policy, law and economics, and good governance.

Map: Shutterstock.

Unveiling China’s ‘Transnational Populism’ and Sharp Power Politics: The Case of the Belt and Road Initiative

by ArticlesEconomicsEditor’s ChoiceHomeJournal of Populism Studies

Abstract

In a mutually reinforcing context, the rise of multipolarity and the decline of the rules-based liberal multilateral world order have transformed populism from a national phenomenon into one with global dimensions, characterized by transborder transgressiveness. Rooted in nationalist rhetoric that emphasizes independence and sovereignty, this dynamic challenges the norms and values of multilateralism, fuels a vicious cycle of sharp power politics (SPP), and opens new fronts in the competition for national interests. China’s recent political and economic trajectory under President Xi Jinping provides a compelling case for examining the interplay between these factors. Drawing on the evolving theoretical framework of populism and an analysis of the Belt and Road Initiative (BRI), this article argues that Xi Jinping’s strategic framing of SPPs within an appealing populist narrative does not qualify him as a transnational populist leader. Notably, Chinese rhetoric lacks a cohesive ideology, a clearly defined transnational citizenry with shared interests, and a corresponding mechanism for the participatory representation of global citizens.

Keywords: Populism, sharp-power politics, multipolarity, multilateralism, China, governance, development, (in)dependence, global public goods, cooperation.

 

By Ibrahim Ozturk

Introduction

The transformation of global power dynamics, particularly in the post-Cold War era, has exposed vulnerabilities in the Western-dominated liberal multilateral order, leading to a multipolar world (dis)order. This shift has also curtailed the dominance of any single superpower, intensifying competition for influence and resources. This complex landscape has witnessed two notable political phenomena: the global rise of right- and left-wing populism and the adoption of Sharp Power Politics (SPP) by rising powers like Russia and China to enhance their global influence.

The emergence of this geopolitical landscape significantly limits the global cooperation necessary for collective action to effectively secure global public goods. Increasingly characterized by a “negative-sum game,” this environment poses deeply troubling implications for the future. It fosters the development of a causal chain in which populism, typically addressed at the national level, transcends borders and amplifies the influence of sharp-power politics.

While populists often portray themselves as champions of the people, challenging the established order on behalf of the masses, SPP co-opts populist rhetoric to serve the interests of authoritarian regimes, ultimately consolidating their power. A plausible transmission mechanism involves the gradual co-option of a functioning, though flawed, rule-based democracy by exclusionary, interest-driven coalitions of established elites. These elites prioritize their class interests at the expense of long-term efficiency, leading to stagnation. Over time, populist leaders exploit systemic vulnerabilities, using their rhetoric to gain power. If they maintain power long enough, they eventually transform the system into a form of authoritarianism, reinforcing this new status quo through sharp-power tactics both domestically and internationally to expand their influence and national interests.

Within this framework, the central aim of this article is to explore the extent to which the concept of “transnational populism” (TNP) can be considered an intermediate stage linking the progression from national-level populism to authoritarianism and, subsequently, to SPP beyond national borders. Following these theoretical discussions, the article also seeks to examine whether the notion of TNP can be inferred from the extensive use of populist rhetoric within China’s SPP framework, specifically in the context of the Belt and Road Initiative (BRI).

The article is organized as follows: The second section explores key theoretical issues, evaluating the existence of a robust concept of transnational populism while examining the intersections, overlaps, and tensions between national populism, transnational populism, and sharp power politics (SPP). The third section builds on these theoretical insights to assess whether China’s foreign policies can be interpreted through the framework of transnational populism within its authoritarian regime. The fourth section connects China’s so-called transnational populism (TNP) to SPP, highlighting their incompatibilities, particularly in the context of the BRI. The final section concludes by summarizing the key findings.

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Two elderly men sit on the street in front of a café in Oslo, Norway, asking for alms on August 1, 2013. This image symbolizes the indifference of society and the state toward poverty. Photo: Medvedeva Oxana.

Recalibration, Not Austerity: Welfare States and the Struggle for Liberalism

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Olivares-Jirsell, Jellen. (2024). “Recalibration, Not Austerity: Welfare States and the Struggle for Liberalism.” Populism & Politics (P&P). European Center for Populism Studies (ECPS). December 6, 2024. Doi: https://doi.org/10.55271/pp0044

 

Abstract

Welfare states have acted as societal equalisers. They have reduced poverty, improved living standards, promoted equality, and supported democracy. However, their alignment with market imperatives and exclusionary definitions of deservedness threatens the welfare state’s role as a social equalising force. This paper aims to diagnose a challenge facing welfare states through two arguments. The first is that four recalibrations have taken place within welfare states: settling for universality, redefining universality, outsourcing, and reducing public spending. These recalibrations aim for market compliance, savings, and competitiveness. The second is that welfare states may prevent unequal distributions and promote equity by focusing beyond universality and prioritising socially liberal policies. By examining OECD countries and beyond, the paper highlights the pitfalls: a myopic focus on universality exacerbates inequalities; neoliberal criteria that align welfare states with populism and lend credence to welfare chauvinism; and outsourcing and privatisation that increase costs without improving service quality, weakening democratic capacity due to reliance on private providers.

Keywords: Recalibration, welfare states, austerity, producerism, populism, welfare chauvinism

(Received June 7, 2024, Published December 6, 2024.) 

 

By Jellen Olivares-Jirsell*

Introduction

The establishment of welfare states has significantly impacted societies. The incredible achievements in social equality that welfare states have created cannot be overlooked. The package of wealth redistribution, services, and programmes has successfully reduced poverty in the places where it has been implemented (Kenworthy, 1999), thereby improving the living standards of millions of people.[1]

Welfare states record of success includes transforming democracies’ form and character (King, 1987) by producing high levels of income and gender equality (Swank, 2000) as well as supporting the consolidation of democratic rule (Pestoff, 2006). The role of the welfare state as a societal equaliser and creator of a critically engaged populous, confident in challenging and scrutinising policy, is widely acknowledged and understood (Patrick, 2017); the inclusion of Target 1.3 – ‘Social Protection Systems for All’ in the Sustainable Development Goals (SDG) is evidence of this ideological consensus of welfare states as essential for society.

However, welfare states currently survive precariously and face the consistent and erroneous idea that deficits are always bad, and that the welfare state is an expensive luxury that can only exist in exchange for sacrificing economic competition(Wren-Lewis, 2018). They have nonetheless endured and—mostly—remained in place (King, 1987), lifting their populations out of poverty and protecting them from external shocks, especially during crises (Bhambra & Holmwood, 2018), but they sacrifice much in the process.

When we think about the most celebrated welfare systems, we may consider their universal provision. Our minds may also drift to generous parental leave, free healthcare, education, and support. Unfortunately, this rosy picture of welfare states describes a non-existent utopia, as even the most celebrated welfare states now face issues with their provision.

This paper makes two main points: First, welfare states are not retrenching due to austerity but are recalibrating to align more with market imperatives. This recalibration, often mistaken for austerity, has shifted the focus from real accountability to delivering provision. It has narrowed perceptions such that funding issues are considered the only reason welfare states struggle to support their citizens. Second, this paper argues against the conventional view of the universality of provision as a north star for welfare states. Instead, the analysis guides the argument by focusing beyond universality and towards the prioritisation of socially liberal policies. Specifically, welfare states may prevent unequal distributions and promote equity within universal welfare programs. In doing so, welfare states may also prevent populists and neoliberals from redefining their inclusion criteria. The specific dynamics of these redefinitions will also be elaborated upon.

The goal of this paper is not prescriptive; welfare states are as varied as countries. Hence, a generic solution would not address local needs. Alternatively, it highlights the maladies our communal abandonment of liberalism and prioritisation of market imperatives have caused.

The two main arguments challenge the idea that citizens should accept subpar support, as welfare states are adequately funded. Social spending takes up more than a quarter of the GDP of OECD countries (Ortiz-Ospina & Roser, 2023). Instead, they argue that welfare states may effectively safeguard their citizens if liberal priorities precede market competition.

The paper challenges the notion that welfare states are expendable luxuries, advocating instead for a reimagined role beyond essential provision, which can address deeper societal needs beyond mere bodily survival. After providing an overview of the debate around social public expenditure, this point is demonstrated by examining changes in public spending, the move towards outsourcing, and the redefined criteria of deservedness. Using examples within the OECD and beyond, emphasising Northern European countries, the paper illustrates how welfare states are recalibrating rather than simply cutting back. It underscores the essential role of welfare states in protecting the most vulnerable and maintaining social stability. The paper also critiques overemphasis on universality, arguing that this metric alone can mask underlying inefficiencies and exclusions in welfare provision. Instead, it calls for a broader evaluation of welfare states based on their impact and outcomes, not just their coverage.

A Few Words on Welfare States and Austerity

Welfare states are complex and multifaceted, sometimes seen as burdens or saviours, expendable or essential depending on the observer. In a first understanding of the welfare state, as King (1987) described, the welfare state embodies non-market criteria. It exists only to provide essential public goods and services to gain or maintain at least minimal well-being standards in a population. In a compromise between capitalist and socialist ideologies, welfare states look after their citizens so that they can be part of a healthy, educated and capable society, with the added benefit that healthy, educated and capable individuals make great contributors to the financial markets and democracies (Begg et al., 2015; Crosland, 1964). This represents a mutually beneficial relationship between citizens, markets and states. Another view on the welfare state is that it is costly, inefficient, creates dependence on government, and burdens markets, hence needs transforming to serve the market, generate growth and benefit society through generalised economic prosperity (Alesina et al., 2019).

Neither the idealised nor vilified version of the welfare state exists. Welfare states compile liberal goals of social protection and betterment with older themes, including the ubiquitous condemnation of the ‘unworthy poor’. At one point, these notions were used to justify the ‘progressive opinion’ that saw eugenics as a legitimate tool for raising the general quality of the population (Pierson & Leimgruber, 2010).

Moreover, welfare states determine who is part of society and deserves safety and security. This creates a sense of inclusion and trust for those considered members. At the same time, those outside are excluded, fitting well with the political manifestos of populists (Bergman, 2022; Busemeyer et al., 2021). As Zakaria (2007) warns, liberalism, the progressive force behind inclusive and fair societies and democracies, which endorses social justice and the expansion of civil and political rights, has been slowly extracted from liberal institutions such as welfare states. These ideas over the deservedness of some over others led over thirty years ago, to coining the term ‘welfare chauvinism’ to describe some Norwegians and Danes’ belief that welfare services should be restricted to the country’s own (Andersen & Bjørklund, 1990). In short, welfare states are complex and multifaceted, capable of much good but also capable of reproducing and sustaining unfair structures.

In a purely economic sense, the welfare state costs countries large chunks of their GDP (Ortiz-Ospina & Roser, 2023), and at times, when welfare states do not uphold liberal values, they can solidify or even widen societal cleavages (Kenworthy, 1999; Parolin et al., 2023). This means that despite the good they do, they are imperfect institutions that are both essential and need improvement.

Overall, welfare states are state institutions that deliver interventions that help a population achieve or maintain at least minimal well-being standards. Their aims, however, may vary. Variously, it focuses on protecting the population, the market, the societal order, or something else. These differences are defined by the social and political priorities governing the state at that moment in time, as the upcoming examples will shortly show. In truth, welfare states are intrinsically political entities, defining acceptable and deserving versions of their citizens and responding to political priorities as they occur. This means that welfare states are subject to the ebb and flow of politics and the changing norms around deservedness, the role of the state in individual life and the multiple political priorities of contemporary politics.

Among said political priorities, governments may be concerned with creating surpluses in their cyclical primary balance adjustments (austerity), requiring – among other measures – reduced social spending. As hinted in the introduction, the constant push and pull between economic and social needs have caused significant changes to welfare states; these economic forces permeate politics and democratic institutions. Austerity measures have been one of the most favoured economic interventions since the normalisation of neoliberal economics in the 1980s.

There are different forms of austerity measures governments can introduce. Although raising or decreasing taxes is part of the austerity arsenal (Union of International Associations, 2024), we have come to understand austerity to mean cuts in spending rather than tax adjustments. The general idea of austerity measures is to cut down on luxuries and unnecessary spending, work on paying back debt, and even create a surplus in the budget. However, especially in countries like the UK, the everyday use of austerity is almost always equated with spending cuts (The Guardian, 2024). It rarely includes consideration of tax increases or reductions in the public lexicon. This leads to a frequent conflation of austerity with cuts to the welfare state.

Despite this frequent confusion, austerity measures refer to policies that aim to reduce government budget deficits by decreasing spending but may also involve tax increases, decreases, or a combination of these. The creation of surplus or reduction of deficit that austerity measures aim to create can be pretty confusing, as at times, it may even include increasing funding of certain areas of the economy – for example, by providing subsidies to industries that are expected to create growth (GOV.UK, 2023) – and cuts in other areas not deemed to help with economic growth – typically social spending. However, it is essential to understand that austerity measures aim to reduce budget deficits.

The effectiveness of austerity policies is subject to much debate. According to Keynesian economists, since one person’s spending is another person’s income, reductions in government spending during economic downturns worsen economic crises (Fazzari et al., 2013). Further, these reductions pass down debt to the working classes (Blyth, 2013) and severely affect physical and mental health (Barr et al., 2015; Loopstra et al., 2016; Patrick, 2017). Others believe reducing government budget deficits through spending cuts is more effective than increasing taxes. They argue that such policies demonstrate a government’s financial discipline to creditors and credit rating agencies, making borrowing easier and less expensive (Alesina et al., 2019).

Austerity is engaged with here because welfare states are often written and discussed in relation to austerity. This is central to the argument about recalibration. Austerity means more than cuts to the social spending budget; it has become a shorthand for welfare states’ funding challenges. In this paper, it is put forth that the issue lies beyond cuts to public social spending and that austerity (colloquially understood as cuts to the welfare state) is not the cause of the perceived retrenchment of welfare states; instead, recalibration is.

This paper aims to diagnose a challenge facing welfare states. The idea that welfare states have been reduced to nothing due to a lack of funding is as pervasive as the idea that deficits are bad. Both these ideas have severe implications for welfare states and their operations. However, as this paper argues, the strategies adopted to keep welfare states alive are geared around four central recalibrations: settling for universality, redefining universality, outsourcing and monetising public provision and reducing public spending on social protection. All these recalibrations are, in one way or another, based on the idea that welfare states ought to comply with market imperatives, making savings and operating competitively. To analyse welfare state recalibration empirically, some examples of countries facing these challenges are reviewed to assess how these recalibrations have taken shape.

The Recalibration Strategies

Settling for and Redefining Universality

Welfare states are permanently forced to justify their existence based on market imperatives due to the pervasive idea that governments should always grow, maintain a surplus and avoid debt at all costs (Wren-Lewis, 2018). There is a consistent thread of welfare provision as a value-for-money exercise: citizens are trained and kept sheltered and healthy to become productive members of society, but these protections must always cost less than citizens produce.

Considering this, welfare states are constituted as providers of social protection floors, overlooking their potential role in promoting liberalism through equality (Swank, 2000) and democracy (Patrick, 2017; Pestoff, 2006). Following the UN’s SDG, welfare states have been correctly lauded as basic protection floors with universal distribution as a deterrent to poverty and inequality.

The absence of a safety net can predispose the most vulnerable populations to extreme poverty; thus, implementing a basic yet universal provision may effectively mitigate this risk. However, in welfare states that have (or aim to have) universal coverage of those deemed deserving, citizens miss out on the broader societal benefits that welfare states provide when they instead focus on basic universal provision. Moreover, inequality and poverty may go unnoticed in places where universality of coverage exists as long as universality alone is the metric used to assess our welfare state outcomes (Patrick, 2017).

A case in point is that of the Netherlands, a country with a very high social expenditure budget and one of the most celebrated welfare states in the world. This country, however, has the highest level of outsourcing of social provision globally (Ortiz-Ospina & Roser, 2023). It is also a place with very high levels of wealth inequality (Van den Bossche, 2019), a growing opportunity gap in education based on ethnicity and socio-economic class and issues of accessibility for service users due to significant restrictions to cover, resulting in the duality of provision, known as welfare chauvinism (de Koster et al., 2013).

In the Netherlands, for-profit nursing home care is banned, but changes in the policy have enabled for-profit nursing homes to circumvent the for-profit ban. This leads to exclusionary practices. For example, selecting clients based on the severity of their disease and not hiring expensive staff for specialist care, then moving people out if they become too ill and need specialist care (Bos et al., 2020). Similarly, childcare was privatised in 2005 to make provision efficient. However, there is inequality in childcare use by family type, and the quality of provision has decreased since privatisation and outsourcing started (Akgunduz & Plantenga, 2014).

In the case of the Netherlands, the services are technically more widely available than before, at least in terms of spaces in nursing homes or childcare; thus, the universality of provision has yet to be challenged. However, even as the provision of nursing homes and childcare has increased since the private sector incursion (Akgunduz & Plantenga, 2014; Bos et al., 2020), the examples evidence, universality is caveated to exclude those very sick from nursing homes or certain family groups from childcare. In this case, it is clear that the goal of universality has been kept, but focusing only on universality alone obscures important aspects of accessibility for specific groups.

Sweden provides another example of this duality of high social expenditure with disparities in outcomes. This country has privatised and outsourced much of its schooling provision and now observes a significant drop in the performance of these schools (OECD, 2023; West, 2014). The metric of universality is met since Sweden provides universal coverage to its population (Janlöv et al., 2023). However, considering the performance variations between schools in low and high-income areas, especially since 2003 (OECD, 2015), the universal provision of education clearly evidences a Matthew Effect, whereby provision is most beneficial to those who need it the least (Bonoli & Fabienne, 2018). Besides the inequitable distribution of public goods, an additional challenge in the Swedish educational landscape is the establishment of lobbying. Private actors have evolved from holding purely economic roles to being strong political actors engaged in policymaking, adversely affecting transparency and democracy (Jobér, 2023). Moreover, this type of lobbyism can enhance existing socio-economic divisions, as schools with the capacity to lobby for more resources are also those in the wealthier areas.

The point here is not to minimise the achievements of welfare states; both the Netherlands and Sweden boast some of the best social well-being metrics in the world. Indeed, these two countries have some of the most acclaimed welfare systems in the world (Hutt, 2019; OECD, 2024a; OECD, 2024b). Sweden, particularly, was seen as the model for most welfare states in the post-war era for the rest of Europe. However, as the above examples show, the universality of public provision does not equate to better outcomes, and, at times, it may even perpetuate or exacerbate unequal societal constructions.

Moreover, the Netherlands and Sweden are not isolated cases. In the EU, native workers obtain the highest economic prosperity and employment returns from education, followed by EU workers, leaving non-EU workers last. Similar trends can also be observed in the US between natives and non-natives (Gamito, 2022). The universality of provision, therefore, does not signify equality in outcomes when inequity is built into the infrastructure of provision. Thus, universal provision may enhance societal cleavages and create or enhance a Matthew Effect.

This Matthew Effect exists in various forms in all welfare states (Heckman & Landersø, 2021; Pavolini & Van Lancker, 2018). If anything, the Netherlands and Sweden have been somewhat protected from adverse outcomes because of the societal duress and resilience created before these services were privatised and outsourced (OECD, 2018) and their goals were rearranged.

I have so far argued that welfare states have adopted universality as their central goal, even though focusing on universality conceals issues with exclusionary practices that may perpetuate and even enhance social crevices. I will build upon this argument on universality as a central goal and posit that, besides focusing on universality as a central goal, welfare states have also redefined universality, at least to some degree, due to producerism.

Producerism emphasises the importance of productive labour and the contributions of producers to society (Bergman, 2022). It often advocates for policies and attitudes that prioritise the interests of producers, such as workers, farmers, and entrepreneurs, over consumers or other groups. Producerism can manifest in various forms, including support for protectionist trade policies, subsidies for domestic industries, and efforts to promote self-sufficiency and national economic independence. It also lends credence to exclusionary forms of provision.

This emphasis on work participation within welfare programs dovetails producerism, underscoring the significance of productive labour and workers’ contributions to society through increasing adherence to workfare initiatives. Workfare refers to government programs or policies requiring individuals receiving welfare benefits to participate in some form of work or job training as a condition of assistance (Crisp & Fletcher, 2008). Unlike traditional welfare programs, which may provide financial support without a work requirement, workfare aims to promote self-sufficiency and reduce dependency on government assistance by encouraging recipients, via specific participation requirements, to gain job skills and enter the workforce. These requirements are often a combination of activities intended to improve the recipient’s job prospects and force the unemployed to contribute to society through unpaid or low-paid work comparable to community work (Ibid.). Forms of workfare programs include job placement services, subsidised employment, and mandatory community service or work assignments. Through workfare programmes, governments seek to enhance recipients’ employability and instil a sense of societal obligation to be productive members of society.

While employment can have a positive effect on well-being, the issue is not that the workfare approach may find jobs for those who want them; rather, it lies in that liberal protections are taken out of the equation as the main point of the welfare state, creating perverse incentives for the welfare state to become the surveyor and punisher of uncompliant citizens. This approach discourages fairness and social justice (Bonoli, 2010) because if all that matters is productivity, pensions serve little purpose, as does education beyond vocational training and services that cover sectors of the population that cannot access employment, such as those caring for family members and those with disabilities that prevent them from gaining employment. The issue is not that people will be encouraged to work but that this becomes a primary consideration of the welfare state, putting all others aside. In other words, welfare states have been recalibrated towards market imperatives and stripped of liberal notions.

Producerism can be said to be the ideological force behind workfare policies and is linked to welfare chauvinism (Van der Waal et al., 2013). Geva (2021), Cinpoeş and Norocel (2020) identify a producerist shift that coexists with welfare chauvinism in some post-communist countries. These authors argue that with the fall of the Soviet Union, post-communist countries like Poland, Hungary, and Romania aimed to shed anything resembling communism, hurriedly embracing neoliberal values to better fit into the rest of Europe. This symbolic return to Europe was so complete that the reconstructions of national membership and identity were combined with notions of entrepreneurship and self.

The vilification of people with low incomes is evidenced in Romania with the use of ‘asistat’ as a slur, a term referring to social assistance recipients; in Hungary, a Roma-specific welfare policy targeted Roma minorities who were construed as unwilling to work and carry their weight in society; and in Poland, this was articulated as lazy guests freeloading onto their hard-working hosts (Ibid.).

Other times, producerism can work to articulate the caveats of universality by allowing proxy exclusions. That is to say, producerism has redefined what universality is. Moral gymnastics have always surrounded universality considerations; at another time in history, being impious may have rendered someone unworthy of assistance and access to an almshouse (Lambeth Archives, 2024). What is novel about the redefinition of universality is that it is underpinned by neoliberal ideas, which claim to be unbiased and rational approaches to defining deservedness (Davies, 2014). By claiming rationality, producerism can help implement exclusionary policies that might otherwise create a political backlash by liberals and progressives.

Of course, it was a matter of economic competition. In that case, a purely homo-economicus approach to the ageing population challenges in many countries would involve welcoming migrants in any country they wished to work in, as they would contribute to the competitiveness of the nation and pay into the tax systems that fund the welfare state (Marois et al., 2020). However, producerism has been used to legitimise exclusionary welfare provisions that may ultimately operate against market efficiency. These neoliberal justifications for exclusion are most efficient as they sanitise and depoliticise prejudiced views under economic imperatives. The depoliticisation of prejudice enables governments to exclude significant portions of their residents from support. For instance, they may deny some individuals access to legal work and then claim those individuals are ineligible for assistance because they lack contributions or the required legal status.

Denmark, for example, currently has a two-tiered welfare system, one for Danish citizens and another for the rest (Van der Waal et al., 2013). Denmark prides itself on its universalist welfare regime; however, the universality of its provisions is truly exclusionary when considering that only some residents are included within this universal provision.

In the UK, the government, on the one hand, takes part in women empowerment campaigns (UN Women, 2023) and actively implements gender equality in the workplace regulations (UK Legislation, 2023) while at the same time actively restricting women from seeking help when experiencing domestic violence when they are not UK nationals and are stamped ‘no recourse to public funds’ in their passports. These actions can be justified under producerism because these groups are excluded only due to their lack of contributions (Pennings, 2020).

Producerism suggests that workers are virtuous and hard-working but are being squeezed by non-productive others both above them, such as bureaucrats, politicians, elites, bankers, and international capital, and below them, such as immigrants and undeserving poor who rely on benefits paid for by the labour of others. Moreover, it articulates and justifies divisions in a language many understand as unbiased and rational.

According to Larsen (2008), how welfare regimes are structured can impact how the public views those who are poor or unemployed. Van der Waal et al. (2013) have observed that various welfare regimes handle the provision/restriction duality differently but that, for the most part, producerist ideas of deservedness come to the fore. Guentner et al. (2016) find that groups framed as economically unproductive start to be considered a kind of human surplus and are, therefore, undeserving. In a UK example, a group of low-income individuals were pushed out of London’s social housing, resulting in their displacement because they were considered not to contribute sufficiently to the city to maintain their place in it (ibid.). Jingwei He (2022) finds the same concerning Chinese people’s attitudes toward welfare entitlements for rural-to-urban migrants.

Ward and Denney (2021) document a consistent rhetoric of abuse towards migrants framed around myths of them as less productive than nationals. Thus, we see here that producerist logic has been amalgamated with populism to create a type of welfare chauvinism that is both economic and cultural. This is crucial because, as argued, welfare states undergo producerist reconstructions whereby market-based logics are applied to social provision. This reconstructs the welfare state and the definition of universal provision upon caveated universal criteria – where universal does not mean everybody but those considered deserving. Hence, it is essential to re-examine welfare policies to ensure they promote fairness and social justice universally.

This section has discussed the evolution and challenges of welfare states, with a particular focus on the idea of universality in social protection. The argument is that welfare states have increasingly prioritised market-driven goals such as productivity and cost-efficiency over liberal objectives like equality and democracy. This shift has led to welfare systems that, while offering universal social protection, may fail to address underlying issues of inequality and poverty. Additionally, producerism was introduced as a factor contributing to the narrow and exclusive redefinition of universality. It rationalises social provisions that are only accessible to those considered deserving based on their productivity.

Outsourcing, Monetising and Reducing Public Spending on Social Protection

Thus far, this paper has mentioned privatisation and outsourcing only in relation to the universality of provision. Welfare states have undergone recalibrations that have made them settle for the simple goal of extended coverage. However, this may conceal issues with the quality of provision. I have argued that welfare states have always had an exclusionary criterion of deservedness disguised as logical and unbiased; the current iteration has been based on economic competition, best encapsulated under producerism. This has lent credence to policies of exclusion that affect the range, coverage and quality of welfare provisions.

In this section, I argue that welfare states have become privatised and outsourced to continue to exist. In the process, they have prioritised market imperatives instead of the liberal protections liberal democracies declare to prioritise. Nevertheless, this shift has not necessarily resulted in cost savings, improved service quality, or decreased public spending.

Public-private partnerships are becoming increasingly popular among governments to finance, design, build, and operate infrastructure projects and outsource goods and services, sometimes fully delivered by third parties but financed by governments (Jobér, 2023). The idea that the private sector is more efficient than the public sector and hence services ought to be outsourced, or else be done poorly and at more cost by the state, has prompted commissioning and subcontracting structures that are not necessarily more supportive of people’s needs, as I will shortly elaborate. Moreover, these outsourced services are not ipso facto cheaper than direct provision. This has resulted in for-profit companies becoming the primary or exclusive providers of public employment services in several countries (McGann, 2023) and failing to deliver the expected reduction in public spending on social protection.

Between 2005 and 2010, the total value of partnership projects in low and middle-income countries more than doubled (Ortiz-Ospina & Roser, 2023). In OECD countries, around 36 per cent of total general spending is dedicated to public social protection, of which around 9 per cent is outsourced to private providers (Ortiz-Ospina & Roser, 2023). In other words, a significant portion of OECD countries’ GDP is outsourced to the private sector. Swank (2000) argues that the structural transformations of welfare states include privatisation, decentralisation of authority, segmentation of benefit equality, and an increased emphasis on outsourcing provisions to non-state actors such as charities or private organisations through publicly commissioned services and are taking place worldwide. These changes align social policy with market-oriented values, emphasising work and market efficiency.

Whether these changes can be considered efficient depends on their goal. A 2018 OECD report showed that the rationale for privatising public provisions has mainly been geared towards economic stabilisation, improving the efficiency of the markets, or raising fiscal resources. The criteria for privatisation are based on two critical assumptions. First, it assumes that private markets are the most efficient way to provide public services. Second, it assumes that privatisation is the default option; those against it are tasked to prove why public services should remain state-owned (OECD, 2018).

With that in mind, the goal has been largely achieved if the rationale for privatising public provision is to improve market structures or economic efficiency. The state has effectively subsidised the private sector by providing extensive and profitable government contracts. Public sector privatisation and outsourcing have created millionaires and significant money transfers from the public to the private sector, especially during the COVID-19 pandemic (Lilly et al., 2020).

The OECD report is interesting because it presents how disjointed the rationales for privatisation are from public protection. The report shows evident market prioritisation over the protection of liberal values that countries in the OECD area may otherwise claim to prioritise.

The second argument in this section is that the goal of reducing public spending on social protection through privatisation and outsourcing of social protection has not materialised. As shown in the examples above, public spending is at its highest despite recent fluctuations. While raising fiscal resources by making savings in social public spending may be one of the rationales provided for privatisation, the outcomes do not necessarily give the taxpayer the opportunity for a discount (OECD, 2018). Countries continue to dedicate large sections of their GDP to social spending, but the savings expected due to the privatisation and monetisation of welfare provision have not been fulfilled. Moreover, welfare provision has not improved either; headlines abound about funding losses and service deterioration (Bambra, 2019; Boylan & Ho, 2017; Konzelmann, 2019; Pentaraki, 2017).

This increase in privatisation and outsourcing of public provision means that the state has less direct control over the provision of public services but oversees the delivery of these services through monitoring and surveillance. Many local authorities in the UK have shifted to commissioning-only or at least commissioning-heavy provisions (Dickinson, 2014), with staff overseeing the contracts and ensuring goals are met. Commissioning aims to decrease the government’s involvement in providing services. This encourages public authorities to act as enablers with a strategic oversight function that assesses the needs of defined populations and the outcomes delivered by third parties. The commissioning economy comprises an extensive network of public bodies, private firms, and third sector organisations that are variously involved in providing services (Macmillan & Paine, 2021). The state has thus reconfigured its mission as a regulator rather than a direct provider of welfare and other crucial services (Yeung, 2010).

This shift from rowing to steering (Osborne & Gaebler, 1992) has had two notable outcomes; the first is that, as we have seen, no saving has occurred. Since 1995, government social spending has increased in many countries (The World Bank, 2024). While several countries appear to be decreasing their social spending recently, they have maintained a very high level of social expenditure (Ortiz-Ospina & Roser, 2023). Governments still have to employ people to manage the commissioned services, and these private contracts are not cheaper for the public purse or better for the service user, as seen in the Swedish and Dutch examples.

The Netherlands is a valuable reminder of this reality as the country has a very high social expenditure budget and the highest level of outsourcing of social provision globally (ibid.). It has been very active in privatisation for around 30 years; between 1980 and 2015, the expenditure on health was around 5 per cent. Around the late 1990s, when privatisation and outsourcing began in earnest, the country spent around 1% less on health than it had a decade before. However, at the beginning of the 2000s, the number increased to around 6 per cent, peaking at 6.5 per cent in 2015, and currently at around 5.7 per cent (OECDc, 2024).

At the same time, the service provision became conditional and monetised, resulting in all persons residing in the Netherlands and all non-residents working in the Netherlands being required to buy private healthcare insurance (Pennings, 2020). In short, the Netherlands pays more now for a health provision that requires insurance premiums and deductibles (co-pays) to access (Government of the Netherlands, 2024). This diminished (in terms of accessibility) health provision is paid twice, once through taxes and again directly when patients require provision.

The second notable outcome is the loss of democratic capacity. The capacity-building exercise of democratic institutions occurs daily when providing goods and services to its citizens. When managing these social goods and services is outsourced, so is the daily exercise of liberal provision. As a result, welfare states lose their ability to maintain the liberal institutions that underpin democracies. Capacity building is essential for successfully navigating, adapting, and flourishing in a rapidly changing world (United Nations, 2024). When this is outsourced, governments become dependent on private provision and lose the ability to deal with complex challenges.

In the UK, outsourcing accelerated during the COVID-19 pandemic, when the government contracted various private providers to manage the logistics of and store personal protective equipment, the national drive-in testing centres and super-labs, run the contact tracing programme, build the COVID-19 datastore and onboard returning health workers (British Medical Association (BMA), 2020). The BMA report (Ibid.) shows that continued outsourcing of the national health service in the UK significantly limited the government’s ability to mount a coordinated response during the public health emergency. Paradoxically, outsourcing was used to fill gaps created by sustained outsourcing and privatisation.

Of course, the changes in privatisation and outsourcing of public provision are not unique to the Netherlands, the UK, or health. Indeed, this process is taking place widely (Jobér, 2023) and over various areas of social protection spending (Ortiz-Ospina & Roser, 2023). Meanwhile, private sector involvement in public provision trend is on the rise with no apparent slowdown on the horizon (British Medical Association, 2020; OECD, 2018); all the while, public spending on social protection has stayed at very high levels, and state capacity has become dependent on the private sector.

This section has examined the trend of privatisation and outsourcing in welfare states, arguing that these practices have shifted the focus from liberal protections to market imperatives. Welfare states, driven by the belief in the private sector’s efficiency, have increasingly turned to public-private partnerships and outsourcing to deliver public services. This shift has not necessarily resulted in cost savings or improved service quality. Instead, as commissioning and outsourcing increase, so does public spending, with significant portions of GDP now directed to private providers, furthering a disconnect between the goals of economic efficiency and the quality of social protection. Welfare states have increasingly become commodification engines, prioritising market-driven goals such as productivity and cost-efficiency over liberal objectives such as equality and democracy.

Moreover, the reliance on private sector provision has undermined democratic capacities by reducing the state’s direct control over public services and eroding the daily exercise of liberal provision. This dependence on private providers has also compromised the state’s ability to handle complex challenges. Privatisation and outsourcing have thus not achieved the intended economic efficiencies or service quality improvements. Instead, public spending remains high, and state capacity has become increasingly reliant on the private sector, raising concerns about the future of social protection and democratic governance.

Conclusion

Welfare states are complex and multifaceted. They have inherent issues, and their goals of social betterment coexist with older themes, including the condemnation of the ‘unworthy poor.’ Moreover, welfare states are costly, consuming significant portions of GDP, and can sometimes reinforce societal divides instead of bridging them. Welfare states are intrinsically political, defining acceptable and deserving versions of citizens.

However, they are also essential for equality and democracy and for lifting many out of poverty. This paper acknowledged that welfare states’ strengths are more potent than their weaknesses and aimed to identify the nature of the challenges facing them today.

Welfare states have fared rough neoliberal waters in some ways through recalibration strategies. By submitting to market imperatives and focusing on and redefining universality, outsourcing, and monetising public provision, they have managed to keep their place in society. However, these recalibrations have not met the promised savings to the taxpayer nor the desired liberal outcomes in protecting society’s most vulnerable. Welfare states have kept their places in society, but much has been lost in adapting to market imperatives.

These recalibrations have aligned welfare states with market imperatives, emphasising cost savings and competitive operation and forfeiting liberal priorities in the following ways. For example, focusing solely on universality has obscured and exacerbated existing inequalities. Second, by redefining universality through neoliberal criteria, welfare states have lent credence and inadvertently aligned themselves with the populist ‘us versus them’ criterion of difference. Third, outsourcing has led to higher costs without improved service quality. Lastly, such outsourcing has eroded democratic capacity as governments become dependent on private providers, losing the ability to manage social challenges independently.

In this paper, two main points were presented. The first is that the welfare state is undergoing recalibration, not austerity. This was illustrated through explanations around social public expenditure, the move towards outsourcing, and the redefined criteria of deservedness. Despite some small recent dips, the expenditure has increased overall. Social public spending is among the highest it has ever been, but what has changed is how it is spent. With that in mind, the issue is not austerity. Thus, the problem is that social spending is financing the private sector through outsourcing contracts instead of focusing on improving its provision.

As articulated here, welfare states are not luxuries; they can reduce poverty, protect citizens against shocks, and embolden citizens to be capable, educated, and healthy protectors of democracy, especially during crises and economic downturns. However, the essential liberal values that welfare states aim to protect are compromised when market imperatives become the priority. The public sector has effectively subsidised the private sector through commissioning contracts that do not necessarily provide cheaper or better support for service users compared to what governments can offer. This is because the primary incentive for the private sector is profit-making and contract renewal rather than focusing on reducing poverty and inequalities, protecting citizens from shocks, or empowering citizens to be capable, educated, and healthy protectors of democracy.

We now know that outsourcing and privatising public provision have not resulted in savings for the taxpayer; decades of data show that welfare states are not spending less (Ortiz-Ospina & Roser, 2023). However, when citizens inquire about what has happened to their community services, schools, or health services, a word frequently used is austerity. Used colloquially, austerity refers to budget cuts for public social spending. Still, if these budgets have expanded, then this means that the challenges faced by welfare states are not only due to austerity.

In the second point, I have demonstrated that governments’ focus on the universality of welfare states is at the expense of achieving liberal goals. The universality of provision, as shown, may create the illusion that it is worth having a welfare state just for its own sake, even if it barely functions as a social equaliser and poverty-reducing tool.

I reiterate that my argument is not for eliminating universality in welfare states but rather for implementing policies that prevent the unequal distribution of benefits within universal welfare programs. Specifically, I posited that governments might reconsider financing the private sector via outsourcing contracts and instead exercise their liberal muscle by working on improving their provision, not just coverage.

So much institutional knowledge has been lost through outsourcing, knowledge that may help adapt services to assist better those slipping through the cracks. By creating or rebuilding their institutional capacity, governments are better placed to deal with emerging crises instead of relying on the private sector, as was the case during the COVID-19 pandemic. By engaging with and prioritising market imperatives, liberal values have been put to one side, and producerism has entered welfare provision, shaping welfare programmes and objectives. However, this focus on universality is a recalibration emerging from an erroneous understanding that welfare states must trim their goals due to limited funding.

The two arguments presented challenge the idea that citizens must settle for scraps, as welfare states are suitably funded to provide the required provisions. Since the issue is not austerity, I suggest that citizens consider whether their welfare states suitably protect them under the current provision or if market imperatives have been prioritised.

The recalibration of welfare states often comes at the expense of service quality, equity, and democratic capacity, raising concerns about welfare states’ future direction. In truth, citizens are paying dearly for a poor product and are losing their capacity as capable, educated, and healthy protectors of democracy to reject a poor deal.

Confusion over the real cause of welfare state retrenchment obscures potential solutions. This diagnosis and the suggestion that welfare states may look beyond universality and stop working towards market imperatives are more straightforward said than done, as welfare states are intrinsically political and politicised entities. Still, I propose that by suitably diagnosing the issue, societies might have a fighting chance to save welfare states and, in turn, strengthen liberal democracies

 

(*) Jellen Olivares-Jirsell is a Doctoral candidate in Politics at Kingston University London. Her scholarly contributions include publications in the Global Affairs and Populism journals. Research activities include roles with the Trust Lab project at Swansea University and EUscepticOBS and Populism in the Age of COVID-19 at Malmo University. Research interests encompass politics, norms and ideologies, populism, neoliberalism, welfare states, trust, and polarization.

 

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[1] Acknowledgement: I am grateful for the feedback this paper received during and after the workshop and the anonymous reviewers. I am also incredibly thankful for Hannah Geddes’s full engagement as a discussant.

Illustration: Design Rage.

A World of Insecurity: Democratic Disenchantment in Rich and Poor Countries

by AuthoritarianismBook ReviewsEconomicsEditor’s ChoiceHome

Nguijoi, Gabriel Cyrille. (2024). “A World of Insecurity: Democratic Disenchantment in Rich and Poor Countries.” ECPS Book Reviews. European Center for Populism Studies. September 19, 2024. https://doi.org/10.55271/br0018

 

In this book, Professor Pranab Bardhan examines the complex interplay between economic and cultural insecurities through a mixture of empirical data and comparative case studies covering different socio-political backgrounds. It emphasizes populist politics by capitalizing on widespread feelings of vulnerability and disenchantment with traditional democratic institutions. Bardhan argues that populists tend to adopt a simplified, emotive rhetoric that appeals to fears of economic displacement, cultural loss, and existential threats, thereby circumventing nuanced, evidence-based discussions on the actual causes of insecurity. Unlike many studies that narrowly focus on economic inequality as the sole driver of populism, Bardhan’s work explores the broader spectrum of insecurities-economic, cultural, and existential-that foster democratic disenchantment. This book makes a significant contribution to the literature by providing a comprehensive, interdisciplinary analysis that enhances our understanding of the multifaceted challenges facing democracies today.

Reviewed by Dr. Gabriel Cyrille Nguijoi 

How do global societies navigate the increasing complexities and contradictions inherent in democratic governance amidst rising insecurity? What roles do economic anxieties, and cultural tensions play in shaping populist movements across the world? Why is understanding the multifaceted forms of insecurity essential to diagnosing the current democratic crisis? What drives citizens, particularly in diverse socio-political contexts, to place their trust in authoritarian figures who promise stability and protection? 

These are the pressing questions that Pranab Bardhan, Distinguished Professor Emeritus of Economics at the University of California, Berkeley, addresses in his critical work, A World of Insecurity: Democratic Disenchantment in Rich and Poor Countries. Published by Harvard University Press in 2022, Bardhan’s book offers a comprehensive exploration of the factors driving democratic backsliding and the erosion of civic norms across both developed and developing countries. Drawing on a wealth of empirical data and comparative case studies, Bardhan challenges the prevailing assumption that rising inequality is the sole driver of democratic disenchantment, proposing instead that a broader and deeper sense of insecurity-economic, cultural, and existential is at the core of this global phenomenon. Through a rigorous interdisciplinary approach, Bardhan offers a nuanced analysis that bridges the divide between the experiences of rich and poor countries, demonstrating that the threats to democracy are both universal in their essence and unique in their manifestation.

Bardhan’s exploration begins with an incisive critique of the commonly held belief that economic inequality is the predominant cause of democratic erosion. While acknowledging the importance of inequality, Bardhan shifts the focus toward a more complex web of insecurities that underlie the current discontent with democratic governance. He argues that economic insecurity, which includes job loss, wage stagnation, and the erosion of social safety nets, has fundamentally altered the political landscape in both wealthy and poorer nations. Drawing from recent data from the V-Dem Institute, Freedom House, and other democratic indexes, he notes that the world is witnessing a dramatic rise in “autocratization” with liberal democracies declining in number and influence. Autocracies now govern the majority of the world’s population, and only a small fraction of people live in countries that are becoming more democratic. The author’s argument is that this is not simply the result of increased economic inequality but is deeply tied to broader insecurities that extend beyond the economic domain, encompassing cultural, social, and even existential dimensions.

The book meticulously dissects the interplay between economic insecurity and cultural anxieties. Bardhan emphasizes that the economic anxieties triggered by globalization, automation, and technological disruptions have been compounded by cultural insecurities related to immigration, national identity, and perceived threats to social cohesion. He examines the populist backlash against globalization, noting that while there has been some decline in international trade due to geopolitical tensions and supply chain disruptions, the more significant issue is the perceived cultural threat posed by immigrants and minorities. Bardhan draws on case studies from various countries, including the United States, India, Brazil, and European nations, to illustrate how populist leaders exploit these insecurities to foster support for authoritarian measures. He highlights how figures like Donald Trump, Narendra Modi, Jair Bolsonaro, Viktor Orbán, and Recep Tayyip Erdogan have utilized nationalist rhetoric, historical grievances, and cultural myths to galvanize support and undermine democratic norms. By framing their leadership as a defense against external and internal enemies, these leaders create a narrative of existential threat that justifies the erosion of democratic institutions and civil liberties.

Bardhan’s analysis is particularly compelling in its examination of the dynamics of “majoritarianism” and the way populist leaders manipulate democratic processes to entrench their power. He provides a thorough critique of how elected leaders in countries such as India, Hungary, Turkey, and the United States have systematically undermined judicial independence, curtailed press freedom, and eroded checks and balances to consolidate authority. He argues that these leaders exploit cultural insecurities, presenting themselves as defenders of the “real” people against corrupt elites and dangerous minorities. This tactic resonates strongly with populations experiencing rapid social and economic change, who feel their traditional ways of life are under threat. The author presents evidence that these populist strategies are often successful in garnering mass support, especially in environments where economic insecurities are compounded by cultural fears of displacement and loss.

In addition to his analysis of populism and majoritarianism, Bardhan also tackles the growing attraction to authoritarian capitalism, particularly the “China model.” He explores how China’s perceived economic success has led to a fascination with authoritarian governance in many parts of the world, both among political elites and ordinary citizens who are disillusioned with democratic performance. He critiques the simplistic binary of democracy versus authoritarianism, arguing that the success of the Chinese model is not purely a result of its authoritarian nature but is also due to specific historical, institutional, and policy factors that are not easily replicable elsewhere. He points out that many democratic countries have adopted elements of state-led capitalism, such as strategic state investments in key industries, without abandoning democratic governance. Bardhan thus challenges the notion that authoritarianism is necessary for economic development, arguing instead for a democratic governance model that incorporates strong state capacity and effective public policies to promote social and economic stability.

Throughout the book, he skillfully combines theoretical insights with empirical data to support his arguments. He uses a wealth of examples from different regions to illustrate the universality and specificity of democratic disenchantment. For instance, he draws parallels between the cultural nationalism of Modi’s (India), which seeks to marginalize religious and ethnic minorities, and Trump’s (America), where the rhetoric of “America First” has been used to justify exclusionary policies and undermine democratic norms. The author’s global perspective is one of the major strengths of the book, as it allows him to highlight both the commonalities and differences in the experiences of democratic backsliding across various contexts.

The interdisciplinary approach is another notable feature of Bardhan’s book. He draws on insights from economics, political science, sociology, and cultural studies to provide a comprehensive understanding of the forces driving democratic erosion. His discussion of the economic dimensions of insecurity, such as the impact of globalization and automation on job security and wages, is particularly illuminating. Bardhan also explores how cultural insecurities are intertwined with economic anxieties, as people who feel left behind by economic changes often perceive themselves to be culturally marginalized as well. This dual focus on economic and cultural insecurity provides a more nuanced understanding of the populist challenge to democracy, as it shows how these two forms of insecurity reinforce each other to create a fertile ground for authoritarianism.

His discussion of potential solutions to the democratic crisis is just as thorough and well-founded. He advocates for a rejuvenation of social democracy as a viable alternative to both unfettered capitalism and authoritarian populism. Bardhan argues that social democracy, with its emphasis on social justice, economic security, and democratic participation, offers a path forward that can address the insecurities driving democratic discontent. He suggests that social democrats must reorient their policies to better address the needs of those who feel left behind by globalization and technological change. This includes advocating for policies such as universal basic income, progressive taxation, and public investment in education, healthcare, and infrastructure. He also emphasizes the importance of strengthening democratic institutions and promoting civic engagement to counter the influence of populist narratives and rebuild trust in democratic governance.

However, Bardhan does not shy away from acknowledging the challenges and limitations of his proposed solutions. He recognizes that the revival of social democracy will require significant reforms in welfare states, labor markets, and public finance, which may be politically difficult to achieve, especially in contexts where democratic institutions are already weakened. He also discusses the challenges of implementing social democratic policies in countries with weaker state capacity and more polarized political environments. He provides a critical examination of the obstacles to policy implementation, including resistance from powerful vested interests, bureaucratic inefficiencies, and the complexity of coordinating policy efforts across different levels of government. The author’s recognition of these challenges adds depth to his analysis and prevents it from becoming overly idealistic.

The book concludes with a reflection on the future of democracy in an age of insecurity. Bardhan reiterates his argument that the current crisis is not merely a result of economic inequality but is rooted in deeper insecurities that cut across economic, cultural, and social dimensions. He calls for a renewed commitment to democratic values and institutions, emphasizing that the solution to democratic disenchantment lies not in abandoning democracy but in reimagining it to meet the challenges of the twenty-first century. Bardhan’s call for a rejuvenation of social democracy is both a critique of current democratic practices and a hopeful vision for the future. He argues that by addressing the insecurities that fuel populism, democracies can be revitalized and made more resilient to the challenges they face.

Overall, Bardhan’s book A World of Insecurity: Democratic Disenchantment in Rich and Poor Countries is a thought-provoking and timely contribution to the literature on democratic erosion and populism. It offers a fresh perspective on the current democratic crisis by shifting the focus from inequality to insecurity and provides a nuanced analysis of the complex forces driving democratic disenchantment around the world. The book’s comparative approach, interdisciplinary method, and focus on both developed and developing countries make it a valuable resource for scholars, policymakers, and anyone interested in understanding the future of democracy. While Bardhan’s call for a revival of social democracy is compelling, his analysis also serves as a sobering reminder of the challenges involved in achieving such a transformation. The book is a must-read for those seeking to understand the underlying causes of democratic backsliding and the potential pathways to democratic renewal in an age of uncertainty and insecurity.

 

Bardhan, P. (2022). A World of Insecurity: Democratic Disenchantment in Rich and Poor Countries. Harvard University Press. 240 pp. Hardcover €25.95, ISBN 9780674259843

US presidential candidates Kamala Harris and Donald Trump. Photo: Shutterstock.

Revising the Trumpian Legacy in the US Foreign Policy towards Latin America*

by EconomicsEditor’s ChoiceHomePolicy Papers

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Please cite as:

Ronco, Massimo & Pretorius, Christo. (2024). “Revising the Trumpian Legacy in the US Foreign Policy towards Latin America.” Policy Papers. European Center for Populism Studies (ECPS). September 16, 2024. https://doi.org/10.55271/pop0003

 

Abstract 

This paper revisits the legacy of former US President Donald Trump’s foreign policy towards Latin America and the Caribbean (LAC), with a particular focus on economic policies and their long-term impact. It argues that Trump’s policies eroded US soft power in the region and failed to adequately address China’s expanding influence. Although the Joe Biden administration sought to reset US relations with LAC, it retained the bulk of Trump’s protectionist policies, perpetuating ongoing trade volatility and regional instability. This paper emphasizes the need for a revised US economic strategy in Latin America that both counters China’s influence and fosters deeper economic integration across the region. The authors propose three policy scenarios for the future: a more aggressive protectionist stance under a second Trump administration, a continuation of Biden-era policies under potential future Democratic leadership, or a more integrative approach that enhances regional cooperation and infrastructure development.

 

Authored by Massimo Ronco & Christo Pretorius

Edited by Angelica Lisa Rossi-Hawkins

Introduction 

Although the US influence in Latin America and the Caribbean (LAC) has been undermined by a lack of targeted engagement following the Cold War (McKinley, 2023), at the beginning of Donald Trump’s presidency, US policy choices in LAC rapidly eroded American soft power and compromised the US’s regional interests by inadequately addressing China’s growing regional influence. The paper intends to outline the features of a revised American foreign policy towards LAC by focusing on the economic policies enacted by Trump. The aim of this brief is to provide recommendations on how to develop a strategy to rebuild trust with Latin American countries and prevent China from further increasing its influence on the continent. While the focus is on Trump’s policies, this paper remains highly relevant, as much of the former president’s foreign policy has been maintained by President Joe Biden. Many protectionist policies remain in place – and some tariff barriers and subsidies to national companies have even increased. The paper argues that any responsible economic policy launched in the region should be integrated into a comprehensive strategy which acknowledges that the main obstacle to unlocking the region’s potential as a partner remains the trade volatility between North and Global South economies, in this case, between the US and the LAC. 

The paper’s focus on economic policies is warranted by three considerations. The first is that trade constitutes the foundation for future, deeper cooperation and the conditions for developing political and strategic partnerships (Kehonane & Nye, 2011; Haas, 1964). Second, economic agreements are more palatable to foreign allies. Against the backdrop of Trump’s rhetorical resort to the Monroe Doctrine (PBS NewsHour, 2018), economic policy is perceived as less damaging to state sovereignty than agreements of a political, military or strategic nature. The third reason has to do with the nature of the regimes of some countries in Latin America, which display some socialist tendencies and may offer reduced margins for cooperation in the political or military fields. This paper also emphasizes the connection between the economic policies enacted in the region under Trump and the populist character of the broader strategy from which they emerged, which approaches foreign policy issues as opportunities to appeal to the domestic base (Cadier, 2024; Hall, 2021). 

Revising Trump’s Economic Policy

Although outspoken about how the US would ‘reject the interference of foreign nations in this hemisphere’ during his 2018 address to the United Nations General Assembly (UNGA),  the Trump administration’s general approach to Central and Latin America was marked by a blend of strategic disinterest in the region and isolationist closure, as exemplified by the barriers established at the border with Mexico in 2018 or by Trump’s stated intention of withdrawing from the NAFTA (PBS NewsHour, 2018). The US’s relative indifference to the LAC region is to be contextualized within a progressive loss of appeal following the collapse of the Soviet Union (Campos & Prevost, 2019: 22; Gurtov, 2021), which originally comprised three components: free trade and economic liberalization, democracy and governance, and security. Trump’s rise to power meant the restructuring of such a triad and a weakening of the first two pillars. The economic policy choices made by Trump’s administration were mainly motivated by the desire to correct the terms of trade relations that were considered detrimental to US interests and American workers and to curb the expansion of China’s influence on the continent. 

This paper proposes to revise and mitigate some populist elements of Trump’s foreign policy in the region, which are considered counterproductive and weakening the US influence. 

The first amendable element is the transactional and short-term approach to dealing with trade agreements and, more broadly, the economic issues of the continent. The promise to withdraw from NAFTA and the imposition of tariffs on items like steel and aluminum resulted in negative consequences, as the volatility of Latin American countries’ markets increased due to the uncertainty of access to the US market or aid assistance, Latin American countries became more vulnerable to the Chinese debt trap and, finally, during Trump’s tenure China became Latin America’s largest trading partner, with the exception of Mexico. (Stuenkel, 2020; Roy, 2023). 

The second element worthy of scrutiny is the Trump presidency’s anti-globalist rhetoric and adoption of old-style protectionist policies. Trump’s economic policies were guided by the objective of reducing US dependency on other productive economies, such as China and South Korea, without fully taking into account that reducing dependency does not necessarily translate into autonomy because value chains still have an important global dimension. The result of this approach was a substantial blow to US credibility in the eyes of Latin American countries, even those considered more aligned, such as Brazil. In fact, despite former Brazilian President Jair Bolsonaro’s anti-Chinese stance and ideological affinities with Trump, the US president still imposed barriers on products and metals from Brazil, such as steel and aluminum (Gilardi, 2019).

Assessing Three Policy Options

At the moment of the writing, three policy scenarios can be envisaged: 

The first policy option, likely to be implemented if Trump is elected in the 2024 US presidential elections on November 5, will consist of putting pressure on Mexico to review the United States-Mexico-Canada Agreement (USMCA) in view of its renegotiation scheduled for 2026. In this case, further restrictions on rules of origin would be included with the intention both to bar China from accessing the Mexican market and to continue to shrink trade deflection, which would otherwise allow some imported goods from non-USCMA countries to enter the US market via Mexico without paying tariffs. 

Furthermore, Trump may engage in a trade war with some other countries in the region. He may suspend the Free Trade Agreement (FTA) with Nicaragua if its policies towards illegal migration do not change, while relations with Colombia, the US’s closest partner in the region, which in 2022 saw the first leftist government of the country’s modern history, may cool due to ideological divergences. Likely, the result of the will to impose tariff barriers, introduce reinforced rules of origin and subside the American national industry would damage US interests by precipitating higher domestic inflation, reallocation of market shares towards less efficient domestic producers, lower capital investment, the decline of the demand for domestic goods, and a loss of jobs in the USMCA area.

The second option would be to multiply the number of economic agreements and partnerships in the region while maintaining or doubling down on protectionist policies. This scenario would be most likely in the case of Democratic nominee Kamala Harris’ victory in the presidential elections. As Biden’s vice president with limited previous experience in foreign policy (Ashford & Kroenig, 2024) and with not a dominating character (Jenkins, 2024), Harris may seek to preserve some of Biden’s economic policies in the region, founded on subsidies to national industry, tariffs and “Buy American” rules (White House, 2021). For instance, the new partnerships negotiated by the Democratic presidency, such as the “Americas Partnership for Economic Prosperity” (APEP), did not foresee provisions of preferential access to the US market, thus denying the eleven Latin American countries who signed the pact to benefit from a reduction of tariffs or a significant increase in trade flow (Hufbauer & Hoogan, 2021). If, on the one hand, Biden rejected the populist character of his predecessor’s strategy, on the other hand, he did not substantially change the US’s economic approach, including towards Latin America. Closer economic cooperation between the US and Latin America ties into supranationalist and intergovernmentalist theories of integration, reinforcing regional ties whilst maintaining peace and stability (Leuffen et al., 2022).

The third option, recommended by the writers of this paper, is to implement a set of measures which would aim to offset the disparity of trade relations between Northern and Global South economies. Indeed, in 2023, the relations between the US and Latin American countries were characterized by low levels of trade in comparison with those between the US and other advanced economies, such as European countries or Japan. In other words, Northern American countries record a higher level of economic integration (EI) than Latin American countries. This third scenario would entail a mitigation process of the dragging effect of the protectionist policies enacted by the last two presidencies with the aim of gaining the trust of Latin American countries. One step in this direction would be the enlargement of the USCM, an FTA to which the US, Mexico, and Canada are already signatories, to other Latin American countries (de la Calle, 2023). The USMCA could be extended to Chile, which has a solid market-oriented economy and stable democratic institutions; Panama, which constitutes a major distribution center for goods moving between North and South America; and Costa Rica, given its economic stability, strong regulatory alignment, and existing close ties with the US and Canada. The enlargement of the market would allow Mexico to offset the economic loss derived from the imports coming from extra-USCMA countries, especially the EU and China, by exporting to the FTA products with a higher level of foreign backward participation originating from Costa Rica and Panama.

Secondly, the US should support a modification of the economic agreement, which will discipline the expansion of the free trade area in order to reduce the instability of preferential market access. The targets of the amendments should concern three provisions of the current agreement. The first is the sunset clause, which foresees the agreement’s expiration after sixteen years since its entry into force and a review period after six years, weakening the investors’ trust for long-term investments. Regarding this point, the US should introduce automatic renewal mechanisms and extend review periods to create stability in the markets and members of the USMCA. The second provision concerns the limitation of Investor-State Dispute Settlement (ISDS) to only certain sectors with high upfront costs, including oil and gas. In future negotiations, the US should consider extending the protection to a higher number of economic sectors to provide more guarantees to investors. 

Finally, the third provision established three new rules concerning automotive rules of origin: the extension of the Regional Value Contents (RVCs) to core parts of vehicles, the requirement that 70% of a vehicle’s steel be sourced from North America and, finally, the requirement that the production of 40/45% of a vehicle or a truck occur in factory plants where the Mexican workers’ wage is five to eight times higher than average (Ludovic, 2023: 365). These measures contributed to a decline in investments and a 0.971% reduction in Mexico’s annual real GDP in 2020, other than an estimated loss of US GDP of 0.12% compared to NAFTA (Manak, 2020). There is evidence to suggest the objective of strengthening the North American value chains was not achieved, as, between 2019 and 2022, imports from the USMCA area (29%) rose less than imports from the rest of the world (32%) (Sarukhán et al., 2023). To counter the negative impact of the tightening of the rules of origin, the US should negotiate an enlargement of the USMCA with Chile, Costa Rica, and Panama, as already mentioned above, and provide incentives to small and medium-sized companies of the members of the expanded USMCA.

Thirdly, the US should launch a long-term program of targeted investments in the construction and improvement of infrastructure in Latin American countries. The construction of ports, airports, canals and highways is an essential condition for reaching the objective of offsetting the structural volatility of trade relations between the US and Latin American countries, but also within Latin America. Investments in the infrastructure field would equip Latin American countries with the appropriate platforms, hubs and roads to increase the trade flows within the continent. 

Conclusion

The paper tackled not only the economic policy choices towards Latin America undertaken during Trump’s presidency but, by embracing a broader timeline, analyzed the more problematic subject of the legacy of Trump’s foreign policy in Latin America. Despite Biden’s entry into office and the current president’s stated intention to reset relations with Latin American countries and increase cooperation, relatively scarce attention has been given to the Latin American strategic quadrant in the past four years. 

The fact that after the first six months of the Democratic administration, the position of Assistant Secretary for Western Hemisphere Affairs was still vacant indicates what little priority Latin America has for current US policymakers. As the Western Hemisphere can be considered the US’s “backyard,” it is a region in which the emergence of a hegemonic country – like China- cannot be tolerated, and current US foreign policy does not seem suited to address this challenge. 

This paper emphasized the cruciality of the Latin American strategic quadrant for the US’ interests by recommending a set of economic policy measures which should respond to an organic and coherent economic-strategic logic, aimed at increasing trade flows and boosting regional economic integration. Since the 1950s, scholars have tried to find a solution for the trade volatility between LAC countries and industrialized countries, such as the US or EU. They proposed implementing measures aimed at privileging intra-regional trade and building a regional integration process (Goodman & Schneider, 2023).

Nonetheless, the failure of economic integration from the inside should make the US consider how it can foster both trade flows with LAC countries and favorable conditions for building a regional integration process. Such a strategy would also counter China’s growing influence, derived from their FTAs already negotiated with four countries and the Belt & Road Initiative (BRI) (Duckworth, 2023). Chinese funding for infrastructure projects leveraged LAC countries’ structural need to build a regional integration space to face the low levels of trade with more advanced economies such as the US and EU and the uncertainty of access to their markets. 

 

(*) This policy paper is based on research conducted by Andrea Sanchez, Angelica Lisa Rossi-Hawkins, Christo Pretorius, Massimo Ronco, and Muhmmed Sihabudheen during the ECPS Case Competition “US Foreign Policy and Populism,” held as part of the ECPS Summer School from July 1-5, 2024. 

 

Authors’ Biographies

Massimo Ronco is a Researcher and International Policy Analyst with a master’s degree in international studies from Turin and a master’s degree in EU external relations from the Brussels School of International Studies of Kent. He is currently working in Brussels in the field of EU research and project management. In 2023, he became a member of the “German-Italian Young Leaders Dialogue,” a forum promoted by the Italian and German Ministries of Foreign Affairs. Also, in 2023, he obtained a diploma in Geopolitics at the Italian Institute for International Political Studies. His areas of interest and research are geopolitics, US foreign policy, European security, Russian foreign policy, politics and culture of the Middle East, and political philosophy.

Christo Pretorius graduated with an MSc in International Public Policy and Diplomacy from University College Cork and was the first student to receive a postgraduate “Student of the Year” award from the Department of Government. His dissertation was published and acquired by the Bar of Ireland’s Law Library and has gone on to support Irish policymakers. Stemming from his undergraduate degree in Ancient and Medieval History and Culture from Trinity College Dublin, his research interests include the mechanisms for authoritarian power and control, as well as democratic backsliding, particularly when viewed from a historical lens. 

Angelica Lisa Rossi-Hawkins is a second-year Ph.D. researcher at the University of Oxford. Her research primarily concerns studies of masculinity and elite culture in post-WWII Italy. By examining a number of clusters of upper-middle-class male networks of solidarity from 1945 to the mid-1970s, she hopes to understand the fabric of the post-war democratic ‘classe dirigente.’ While working on her thesis, she also continues to research the development of Christian Democratic politics in the 20th century and remains broadly interested in the history of gender, the history of friendship, and – when time allows — 19th and 20th-century art history.

 

References

— (2018). “Watch: President Donald Trump’s full address to the United Nations General Assembly.” PBS NewsHour.September 25, 2018. https://www.youtube.com/watch?v=wGK4DPn2R58 (accessed on August 9, 2024).

Arnaud, L. (2024). “From NAFTA to USMCA: revisiting the market access – policy space trade-off.” New Political Economy. 29(3), 356–369. https://doi.org/10.1080/13563467.2023.2260986

Ashford E. & Kroenig M. (2024). “Does Harris Have a Foreign Policy?” Foreign Policy. August 30, 2024. https://foreignpolicy.com/2024/08/30/harris-ukraine-gaza-israel-lebanon-dnc-hezbollah-foreign-policy/ (accessed on August 10, 2024).

Cadier, D. (2023). “Foreign Policy as the Continuation of Domestic Politics by Other Means: Pathways and Patterns of Populist Politicization.” Foreign Policy Analysis. 20(1). https://doi.org/10.1093/fpa/orad035

Campos, C. O. & Prevost, G. (2019). “The Trump Administration in Latin America: Continuity and Change.” The International Journal of Cuban Studies. 11(1), 13–23. https://doi.org/10.13169/intejcubastud.11.1.0013

De la Calle, L. (2023). “Time to Analyze Expansion of USMCA? Costa Rica and Uruguay Would Be Potential Candidates.” Wilson Center. January 12, 2023. https://www.wilsoncenter.org/article/time-analyze-expansion-usmca-costa-rica-and-uruguay-would-be-potential-candidates (accessed on August 9, 2024).

Duckworth, E. (2023). “Latin American and Caribbean Participation in China’s Belt and Road Initiative.” Cornell International Affairs Review. 16(1), 115–161. https://doi.org/10.37513/ciar.v16i1.710

Gilardi, J. (2019). “Brazil and Argentina Surprised by Tariff Announcement: What Comes Next?” Atlantic Council. December 3, 2019. https://www.atlanticcouncil.org/blogs/new-atlanticist/brazil-and-argentina-surprised-by-tariff-announcement-what-comes-next/ (accessed on August 9, 2024).

Goodman, L.W. & A. Schneider. (2023). “Conflict, Competition, or Collaboration? China and the United States in Latin America and the Caribbean.” In: Schneider A. & Teixeira A.G. (eds.) China, Latin America, and the Global Economy. Cham: Palgrave Macmillan.  pp 163–185. https://doi.org/10.1007/978-3-031-18026-2_8

Gurtov, M. (2021). America in Retreat. Foreign Policy under Trump. Rowman & Littlefield. 

Haas, E.B. (1964). Beyond the Nation-State: Functionalism and International Organization. Stanford: Stanford University Press.

Hall, J. (2021). “In search of enemies: Donald Trump’s populist foreign policy rhetoric.” Politics (Manchester, England). 41(1), 48–63. https://doi.org/10.1177/0263395720935377

Hufbauer, G.C. & Hogan, M. (2023). “Biden Embraces Buy America, Doubles Down on Trade Protection.” Promarket.February 21, 2023. https://www.promarket.org/2023/02/21/biden-embraces-buy-america-doubles-down-on-trade-protection/ (accessed on August 9, 2024).

Jensens, S. (2024). “Kamala Harris is no dominating leader – and that may be her biggest strength.” The Guardian. July 22, 2024. https://www.theguardian.com/commentisfree/article/2024/jul/22/kamala-harris-democrats-us-presidential-election-donald-trump (accessed on August 8, 2024).

Keohane, R. O. & Nye, J. S. (1987). “Power and Interdependence revisited.” International Organization. 41(4), 725–753. https://doi.org/10.1017/S0020818300027661

Leuffen, D., Rittberger B., & Schimmelfennig F. (2022). “Supranationalism.” In: Integration and Differentiation in the European Union. Palgrave Macmillan: Switzerland, (pp.89-116). https://doi.org/10.1007/978-3-030-76677-1_4  

Manak, I. (2020). “Canada Evaluates USMCA, Raises More Questions than Answers.” CATO Institute. February 28. 2020. https://www.cato.org/blog/canada-evaluates-usmca-raises-more-questions-answers#:~:text=Howe%20Institute%2C%20a%20Canadian%20think,0.097%25%20for%20the%20United%20States. (accessed on August 9, 2024).

McKinley P.M. (2023). “Inflection Point: The Challenges Facing Latin America and U.S. Policy in the Region”. Center for Strategic and International Studies. https://www.cato.org/blog/canada-evaluates-usmca-raises-more-questions-answers#:~:text=Canada%20Evaluates%20USMCA%2C%20Raises%20More%20Questions%20than%20Answers,-By%20Inu%20Manak&text=This%20week%2C%20Canada%20released%20its,referred%20to%20in%20Canada%2C%20CUSMA (accessed on August 10, 2024).

Roy, D. (2023). “China’s Growing Influence in Latin America, Council on Foreign Relations.” Council on Foreign Relations. June 15, 2023. https://www.cfr.org/backgrounder/china-influence-latin-america-argentina-brazil-venezuela-security-energy-bri (accessed on August 9, 2024).

Sarukhán, A.; Rangel, B.; McCoy, M.; Ciuriak, D. & Huenemann, J.E. (2023). “How Well Is the USMCA Working After Three Years.” The Dialogue. June 22, 2023. https://www.thedialogue.org/analysis/how-well-is-the-usmca-working-after-three-years/#:~:text=Formal%20analysis%20of%20the%20USMCA’s,percent%20compared%20to%20the%20NAFTA (accessed on August 9, 2024). 

Stuenkel, O. (2020). “Trump Drove Latin America Into China’s Arms.” Foreign Affairs, November 13. https://www.foreignaffairs.com/articles/south-america/2020-11-13/trump-drove-latin-america-chinas-arms (accessed on August 9, 2024).

White House. (2021). Biden-⁠Harris Administration Issues Proposed Buy American Rule, Advancing the President’s Commitment to Ensuring the Future of America is Made in America by All of America’s Workers, July 28, 2021. https://www.whitehouse.gov/briefing-room/statements-releases/2021/07/28/fact-sheet-biden-harris-administration-issues-proposed-buy-american-rule-advancing-the-presidents-commitment-to-ensuring-the-future-of-america-is-made-in-america-by-all-of-americas/ (accessed on August 9, 2024).

Further Reading

— (2024). Text – S.3878 – 118th Congress (2023-2024): Americas Act. Congress. March 6, 2024. https://www.congress.gov/bill/118th-congress/senate-bill/3878/text/is (accessed on August 9, 2024).

Cheng, D. (2023). “U.S. Needs to Invest More in Latin America to Counteract China in the Region.” United States Institute of Peace. https://www.usip.org/publications/2023/10/us-needs-invest-more-latin-america-counteract-china-region (accessed on August 9, 2024).

Marczak, J.; Bozmoski, M.F. & Kroenig, M. (2024). Redefining US strategy with Latin America and the Caribbean for a new era. Atlantic Council. February 26, 2024. https://www.atlanticcouncil.org/in-depth-research-reports/report/redefining-us-strategy-with-latin-america-and-the-caribbean-for-a-new-era/ (accessed on August 9, 2024).

Meltzer, J.P. (2021). Developing a roadmap for USMCA success. Brooking’s Institute. https://www.brookings.edu/wp-content/uploads/2021/09/Developing-roadmap-USMCA.pdf (accessed on August 9, 2024).

Turkish President Recep Tayyip Erdogan.

Towards the Fall of ‘Erdoganism’ in Turkey

by CommentariesEconomicsEditor’s ChoiceHomeMONITOR

Given the inability of Turkey’s strongman Recep Tayyip Erdogan’s to satisfy Turkey’s 86 million citizens with an economy reliant on corrupt patronage networks and the challenges of implementing a heavy austerity program within a democratic framework, diverting public attention to domestic and foreign disturbances to suspend democracy becomes a realistic expectation. Ultimately, Erdogan’s pursuit seems to lead toward a costly Pyrrhic Victory.

By Ibrahim Ozturk

In one of his poems, the late Turkish poet Sezai Karakoc, whose verses were even recited with enthusiasm by Turkish President Recep Tayyip Erdogan, proclaimed, “Never say fate, there is a fate beyond fate,” and spoke of “victories growing from defeat.” Through these words, he sought to nurture the hope that the oppressed, who steadfastly endure in their just “cause,” will ultimately triumph.

Tactical Commitment to Democracy Between 2003-2011

It all began with a “cause”! Erdogan and a few friends decided to engage in politics in an independent party, breaking away from the main political backbone known as National Outlook (Milli Gorus), of which he was a member, and its cult leader, Necmettin Erbakan, in the early 2000s. Erdogan explained his “taking off the National Outlook shirt” as “evolving and transforming towards perfection.” He described Turkey’s fundamental problems as political repression, leading to corruption and resulting in poverty. To break this vicious cycle, Erdogan declared that his team would not address the ambiguous rhetoric of National Outlook but rely on human rights-based, pluralistic, participatory democracy, full membership in the EU and, in this context, a modern and democratic constitution.

The party program of the Justice and Development Party (AKP), which he founded, confirmed this. With the support of EU reforms, favorable domestic and international circumstances, and relatively good governance, he continuously elevated the bar for success during a period that could be considered successful. As a Muslim country on the path to EU membership, adhering to the norms and values of a democratic secular regime and safeguarding the rule of law and a market economy, Turkey stirred feelings of admiration in the Islamic world, underscoring its role model status.

As the famous political historian Lord Acton wrote in a letter to an Anglican priest in 1887, “Power corrupts, and absolute power corrupts absolutely.” Having observed Erdogan’s successive election victories in general elections for central government and local elections for municipalities and his subsequent rise in power, I raised questions in my commentary in Project Syndicate in 2011 about how Erdogan would wield his increasing power or how it would be balanced. The question is legitimate because when populist politicians come to power, they might disregard the promises made to society during their time in opposition. Instead, they may opt to perpetuate the old regime and exploit it for their own benefit rather than reforming it in a positive direction, particularly when confronted with real challenges in governance, leading to the implementation of unrealistic solutions to real problems. Additionally, the manner in which they would relinquish power in case of failure remains a highly controversial issue.

Corruption Economy and Return to Authoritarian Agenda

Much has transpired since then, and the AKP’s utilization of its acquired power has been viewed with dismay. Indeed, following the success of the 2011 elections, Erdogan veered toward a different path. AKP Istanbul Provincial Chairman Aziz Babuscu openly declared at the April 1, 2013, Inner City Meetings what they intended to do: “… in the next decade, we will separate our ways from our stakeholders with whom we collaborated when we were powerless because we will no longer need them. For us, the state and social order they idealized were merely tactics and war ploys. We will depart from this intersection, and due to the bitter realities of life, we will have a callous agenda to eliminate them.”

Therefore, society would come to understand for the first time that the proclamation of being an “exemplary secular-conservative democratic model” before and upon assuming power was merely a strategic maneuver until the AKP cadre consolidated enough power. With the eruption of a corrupt regime, where Erdogan diverted economic resources to construct a political order he had long envisioned, coupled with the environmentalist Gezi Protests in June 2013 and the police-judicial graft operations on December 17-25, 2013, he found himself compelled to expedite the inevitable transition towards authoritarianism. This pivotal juncture, symbolizing the crossing of the Rubicon, is fraught with danger for individuals like Erdogan, burdened by a multitude of transgressions and devoid of any avenue for retreat. Indeed, the die has been cast, the arrow released from the bow, and the conflict has commenced.

We have also witnessed how the evolving multipolar world provides authoritarian populists with additional opportunities to validate their “political engineering” and shift towards more oppressive regimes. By labeling corruption files and probes as “imperialist-foreign capital induced coup attempts against the autonomous government of the people,” Erdogan promptly forged an emergency alliance with the previously corrupt state apparatus inherited in 2002, significantly overhauling it to align with Turkey’s EU membership requisites. In exchange for his cooperation, Erdogan directed his highly politicized judiciary to dismiss all former Gladio-related cases in 2014, thus safeguarding his government and himself while closely collaborating with members of the old oligarchy.

After the defeat in the general elections on June 7, 2015, amidst escalating violence due to a resurgence of intelligence-led terrorism and heightened pressure on the Kurds, Erdogan capitalized on security concerns among the populace. He was subsequently reelected in the snap election held on November 1, 2015. However, achieving his political goals required strategic planning and luck. The “witch hunt,” which couldn’t be conducted within the bounds of a democratic rule of law, found fertile ground only under a state of emergency where legal norms were disregarded. This tactic, often employed by Turkey in the past to target minorities of various ethnic backgrounds, proved effective under such circumstances. The “failed coup attempt” on July 15, 2016, served precisely this purpose.

Following the coup attempt, hundreds of thousands of public employees were dismissed from universities, the judiciary, the police, the military, and the Ministry of Education etc. Dozens of foundation universities, widespread educational institutions, and prep schools were shuttered. Thousands of companies were seized, and their assets confiscated. A witch hunt ensued, wherein people were stigmatized for exercising their constitutional rights, ostracized from society, and rendered unemployable. To solidify Erdogan’s party state, hundreds of thousands of political militants were recruited without regard for merit-based criteria to fill the vacancies left by those purged from the public sector.

With the controversial July 15 coup attempt, not only was the relatively moderate faith-based Gulen movement demonized by Erdogan, but also those who did not support the regime were declared open enemies, or at the very least intimidated, with the slogan “those who are impartial will be eliminated.”

The final stage in the regime’s transformation occurred with the 2017 referendum. The adoption of a partisan Presidential system effectively eradicated the separation of powers and checks and balances. The Turkish Parliament (The Grand National Assembly of Turkey, TBMM) lost its efficacy, becoming a mere formality. The judiciary, police, and media were completely co-opted and utilized to serve the regime’s interests. Authoritarian populism, forsaking long-term scientific and institutional planning in favor of a cult of strong leadership centered around a single man, led to decisions made on a whim and managed arbitrarily. Decisions made overnight were rescinded during the day, while personal preferences and exceptions proliferated. Institutions whose autonomy was dismantled were infiltrated by unqualified party militants.

Several crucial examples illustrate the extent of the damage: the Turkish Statistical Institute’s (TUIK) inability to provide accurate information; the Central Bank of the Republic of Turkey’s (CBRT) inability to execute specialized monetary policies crucial for price stability; the Competition Authority’s inability to prevent market monopolization; and the Banking Regulation and Supervision Agency (BDDK) and the Savings Deposit Insurance Fund’s (TMSF) inability to fulfill their roles in the financial system. Furthermore, the Court of Accounts’ capacity to audit the legality of public administration actions was compromised. The Public Procurement Law underwent constant amendments and violations, leading to inflated costs through preferential tenders, while compromising quality and exacerbating impoverishment. The erosion of the rule of law was further evidenced by the severe repression of civil society.

At this juncture, political power took precedence over social dialogue, exacerbating polarization and conflicts. While certain influential industrialists, pro-government media entities, and rent-seeking groups found favor under the regime, disillusionment grew among the educated middle class and youth, who had once harbored hopes for a society founded on principles of freedom of thought, expression, rule of law, and human rights. The Turkish populace, yearning for an open and progressive society, felt betrayed, particularly evident during the 2017 referendum and the 2018 presidential and parliamentary elections, where they expressed their discontent by voting against Erdogan.

The consolidation of political power within Erdogan’s inner circle, notably through intra-party elections in August 2017 which saw power being transferred to his relatives, and the appointment of his son-in-law as Treasury and Finance Minister in the subsequent government, heightened perceptions of “familism” and cronyism among the public. Projects backed by “customer and foreign currency-indexed price guarantees,” which were later transferred to the Treasury, became significant drains on public finances, resembling black holes in their insatiable consumption of resources.

At this point, it’s crucial to briefly examine Erdoganism’s governing model. Erdogan’s tenure, starting from his days as the mayor of Istanbul, has been characterized by notable successes in creating “win-win games” and “interest coalitions” primarily through rent-seeking. In this corrupt system, Erdogan has enriched himself through a give-and-take approach. Secondly, “purchased loyalty” emerges as another key aspect. His transactional strategy involves incentivizing individuals to partake in his corrupt regime by generously sharing the spoils, thereby securing their loyalty, and inducing compliance. Thirdly, a tactic of creating scapegoats and governing through division, even if it means ruthlessly sacrificing one’s allies and offspring when necessary. For Erdogan, any means to achieve his objectives are deemed permissible. Politics is regarded as a battlefield, where deceit and stratagems are not only necessary but also legitimate. This ethos shapes both alliances and enmities. Just as forming coalitions is inevitable, so too is the elimination of partners to strengthen one’s position at every stage.

Tragedy of Patronage in A Low Productivity Economy

Despite the exposure of Erdogan’s blatant corruption model during the December 17-25, 2013 corruption operations, the public did not retract its support from this political structure, which it perceives as vital to its bread and freedom. As is the case globally, the political behavior of Turkish society oscillates between instability, fear of authority, and the risk to livelihood. Until the adverse effects of the deeply entrenched corruption within the regime directly impacted their lives, society not only refrained from reacting out of fear that Erdogan’s absence could lead to instability, but also remained steadfast in their support for him.

Numerous factors, including justice, contribute to the source of political legitimacy, yet the provision of livelihood stands out as the pivotal influence. Erdogan’s dilemma lies in maintaining the sustainability of a patrimonial order characterized by high levels of contingency and arbitrariness in a country as populous as Turkey, with its 86 million inhabitants, largely possessing relatively weaker human capital. Furthermore, the challenges posed by the country’s large population and the inadequacy of natural resources are compounded by external changes. As the world undergoes a new wave of “creative destruction” marked by intensified technological competition, driven by the Fourth Industrial Revolution and the Fifth Generation Communication Revolution, Erdogan’s focus on sectors from the first and second industrial revolutions, such as textiles and land-construction, which are shielded from foreign trade and competition, as well as rent-seeking activities facilitating wealth transfer, proves unsustainable.

Attempting to evade the Middle-Income Trap (MIT) through reliance on these sectors—often associated with the lowest value-added and situated at the cheapest end of the global value chain—is futile. The MIT concept posits that traditional sectors, at the current stage of development, are excessively costly to compete with low-cost developing countries, while modern sectors demand higher quality and added value to rival leading industrialized nations. Consequently, the manufacturing industry finds itself trapped between traditional sectors characterized by high prices and modern sectors marked by inadequate quality.

Indeed, in a 2012 economic report I edited for the Independent Industrialists and Businessmen’s Association (MUSIAD), of which Erdogan was one of the founders, I forecasted a continuous decline in per capita income from 2013 onwards, suggesting that Turkey would likely fall into the MIT by the 100th anniversary of the Republic. These projections have largely materialized today: Per capita income, which stood at $12,500 in 2013 and for the first time in her modern history put Turkey on the brink of entering the high-income country group and attracting global attention, has steadily decreased and plummeted to $10,674 by 2022. In the context of the 2023 election, due to excessive suppression of the exchange rate and the exclusion of migrants, who were considered in the calculation of the gross domestic production (GDP), when GDP was divided by the population, per capita GDP was reported as $13,000 (Figure 1). Despite the national income remaining at $1 trillion in 2023, the per capita income aimed at $25,000 stagnated at half that level—a loss of a decade’s worth of progress. Turkey, which climbed to the top of the developing country groups in the 2012-2013 transition, has slipped back to the status that Erdogan took over 20 years ago, as of 2022. In 2021, Turkey dropped out of the “top 20 largest economies in the world” rankings for the first time in modern history.

The predictions regarding macroeconomic management under populist regimes, spanning from right to left-wing populists, have been largely confirmed in Erdogan’s case. Initially, Erdogan began his term in late 2002 with an IMF program and effectively implemented EU reforms. However, following the regime change in 2018, which marked the onset of his authoritarian tendencies, Erdogan exhibited numerous shortcomings. These included the implementation of expansive monetary and fiscal policies, resulting in soaring inflation rates, price controls, credit rationing, persistent budget deficits, unsustainable debt accumulation, arbitrary and short-term decision-making, non-compliance with established economic programs, and failure to achieve projected outcomes.

Erdogan’s management has failed to address chronic macroeconomic imbalances, characterized by persistent external and internal deficits, high inflation rates, volatile borrowing and lending rates, and depreciation of the Turkish Lira (TL), thus impeding the economy from achieving sustainable growth. The economic environment, marked by a sharp annual increase in broad money supply by 65 percent and the political decision to keep the policy rate well below inflation, has led to a significant negative real return, creating conditions favorable to speculative attacks on the TL. Heightened insecurity and uncertainty have further increased demand for foreign exchange, while the annual credit volume has surged by approximately 55 percent, driving up consumption and import demand and inflating the real estate sector bubble. These factors have exacerbated inflationary pressures, which have already spiraled out of control (Figure 2a). Johns Hopkins University professor Steve H. Hanke and the Inflation Research Group (ENAG) have meticulously uncovered a stark reality: TURKSTAT, evidently under the direct influence of Erdogan’s administration, has significantly understated inflation data. This revelation sheds light on a deliberate manipulation aimed at distorting income distribution, particularly impacting fixed-income civil servants, workers, and employees. The wealth transfer orchestrated through this misrepresentation has inflicted a substantial blow to their financial well-being (Figure 2a).

Meanwhile, the dollar exchange rate surged from ₺3.86 in 2018, the year of the regime change, to ₺32 by the end of March 2024, marking an 850% depreciation of the TL over five consecutive years. Despite unreliable public data, inflation spiked to around 100% at one point in 2022, up from 17% in 2020, before closing the year at 65%. The same level of inflation, 65%, was recorded in the election year 2023. However, Erdogan intervened aggressively in the foreign exchange markets to curb further inflation after his politically motivated decision to lower interest rates, depleting over $200 billion from central bank reserves in just two years.

With Mehmet Simsek’s return to politics, who served as finance minister in the AKP government until 2018, in June 2023, and his reappointment to the same ministry, there has been discussion of a stabilization program under the motto “cutting off the wrong and returning to rational ground.” However, despite having a name, its content has remained unfulfilled. When Simsek took office, the CBRT policy rate stood at 8.5%, with inflation around 39%. By the end of 2023, the interest rate had soared to 45%, while inflation reached 65% by the year’s close.  Despite selling more than 40 billion dollars of additional borrowed reserves from the Central Bank, and the interest rates rose to 50% during the election to repress inflation, it hit 68,50%. Such a doubling of consumer inflation over less than a year, accompanied by an almost 6 to 7-fold increase in the policy rate, is highly unusual, reflecting the heavy injury of the demand and supply mechanism. Populist policies implemented following successive elections have worsened expectations, and the secondary effects of the inflation shock in autumn 2021 appear to be further strengthening.

Erdogan’s “economic model,” based on unfulfilling prophecies and aimed to determine the opportunity cost of money through political decrees centrally, assumed that lowering interest rates would reduce production costs and decrease inflation. It also posited that an increase in the exchange rate would enhance Turkey’s export competitiveness, thus allowing the country to close its foreign exchange deficit. However, these prophecies did not come true, and instead, the opposite happened. The model eventually transitioned into a tragic stage when Erdogan and his “politburo members” attempted to control inflation through direct and indirect exchange rate and price controls at all costs. This “learning-by-doing experience,” which incurred a devastating political and economic cost, reflects the tragic “self-fulfilling prophecies” of populist leaders like Erdogan, who aim to keep interest rates low while unreasonably hoping to prevent prices, foreign exchange rates, and inflation from rising. The process resulted in an incredible transfer of wealth and increased cost of living in favor of a small segment of society at the expense of the majority.

As outlined above, the challenges under Erdogan’s regime extend beyond resource allocation efficiency and raise significant concerns about distributional issues. This is sadly reflected in Turkey’s income and wealth distribution statistics in 2023, compiled by TUIK. According to labor union studies conducted in March 2024, the hunger threshold for a family of four in Turkey, where the minimum wage is 17,000 TL, was estimated at nearly 20,000 TL, while the poverty line stood at almost 55,000 TL. Thus, voters faced dire circumstances without security or other guarantees when hunger and poverty levels reached such heights. According to TUİK, by 2023, the share of the highest-income group, comprising 20 percent of the population, had surged to 50 percent of the national income, while the lowest-income group remained stagnant at 6%.

The Gini coefficient, a key measure of income inequality (where zero indicates perfect equality and one signals extreme inequality), has been on the rise since 2014, reaching an estimated 0.433. Finally, data released by Credit Suisse and UBS in March 2024 depict an even grimmer picture of wealth distribution in Turkey. The country’s wealth Gini coefficient stands at 0.8, with the wealthiest 10% owning a staggering 70%. According to a recent European Commission for Turkey report, Turkey still lacks a dedicated poverty reduction strategy. After sustained price increases, the poverty rate reached 14.4%, up from 13.8% in 2021. The severe-material-deprivation rate reached 28.4% in 2022.

In that, after 2011, it became increasingly evident that Erdogan’s focus shifted towards exploiting the flaws of the old regime to consolidate his government rather than addressing political repression, corruption, and poverty. Instead of actively tackling poverty and income inequality, he opted to “manage” these issues, perpetuating a cycle of dependency. Emerging data summarized above shows that Erdogan can not sustain his role as a Robin Hood figure, redistributing part of the wealth generated from public rents to society through various mechanisms in a low-value-added, low-productivity economy (Figure 3) with a population of 86 million people.

A recent publication indicates that this range of patronage or patrimonial economic relationships was facilitated through cultural and ideological narratives, civilizational and religious populism, anti-elite polarization, and the government’s inclination to scapegoat foreigners.

Erdogan’s purported model, as discussed thus far, aims to position Turkey as a “cheap production base” in the western part of Eurasia and the eastern part of Europe by suppressing real wages, utilizing cheap surplus labor provided also by immigrant workers, channeling people’s savings to cronies through subsidized interest rates, attracting capital by devaluing all national assets through currency depreciation, sustaining economic growth inflated by inflation, raising indirect taxes, and ultimately exporting low-value-added products to improve the external balance. However, these objectives have yet to be fully realized. Despite the sharp devaluation of the TL and the imposition of very high customs duties, trade deficits have continued to increase, and financing quality has deteriorated, leading to the accumulation of unsustainable foreign debt (Figures 4 and 5).

From a longer-term perspective, the combined impact of institutional erosion, the dismantling of checks and balances, and a contentious foreign policy under autocratic rule have resulted in flawed economic policies and the disintegration of the production fabric. The total volume of Foreign Direct Investment (FDI) entering Turkey has experienced a sharp decline since 2007. The crisis of trust has led Turkey to detach from the European value chain. Simultaneously, political tensions with major Arab countries like Saudi Arabia and Egypt have prompted a distancing from the Middle Eastern market. Meanwhile, Erdogan’s allies in Eurasia, such as China and Russia, dominate in trade deficits but do not contribute to financing. China relegates Turkey to merely an “open market” and a “transit route” to access the EU and neighboring countries duty-free. In summary, China and Russia are the primary sources of Turkey’s trade deficit, while the source of finance remains traditionally Western Europe (Figure 6, Table 1).

‘God of Hunger’ Prevails over the “Gods of Fear’

In Greek mythology, Limos represents the embodiment of starvation, hunger, and famine, while Deimos and Phobos epitomize chaos and fear. Deimos symbolizes terror and dread in ancient Greek religious beliefs and mythology, whereas his sibling Phobos embodies panic, flight, and rout. Recently, the Turkish populace, losing hope and experiencing escalating hunger, has rebelled against the dominion of the “gods of fear.” Instead, they find themselves under the sway of the god of hunger, embodying their current struggles.

In the March 2024 local elections, amid the economic crisis and regional and global contractions in foreign policy, a pivotal moment emerged where the “god of hunger” prevailed over the “god of fear.” Despite the government’s extensive propaganda urging the populace to prioritize “stability,” maintain “gains” under Erdogan’s regime, and resist foreign influence, people turned a deaf ear to these messages. Consequently, the elections resulted in a resounding defeat for the ruling party.

In recent years, Erdogan has crafted his entire political narrative around themes of national honor, sovereigntism, independence, and autonomous foreign policy. Consequently, he has leaned towards polarization, alienation, and divisive governance both domestically and internationally. Erdogan has positioned himself as the guardian of the Muslim ummah, the champion of a Free Palestine, and the rightful inheritor of former Ottoman territories. However, his loss of ability to engage in economic and political populism at home and abroad during the March 2024 local elections underscores the unsustainability of populism in a country of Turkey’s magnitude and geopolitical complexity. It is indeed a notable irony in the history of a religiously motivated populist authoritarian political leader to transition from the rhetoric of the “caliphate of the ummah” to being labeled as a “collaborator of Zionism” amid Israel’s Gaza massacres. This shift arises from the diverse forms of support, including weapons and kerosene, extended to the Netanyahu government during the ongoing massacre of civilians in Gaza and the relentless destruction of the city. This transformation must be viewed as a profound turn of events in the history of the region.

Finally, despite the ruling party’s defeat in the local elections, the opposition strategically positioned itself to claim victory. Firstly, by gaining control of critical municipalities in major cities through the “Nation Alliance,” formed in 2019 as a counterforce to Erdogan’s “People’s Alliance,” the opposition effectively deprived the government of a populist tool while providing an avenue for engagement with the public and showcasing its capabilities. Despite Erdogan’s acknowledgment that losing Istanbul equated to losing Turkey, he couldn’t prevent it in 2019. Fast forward to 2024, not only did he fail to reclaim any major cities lost in 2019, but the losses extended further, with additional significant cities slipping away.

Utilizing this opportunity, opposition-led municipalities efficiently reached out to citizens facing hardships during the crisis. Secondly, the opposition embraced positive populism, taking cues from Erdogan’s playbook. This involved a notable transformation within the main opposition party, the Republican People’s Party (CHP), which shifted from its elitist and establishment image to a more grassroots approach. By speaking the language of the people, acknowledging past shortcomings, and seeking forgiveness, the CHP significantly bolstered its appeal and credibility among the populace.

Conclusion

Following Erdogan’s recent electoral defeat, exacerbated financial crisis, and foreign policy constraints, the period between 2024 and 2028 is poised for turbulent developments. The stark contrast between the people’s needs and Erdogan’s priorities renders the situation even more fragile. Erdogan’s primary objective is to maintain power and evade accountability at all costs.

The inevitable repercussions of the March 2024 local elections seem unavoidable, primarily due to the substantial number and size of municipalities lost, rather than merely the overall voting percentages. These cities predominantly housed Erdogan’s rent projects, thrived on corrupt economies, and relied on assistance to people experiencing poverty, cementing their dependence on him.

Hence, Erdogan suffered losses not only in terms of the popular vote but also in terms of financial resources. Ambitious projects like “Canal Istanbul” or the construction of malls in Taksim Gezi Park now seem unattainable. Moreover, his loss of domestic support and resources has tarnished his reputation. To reclaim these lost assets, it’s foreseeable that Erdogan will centralize numerous resources and administrative units previously overseen by municipalities. This might involve appointing trustees to many cities, obstructing municipal budgets, and hindering investment financing initiated by municipalities.

However, instead of focusing on trivial matters, a more comprehensive political strategy should be anticipated to address the underlying issues. The saying goes, “each blow that doesn’t kill strengthens.” Erdogan finds himself wounded, vulnerable, and, consequently, highly perilous. Just as Turkey spiraled into a state of fear following the June 7, 2015 elections that he lost and witnessed the suspension of law after the failed coup attempt orchestrated by government intelligence on July 15, 2016, Erdogan might resort to provoking Kurds and stoking societal tensions using his concocted “FETO” narrative to neutralize the impact of local elections by sidelining legal procedures once more.

The recent attempt to hinder the elected candidate in Van province immediately after the election may signify something more than a conclusion but rather the inception of a more extensive process. Erdogan’s alliance with the ultranationalist National Action Party (MHP) and its leader, Devlet Bahceli, known for their connections with criminal elements, could potentially draw Erdogan into hazardous undertakings, leveraging Turkey’s instabilities to their advantage.

Another urgent agenda that influences the aforementioned projects is Turkey’s austerity program, whether implemented with or without the IMF. Turkey is currently facing economic and political crises, and implementing a rigorous stabilization program is crucial to mitigate inflation and urgently address the foreign exchange shortage. However, the societal burden of such programs is significant, and only a newly elected government with high credibility could realistically enact one. Given the ongoing erosion of trust, compounded by Erdogan’s autocratic regime’s arbitrary and amateurish practices, it seems unlikely that the current government could effectively execute such a demanding program to fully address the situation.

The upbeat “signaling effect” of an IMF agreement is undoubtedly more urgent than a gradual loan dispersal. Yet, Erdogan’s acceptance of such an agreement presents another challenge, as it would require substantial reforms, including transparency, accountability, addressing past crimes, and moving away from entrenched corruption. Moreover, the specific political and economic concessions the US might demand from Turkey to facilitate an IMF agreement still need to be determined.

In terms of the root cause of Erdogan’s tragedy in Turkey, while Erdogan endeavors to assert leadership within “the Islamic Ummah” rather than “bowing to Europe,” he finds himself increasingly isolated not only from Europe but also from the Arab world. His efforts to appease Russia and China have faltered, and he is entangled in a costly “war of liberation” without sufficient resources. In this scenario, the longstanding propaganda that portrayed Erdogan as “the guardian of the Ummah” has collapsed and been replaced by the perception of him as a “Zionist collaborator.” 

Therefore, given Erdogan’s inability to satisfy Turkey’s 86 million citizens with an economy reliant on corrupt patronage networks and the challenges of implementing a heavy austerity program within a democratic framework, diverting public attention to domestic and foreign disturbances to suspend democracy becomes a realistic expectation. Ultimately, Erdogan’s pursuit appears to lead toward a costly Pyrrhic Victory.

Dr. Barrie Axford, Emeritus Professor of Politics at School of Law and Social Sciences, Oxford Brookes University.

­­­­­The Implications of Rising Multipolarity for Authoritarian Populist Governance, Multilateralism, and the Nature of New Globalization

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Please cite as:

Axford, Barrie. (2024). “The Implications of Rising Multipolarity for Authoritarian Populist Governance, Multilateralism, and the Nature of New Globalization.” Populism & Politics (P&P). European Center for Populism Studies (ECPS). March 30, 2024. https://doi.org/10.55271/pp0031

 

Abstract

What is it about the current phase of globalization that feeds on and is fed by the populist zeitgeist? In what follows I will tie the discussion of populism to the changing character of globalization, sometimes called the “new” globalization, though that label does less than justice to the overlapping nature of historical globalizations. The “new” globalization is both a description of the de-centered and multi-polar constitution of globality today and a reflex to safeguard against the roils of an ever more connected and turbulent world. It is a reminder that globalization has always been a multidimensional and contradictory process, moving to no single constitutive logic, and historically variable. The new globalization is the context for the current populist surge and, in turn, that surge is testimony to its emergence as a serious political force, perhaps as an embedded global script. In this same context the much-trumpeted failures of multilateralism are set against a burgeoning multipolarity which is itself an expression of the changing face of political modernity.

By Barrie Axford

The end of multilateralism and the onset of a multipolar world is a compelling narrative today. Here is a flavor of that narrative as told by academics and players of different hue:

First, Gideon Rose in 2017: “Today the liberal international order is a bit dilapidated. The structure still stands, but paint is peeling, walls are cracking, and jerry-built additions jut out from odd angles. Even at its best the arrangements never fully lived up to their ideals, and benefits have not always been distributed equally or fairly. Slowing growth, increasing inequality, declining social mobility, excessive bureaucracy, self-dealing elites, poor responses to transnational problems such as terrorism and climate change—the litany of current problems is long and familiar.” 

Second, EU foreign affairs supremo, Josep Borrell, who in July 2023 opined “(w)e live indeed in a more and more multipolar world, but multilateralism is in retreat. It is a paradox. Why? Because when the number of participants in a game increases, the natural response should be to strengthen the rules governing the game. However, we are facing the opposite trend: the rules governing the world are running out of steam. We must find ways to overcome this paradox.”

The third intervention has it that regardless of what robust multilateralism might imply or even require, as Donald Trump repeated in early Spring 2024, collective security – among other things – can go hang if America is expected to go on bearing undue financial costs.

The penultimate reference is to Elizabeth Braw’s recent claim that “the uprising of Europe’s farmers is a final nail in the coffin of globalization.” She goes on, “globalization is rapidly retreating and the forces of populism it helped to unleash are on the march.” Which, of course, echoes similar predictions made over the 30 years since Silvio Berlusconi first promised Italians a videocracy shorn of usual politics and politicians. Some years later various factions of the British “Leave” campaign weaponized Brexit with the promise to “take back control.”

Finally, from the Politico App in October 2023 a swingeing judgement: “For years we debated whether multipolarity would strengthen or weaken multilateralism. Now we know it has killed it.”

With the exception of the Politico quote none of these references is a full-blown jeremiad on the twilight of the liberal order. Is Trump really serious about NATO? Will his “Second Coming” deliver the brain-death of the liberal international order?  Does widespread agricultural protest actually signify a wider and deeper disenchantment with the globalized economy; or even suggest that globalization is crumbling? Well, perhaps, but we are right to question the credentials of such claims. At the least exercising social-scientific caution will alert us to the complexity and dangerous messiness of world geo-politics and economics today, and this almost irrespective of whether one stands on the rise or decline in American power.

In what follows I begin by addressing the key terms in use: first multilateralism and particularly its troubled confrere the liberal international order; then multipolarity, which, with something of an Orwellian cast, can be read in different ways and with quite different agendas in mind. And finally, the part played by populism in these scenarios; bearing in mind the need to couch all this in a rather wider canvass of what might be called “new” globalization with the attendant shift to what looks like a re-racinated modernity, and what that might entail for world order.

Multilateralism Today

The concept of liberal international order is far from precise, despite its routine usage by scholars, journalists, and politicians. It is often spoken about as an open and rule-based order, enshrined ‘in institutions such as the United Nations and norms such as multilateralism’ (Ikenberry, 2011: 56; 2010). States are core actors in this order, which nonetheless prescribes a cooperative demeanor on their part and, in some cases, a partial abrogation, or pooling, of state power (Ruggie, 1993: 562). So far – so uncontentious. But at this point some definitional, and thus operational, issues arise (Kundnani, 2017).  These include obvious qualifiers as to its actual openness – is it really no more than a Western club masquerading as a universal order? What is meant by ‘rules? – who makes them and what are the sources of their legitimacy? There is also the matter of what ‘liberal’ implies. Does it suggest a modal opposition to authoritarianism? (political liberalism) Is it just about open markets and opposition to economic nationalism? (economic liberalism). Or is it just an abstract and scholarly term, used to disparage realist and neo-realist theories of international relations? (liberalism as IR theory). Well in fact, the concept melds all these definitions of liberal, but in doing so highlights tensions between them. These tensions are evident in what, some years back, became known as the ‘Beijing Consensus,” whose precepts were succinctly put by Stefan Halper (2012) when he wrote that states outside the West have been ‘learning market economics with traditional autocratic or semi-autocratic politics in a process that signals an intellectual rejection of the Western economic model.’ Here economic and political liberalism are distinct and one does not predicate the other. 

The present international order fuses two distinct notions of order. The first dates back to the Peace of Westphalia in 1648, somewhat contentiously taken to have laid down the concept of state sovereignty (Teschke, 2003). The second draws on liberal thinking developed first in Britain and the US over the past two centuries. Here being ‘liberal’ means embracing ‘open markets, international institutions, cooperative security, democratic community, progressive change, collective problem-solving, shared sovereignty and the rule of law’ (Ikenberry, 2011: 2). So, what we currently depict as the international liberal order is in fact a hybrid based on more-or-less statist assumptions and, since 1945, a regard for multilateral cooperation in many policy areas and issues of common concern. 

In all but name this was a settlement made in the image of the Western powers that initiated it. Realist in its commitment to state autonomy, it also espoused liberal principles, and these found limited expression in the United Nations Charter. The great economic institutions of the postwar era – the General Agreement on Trade and Tariffs (GATT – later to be replaced by the World Trade Organization or WTO), the World Bank and the International Monetary Fund (IMF) were resolutely liberal, but still dominated by Western powers and reflected Western economic interests.

In sum, the idea of a liberal international order comprises three basic elements. The first is a systemic configuration of power in the doctrine of sovereignty. Second is the architecture of fundamental rules and practices that designate sources of authority in that order and smooth its routine operation. Finally, there is the framework of social norms that sanction the other two elements. This third element provides the justification for what might otherwise appear as a system governed by contradictory imperatives – territorial particularism (sovereignty) and moral universalism (seen, for example in the United Nations doctrine of human rights). These elements have developed in different, and sometimes contradictory, ways and these are manifest in the tensions over what constitutes an international security order, an international economic order and an international human rights regime, all under the auspices of a self-styled benignAmerican hegemony. 

Current arguments between the West and authoritarian powers such as China and Russia are not so much about international order per se but about different versions of it and in particular about the way Western powers have sought to change it since the end of the Cold War. Russia – some startling appearances to the contrary – wants to go back to the order agreed at the Yalta Conference in 1945, in which states with different ideologies and political systems co-exist and in particular respect territorial sovereignty — a Westphalian world in other words. In contrast, the more ‘liberal’ order for which many in the West argued in the post-Cold War period, “demands that states be obedient to liberal principles in foreign policy” (Kundnani, 2017: 47)

What About Multipolarity?

At this point it is appropriate to add that opposition to the liberal world order is not confined to China, Russia, and their allies. During Donald Trump’s presidency and still a feature of his current bid for office, is the rhetorical dismissal of the postwar liberal order and America’s stewardship of it. Moreover, it is clear that states of different hues do not share the vision of a benign US hegemony or, if they share it, wonder if the United States is still suited or committed to playing that role. 

In 2016, Fu Ying, then Chair of the Foreign Affairs Committee of the Chinese National People’s Congress identified three features of what she called the ‘US-led world order.’ These are ‘the American value system,’ the ‘US military alignment system’ and ‘international institutions, including the UN system.’ Although she did not use the term hegemony, what she describes amounts to the same thing. Apparently willing to support the third element of the international order, she said that China would always temper its approval of a system based on Western, and especially American, values. This reaction is increasingly widespread and has led to demands to dismantle the postwar geopolitical order and inaugurate a more obviously multipolar world, much like the economic sector. Americans counter that their hegemony has been, and remains benevolent, but the fact is that many outside the geographic and ideological West (and some within it, including countries in Europe) see the Liberal International Order as an ideological project. China is still frequently mentioned as a possible or likely successor to America’s hegemony, and so attention rightly turns to the kind of world order it would support and pursue. 

Multipolarity is the defining feature of this order, and it elicits both approbation and opprobrium. Some commentators argue that it is a myth, and even those who discern its rise claim either that it is “unbalanced” and therefore dangerous, or that it reflects a growing demand for sovereignty (for which read recognition) and identity and recognizes that there are multiple routes to economic modernity, especially in the Global South. As Josep Borrell also wrote, this new multipolarity results from the combination of three dynamics. First, a wider distribution of wealth in the world, second, the willingness of (hitherto middle-ranking) states to assert themselves strategically and ideologically and third, the emergence of an increasingly transactional international system, seen in bilateral deals – strategic partnerships and the like, or in forms of minilateralism – rather than in global rules. All this is a good way from the uniform “end of history” envisaged by Fukuyama in the early 1990’s, or visions of the smooth, networked world of hyperglobalist fantasy, and is clearly threatening to liberalism and universalism as the paradigm expressions of a post-ideological world. Moreover, the multipolar cast of twenty-first-century globalization is significantly different from the twentieth-century version. Before coming to, that let me say, a preliminary word about populism. 

The current (and seemingly protracted) spate of populisms is also part of a post-triumphal, post-hegemonic phase of global rebalancing. It is an expression of the tension that arises between globalization as a process of interconnection and de-bordering on the one hand, and strains of consciousness, as well as pressing exigencies, that resist any such convergence. It is at once fractal and ubiquitous; national populism was clearly orthogonal to the ideological landscape of the neo-liberal narrative of late twentieth century globalization, with its borderless credo. Then, it was fashionable, and for a while prescient, to declaim the potentially borderless quality of every kind of network and flow. Now that bullishness is largely absent – in the global north as well as south. Populism in its current guise is a specific moment in the more encompassing dialectic of global convergence and heterogeneity; a dialectic that displays various types of accommodation between national and global imaginaries, while still proclaiming an ontological divide between the two. 

Globalization in Flux

The much-rehearsed crisis of (Western) liberal capitalism is, along with the travails of Western modernity, more generally construed a staple in accounts of global change, leading to intense arguments about the end or rebirth of modern history. Sometimes this is glossed as a hegemonic shift, the sequential, and even cyclical, passing of preponderant might. But more often today the emphasis is on systemic disruption, disjunction, and fragmentation, and on alternative futures, where nothing is certain, and insecurity is rife. In terms of scholarship’s attention to things global this is an important development. For one thing, it locates the much touted “backlash” against globalization and modernity in a global crisis of “existential security,” which is a matter of consciousness. 

In his book the “Silent Revolution,” published in 1977, Ronald Inglehart drew attention to extraordinarily high levels of existential security experienced in mature democracies in the decades following World War II. This condition brought an unprecedented shift from materialist values that emphasized economic and physical security alongside endemic fears over the liminal quality of many lifestyles; to post-materialist values privileging individual autonomy, self-expression, openness to change and embracing diversity. The value shift so described brought with it huge social and political changes, from the rise of anti-war movements, demands for stronger environmental protection and their partial fulfillment, higher levels of gender equality across the social spectrum and the mainstreaming of gay rights. Democracy as a global cultural script also flourished. It too was dependent upon unprecedented levels of economic prosperity and geo-political stability. Of course, none of this happened overnight. Change was often quite protracted, occurring at the speed of intergenerational population replacement and, while secular, always subject to short, and sometimes not so short, economic downturns. 

But, for the past forty years or so, citizens of even high-income countries have seen more volatility in fortunes, so that they no longer take material wellbeing, or even survival, for granted. As a result, the graph tracing feelings of security has dipped markedly. Ulrich Beck argued that this is part of the crisis of second modernity – the inevitable consequence of living in the risk society (1996). In risk society, hazards have become much less predictable than of yore and even when predictable, profoundly more unmanageable. As a result, the scope for contingency, doubt and relativism increases vastly, to the point where fears about survival are rife; all without the dampening effects of fatalism or the haven of insurance. In this scenario the list of contributory ailments is familiar – declining real incomes, erosion of job security, rising income inequality within, if not always between, nations, and fears for the lot of subsequent generations, not least in terms of actual or impending environmental and health disasters and perceived threats from uncontrolled immigration and the displacement of whole peoples. Inglehart argued that the “Silent Revolution” dynamic still musters, but that – to a marked extent – it has gone into reverse with acute consequences, both politically and socially.  The consequences include growing support for xenophobic, populist, and authoritarian movements, along with a morbid fear of globalization, at least in its paradigmatic Western and capitalist (neoliberal) shape (Brubaker, 2017). 

In systemic language all this suggests a faltering of the Western model of globalization and of Western modernity; modernity shaped by rational, cognitive reflexivity on the part of individuals and institutions, along with critical monitoring of the self and social institutions by all actors. And as a reaction to the perceived failure of reflexive modernization and the ability to manage the trials of everyday life, there has been a search for, or reversion to, seemingly more “authentic,” and decidedly more expressive components of self and collective identity. Anti-globalization and neo-statist rhetoric and activism is one such expression – distilled in the slogan “taking my country back” – and it appears in various shades of contentious politics; not all of them regressive. And where it is not seen as part of a cyclical process, but as a contingency born of circumstance – de-globalization is another; often taking the form of the “innovative fortification” of various enclaves and identities to protect against globalization’s relativizing and integrative dynamics (Betz, 2023; Benedikter et al, 2022). Populism is a key – though not the only – component in such politics. 

What are the implications for globalization’s 21st century profile? 

The politics range from exclusivist forms of collective identity, like ultra-nationalism, through a world in which the “other” – however conceived – is forever consigned as alien and untrustworthy; to adopting designer selves in line with fashion or circumstance, making identity construction a lifestyle choice (Foges, 2020). Crucially, for the temper of politics abroad in such a milieu, the latter often entails a rejection of meaning systems that are mediated by technical expertise, abstract systems and rationality; ironically at a time when life itself is ever more subject to the pervasive technologies of the Internet, AGI (artificial general intelligence), and soon, quantum computing. The first two are all too familiar as the tools of what Joshua Neves calls “under-globalization” with its panoply of fake news, deep fakes, conspiracy theories, disinformation and polarized worldviews (Neves, 2020). 

On the ground the search for security and for recognition has triggered new forms of contentious politics. As well as varieties of populism, new social movements – of indigenous peoples, climate change protestors, communitarians, feminists, and Trans activists – have invoked elements of the romantic-aesthetic tradition. But in its most robust, and least palatable, form the search to minimize exposure to risk tribalizes relations between groups. In this scenario the recently dominant trope of a hegemonic, benign and borderless global order – capitalist, liberal and embracing of (cultural) diversity – has less and less purchase. Other contenders, other globalizations, such as “justice globalism” or “jihadist globalism,” perhaps civilizationism, as well as evidence of multiple routes to modernity, point up the increasingly fissiparous, or at any rate plural qualities of the umbrella concept “globalization” (Steger, 2015).  The point is that all such changes in the real world demand an agile scholarship to address changing global complexity which is comprised – inter alia – of the emergence of non-western, post-western, post-capitalist, and post-socialist globalities and a myriad of glocal formations, including platforms in cyberspace. 

A sense of impending doom on many fronts lends a febrile quality to any discussion of current global change and its direction; though the actual set of the world after a veritable glut of deluges remains hard to fathom. Which will undo us first; nuclear Armageddon courtesy of a throwback to what – pre-Ukraine – most scholarship had consigned as an outdated twentieth century trope for world order? Or might demise lie in the kind of politics occasioned by excessive inequalities and growing precarities, in the spillover from wars in Ukraine and Gaza and the weakening of US hegemony on many fronts? Is climate change the obvious, or only, form horse in the apocalypse stakes? These are hardly frivolous questions, and for some, they betoken a world already far down the road to perdition. But here a word of caution is appropriate because while a focus on dislocation and crisis is seductive and the narrative of impending ruin compelling, they tell only part of the story, at least for how we construe and consign the global, both in the academy and in popular imagination.

So, Is There a New Globalization?

Neoliberal globalization is experiencing profound challenges, sometimes simplified as a “backlash,” and its opponents have markedly differing prescriptions for the global future, including a world disaggregated into national redoubts. In the climate engendered by the Coronavirus pandemic the latter scenario is less a strategic vision of multi-polar or decentered globalization than the reflex of insecure humanity looking for succor where it can. The responses to Covid-19 reflect a sense of collective (global) vulnerability while decanting to mainly local ways of dealing with it, and this is a paradigm for the present global condition. The same is true of the politics of climate change, where the cause of national exceptionalism, seen in what became known as “vaccine nationalism,” was reflected in health security measures and more draconian forms of immigration control.

Viral and ecological disasters, along with the possibility of nuclear Armageddon aside, there is widespread agreement that liberal globalization has been usurped by rising protectionism and by diverging growth paths in emerging markets. Taken together they describe a concatenation of crises for previous versions of globality (Gills, 2020). But talk of a backlash against this model does not imply an end to globalization, or even a systematic process of “deglobalization.” Rather it posits a rebalancing in, as well as a destabilization of, what Steger and James describe as once “taken-for-granted shibboleths,” most obviously the centrality of unfettered markets (Steger and James, 2019: 191; Benedikter and Kofler, 2019; Steger, 2019b; Steger, 2019a). Rebalancing tends to what I call a “new” globalization, though the attribution has to be used with care. New globalization is no hyperglobalist rebirth; but neither is it an unequivocal shift to more state-centric forms of national liberalism or, for that matter, national populism. 

So, what is it?

First, we should note a shift in the global balance of economic power, which is, or may be, of world-historical significance. We are in the midst of another long-term transition – from the Atlantic economy (Atlantic globalization?) to the Pacific economy (Pacific globalization?) (Nederveen Pieterse, 2018: 124) – a shift that further attests to globalization’s dynamism and its indeterminate nature. This re-balancing is often characterized as a process of “post-Westernization,” or “Easternization.” Using such labels is still simplifying but qualifies the urge to treat radical changes as just another increment in the cyclical transfer of hegemonic power. It is more accurately portrayed as a process of “multi-polar globalization,” no longer in thrall to Western neoliberalism (Nederveen Pieterse, 2018; Arrighi, 2007). Easternization is a complex process wherein “non-Western societies and civilizations acquire, institutionalize, and transform…. modern traits” (Casanova, 2011: 263), but crucially, also enact their own versions of modernity out of their own pasts. The Chinese case underlines the fact that the pattern of global economic integration is not a Western telos, and in key respects never has been (Axford, 2018). 

As Jan Nederveen-Pieterse says, twenty-first century globalization involves a “new geography of trade, weaker hegemony and growing multipolarity” (2018: 11). Increasing multipolarity has cast shadows on the relevance, legitimacy, and effectiveness of established multilateral organizations and processes seen, most obviously, in the UN, G-20, World Bank, IMF, EBRD, WTO, and WHO. Chronic weaknesses have been concurrent with the rise of initiatives such as BRICS – plus, the Shanghai Cooperation Organization (SCO), and China’s Belt and Road Initiative (BRI), driven by authoritarian and populist leaders, who have now staked a claim on the future demeanor of global governance. Meanwhile the Western architectures of post-war global governance are often perceived as “weak” or “disingenuous.” These developments have far-reaching implications, not least in the ability to address global challenges such as climate change, food security, conflict resolution, and humanitarian crises. And proxy conflicts, political oppression, terrorism, and ethnic and community displacement have triggered irregular and uncontrolled migration, contributing to the rise of far-right and other populist parties and movements in developed nations. 

What really sets the two strains of “old” and “new’ globalization apart is the rise of emerging economies in the current phase. Their growth has outstripped rivals in the developed world to the point where they are now the drivers of the world economy. Data for 2023 confirms this trend. A group of 24 emerging economies accounted for 50% of Global GDP in 2023, and 66% of global GDP growth in the past 10 years (2013-2023) (World Economics 2024). Although dramatic, this growth spurt might still be seen as tracking a pattern of global convergence already extant, whereby Asian and other emerging economies strive to achieve per capita GDP and living standards currently enjoyed by developed nations. But that understates the extent to which the rise of emerging economies upsets, and possibly overturns, the practices and mythologies of two centuries of North over South domination, with its “familiar expressions of colonialism, imperialism and American hegemony” (Nederveen-Pieterse, 2018: 10). 

Because of this shift, the new globalization has something of an epochal feel to it, although such a conclusion may be premature. Overall, the demeanor of twenty-first century globalization is not assured because the data lends itself to different interpretations. Thus, in 2019 geopolitical uncertainty in the guise of the US-Iran conflict and a slowing Chinese economy combined to trigger a global manufacturing downturn. A year later the novel coronavirus that began in China dampened Asia’s growth prospects still further, with the global consequences still being played out, most obviously through its effects on those developing nations with poor healthcare systems, pronounced national debt and generally fragile economies. The Coronavirus pandemic then reshaped trade by shortening supply chains. For many multinationals a move towards regional, rather than global, supply chains offers the prospects for resilience and, as the Economist Intelligence Unit reported in 2021 the flexibility to shift production of key components from one location to another. Global trade networks have also shrunk or been damaged in the fallout from the Russian invasion of Ukraine and from Israel’s response to Hamas’ massacre of its citizens in October 2023. 

Relations between old and new preponderant powers are also more volatile. In particular, US-China trade relations remain fragile. Geo-strategically the same is true, a consequence of China’s insistent and persistent claims on Taiwan. Calls to decouple Western economies from “strategic dependency” on China for a range of goods and infrastructural services increased markedly during the time of the Coronavirus, partly as a reflection of worsening relations with the USA, and partly out of fears that the CPR controlled too great a proportion of trade in goods critical for national security.   

So, important questions have to be asked about the significance of events and trends and about the rise of emergent economies and fragmented societies more generally. Are these secular changes, heralding an epoch-ending, terminal failure of the status quo, or another periodic adjustment in the dominance of global (read Western) capitalism? Do they advance or retard neoliberalism or is that question already redundant? Are they just another frisson in the changing (if not cyclical) fortunes of nations in general and preponderant nations in particular? Do they signify the advent of post-liberal globalization tout court, as an illiberal and authoritarian  state (China) and its cohorts, make the running in terms of global growth and stewardship? Most portentous, are the shifts epochal because they intimate the breakup of the capitalist world economy, of capitalist modernity and thus of capitalist history? The weight of these questions imparts a more nebulous quality to any judgment about apparently seminal indicators of change.

The likelihood is that multi-polar globalization has its own dynamics, including the lineages of Chinese and Indian economic development as alternatives to Western models of growth. But this is not another grand narrative of globalization – a new hegemony – in the making; more a major rebalancing in key areas such as trade, finance, international institutions, and soft power. It contributes to a crisis of dominant modes and the appearance of a globalization that is more complex, overlapping, disjunctive and (dis)ordered. 

Second: Digitalization. Of course, there are still robust signs of global convergence economically and culturally, but the drivers and character of that convergence are changing, and this has consequences for the character of world trade, for growth, as well as for wealth creation and distribution. Such drivers also impact profoundly on the ways we live our lives. Here I advert digitalization – the displacement of analogue technologies and cultures by digital means – as a new global formation that has become “continuous and ubiquitous” (Sandywell, 2011: 14). In this respect, though in many others too, the “emergent global” as Appadurai says, is (or has been) all about speed (2020). While the trade in goods seems to be slowing down, and may be stagnating, trade in global services and information – especially where they are digitally enabled – continues to boom. 

Of course, there are disabling pinch points in these developments. Digital technologies are not replacing mass and low-cost manufacturing altogether; or not yet. But the roboticization of production threatens an ever-wider constituency of workers, not only just low or unskilled operatives. The consequent political need to protect jobs in face of such pressures is growing stronger, especially in advanced economies, and this spawns a protectionist politics to match. But here there is a crucial prospect to consider. Across the board digital media are no longer just intermediaries between social agents, no longer just channels or conduits of information. Rather, they are generative social apparatuses that produce the social. Digital technologies are designed for a borderless world because, as Barry Sandywell argues, “the images of life, nature and relationships they promulgate tend to take a universal form” (2011: 15). Yet there are paradoxes, some of them apparent in the ruttedness of places and identities when set against the desire to live “in the moment,” to benefit from simultaneity and routine access and yet be free of the usual joys and trammels of human contact.

Arguably, these developments have few, if any, parallels in previous analogue cultures. The virtual inscriptions of cyberspace are creating new spaces and times of politics, governance and leisure, new business practices and new kinds of imagined community. The changes are perhaps most advanced and dramatic in visual worlds – especially in the seductiveness and growing availability of worlds through virtual and augmented reality technologies and AGI (artificial general intelligence). But in truth, they are everywhere, mainly because digital information is accessible at any point on the planet – if not always easily – and thus supplies resources for personal and institutional innovation and greater reflexivity, and also opportunities for more systematic and draconian surveillance. This process is never going to be a tale of bland homogenization. The globalization of digital culture is variable and contested in terms of its liberating potential, its repressive and dehumanizing possibilities, and its variation across localities. And the digitalization of personal worlds and cultures demonstrates the same features, arousing the same passions.

Third, Sovereigntism (neo-statism): In a recent foray Jonathan Friedman corrals populism’s basic precepts with the label “sovereigntism” (2018; see also Kallis, 2018 and Basile and Mazzoleni, 2019, Gerbaudo, 2021) an almost elemental regard for retaining or “taking back” control over one’s conditions of existence. In like vein Paolo Gerbaudo labels this phenomenon “neo-statism. This is a mantra that keeps on giving, witness ex-UK Prime Minister Elizabeth Truss’ reference to the Trumpian “deep state” at the CPAC conference in February 2024. Sovereigntism is a very portable concept and popular sovereigntism, the “will of the people,” is the evocation most favored by populists. Just where does all this sit in the narrative of the new globalization?  

Sovereignty resides center-stage, if uneasily, in all accounts of modern globalization, where debate and dispute focus on the capacity and future of the state and the international system of states, alongside the threat or promise of statelessness. Sovereigntism looks back longingly to a more untrammeled version of sovereign power based on “mutually exclusive territories and the retrenchment to the national dimension” (Kallis, 2018). If populism is the bully-boy opponent of globalization, then sovereigntism and neo-statism are its intellectual and ideological avatars. They instantiate the “innovative fortification” of the national I spoke of earlier, but they do not amount to de-globalization. 

Most observers now agree that states are not in demise, which was the hyper-globalist conceit not all that long ago. But are they routinely effective actors, not just in the mythology of realist and neo-realist theory, but in their actual ability to penetrate, extract and coordinate resources within a territorially defined space and act in concert with others? These resources include the size of the available pool of trust in governments, and the belief that, by and large, what they do will enhance the quality of life for citizens. The Covid-19 pandemic trialed the strength of that trust, challenging the state’s position as a bastion for nationals, while underlining its vulnerability to the indifferent globality of pathogens. But is this a limiting case, or was the pandemic a turning point in the capacity of individual states to manage their affairs, as well as in the shape of global geopolitics? 

Taking back control is an elemental, if often non-specific, ambition. The complexities of twenty-first century globalization confront all shades of populism as a battle for the future of the national imaginary in geo-political, geo-economic and geo-cultural guises. Taking note of the previous indicators of new globalization, it can be argued with some conviction that since the millennium the “rise of a multifaceted populist challenge to the liberal mainstream” (has) exposed the shallowness of liberalism’s supposed triumph in the world more generally, but critically in its heartlands in Europe and North America (Kallis, 2018). We might also claim that in the shape of a renewed sovereigntism, the national state, indeed the national imaginary altogether, have staged something of a comeback in recent years. Indeed, sovereigntism as a facet of the new globalization may have “emerged as one of the primary ideological-political fault lines of contemporary politics” (Kallis, 2018: 13). It is, as Aristotle Kallis notes, benefitting from lying at the “intersection between rival populist projects of re-defining and allegedly re-empowering the community of ‘the people’” (2018: 13) and frequently apocalyptic – though sometimes experiential – accounts of a world in chaos, or soon heading that way.

But Are There Reasons to Be Cheerful?

Populism – which traffics the relativization and even transcendence of modernity’s principles and forms – holds up a mirror to current politics and the current phase of globalization, and what that shows is both unedifying and palatable. But the fissiparous quality of politics around the world should temper any impulse to generalize. This is a world manifesting different kinds of conflict and revolt, and that variety is itself a reflection of growing – not to say systemic – multipolarity. The de-centeredness, or multi-centeredness of this world also qualifies any neat blanket labels such as “global capitalism,” “global neoliberalism” or liberal order, as unequivocal descriptions of a predominant or hegemonic variety of globalization or global system. Capitalism is differentiated, and neoliberalism increasingly fails to convince as an overarching and steadfast rubric because big players in emerging markets – China, India, and Northeast Asia – have developed, and continue to develop, outside it (Arrighi, 2007). And to underline further the variety of origin and temper, Modi’s populism in India is a mix of autocracy, ethno-religious nationalism, and neo-liberal economic dogma. Donald Trump – in his guise as the “come-back kid,” still beggars any model of ideological (or policy) consistency; touting a blend of Jacksonian conservatism and protectionism, alongside neo-liberal formulaics, and a now developed white version of nationalism. 

It also remains true that in advanced economies in the West and North populist movements and parties of both the (notional) left and the (notional) right have emerged in recent years to protest and counter the perceived and experienced ills of market capitalism. To a greater or lesser extent, and almost regardless of ideological hue, they offer cures or palliatives for perceived maladies that are inimical, or at least challenging, to democratic elitism as the dominant mode of governance and political culture (Inglehart, 2018). On this count, populism, in what I have elsewhere termed its “postmodern” guise, can be seen either as a distinct (though not singular) challenge to the remnants of embedded liberalism and the currency of its neoliberal spawn, or a remedy for their ills (Axford, 2021). As Dani Rodrik says, populism so conceived is part of an ideological and policy rebalancing of globalization (Rodrik, 2018). That said it may be no more than a cathartic response to periodic crises; a shock to the system, rather than its successor-in-waiting, and that syncs with its hit-and-run style of politics. Populism appears to demand transformation, albeit of a back-to-the-future variety but is perennially light on detail. In the aftermath of Covid such coltishness may continue to find favor with sections of disaffected electorates. But in the longer-term, perhaps not. The spate of elections – including to the European Parliament – around the world in June 2024 may provide some of the answers to that question. 

And to a great extent it depends on how deep and how widespread the politics of anger and of cultural insecurities run. How serious is the demand for change in the battle to rebuild the world and domestic economies after successive crises? We know the depth of anger and the degree of polarization, or so we now think; though many commentators dismiss such frustration as either whimsy, or as an unlikely basis on which to build a new politics, to fashion radical economic policies, and to mend broken cultures. Populism’s credentials in these respects remain open to question. How committed are various electorates to radical solutions as opposed to garish gestures – and what would a politics born of such radical commitment look like? The “cultural turn” of late has encouraged citizens to repose what were once seen as biddable political issues into matters of identity that are not so malleable, and these may be legion. 

So, in the broader warp of social change what signifies is a politics founded on insecurity as the dominant motif for turbulent times. Crucially, insecurities are manifest over the stability of borders and identities, as much as over jobs and wages. And, of course, Covid-19 added a new source of universal insecurity. Populism did not cause these insecurities but taken in the round it narrates a crisis of modernity that is unlikely to be resolved through mere refurbishment of usual politics. Because of that it has a course still to run. Nonetheless, can it be redeemed as a project that tempers globalist excesses; holds at bay the indifferent globalities of microbial infection, and heals cultural divisions? The answer is probably not, and certainly not entirely. But what I have argued here locates populism as a feature of a globalized world itself in the midst of change; and a quickener in the ontological shift away from political and quotidian modernity. This will look like a re-racinated version of twentieth century Western modernity, but notably without its universalist cast and, to say the least, such a designation adds a sting to routine talk of a multipolar world. Populism may not be an embedded feature of current geo-politics, but it is expressive of what is a now likely to be a modal force for change; perhaps for good, but more likely for ill.

Note: A version of this article was delivered by Professor Barrie Axford at the ECPS’ Third Annual International Symposium on “The Future of Multilateralism Between Multipolarity and Populists in Power” with the same title on March 19, 2024.

References

Appadurai, A. (2020). Globalization and the Rush to History, Global Perspectives, 1 (1). https://doi.org/10.1525/001c.11656

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Symposium

The Third Annual International Symposium on “The Future of Multilateralism Between Multipolarity and Populists in Power”

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Day I (March 19, 2024)

Opening Session

Welcome Remarks

Dr. Ibrahim OZTURK

(Professor of Economics at the Institute of East Asian Studies, University of Duisburg-Essen and ECPS Senior Researcher).

Opening Speech

Irina VON WIESE (Honorary President of the ECPS).

Moderator

Dr. Simon P. WATMOUGH (Non-Resident Fellow in the Authoritarianism Research Program at ECPS).

Keynote Speech

“The Implications of Rising Multipolarity for Authoritarian Populist Governance, Multilateralism, and the Nature of New Globalization,” by Dr. Barrie AXFORD (Professor Emeritus in Politics, Centre for Global Politics Economy and Society (GPES), School of Social Sciences and Law, Oxford Brookes University).

 

Panel -I-

Interactions Between Multilateralism, Multi-Order World, and Populism

Moderator

Dr. Albena AZMANOVA (Professor, Chair in Political and Social Science, Department of Politics and International Relations and Brussels School of International Studies, University of Kent).

Speakers

“Reimagining Global Economic Governance and the State of the Global Governance,” by Dr. Stewart PATRICK (Senior Fellow and Director, Global Order and Institutions Program, Carnegie Endowment for International Peace).

“Multipolarity and a post-Ukraine War New World Order: The Rise of Populism,” by Dr. Viktor JAKUPEC (Hon. Professor of International Development, Faculty of Art and Education, Deakin University, Australia; Faculty of Economics and Social Sciences, Potsdam University, Germany).

 

Panel -II-

The Future of Democracy Between Resilience & Decline

Moderator

Dr. Nora FISHER-ONAR (Associate Professor of International Studies at the University of San Francisco).

Speakers

“The Impact of Populist Authoritarian Politics on the Future Course of Globalization, Economics, the Rule of Law and Human Rights,” by Dr. James BACCHUS (Distinguished Professor of Global Affairs; Director of the Center for Global Economic and Environmental Opportunity, School of Politics, Security, and International Affairs, University of Central Florida, Former Chairman of the WTO Appellate Body).

“Resilience of Democracies Against the Authoritarian Populism,” by Dr. Kurt WEYLAND (Mike Hogg Professor in Liberal Arts, Department of Government University of Texas at Austin).

“Global Trends for Democracy and Autocracy: On the Third Wave of Autocratization and the Cases of Democratic Reversals,” by Dr. Marina NORD (Postdoctoral Research Fellow at V-Dem Institute, University of Gothenburg).

 

Day II (March 20, 2024)

Keynote Speech

“How Globalization, under Neoliberal Auspices, Has Stimulated Right-wing Populism and What Might Be Done to Arrest That Tendency?” by Dr. Robert KUTTNER (Meyer and Ida Kirstein Professor in Social Planning and Administration at Brandeis University’s Heller School, Co-Founder and Co-Editor of The American Prospect).

 

Panel -III-

Globalization in Transition

Moderator

Dr. Anna SHPAKOVSKAYA

(Postdoctoral Research Fellow, China Research Analyst at Institute of East Asian Studies, Duisburg-Essen University).

Speakers

“China’s Appeal to Populist Leaders: A Friend in Need is a Friend Indeed,” by Dr. Steven R. DAVID (Professor of Political Science at The Johns Hopkins University).

“Belt and Road Initiative: China’s Vision for Globalization?” by Dr. Jinghan ZENG (Professor of China and International Studies at Lancaster University).

“Predicting the Nature of the Next Generation Globalization under China, Multipolarity, and Authoritarian Populism” by Humphrey HAWKSLEY (Author, Commentator and Broadcaster). 

Special Commentator Dr. Ho Tze Ern BENJAMIN (Rajaratnam School of International Studies in Singapore, Coordinator at the China Program, and International Relations Program).

Closing Session

Economic Implications of Rising Populism and Multipolarity

Moderator

Dr. Patrick HOLDEN 

(Associate Professor in International Relations at School of Society and Culture, University of Plymouth).

Speaker

“Demise of Multilateralism and Politicization of International Trade Relations and the Multilateral Trading System,” by Dr. Giorgio SACERDOTI (Professor of Law, Bocconi University; Former Chairman of the WTO Appellate Body).

Closing Remarks

Dr. Cengiz AKTAR 

(Adjunct Professor of Political Science at the University of Athens and ECPS Advisory Board Member).