Does Inequality Stoke Support for Nationalism?

Steven Bosworth

It can have escaped no one that the political institutions in western democracies are going through a rough patch. Support for established political parties are in steady decline. Today, the Caravan and Motorhome Club has far more members than our three main political parties added together.

The decline in support for mainstream political parties has coincided with the rise of nationalist and even far-right politicians in several countries. And of course, the UK has opened-up a yet-to-be resolved debate about how close it should be to its neighbours. These trends have caught most experts by surprise and prompted understandable worry about liberal democracy’s resilience.

How can we understand this crisis of legitimacy? We can certainly identify responsibilities where governments have fallen short and are still falling short. The financial crisis ten years ago ended-up putting strains on the welfare state, while the actors responsible bore very few of the costs. The planet continues to warm, yet current policies will fail to avert catastrophic damage to life on earth if kept in place.

But trying to understand recent politics in instrumental terms doesn’t get us very far. There’s an island in Chesapeake Bay which will disappear when sea levels rise, yet residents voted overwhelmingly for President Trump, a well-known climate change denier. Or take the Leave voter (2:20) who stands to lose his business if Brexit creates shipping delays.

In my research project with Dennis Snower under the Social Macroeconomics hub of Rebuilding Macroeconomics, we argue that the disagreements paralysing our democracies are really about values and identities, and not regulations and trade agreements. Voters see themselves disconnected from those in power, and turn away from appeals to economic forecasts, especially if they don’t identify with the forecaster.

Yet the forces driving the polarisation between a cosmopolitan elite and those “left behind” are far from irrational or impossible to predict. We must remember that, first and foremost, we are social creatures. The turn towards nationalism and populism may be in part a consequence of inequality of economic fortunes in modern societies.

People who see their prospects “flat-line” may turn to other ways of finding meaning. Nationalism provides a notional community for which adherents can share in the nation’s successes. Political scientist Kyung Joon Han has observed that support for far-right parties tracks positively with income inequality among the poor and middle classes but negatively with inequality among the well-off.

Our work looks to incorporate voter psychology into a political economy model where people select nationalist or cosmopolitan values based on the resulting consequences for their self-esteem. Placing more weight on individualist concerns confers pride if the individual compares favourably with others, but envy if they compare unfavourably. Placing more weight on nation-level identity replaces some of this psychological stress for those left behind.

This approach allows nationalism and nationalist policies to vary with the distribution of income: highly distorted inequality can place fewer people on the favourable side of social comparisons, thereby leading to greater support for nationalist populism. Of course, we need to see how well our model performs and we will investigate the channels and mediating factors behind the link between nationalism and inequality using individual-level data.

We hope to advance our knowledge of the rise in nationalism in two ways. Firstly, can we pin-down some parameters which might allow us to better predict the consequences of macroeconomic policies for political outcomes. Our hypothesis is that distributions matter. Secondly, can we also shed light on which types of people are more susceptible to appeals to nationalism when we observe their economic circumstances changing.

These could be factors related to their communities, such as local job opportunities, oversubscribed public services, and public goods; or could be influenced by individual factors such as gender, religiosity, age, and education. Targeting interventions which meet these people’s economic anxieties could lessen support for extremist politics in ways which are complementary with policies to reduce income inequality and promote opportunity.