Economic Causes for the Rise of Populist and Nationalist Movements
Key Messages
- Radical parties and populists benefit from deteriorating macroeconomic conditions. For voters, the overall economic development appears to be more important than their actual personal economic situation
- The most important economic factors explaining the rise of populism as well as the loss of trust in political institutions are a widening income gap between people and between regions, exposure to economic shocks, high economic uncertainty, and worries about the future
- Financial and economic crises, high exposure to global trade competition, an accelerating structural transformation, and immigration are discussed as key factors for increasing economic uncertainty
- Populists benefit from misperceptions about immigration and from perceptions of increasing economic risks, even if they differ from objective developments
- To combat the rise in populism, democracies need to increase resilience. That requires well-designed welfare and education systems that shield citizens from the consequences of economic crises and ensure equal opportunities; sound and sustainable fiscal policy to be able to react to economic crises; and targeted economic policies and instruments to limit economic uncertainty during crises and to support regions and people that feel left behind
In recent years, radical right-wing political groups and populist movements have strongly gained popularity in many Western democracies. The presidency of Donald Trump and the increasing political polarization in the US, the Brexit vote in the UK, as well as the electoral successes of nationalist parties in many Western countries – such as the Alternative für Deutschland (AfD) in Germany, Rassemblement National in France, the Sweden Democrats, or the Movimento 5 Stelle, Lega, or Fratelli d’Italia in Italy – serve as evidence of this trend. One of the key features of many of these movements is an anti-establishment, anti-immigration, and anti-globalization rhetoric. In this article, we summarize the existing literature studying the extent to which economic causes contribute to the rise in populism.
Florian Dorn, David Gstrein and Florian Neumeier: “Economic Causes for the Rise of Populist and Nationalist Movements?,” EconPol Forum 25 (2), CESifo, Munich, 2024.