Since the vote in favour of Brexit nearly two years ago, there has been accumulating and almost undisputed evidence that a populist wave is destabilising democracies across the West and beyond.
Rebellious public opinions have repeatedly shown in recent months their ability to shape political outcomes across the globe, often in unexpected ways: Pleas from established policymakers not to tempt the devil and to vote for the “obvious” candidate in an election or choose the “obvious” option in a referendum do not appear to be as influential as in the past. Public opinions seldom hear that message nowadays as they seem increasingly disenchanted with a system they may be accustomed to but whose actual benefits are growing unclear: after all, they wonder, what has remaining in the mainstream brought them over the years, apart from slower gains in real income, a greater likelihood of losing one’s status, increased insecurity, and the acceleration in the decline of influence of their government and country in the world?
The expression of the discontent with the status quo and the establishment parties is a central feature of this most recent brand of populism, which is more concerned with rejecting a system that is not meeting its promises than promoting an alternative that would work better. The rejectionists are increasingly disillusioned with yesterday’s promises of political and economic openness. Though they do not share a common political agenda or philosophy, and are not involved in a concerted effort – let alone a conspiracy – to undermine democratic processes and free markets across the globe, they share the perception that they have nothing to lose anymore from exploring what non-mainstream options have to offer – the traditional ones having unquestionably failed.
Evidence that rejectionists are increasingly influential is widespread: Political outcomes in the UK, in the US, in Italy – and to some extent in France and Germany – offer telling examples of this mind-set, while the instance of Colombia, where the government was initially unable to obtain public support to end the armed conflict with the FARC, suggests that this phenomenon is not purely western.
This rejection of traditional forms of political legitimacy and mainstream economic remedies will be a challenge to policymakers everywhere: Policymakers trying to counter the rejectionist message cannot rely on the fear of uncharted territories to sway public opinions towards more conventional candidates and choices anymore. In fact, that choosing the “obvious” option would lead to small, incremental improvements does not make the mainstream options and candidates legitimate as it did in the past. It appears that disenchanted public opinions are far more willing to sustain short-term losses or are far less averse to uncertainty, compared to previous generations, making the choice of radical options all the more so plausible.
As a result, traditional assumptions about the world and the state of public opinion are deeply flawed and unlikely to be conducive to the disruptive forms of policymaking that most countries require. Unless policymakers account for this pervasive rejectionist mind-set with new forms of governance and policy innovation, they are unlikely to be able to undermine what many headlines have characterised as the rise of populist movements, but which may turn out to be far more transformative than what previous historical examples suggest.
Disenchantment with yesterday’s promises
German Philosopher Max Weber observed a growing sense of disenchantment among 19th century European elites who were taking their distance with religion in the name of enlightenment, rationality and science. (This theme is omnipresent in Weber’s work, see in particular The Sociology of Religion.) Central to this mind-set was the notion that Western societies should not be about the omnipotence of God but about the quasi-infinite capabilities of humankind and its ability to solve an ever-growing range of pressing problems. Disenchantment was therefore not pessimistic about the prospects of humankind. Relying on the Renaissance as a springboard for progress and the potential of science to increase societal welfare, this elite was convinced that Western societies had the ability to move forward even without religion as a mobilising force.
Disenchantment is therefore not new from a historical perspective. The willingness of any political force to put into question yesterday’s consensus about how the world should work and what the most efficient means of policy actions are can even be healthy for democracy by helping societies evolve. But its current manifestation, which seems to particularly focus on the failed promises of political and economic openness, should worry policymakers: if and when public opinions focus far more on past realities they want to come to term with rather than on the political, economic and societal projects they favour, continuous political instability and uncertainty are likely to become the new normal, thereby impeding any reform effort.
In the current global environment, public opinions are increasingly sceptical about the ability of their established government to protect them, economically and even physically. They are also increasingly convinced that rules of the game do not equally apply to everyone and that there is therefore a disconnect between the nature of one’s efforts and the likelihood of one’s success. This form of disenchantment with modernity may have lasting effects, in particular by making the possibility of protracted stalemates across the globe more significant in time.
When mainstream fail to deliver
The notion that traditional and mainstream policy recipes are not keeping middle classes safe was at the heart of many political debates and elections in recent months. This fuelled the rejectionist mind-set that we observed repeatedly.
In the United Kingdom, calling a referendum over the country’s membership in the EU was justified, argued then Prime Minister David Cameron in January 2013 speech, because of the popular discontent with Brussels that set the question of how London could cooperate with other EU-members to protect the British people and keep the country strong. This vote over Brexit in the United Kingdom admittedly took place in a country that was never particularly enthusiastic about the prospects of European integration. But the referendum shifted the burden of proof away from those who were unenthusiastic about the European project and who needed to offer alternatives onto the proponents of EU membership who were unable to make a convincing case in favour of it in the new global context.
And as hard as the proponents of EU integration in the UK tried, it proved ultimately difficult to convince a majority in public opinion that the small, incremental gains obtained within the European Union were worth the efforts and would unquestionably lead the country in a better position to face increased competition. Those who favoured Brexit were particularly empowered by the fact that no one was truly able to make the demonstration that the UK had everything to lose from leaving the European Union.
The 2016 US presidential election also offers a telling example of the rise of the rejectionists. It was tempting for pundits and non-US public opinions to see in Hillary Clinton an incarnation of continuity that the country would undoubtedly choose after two Obama mandates. What we failed to understand though is that Barack Obama won twice because he was able to respond to a very popular demand for political disruption. That demand persisted in 2016. It led states such as Pennsylvania, Michigan and Wisconsin, which had been consistently blue since 1992, to favour Donald Trump, the true figure of disruption, over Hillary Clinton, the establishment figure par excellence. Continuity, in the eyes of a significant chunk of public opinions in these states, did not lie in the Clinton candidacy but in the Trump candidacy.
This is unquestionably a paradox, considering that this about continuous disruption, rather than continuing stability as one may have expected. But this is at the same time a real demonstration of the public lack of aversion to uncertainty and to uncharted waters. The time when leaders built their credibility by inviting public opinions to unite in the wake of uncertainty has ended with the Donald Trump presidency: as a candidate, Donald Trump openly argued that the US should generate, not manage, global uncertainty so as to be stronger and more respected. What are regarded as the establishment and the elite have failed to deliver on their promise to keep Americans safe, security- and economic-wise. Trump’s ultimate victory suggests again that a significant number of Americans tend to believe they have more to lose from mainstream options – including those that put a premium on political and economic openness – than from unexplored ones.
When rigged rules favour the cheaters
What rejectionists take issue with is not simply the problem of possible social demotion: it is also about the inability to thrive in a world in which the rules are rigged. The perception no matter how hard one tries, the likelihood of succeeding is the same because of the insurmountable head start those well-off – today’s true insiders – have makes the current system all the more so questionable and easy to reject. This was a leitmotiv in many political discussions in the west, but was not limited to the west.
The inability of the Colombian government to get public support for its peace deal with the FARC guerrillas is evidence of this rejectionist rebellion against a dysfunctional system and suggests that the rejectionist mind-set is not a purely western phenomenon. The deal, designed to put an end to a half-century long civil war that had killed 250,000 people and displaced 6 million more, enjoyed broad support from the international community. But because it was perceived as far too lenient given the atrocities the guerrilla had committed over the years.
The promise of peace with the FARC did not assuage the need for justice after five decades of conflict and trauma that is likely to last beyond the war itself. The fundamental point of rejection was the price that the country would need to pay to ultimately enjoy peace: in their cost-benefit analysis of the deal, Colombians ultimately focused far more on the cost of easily forgiving yesterday’s enemies than the government ever did. Strikingly, as it was the case in the UK during the Brexit debate, the burden of proof shifted away from the sceptics of peace to those who defended the agreement.
France as a European paradox
The case of France presents a paradox. Unlike Germany or the Netherlands, the so-called established parties did not succeed in containing the populist wave: what would have been considered as mainstream candidates two election cycles ago, given the historical weight of their respective party in domestic politics, did not manage to convince. Discontent with political insiders who “rigged” the system in their favour also influenced the outcome of this election – as what disqualified at least one of the favourites, former Prime Minister François Fillon of the moderate right, were a series of financial scandals that weakened the candidate’s credibility and ability to carry out reforms.
Instead, in that respect, the configuration resembles that of the US, the UK and Italy, where mainstream failed as a reasonably viable option: Emmanuel Macron, a candidate without a party before the election, and Marine Le Pen, the far right controversial contender, faced-off in a historical second round that led to a reconfiguration of French politics. The rejection of both mainstream candidates and a dysfunctional system were therefore omnipresent.
But where France may still also be different from the US and the UK – in addition to striking a real difference with its European neighbours – is that disenchantment with politics allowed the political centre to emerge in the country, perhaps signalling popular consent to reform in an unprecedented way for the country. Recent strikes in France resulting from these reforms suggest that the jury is still out on this government’s ability to be a true force of change – though it has been able to carry out already a set of significant changes on labour markets and taxes. But because of this difference, France could emerge is a lab for political reinvention – unless further disappointment tips the balance in favour of the country’s extremist parties and further fuel the rejectionist sentiment we observed elsewhere.
The ultimatum from public opinions to policymakers
The transformative potential of the rejectionist mind-set is therefore significant: it is not only shaping political processes and outcomes in unforeseen ways, but also empowering public opinions to challenge what they see as rigged rules. The troubling outcome of this new reality is that, more often than not, the objective of rejectionists lies far more in undermining the ability of policymakers to move forward or in impeding them from protecting an unwanted status quo, rather than in improving the overall quality of the political system. This phenomenon sheds light on the stalemate many countries perceive they find themselves in. Our ability to understand how we got to this stalemate will play a decisive role in designing comprehensive and constructive policies in this new global environment.
In fact, if traditional politicians and policymakers seem at a loss when it comes to coping with this new deal, it is often because they have failed to realise that they are now dealing with public opinions that have nothing to lose and who are therefore increasingly less averse to uncertainty. A game theory experiment called the ultimatum game, developed decades ago, captured the complexity of this situation. Yet, we only seem to realise the significance of this game today.
The ultimatum game, revisited
The setting of the ultimatum game is quite simple. A first player is presented with a sum of money. She must decide how much to keep for herself and how much to give to a second player she has no means of communicating with. If the second player agrees on the split the first player offered, this split becomes effective. If, however, the second player disagrees, neither player gets any money.
Beyond the simplicity of the setup, the game is particularly significant because participants quickly understand that its solution lies in the combination of strategic bargaining and fairness. Human intuition, as well as lab experiments, suggest that while the first player will look to be strategic in her decision, the second player is likely to look for fairness. For instance, the second player should be satisfied with a 50-50 deal, which would be the fairest possible. But the first player could look to do better, without necessarily damaging her relationship with the second player: Would a 55-45 deal in her favour be that unacceptable for the second player? Or a 60-40 deal? Or an 80-20 deal?
Remarkably, in lab settings, the first player rarely goes to that extent and tries to remain “fair,” as a sign, perhaps of good gesture to the second player, in a bargaining process in which she cannot communicate with otherwise. (The literature is quite dense on this issue. See in particular “Bargaining and Market Behaviour in Jerusalem, Ljubljana, Pittsburgh, and Tokyo: An Experimental Study”.) Even more remarkable, though, is the fact that this is not the outcome that game theory would expect: it contends that the second player should accept any deal that the first player offers so long as the sum of money he is getting is strictly greater than 0. Refusing would mean giving up on all monetary gains.
This experiment suggests though that humans who play this game do not only pay attention to monetary gains, as they also care about non-monetary consequences of their actions. In the case of outcomes that are repeatedly unfair, the second player may consider that he does not wish this game to played this way anymore and that he needs to demand changes. In particular, if lack of fairness persistently characterises the outcomes of the game in the long run, he may be inclined to reject the proposal, even if that means bearing the cost of not getting any monetary gains in the short run.
The ultimatum game is quite illustrative of what happens in a political system in which politicians, who consider themselves as “reasonable,” try to negotiate with people who feel they have nothing to lose. As hard as these politicians might try to convince public opinion of their good faith through incremental benefits, they will likely fail unless the political climate fosters confidence and consensus. In particular, when there is a significant number of “outsiders,” or people fearing to become so, that feel they have nothing to lose when it comes to rejecting a new deal or a new global strategy.
Why the fear of demotion drives the agenda
As a result, the economics of the problem matter far less than its politics, especially when public opinion suspects that some chunks of society will benefit more – and thus, economic and societal inequalities will rise.
This is particularly significant when the prospect of secular stagnation – a sustained period of low economic growth and slow gains in real income – is fuelling fears of social demotion across a wide range of countries. The perception that the likelihood of losing a job and the responsibilities it entails, seeing the future generation’s prospects significantly worsen and observing those who do not play by the rules thrive is growing is at the heart of this fear of social demotion. While yesterday’s challenge was guaranteeing the survival of the tribe, today’s challenge is about preserving its rank in broader society – a challenge likely to be considered by many as a zero-sum game. The dream of the hard worker making it to the top – or helping future generations make it to the top – has been replaced by the fear of the insider wary of becoming tomorrow’s societal outsider.
This fear, which seems to be fuelling the sense of disenchantment that characterise today’s rejectionists, is the result of the evolving global income distribution that World Bank economist Branko Milanovic captured in his research and in particular in a graph that is commonly referred to as the “elephant chart”:
Whereas we would expect, looking at domestic data of income growth distribution, to see strong inequalities between the poorest and the richest, the situation at the global level is more complex: the data shows how, between 1988 and 2008, the income growth of Asian middle classes progressed far more significantly than those of the Western middle classes, and slightly more than the richest populations of the world. In other words, Western middle classes, who only enjoyed very modest income growth, find themselves stuck between two groups, the relatively poorer Asian middle classes and the richest of the world, whose income growth was phenomenal over the period.
While the link between globalisation and income growth is a source of debate among experts, it is noteworthy that this unequal distribution of income growth is a key driver of the rise of the rejectionists. In particular, it validates the two common perceptions that the cases of the UK, the US, France and Colombia discussed above pointed to.
First, traditional and mainstream policy recipes are not keeping middle classes safe, namely by guaranteeing their status in the world. As a result, public opinions feel justified in rejecting the status quo which undermines their survival ability in an increasingly competitive landscape.
Second, those who are truly taking advantage of the current business environment are those who are already well off – that is, those with a decisive head start that the less favoured cannot catch up with. This reality is all the more so harder to accept when political change is minimal and when mainstream recipes look like tools designed to preserve the unbearable status quo, that is, in turn, far easier to challenge or even to reject.
In a nutshell, not only is the situation becoming increasingly competitive: the rules of the game are also rigged to the extent that honest efforts are unlikely to be rewarded. This justifies radical change in the eyes of public opinion. The extent to which policymakers will be able to respond to this demand is largely uncertain but will be a crucial factor of success.
Time to reinvent policymaking
Before they shaped today’s politics, disruptors were – and remain – a particularly active group in business. And the fundamental lesson one could draw from the management field literature is that the only way to deal with these transformative agents is to ultimately disrupt the disruptors so as to regain some control over the global environment. This is by no means trivial: given the state of disillusion and disenchantment of public opinions across the globe, it is unlikely that there are low hanging fruits to grab in order to impress rejectionists who do not feel any burden of proof anymore.
In the future, policymakers that will be most influential are those who can truly reinvent policy approaches. There are a wide range of policies that would correspond to that goal. Two are discussed below: protecting people rather than jobs, and being pragmatic enough to ultimately pay off those who are likely to be the most significant losers of change and thus the most forceful rejectionists.
Protecting individuals, not jobs
In the era of “fake news” and “alternative facts,” populist movements often claim a monopoly in speaking truths to the public. Among those truths, central is the notion that the “establishment” has not done enough to protect jobs and industries by avoiding – let alone forbidding – outsourcing. It is particularly central because this view is perhaps the most widely shared among populists and their followers. It is particularly influential because it serves as a strong justification for protectionism – and, in some extreme degrees, for a nationalistic and anti-immigration agenda.
But if policymakers are seeking to undermine populists, they bear the burden of proof when it comes to refuting these so-called truths. In particular, a rising consensus in the economic literature suggests that automation and technology, not globalisation and free-trade, are the main culprits when it comes job destruction. The real offensive argument that would truly undermine the populist discourse on this topic would point to the fact that while governments have the authority to close borders and curb free trade, they are unlikely to have the power to stop technological change. Protectionism is therefore unlikely to provide the protection rejectionists are yearning for.
Instead, the real response to job destruction may lie far more in protecting individuals rather than jobs, as French Nobel-laureate Jean Tirole has suggested. In practice, protecting people requires substantial investments in life-long training and in improving labour market fluidity. Disruptive policy in this field would lie in leveraging the amount of information available online – both in terms of content individuals need to master to acquire additional skills and in terms of positions and job openings – to help workers increase their degree of awareness of their employability and what they lack to move forward. The policy or business entrepreneur able to merge Coursera and LinkedIn may achieve far more in terms of improving employment perspectives than any populist or, for that matter, any rational and traditional approach ever would – unless it is the private sector which decides on that merger in a scenario that one could deem far more likely.
The economics of the problem would once again dominate the messy and easy to manipulate politics of it. That would provide a clean slate to policymakers in their effort to rebuild the broken societal consensus that once constructively mobilised public opinions.
Paying off the losers of the game
Disruptive policymaking, even in democratic societies, even with the appropriate safeguards and safety nets, and even with more empowered individuals, can undoubtedly lead to the same instability that rejectionists have generated. This is particularly true if there is an irreducible share of vulnerable people in society that are especially ill-equipped to face global competition. Unless policymakers look to compensate them, they are unlikely to undermine the current momentum of rejectionists. The name of the game is not “pay to play” anymore, but “pay to reform.”
Pay to reform would require a shift away from discretionary spending to maintain social peace and keep core constituencies happy, onto another form of discretionary spending, meant to facilitate reforms by twisting the cost-benefit analysis of those that have the most to lose from change. The first criterion that leads a government handout to take place should be whether or not such a handout can make a reform easier, not how much popularity it will bring. This is the ultimate form of investment in the future considering that it enables governments to remove the remaining obstacles to needed change by helping actors in obsolete industries transition out of an activity and into a newer one.
Ultimately, in order to nudge the most vulnerable who likely have a lot to lose from these reforms and when empowerment is unlikely to suffice, governments can also rely on direct cash transfers. Analyst Antoine Levy, in an award-winning essay, suggested offering workers from industries that are particularly vulnerable to global competition – and to automation and technological change, one might add – compensation indexed on their country’s GDP growth. In addition to shifting the cost-benefit analysis of these workers, such measure – or any variant based on other indicators for that matter – would also provide additional social glue to mobilise public opinions around consensus-building projects. That social glue would lessen the effects of the most divisive debates that have allowed the rejectionist set of mind to emerge.
Neither left nor right: time for a political reconfiguration
It would be hard to characterise these two examples of disruptive policies – protecting individuals rather than jobs and paying the most vulnerable to carry out reforms – as either progressive or free-market oriented. To the extent that they are designed to protect people, and vulnerable populations in particular, progressives could justify both on the grounds of necessary redistribution and safety nets. To the extent that they are designed to empower individuals and to improve the overall ecosystem in which they can thrive, free-market proponents could justify both as well on the grounds that they allow for reforms to happen.
In fact, contrary to popular belief, it is not impossible to reconcile empowerment and protection. But doing so requires far more disruption than established policymakers have been willing to take on in the past. And the question is not whether or not the system can absorb such shocks: public opinions have already demonstrated that they not only can, but also inclined to generate them if policymakers fail to do so. The real question lies in determining what upset and disappointed rejectionists turn to next if disruptive policymaking does not occur now.