March 23, 2017

The Centre is Not Holding: It’s Not a False Alarm!

~ By Raj K Mitra and Shailesh Jha

It is always possible to bind together a considerable number of people in love, so long as there are other people left over to receive the manifestations of their aggressiveness. – Sigmund Freud

If we talk to a political analyst today about the overarching trend in global politics, chances are that the comparison of the world today with that in the 1930s will be easily invoked. There are indeed familiar themes – rising racial intolerance, trade protectionism, hostility to immigration, insecurity about technological progress, frustration with conventional politics and the search for a “hero” amid this confusion. Theoretically, it’s a fertile ground for right-wing populism.

Familiar as these motifs may seem, history may rhyme, but it rarely repeats itself. The rise of right-wing politics we see today has similarity in its origins to the inter-war right-wing radicalism in Europe. It has its genesis in the Great Recession of 2008-09, much as that of the right-wing politics of the 1930s lay in the Great Depression and the collapse of the Gold Standard. That said, the legacy of the current right-wing political resurgence, in the decades to come, is likely to be less violent, but more enduring in its impact on the global economic order.

It is tempting indeed to generalize and basket all nationalist political parties–from Donald Trump’s Republicans in the US to Theresa May’s Conservatives in the UK, from Vladimir Putin’s United Russia Party in Russia to Narendra Modi’s BJP in India –as the manifestation of a global revival of authoritarian, exclusivist politics. However, much of what is called the “Right” today is defined less by what it is, and more by what it is not–an opposition to the left-of-the-centre social democratic political bloc.

Perhaps, it’s a natural product of radical political and economic challenges in “extraordinary times” – when old powers are waning and new alliances are taking center stage. And, in this sense, even President Xi Jinping’s pro-Market faction within the Chinese Communist Party could be considered an incarnation of an alternative to the traditional Left. It is better then, perhaps to describe, the rise of the Right as the displacement of the left-liberal social-democratic political consensus.These alternatives to the center-left occupy a large spectrum. Like a spectrum, the ideological colorsare varying combinations of three primary ingredients- protectionism, intolerance to immigration, and welfare chauvinism.

It is not as if concerns and policies of the 21st century right-wing parties are entirely novel. Ironically, the political Left has often voiced before their modern anxieties about globalization and inequality. What then led to the collapse of that classic left-wing mobilization called Occupy Wall Street and the appropriation of its concerns by the Right? Fundamental changes to the labor market structure, greater global connectivity, highly opinionated dissemination of information and a misplaced faith in the wisdom of markets to distribute the fruits of globalization might be some explanations. We explore how each of these trends has affected the three aforementioned ingredients that form the blueprint of the modern Right’s political philosophy.


To understand the emergence of protectionism and the Right’s increasing opposition to the flow of capital and goods since the Great Recession, we need to turn our clocks a few decades back. The 1980s-90s saw the state’s retreat from economic activity around the world, though at different rates. Thatcher demolished the sick parts of British socialist state and welfare system, Reagan rationalized taxes, China opened its doors cautiously to the private sector, India embraced market reforms and in dozens of eastern European states, the Soviet-style command economy was being replaced by a private sector gradually integrating itself to the EU market.

Open competition was politically endorsed. Talented immigrants were welcomed across borders. Through mergers, acquisitions and internationalizations, firms expanded on a global scale. The transformation brought about by the rise of Internet, telecommunications and financial deregulations in emerging markets was almost as paradigmatic as that of the invention of steam engine and printing press in the West centuries earlier, particularly because, these societies had been at the exploitative end in the previous golden age of globalization (1870-1914). Per capita income in many developing countries doubled or trebled in a generation and inflation began to converge steadily towards a lower global average.

At the same time, these years of tumultuous resurgence in emerging markets produced some losers too –mainly workers in Europe, the US and the UK who lost out to their cheaper counterparts in China, East Asia, Latin America and former Soviet satellite states. However, this wasn’t perceived as a problem so long as de-industrialization in developed countries was compensated with an expansion in lending to households, by national and international banks. During 1980-2007, international bank lending rose a hundredfold, from USD324 billion to USD35 trillion. Markets, bankers and politicians were betting on a better future and rising incomes to help bring about a convergence in income levels of people across borders; until 15 September 2008.

British philosopher John Dunn presciently categorized the developed world society in the latter 1990s, early 2000s into three tiers – those who can take good care of themselves in the market economy (educated elite and talented immigrants); those who can hold their own because they belong to surviving units of collective action with a threat advantage out of all proportion to their value of labor (bureaucrats, PSU employees); and those who are already going under because no one would choose to pay much for their labor (blue-collar white workers). It is this last group whose ranks have swelled and voices become strident in the last nine years. Strangely, the rise in inequality did little to raise the appeal for the radical Left, which had been consistently critical of globalization and had for generations claimed a dominant share of votes among economically disenfranchised voters.

In addition, the paucity of left-wing ideas in the economic sphere to break new grounds beyond Karl Marx has challenged the Left’s alternative standing to traditional political parties – in India and elsewhere – as those ideas increasingly seem based on the interpretation of a world that probably existed in the 1950s. Instead, the Left has banked heavily on its authoritarian patronage politics and forceful exclusion of the non-patronized to stay relevant. Consequently, the Left has been usurped by the Right rhetoric of defending a strong welfare state and protecting social welfare benefits.

The deindustrialization and rise in unemployment in developed countries in the past two decades was not the result of capitalists preying on labor and replacing them with machines, but rather finding a new working class eager to take up production process – in Bangladesh, Vietnam, China, India or Mexico. Any exhortation of the Left asking “workers of the world unite” would have sounded quite disingenuous to the workers in UK’s de-industrialized north, whose jobs were perhaps being shipped to China.

Working class solidarity, in the present age of inequality, thus has become an anachronism, in so far as it seeks to universalize the misery of labor. For workers in the US, the workers in the other country were a problem – whether answering clients from call centers in India or servicing IT complaints with H1B visas closer home. A political rhetoric that claims to protect the interests of one particular nationality of workers over the others became more seductive.

A less understood, but equally strong force that makes the radical Right the more attractive choice to the people left behind by globalization is the change in the nature of employment today. Non-manufacturing sectors dominate the global economy today and few, if any, have strong unions. This lack of unionization, unlike manufacturing and mining sectors, is not an oversight. Indeed, the typical structure of a privately owned banking, retail or consulting firm makes it difficult for workers to bargain collectively or unionize. Usually a manufacturing unit has a stark contrast in the distribution of the fruits of labor, between a small and prosperous senior management and numerous and sparingly provided factory workers.

What changes in the non-manufacturing sectors is the presence of a middle management, where a complex hierarchy of privileges and distribution of incentives exists. This middle management consists of workers who have gained an increasing share of profits, as they have risen through the ranks, due to their ability to direct and lead other workers. Furthermore, modern managerial practices incentivize individual excellence over peers for securing promotion and prospects of career advancement. Even such a marginal decentralization of wealth and authority creates powerful reasons for workers to desist from forming interest-based unions.

In such a society, when faced with economic uncertainty, people do not instinctively rely on their colleagues for support, who are often their competitors. Rather, they lean on groups organized along racial, religious or cultural lines outside of their workplace. Ergo, the political Right, rather than the Left, becomes a beneficiary of this confusion. This anti-trade strain is the strongest in the modern American Right, where deindustrialization is perceived to be an outcome of an ever-widening trade deficit with China, Germany, Korea and Mexico.

Intolerance to immigration

If protectionism is the dominant animating force in the American Right, hostility to immigration is what really unites Right-wing parties in Europe. The threat to a proud local culture from “aliens” is exactly what drives the support for Right-wing parties in Europe, where despite a financial crisis, social inequality in the native population hasn’t risen as much as it has in the US, not least due to the robust and comprehensive welfare systems instituted in the postwar decades of 1950-70. Reprisals against foreign workers or cultural others in times of economic strain are not new to Europe. A prominent example is indeed the rise of fascist parties in inter-war years, which rode strongly on the deep-rooted anti-Semitism in the European culture, blaming Jews for the misery borne by the continent after the collapse of the Gold Standard.

More recently, stagnation in Europe following the Arab oil embargo in the 1970s saw widespread popular opposition in Germany, France and the Netherlands to foreign workers from Eastern Europe, Turkey, Portugal and Spain. To that extent, the resurgence of the Right was then expected even after a prolonged crisis in the Eurozone that lasted from 2008 until 2013. However, three factors are typical to the anti-immigrant sentiment prevailing in Europe in particular, and the developed world in general.

First is the size of the influx. Since 2015, Germany alone has taken in 1.1 million immigrants from the war-torn Middle East and Africa (1.3% of its population). The story has been similar in varying degrees in Scandinavia, Netherlands and Italy. The flows of refugees and asylum seekers across Europe over the past two years have been at an unprecedented rate since World War 2. However, unlike the late 1940s, norms of post-war mainstream politics dictate that the governments must ensure that the refugees are provided a minimum standard of living and security. The increasing burden of refugees on the state, many of whom are illiterate and not economically very productive, has shifted the opposition against immigrants from political fringes to the mainstream.

Second, for a big section of modern immigrants, war is not the reason for leaving their country. Globalization has encouraged and legitimized economic migration, where people cross shores to work for firms that promote and encourage talent. Immigration from South Asia (India and Pakistan) is a fitting illustration of this trend.

The spread of supply chains and corporate operations has also heralded a globalization of aspirations. A hard working young engineer in India can see Satya Nadella and possibly dream of emulating his success in the United States. In that sense, the changing racial composition of boardrooms in Fortune 500 companies is perhaps the unprecedented and lasting legacy of the current age of globalization. However, since the Great Recession, this successful “other” that inordinately benefitted from the dissolution of borders through its own merit and hard work has stood out in sharp contrast, perhaps because of its racial origins, amid the general deterioration in the quality of jobs and rising economic insecurity.

Cultural stereotyping and railing against immigrant communities from developing countries has found an eager audience, especially in the Anglo-Saxon world (English-speaking countries), where these communities were considered civilizationally inferior colonials not long ago.

Third, it wouldn’t be out of place here to mention the catalytic impact of “Filter Bubble Effect” on inflaming these passions. Facebook, Twitter and other forms of curated social media have become cognitive echo chambers. One hears the news one believes in, opposing views are blotted out, and videos confirm one’s worldview. People become a data point to be sold, with meticulous analytics on their political and psychological leanings.

In such a world, extreme outcomes and a lack of consensus are a norm. It was thus not surprising that most people polled ahead of the Brexit vote believed that their side (In or Out) would win with an overwhelming majority. Results were a tight race. However, if you supported Brexit, all the news you would have read in May and June last year would have confirmed that the nation was with you and your choices.

The reality is not very different in India. Every event, whether a budget or a terrorist attacks, is seen through diametrically opposite worldviews, depending on whether you support or oppose the current government. In a world of vanishing middle ground, it is often difficult to elicit a proportionate response to complex situations, such as the pros and cons of immigration. No wonder, hostility to immigrants has found fanatical adherents in the age of social media.

Welfare chauvinism

The public desire to minimize dissent and seek security in a strong political leader gives rise to the third component of the modern Right, particularly dominant in emerging economies. This particularly manifests in countries that are new nations but old cultures. Furthermore, they have all, over the past three decades witnessed the dismantling of moribund economic systems in favor of a dynamic market-driven economy. However, a breakneck economic growth has also created an existential anxiety in these societies, which for generations were feudal and preferred stability to change.

In India, the emergence of Narendra Modi’s BJP as the dominant national political force may in essence seem to be conforming to the broader rightward shift, but the similarities are as stark as the differences. By definition, Right-wing parties pander to the majority but, in India, the majority defined solely on a religious context isn’t one block with various caste and regional issues coming into play. Hindu nationalism is as utopian as Leftist pragmatism. In fact, much before the Ram Janmabhoomi issue in early 1990s, BJP leaders (then Jan Sangh) being aware of the limitations of ideologies in a pan-India context shunned the idea in favor of an ‘aggregative’ approach in 1977.

On the other hand, although the BJP inherited the economic right legacy of the Swatantra Party (which became defunct in 1974) and favored the abolition of the ‘License Raj’ and the empowerment of the private sector, the party essentially remained opposed to the idea of large corporations enjoying privileges in the economy. The Narasimha Rao government’s liberalization policies by dismantling the Nehruvian socialist structures exposed BJP’s inherent economic policy contradictions while its strong roots to Nagpur ensured its branding as a Hindu nationalist party. So, what changed in 2014 so drastically to make BJP the dominant political force?

With the center-left suffering from power fatigue and the Left still caught in a time warp unable to offer a workable alternative model, Narendra Modi’s arrival in the national political scene perfected BJP’s ‘aggregative’ approach – with the ‘achhe din’ slogan having an overarching impact on a heterogeneous electorate. The Hindutva ideologues saw a messiah in him, the backward class and castes (with Modi himself hailing from the MBC) celebrated his rise to the top, the educated middle class was in awe of his no-nonsense style of governance, and market liberals played cheer leaders to the Gujarat model of economic growth.

That said, whether it’s Modi’s victory or Trump’s or the Brexit vote, the common thread isn’t the world’s ideological shift to the Right, but the outburst of a simmering anger against the ‘liberal elites’(alienated from the sections they claim to represent) by cozying up to the supposedly authoritarian leaders often with questionable world views and not-so-flattering opinions about how the world has worked since the end of Cold War. The “put us first” welfare chauvinism is too hard to ignore — be it Narendra Modi’s ‘Make in India’ or Donald Trump’s ‘Make America Great Again’ or Nigel Farage’s ‘We Want Our Country Back’.The underlying tone is about regaining the control of our own fate that has been hijacked by anonymous elites.

However, the biggest beneficiary of this upheaval could be Vladimir Putin’s Russia. When nations across the world were coming under Communist control in the 1950s, US President Dwight Eisenhower had warned about the possible disintegration of the free world due to aggressive Soviet expansion. Billions of dollars were spent and millions of lives sacrificed to contain Soviet influence until the collapse of the USSR in 1991. However, with the European Union’s stability under threat and Russia’s growing assertiveness in world affairs, the tide is turning against ‘American-dictated Russophobic hysteria’. Persistent refugee crisis and a stagnant economy could very well dash the hopes further of a united Europe.

On the other hand, China could emerge as the biggest loser. In a recent speech at the World Economic Forum (which was ostensibly created to promote economic liberalization), Chinese President Xi Jinping warned against any protectionist measures: ‘any attempt to turn off the flows of capital and people around the world will be like trying to divert a river into lakes and creeks. It will not be possible.’ Although Xi’s speech was short on specifics, there’s no denying the role played by neoliberal economic policies in making ‘communist’ China an economic powerhouse and re-legitimizing the Chinese Communist Party that had been shaken in 1989. China found itself in the heart of the global economic engine not out of ideological “conversion,” but out of necessity to create jobs and build infrastructure.With China continuing to mitigate the domestic economic slowdown and Xi’s assumed 10-year tenure reaching half-mark in 2017 autumn, he would attempt to deepen his grip on the party further in the run-up to the party congress. Thus, any sudden shock on the global trade front could destabilize his plans and trigger renewed political jockeying by his opponents in the party for influence.

Thus, 2017 will test the endurance of the Right across the globe, especially in Europe hit by terror attacks and refugee crisis, with Germany, France and the Netherlands scheduled to hold national elections. These countries have witnessed the growing popularity of far-right dispensations that aim to capitalize on economic, political and ethno-nationalist frustrations of the times. In the months ahead, it would be clearer whether such popular support translates into political power for the far-Right. If opinion polls are an indicator, a new sustainable ideological landscape seems emerging, but then opinion polls could not indicate a Brexit or a Trump victory beforehand.

However, the rise of the far-Right or the alt-Right isn’t a false alarm, irrespective of impending election outcomes as they are increasingly cementing their place in the mainstream political discourse and may trigger a broader cultural shift with strong resistance to the idea of political correctness. With Farage playing the role of a catalyst (though UKIP is unlikely to emerge as a potential contender for power soon), Trump’s victory has provided a roadmap for the far-Right across the Westand a strong wake-up call for the Left and the aloof from their ideological slumber. Will the Centre-Left parties reclaim their lost grounds anytime soon? Unlikely. Nobel laureate behavioral economist, Daniel Kahneman, argues that regret is rare; people always find explanations that fix the blame on someone else.

(Shailesh Jha is an Economist focusing on Asia, with over five years of experience in economic and policy issues in the region. He has worked with Abu Dhabbi Commercial Bank and Credit Suisse, after graduating from BITS Pilani in 2011.

Raj Mitra is a freelance communication consultant and a leading online columnist on start-ups. He led the Investment Publishing Unit of Credit Suisse from 2009-16. He has also co-authored a best-selling analytical biography of PM Narendra Modi in Bangla, called Swapner Feriwala.)


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