Originally published at Project-Syndicate | Dec 13th, 2024
Ultimately, populism will always be a temporary phenomenon because its economic policy prescriptions simply do not work. Parties that want to position themselves for success over the long term must provide sound economic management.
WASHINGTON, DC – Understanding the return of populism is crucial for making sense of today’s politics. This is especially true in the United States, both for President-elect Donald Trump and congressional Republicans as they prepare to govern, and for the Democrats as they try to recover from their stunning defeat.
The populism that fueled Trump’s rise in the mid-2010s has its roots in the 2008 global financial crisis. The ensuing recession and sluggish recovery caused significant hardship for well over half the workforce, sowing anger and discontent. The real (inflation-adjusted) median wage did not return to its 2007 level until 2014. As I documented in a 2021 paper, had the expansion ended then, median real wages would not have recovered despite five years of economic growth.
In addition to the direct economic costs, the crisis shook faith in the financial system and in the government’s ability to promote the general welfare. This was fertile soil in which populism – on both the left and the right – could grow.
Populism is a term often used but seldom defined. I see it as comprising three features: a worldview that pits “the people” against “the elites”; pessimism about current and future economic outcomes; and a desire to turn inward as a country. In the US, these tendencies manifested themselves first in the rise of the Tea Party on the political right and the Occupy Wall Street movement on the left. By 2013, they had pushed President Barack Obama to declare (incorrectly, in my view) that inequality is “the defining challenge of our time.” After that, Trump captured the leadership of the Republican Party, and the populist firebrand Bernie Sanders nearly did the same in the Democratic Party.
Because the 2008 crisis was global, there has also been a populist resurgence in the United Kingdom and Europe, and this conforms to the historical pattern. Evidence from the last 150 years shows that populism is a frequent response to financial crises. The good news is that the same evidence shows that populism recedes, typically returning to its pre-crisis level after about ten years.
To me, it did feel like populism was on its way out in 2018. There was growing recognition that the typical working household’s economic outcomes were improving rapidly. America was less angry, and one could imagine facing the future together with more confidence.
But just as America was regaining a step, the COVID-19 pandemic struck in the early months of 2020. As with previous pandemics, political and social disruption followed, and the widespread perception of catastrophic elite failure breathed new life into populism.
Such perceptions were not always incorrect. Restrictions on economic activity chafe in a country so committed to individual liberty, especially when public-health officials seemed at times to make up guidance – like the six-foot rule – on the fly. Even after vaccines and therapeutics had been widely deployed, parents had to deal with ridiculous mandatory quarantine periods for routine childhood illnesses. Tragically, rather than reopening schools in the fall of 2020, elite opinion kept children out of classrooms for far too long; many incurred educational losses from which they will never recover.1
For those of us who are troubled by populism, the upside of this recent history is that it confirms the temporary nature of the phenomenon. If US workers can experience, say, four or five years of solid real wage growth, populist sentiment should wane again, like it did before the pandemic.
To be clear, my expectation is not that Trumpian populism will be extinguished, just that it will become less potent and politically consequential. There has always been a populist strain on the political right. Pat Buchanan’s political success in the 1990s prefigured Trump’s. In the 1996 Republican primary contest, Buchanan won 23% of the vote held on or before Super Tuesday. In the 2016 primaries, Trump won 34% of the vote in early contests and Super Tuesday states. Returning populism’s success in future GOP nominating contests to Buchanan’s share could be thought of as a return to the baseline.
The lesson for the Democrats is that economic management matters. Declining real wage growth in the half decade following the 2008 financial crisis ushered in this populist chapter of US history, and the rapid price inflation (which eroded recent nominal wage gains) of the past four years put Trump back in the White House.
After President Joe Biden belatedly dropped out of the race, many Democratic leaders thought that people would elect Vice President Kamala Harris in order to avoid a candidate whom more than half the country dislikes. But more people ended up voting for Trump (despite disliking him) than in 2020, largely because they correctly understood that the Biden administration’s policies had contributed to rapid inflation, stagnant real wage growth, and record-high consumer prices.
There is also a crucial lesson for Republicans. Voters may be in the mood for a president who will experiment with trade wars and draconian immigration measures, but that could change faster than many think. If Republicans want to win again in 2028, they will need to embrace policies that make peoples’ lives better over the next four years. Populist policies do not work. Smart Republicans with an eye toward lasting political success will seek policies that do.
Michael R. Strain: Director of Economic Policy Studies at the American Enterprise Institute, is the author, most recently, of The American Dream Is Not Dead: (But Populism Could Kill It) (Templeton Press, 2020).
