The eclipse of the centre right should worry us all
Populism and deglobalisation are feeding off each other, fuelling global instability
I have two items for you today. Below is a piece on the resurgence of populism across the West and where this may lead, prompted by a new book on the future of the centre-right in Britain. I’ve also included links to five pieces that I read this week that I thought worth sharing. Let me know what you think. And please do share with others who might be interested and subscribe if you have not already!
For a time over the last couple of years it was possible to imagine that populism was in global retreat. Joe Biden had replaced Donald Trump as US president in 2021 which showed that America’s constitutional arrangements still worked, despite Trump’s attempts to subvert them. Populists had lost power in Austria, the Czech Republic and Slovenia. Emmanuel Macron defeated Marine le Pen in a French presidential election for a second time, while Jair Bolsonaro lost his bid for re-election in Brazil. In Britain, the arrival of Rishi Sunak as prime minister just under a year ago promised to draw a line under the chaos the Boris Johnson and Liz Truss years.
It was this receding of the populist tide that no doubt prompted David Gauke, a former British cabinet minister, to pull together a book of essays by other prominent members on the centre right of British politics several of whom like Gauke had been purged from the Conservative Party by Boris Johnson at the height of the Brexit wars, on “The Case for the Centre Right”. Published on the eve of the Conservative party annual conference, it was clearly written with an eye on the anticipated battle for the soul of the party in the wake of the Tory’s likely defeat in next year’s general election - a battle that until this week, they may have entertained some hope of winning.
The book makes the case for working with international partners, particularly the European Union, to address common challenges even if that means accepting some limits on national decision-making. There is a chapter by former attorney general Dominic Grieve on the importance of respecting the rule of law and abiding by international treaty obligations. Another by Gavin Barwell, former prime minister Theresa May’s chief off staff, on how to reverse the damage of Brexit with an improved trade deal with the EU. Amber Rudd, a former energy secretary, makes the case for working closely with the EU on energy policy to achieve net zero targets.
Populism, Polarisation and Post-Truth
But if, as my former Times colleauge Danny Finkelstein argues in his chapter, the essence of centrism is a willingness to acknowledge trade-offs and the need for compromise, Tory party members in Manchester showed little appetite for either. Instead there was plenty of evidence of what Mosies Naim, the Venezuelan political scientist who is cited by Andrew Cooper in a chapter on the realignment of British politics in recent decades along cultural lines, dubbed the “3P’s” that politicians use to undermine democracy: populism, polarisation and post-truth.
The stars of the conference were Suella Braverman, which her inflammatory claims of a “hurricane” of migrants heading to Europe and divisive attacks on a supposed “woke” elites with “luxury beliefs”; former prime minister Liz Truss who continues to bang the drum for tax cuts, unembarrassed by the memory of her own calamitous 49 days in Downing Street; and Nigel Farage, the former UKIP and Brexit party leader who spent the best part of two decades campaigning against the Tories but was treated in Manchester as a hero. Meanwhile a succession of cabinet ministers took to the podium to give oxygen to online conspiracy theories about 15 minute cities, or attack Labour for fake policies such an alleged meat tax that are no part of its agenda.
This Tory drift back towards populism reflects a global trend that has been reasserting itself in recent months. Last weekend Robert Fico, an avowed admirer of Vladimir Putin, topped the poll in Slovakia’s general election, putting an outspoken opponent of arming Ukraine in contention to become prime minister of a European Union member state. Next weekend’s elections in Poland could see the right wing Law and Justice party retain power in what many observers fear could lead to a further erosion of liberal democracy. In America, one recent poll put Donald Trump 10 points ahead of President Joe Biden in next year's race for the White House. And after a remarkably trouble-free first year as prime minister, there are signs of trouble brewing in the Italian bond market as Georgia Meloni’s right-wing populist government clashes with the EU over its budget plans.
How big a risk does this new populist wave pose to the fragile global economic outlook? The optimistic take is that, populism, loosely defined as political projects that offer simplistic solutions to complex problems which they blame on “the elite”, have been a feature of western politics since the global financial crisis of 2008. But in most countries, their capacity to inflict damage has been contained, usually because they have been obliged to share power in coalitions where they have had to confront political and economic realities. Even in those countries where populists have been able to grab power and inflict real damage, notably America, Britain and Greece, the checks and balances of liberal democracy have ultimately worked to restrain them.
This Time May Be Different
This time, however, may be different - and what happened in Manchester this week shows why. Across western democracies, the traditional mainstream conservative parties are being increasingly captured or eclipsed by the populists. In France, the old centre right party has effectively ceased to exist as a political force. In Spain, the Popular Party has drifted well to the right to see off an electoral threat from the breakaway Vox with whom it tried and failed to form a coalition government after the recent general election. In Germany, the Christian Democrats are similarly shifting rightwards to try to counter a surge in support for AfD, whose strong anti-immigrant message has lifted it to second place in polls ahead of next year’s election. In America, the Republican party now appears completely captured by the Trump wing.
The problem for the centre right is that the international rules-based order that it has long seen as the best guarantee of security and prosperity is now seen by many on the right as a source of insecurity, particularly when it comes to immigration and control of national borders. Its task is made harder by the fact that many of the institutions that underpinned that rules-based order including the United Nations, G20 and World Trade Organisation are barely functioning, hamstrung by vetoes by countries such as China and Russia. Meanwhile that rules-based order is breaking down as governments are engage in subsidy races, block exports of technologies, restrict access to their own markets and “friendshore” supply lines. For self-styled “national conservatives”, the nation state is the only guarantor of security and resilience.
The challenge for the centre right is that it is no longer enough to make the case for free trade, open markets and international cooperation. It needs to articulate how these should operate in an era of deglobalisation and heightened geopolitical tensions. That challenge will become harder as the populist wave gathers momentum, since this make it harder to reach international agreements, making the world more unstable. If Fico becomes prime minister of Slovakia, for example, then even if restrained by a coalition partner, he will be able to complicate EU support for Ukraine as well as make it harder to achieve consensus on other important issues such as migration and climate change. And if the populist-in-chief is re-elected as US president next year, the future of the entire post-war order would be cast into doubt.
Populism is both a symptom and a cause of deglobalisation. The two feed off each other. Governments must try to manage the transition to a new world order in a way that increases security while minimising economic costs. But as I wrote in this column for The Times in 2021, the evidence of the last great era of deglobalisation in the 1930s is that once countries start to fear they can no longer count on the security of the international system, or the functioning of global markets, to supply vital resources, political pressures can exert a dynamic of their own. The eclipse of the centre right suggests that this process is already underway.
Something for the weekend…
Here are five pieces that I read this week that I found interesting. Let me know what you think! And please do let me know of you read this week that you think might be worth discussing in a future post.
In this interview with former Financial Times editor Lionel Barber for Prospect Magazine, Andrew Bailey tries to justify the Bank of England’s record in tackling inflation. Bailey’s defence amounts to “well, everyone got it wrong”. Personally, I don’t think that’s good enough. The Bank’s primary error was to fail to spot the role that an extraordinarily tight Labour market with over a million vacancies was playing in driving inflation. This was something that I had noted in a column in January 2022, having been alerted to the extraordinary correlation between vacancies and inflation over several decades by Ian Harnett and David Bowers at Absolute Strategy Research. Yet it took the Bank until August 2022 to acknowledge the connection. Meanwhile Bailey’s bizarre refusal, not fully addressed in the interview, to acknowledge Brexit as a significant source of Britain’s economic woes dented his and the Bank’s credibility in the City, raising questions about its independence and the extent of Treasury capture.
Adam Posen is one of the most interesting and provocative economists in the world and the president of the Petersen Institute for International Economics certainly put the cat among the pigeons with an essay in the August edition of Foreign Affairs. This suggested that President Xi’s repressive zero Covid policies that led to China being locked down for the best part of three years has permanently damaged the Chinese economy by bringing about a shift in business and consumer behaviour. Since then Posen has defended himself against two of his own colleagues who believe that the current slowdown in the Chinese economy is simply a blip and now in the latest edition of Foreign Affairs against two eminent economists who argue that the morbidities in the Chinese economy predate Covid (Who Killed the Chinese economy?). Personally, I find Posen’s analysis persuasive, as also his conclusion that a permanent shift to slower growth in China creates opportunities and risks for the West. At some point I will write a layman’s summary of the arguments. In the meantime, do have a read.
This piece by my former Wall Street Journal colleague Greg Ip on “Rising Interest Rates Mean Deficits Finally Matter” is certainly worth reading. The big story of the week has been the extraordinary rise in long-dated US Treasury yields which have risen above 5 per cent for the first time in 30 years. Ip’s argument is that this reflects the market’s growing concern at America’s giant budget deficits, which it continued to run even as inflation surged. Ip is not suggesting that America is about to have trouble selling its bonds, but that as questions about its long-term solvency grow, it will have to pay more to borrow. Personally, I think this only tells part of the story. It is not the deficits per se that are the problem, nor even the overall size of the debt. After all, other big economies including Japan and Italy have far higher levels of debt to GDP. The problem is how the deficits are being used. As in Britain, and most western economies, decades of borrowing to fund consumption at the expense of long-term investment is starting to raise questions about long-term debt sustainability. Part of the answer lies in honest accounting and a focus on public sector net worth, as I argued in this post.
Related to the above, I found this piece in Foreign Policy magazine, “America’s Love of Sanctions will be its downfall”, by Christopher Sabatini from Chatham House particularly insightful. I’ve written a few columns over the years, most recently here, wondering about the consequences of the West’s increasing use of economic warfare for the global financial system and dollar supremacy, a concern raised by successive US Treasury secretaries. While the consensus among financial commentators is that so-called de-dollarisation is a low probability but high impact event, Sabatini raises, for me at least, a new concern: that western sanctions on rogue states such as Venezuela are driving the distressed bonds of these countries into the hands of other western adversaries. That not only gives them a much greater hold over those countries’s governments but also, crucially, their strategic assets including oil reserves. I don’t know what the alternative is to sanctions, perhaps Wealth of Nations readers have ideas?
I mention in the piece above the upcoming Polish elections and the risk to Polish democracy. This column by Radek Sikorski, a former Polish defence minister and now a member of the European Parliament, published here on Substack gives a vivid account of the erosions of democratic norms in Poland under the current right-wing Law and Justice party government. It should be noted that Sikorski is of course a prominent member of the opposition Civic Justice party which is currently trailing in the polls. Nonetheless, what he says tallies with what others have reported. Read it and decide for yourself!