A proportionate political and policy response to populism will require that we draw from both sides of our ideological spectrum, writes Sean Speer.

By Sean Speer, January 28, 2019

In this article, I wanted to speak about some of the most important questions facing our societies.

Why are large shares of our populations turning to new and disruptive political vehicles? What does it say about our current political and policy frameworks? And what can and should we do about it?

These questions transcend ideology and partisanship. They’re bigger than the typical tensions between efficiency and equity, freedom and equality, and Liberal and Conservative (or Democrat and Republican) that we’re accustomed to.

We aren’t merely talking about competing political preferences between the 40-yard lines of public debate. There’s something more profound going on. Our basic frameworks are under strain.

Some of these disruptive public sentiments are no doubt unjustified. They reflect the forces of ignorance, demagoguery and possibly worse. But the idea that the present populist moment can be principally explained by a combination of crudeness and racism is, in my view, a copout. It’s a dodge by intellectual and political leaders. It’s an attempt to persuade ourselves that our basic assumptions are right, and the public is wrong.

A mix of more redistribution and better communications isn’t an adequate answer to what ails our politics no matter how much we tell ourselves. It behooves those of us who believe in liberal democracy – on the Left and the Right – to think more fundamentally about how to make our economies, societies, and politics more inclusive and responsive.

Our answers will differ based on our priors and preferences. That’s both healthy and inevitable. But this ought to be a shared project. Too much is at stake.

I just referred to our differing priors. Let me start with mine. I think it’s useful – both for the purposes of being transparent and recognizing potential blind spots.

I have a technocratic mind. I’m predisposed to thinking about these issues through a lens of government and public policy. In so doing, I can neglect the role of norms, institutions, and other societal factors.

I grew up in an entrepreneurial household and can tend to think about these issues through the lens of economic utilitarianism. In so doing, I can neglect non-economic forces such as loneliness or an individual search for belonging and meaning. I can also as a result overemphasize the role of personal responsibility and underemphasize the existence of structural barriers in our society.

I believe in the efficacy of markets, the role of incentives, and the benefits of dynamism. But I can also underestimate the threat of corporate concentration, the short-term costs of growth maximization, and the individual and community downsides of what Joseph Schumpeter called “creative destruction.”

I’m a temperamental conservative which means that I’m skeptical of radicalism and utopianism. Economic, social, and political progress generally comes in the form of incrementalism rather than a big bang, which invariably leads inadvertent consequences.  The risk, of course, is that my resistance to change can cause me to fall victim to a status quo bias.

I could go on. But I think you get the picture – I’m a pretty orthodox conservative thinker.

Or at least I was. The past 36 months have caused me to undergo an ongoing process of introspection. I’m still a conservative. In fact, in some ways, I have become more conservative. But, in others, I’ve started to think more fundamentally about what the rise of populism tells us about conservatism and a renewed agenda of inclusion and responsiveness.

It’s been a complicated journey. It has led me in new and different directions. And it’s far from over. But this exercise of self-analysis is now guiding my thinking about politics and policy.

Why populism?

I started by asking: why populism?

I recognize that there are competing interpretations of contemporary populism. Some argue it’s principally a manifestation of economic anxieties. Others argue it’s driven primarily by cultural anxieties, including “status threat” by majority populations.

This is a nuanced and evolving empirical question. Harvard economist Dani Rodrik (who one might argue has been the most proactive and serious thinker on these questions) spoke at the University of Toronto late last year and argued that the two are inextricable.

He’s, of course, right. But, at the risk of simplifying it, I tend to err on the side of the former explanation. Remember educational attainment is the best determinant of Trump voters. That is to say, the single best predictor of Trump voters is that they didn’t go to college. The same goes for Leave voters in the United Kingdom.

This is consistent with research about the growing relationship between education and labour market outcomes. Those without post-secondary education tend to be in jobs that are most prone to trade-induced dislocation and automation and ultimately face the highest levels of precarity.

It is intuitive, isn’t? We just have to look around us. General Motors’s lay-offs in Oshawa is merely the most recent and regrettable example.

We’re going through a process of “skills-biased” change whereby developed economies are paying larger returns for cognitive skills and educational credentials and have less demand for more routinized or basic skills. The result is that there are increasingly few industries or professions where those without post-secondary education can earn a good living and have economic security.

The rising wage gap between those with post-secondary education and those without it – more than 55 percent in Ontario ($55,216 versus $85,645) – is evidence of this trend.

It’s no surprise therefore that high-income Canadians tend to be highly educated. Two-thirds of the top-1 percent of earners have a university degree (versus 20.9 percent of those above 15-years old without post-secondary education). And this is hardly unique to Canada. Research by the bipartisan Hamilton Project in the United States finds that workers with a college education are now the majority in the top two income quintiles.

Education has thus become the greatest source of differing outcomes and opportunities in today’s economy. It has increasingly come to trump more conventional determinants of wealth and opportunity such as race or family structure.

What does it mean?

The upshot is that we have an economy that will continue to pay higher returns to those with certain credentials and skills but that undervalues physical strength, hard work, and other aptitudes that were more marketable in the past. The winners in this new economy fall into the former camp; the losers into the latter.

The twin trends of globalization and technology have disrupted or threatened traditional sources of middle-class opportunity, including manufacturing employment.

One proof-point: a recent Ball State University study found that the US manufacturing sector, if it kept 2000-levels of productivity and applied them to 2010-levels of production, would have required 20.9 million manufacturing workers rather 12.1 million workers. That’s nearly the equivalent of the productivity-driven destruction of every job in New York City.

That this scale of disruption has manifested itself not just in our economy but also in our culture and politics should hardly be surprising. The consequences have been well-documented on the Left and the Right. We have observed growing evidence of wage stagnation, financial insecurity, and place-based dislocation.

In turn we’ve observed increasingly destructive behaviour among working-class populations and a growing turn to non-conventional politics. These trends are, in my view, and the view of various other center-right thinkers including Charles Murray, Ed Glaeser, and Nick Eberstadt, inextricably linked.

The key here is the following: Economic opportunity is increasingly bifurcated based on one’s education levels and geography. It’s important to emphasize that this is unique in modern history. The economics of credentialism and geography have never been stronger.

What can we do about it?

It, of course, leads to the question: what can we do about it?

The progressive predisposition to redistribution may be well-intended. But I would submit that it’s an incomplete agenda. Not only will it fail to fundamentally address populist demands, which are more about broad-based work and opportunity than state-supported consumption, according to research by a group of Yale scholars. It can also come to harm the economic dynamism that’s at the root of modern society.

I don’t think this tension can be underemphasized. Analysis by Paul Krugman and others defending Alexandria Ocasio-Cortez’s proposal for a 70-percent tax rate for high-income earners fails to address the efficiency trade-offs of such high marginal tax rates. Their analysis is predominantly concerned with the revenue intake. But such analysis fails to account for the effects on entrepreneurialism, innovation, and so on. The result might be higher levels of equality but the costs in the form of less dynamism could be significant.

At its core, this article is about the inherent tension between economic security and economic dynamism. How we respond to this question will, in my view, determine our politics for the years to come.

There are some empirical considerations to bring to bear, including the benefits and costs of high marginal tax rates, for example. But fundamentally this is a normative question where both the Left and the Right have something to offer.

A proportionate political and policy response will require that we draw from both sides of our ideological spectrum. The Left’s emphasis on institutional barriers to social mobility and the role of public policy to break them down will be an essential component. So too is the Right’s thinking about the role of families, the dignity of work, and the limits of state action. This cannot be an all-or-nothing proposition.

A constructive response to populism

I want to conclude with some of the key issues that I think we must confront in the coming weeks and months to arrest the trend towards unrooted populism on the Left and the Right.

My comments aren’t about tinkering on the margins. They reflect a growing view that we require more fundamental changes to our economy, society, and politics, which is an odd conclusion for a conservative. But, as I mentioned in my introduction, my thinking is still being refined on this issue.

In this vein, I’m afraid that you’ll need to settle with a series of questions rather than answers.

First, the current episode of globalization (including what Dani Rodrik has called “hyper-globalization”) has harmed certain industries, regions, and people in western countries. Yet it has also contributed to the most significant reduction in poverty in human history. How should we judge a policy framework that increases domestic inequality but lowers global inequality? Are we prepared to trade-off lower inequality inside our borders even if it involves less income and wealth in the developing world? How do we think about this tension?

Second, redistributive tools can help to distribute welfare gains stemming from globalization from the so-called “winners” to the so-called “losers” in the form of higher tax rates and accompanying cash transfers. Is this a sustainable strategy? How can we properly measure the efficiency-equity trade-off? Are higher tax rates on high-income earners justified merely as a political initiative – even if the empirical argument is weak? And, for how long will the losers be prepared to accept a policy that’s focused on their consumption and not the inherent needs to be productive?

Third, inequality seems to be a motivating force in our politics. How do we define inequality? Should we care about it? Why? Does it even respond to a public demand or do people want work and opportunity (e.g., Paul Bloom’s argument)? There seems to be a false assumption that greater redistribution will solve the problem. I disagree. People rightly want fairness but that’s different than equality. And there are ultimately bigger trade-offs between dynamism and security here than people are prepared to concede.

Fourth, Canada has achieved world-leading rates for educational attainment. Nearly 60 percent of those between the ages of 25 and 64 now have a post-secondary degree. This amount will grow even higher due to demographics, improved post-secondary access, and the possibility for further “nudges” to target low-income and other marginalized voices. But recognizing that a considerable portion of the population will never attain post-secondary education (PSE), what should policy-makers do to respond to their needs and interests? What does a pathway to a non-PSE future look like? How should we reconceptualize public funding to support the two-thirds who go to university or college and the 35 percent who don’t?

Fifth, more localism would help to expand political responsiveness and accountability. Yet some organizations are skeptical of localism due to bad experiences and concern that certain communities and group will be excluded. How can we advance an inclusive vision of the Catholic idea of subsidiarity? What is the role of government to facilitate such an approach?

Lastly: if you accept my premise that the redistribution of welfare gains resulting from a dynamic economy are a necessary yet insufficient response to growing public sentiments about economic security, what more structural changes are we prepared to accept? Are we willing to absorb welfare losses to provide more employment security for certain workers? What are the policy implications? Will the public actually support an agenda that may produce less dynamism, less wealth, fewer choices, and higher prices?

These, in my view, are the fundamental questions that we must confront. Especially the final one.

I’m afraid that I don’t have answers. I’m still on a journey. But we all need to start to reason through them. We’re at a crossroads. It’s exciting, dynamic, serious, and unsure. The best we can do is ask people of good faith to engage and participate. This is democracy at its best.

Sean Speer is a Munk Senior Fellow at the Macdonald-Laurier Institute. This article is based on Sean Speer’s keynote remarks for the Democracy Xchange Conference on January 27, 2019.

MLI would not exist without the support of its donors. Please consider making a small contribution today.

Donate Now Through CanadaHelps.org!