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What impact popularism in Europe and the US?

The UK ‘Leave’ result was seen as a win for popularist vote. Scott Bradshaw, investment manager with Mattioli Woods, looks at the spread of popularism in Europe and beyond as we head towards the US Presidential election on 8 November 2016.

Whilst it would be a gross over simplification to dismiss the ‘Leave’ vote as simply a vote against the established political class, the UK government’s official stance was to recommend to the public a ‘Remain’ vote. The issue of immigration was seemingly an important issue for some, with suggestions that this is putting an undue strain on schools and hospitals. The “austerity” direction of the UK Government has certainly contributed to this feeling with perceived underinvestment arguably also being a factor.

This rejection of conventional politicians mirrors a rejection seen across the world. Whilst the economy has “recovered” since the global financial crisis, ordinary people have not felt it or seen it come through in the form of wage growth. This perhaps goes some way 
to explaining Donald Trump’s runaway success to the Republican Party Presidential nomination (and perhaps beyond …) particularly in the Central Rust Belt, the once mighty industrial complex where jobs are perceived to have been lost to China.

This rejection of mainstream politicians has also been seen across Europe with the rise of so called populism. In France, the right wing National Front has risen in prominence so much that in last December, the ruling Socialist party went so far as to pull candidates in three regional elections to prevent their victory. Given the unpopular labour reforms being pushed through by the incumbent Socialist party, the prospect of Marine Le Pen being one of the two final presidential candidates next year is very real.

It’s not just parties of the right that have risen to prominence. In Spain, leftist group Podemos (We Can) have become a significant force, and in Greece and Portugal new left-leaning parties are part of the ruling coalitions. In Italy, protest party the Five Star Movement has arguably become the second party to the centre-left government.

To grossly oversimplify, the “losers of globalisation” and those disenchanted with austerity have turned away from the traditional political classes whose perceived pro-business policies have helped big business but not the average person.

The “easy” solutions offered by popular parties have gained support, and technology has played a key part with social media disrupting traditional methods of interaction with voters and increasing engagement, perhaps even energising those to vote who may not have done so previously.

For the EU, the organisation has seen much dissatisfaction directed towards it. Whilst recognising each country is different, generally the North of Europe (the richer net contributors to the EU) see the organisation as taking money and importing immigration. The South of Europe (the poorer net beneficiaries of EU monies) has seen some modernisation, but the perceived corruption
 of politicians in delivering this has led to a rise of the left with calls for people to benefit more.

It is clear then that reforms are needed for the EU or
 the prospects of further leavers will increase. Brexit has already seen a number of politicians calling for their
 home countries to allow similar referenda, including 
the Netherlands, Austria and even France. With elections in France, the Netherlands and Germany all coming up next year, politicians will want to be seen as strong and doing the best for their own countries, which could make any negotiations for Italy tough.

Today’s EU has come a long way from its 1950s origins as The European Coal and Steel Community. For it to survive the next 60 years, it will need to respond by addressing the disconnect with the people of Europe, as well as redefining its very purpose at a time when populism and nationalism are on the rise.

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