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The rise of populism: Far-right parties will influence the future
Quarterly Outlook
Summary: Across Europe, there’s been a surge of populist far-right parties, raising concerns about the economic consequences of their policies. While the motivations behind this shift are complex, a combination of economic anxiety, cultural concerns, and political dissatisfaction have fuelled their rise.
The drivers behind the rise of recent populist politics
The economic effects of globalisation and neoliberal policies have left many Europeans feeling insecure about their future. Between job losses, industrial decline, and a widening gap between rich and poor, populist parties have capitalised on this collective anxiety by offering simplistic solutions to complex economic challenges. They appeal to those left behind by the tides of change by promising to protect jobs, restore national sovereignty, and address economic inequality.
Concerns about immigration, cultural change, and the erosion of national identity play a significant role in the rise of populism. Populist parties have exploited these themes via nationalist rhetoric, scapegoating immigrants, and advocating for stricter immigration controls. They capitalise on fear by portraying themselves as defenders of traditional values.
Traditional centre parties have often been perceived as out of touch with the concerns of ordinary citizens and failing to address their problems. This has created a vacuum that populist parties have filled. By presenting themselves as “anti-establishment” they’ve attracted disillusioned voters.
Economic policy impact from far-right parties
Despite their diverse origins, populist, far-right parties share several common characteristics in their economic policies. They often advocate for protectionist measures, such as tariffs and quotas, to shield domestic industries from foreign competition. They believe that protecting domestic jobs and businesses is essential for economic security.
They prioritise the interests of native citizens over those of immigrants. This can manifest in policies that restrict immigration, limit welfare benefits for non-citizens, and favour native-born workers for employment opportunities.
Both far-left and far-right populist parties often view the EU as an undemocratic force that undermines national sovereignty and imposes unwanted economic policies. Some even advocate for leaving the EU, believing that regaining control of economic affairs is essential for national prosperity.
Far-right parties hold a sceptical stance towards climate change and oppose ambitious climate policies. They frame it as a threat to national sovereignty and economic competitiveness, and argue that climate action will disproportionately burden ordinary citizens.The economic consequences of populist far-right policies are complex and uncertain. While some policies may provide short-term benefits for specific sectors or groups, they also carry long-term costs and consequences.
Protectionist measures can hinder international trade and discourage foreign investment, potentially slowing economic growth and reducing consumer choice. Trade barriers, for instance, can lead to increased costs and potentially dampen economic activity. Populist parties often promise to increase social welfare spending and reduce taxes, which leads to larger fiscal deficits which raise borrowing costs, lowers private investment, and increases the risk of economic instability.
Populist rhetoric and policies can contribute to political instability, deterring investment and undermining investor confidence. Political uncertainty makes long-term economic planning difficult for businesses, hindering economic growth.
Sectors impacted by populist politics
Populist parties often propose protectionist measures, such as tariffs and quotas. These policies may be beneficial in the short term, but can lead to higher consumer prices, less choice, and decreased productivity overall.
They may advocate for increased government intervention in the healthcare sector, such as price controls. While these policies aim to make healthcare more affordable, they can also stifle innovation, and reduce access to new treatments.
Populist right-wing parties may propose the nationalisation of energy resources, or stricter control over the energy sector. These policies can lead to increased government influence over energy prices, supply chains, and investment decisions.