The future belongs to the left, not the right

For the time being, rightwingers are thriving, but their rise is self-limiting

Wolfgang Münchau

US congresswoman Alexandria Ocasio-Cortez has proposed a 70 per cent tax rate on high earners. Such a policy could cause collateral damage but from the perspective of the radical left, collateral damage is a promise, not a threat © Reuters

Matteo Renzi, Italy’s former prime minister, is getting ready to form his own centrist political movement, very much like French president Emmanuel Macron’s La République en Marche. A new centrist group in the UK has also brought excitement, albeit for different reasons. Liberal pro-Europeans are certainly not going down without a fight.

But the odds are not looking good for many of them. Liberal democracy is in decline for a reason. Liberal regimes have proved incapable of solving problems that arose directly from liberal policies like tax cuts, fiscal consolidation and deregulation: persistent financial instability and its economic consequences; a rise in insecurity among lower income earners, aggravated by technological change and open immigration policies; and policy co-ordination failures, for example in the crackdown on global tax avoidance.

When the financial crisis struck, continental European governments did not take full control of their banking systems, crack down hard enough on bonuses, or impose financial transaction taxes. They did not raise income and corporate taxes to counter-balance cuts in public sector spending. They did not tighten immigration policies.

The usual economic statistics do not capture how the lives of people on lower incomes have changed over the last two decades. Stagnating real disposable incomes matter, but so does lower job security and reduced access to credit markets and mortgages.

I expect the pushback against liberalism to come in stages. We are in stage one — the Trumpian anti-immigration phase. Immigration carries net economic benefits, especially over the long term. But there are losers from it, too, both actual and imagined. Chancellor Angela Merkel’s decision to open Germany’s borders to 1m refugees in 2015 was justified on ethical grounds, and I am sure will bring long-term benefits. But it turned into a crisis because she did not prepare her country politically.

The euro, too, was a liberal fair-weather construction. Once crisis struck, politicians did the minimum they needed to ensure its survival, but they failed to solve the underlying problems, which nowadays express themselves as imbalances that do not self-correct. Without a single safe asset and a genuine banking union, the eurozone will remain prone to financial crises.

Liberal democracy has been successful at breaking down trade barriers, protecting human rights and fostering open societies. But the inability to manage the social and economic consequences of such policies has rendered liberal regimes inherently unstable.

For now, the right is thriving on the anti-immigration backlash. But its rise is self-limiting for two reasons. First, rightwing policies are not succeeding even on their own narrow terms. A wall along the border with Mexico will not stem US immigration flows any more than the re-nationalisation of immigration policies would in Europe. And second, I suspect that immigration will soon be superseded by other issues — such as the impact of artificial intelligence on middle-class livelihoods; rising levels of poverty; and economic dislocation stemming from climate change.

This is a political environment that favours the radical left over the radical right. The right is not interested in poverty and its parties are full of climate-change deniers. Some of the rightwing populists may speak the language of the working classes, but the left is more likely to deliver.

The killer policy of the left will be the 70 per cent tax rate proposed by freshman US congresswoman Alexandria Ocasio-Cortez. It is not the number that matters, but the determination to reverse a 30-year trend towards lower taxation of very high incomes and profits. There would be collateral damage from such a policy for sure. But from the perspective of the radical left, collateral damage is a promise, not a threat.

What about the radical centre? Mr Macron has demonstrated that grassroots liberalism can succeed as an electoral strategy. But there are factors specific to the French electoral system that favoured Mr Macron’s victory in 2017. And it is too early to pass judgment on whether his actual policies will deliver what his voters wanted. Italy is also a candidate for a Macron-style revolution, but that could not by itself solve the country’s deep-rooted problems.

The economic and social impact of liberal policies varies across countries. Germany has so far avoided the downward spiral because of its unique position inside the eurozone and its still relatively strong industrial base. But wait until the irresistible force of the electric self-driving car hits the immovable object of diesel drivers.

We have entered an age that will favour radicalism over moderation, and the left over the right. It is not going to be the age of Donald Trump.

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