LSE’s Andres Velasco on Identity Politics and Economics
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Bibliographic details
- Authors: Andres Velasco
- Published: June 1, 2020
Executive summary
- Broadly shared identity can be the basis for the sense of shared destiny that is at the core of good politics.
- Populism is better understood as a style of politics that manipulates and exacerbates identity divisions for political gain, distinct from “economic populism.”
- Identity politics helps explain why populism can thrive both where economic distress exists and where strong economic performance prevails.
- Policy responses should acknowledge identity, pursue place-based remedies for communities harmed by deindustrialization, and practice a form of inclusive identity politics that builds shared national purpose.
Definitions and conceptual distinctions
- Classic economic definition of populism (Dornbusch and Edwards 1991): “an approach to economics that emphasizes growth and income redistribution and deemphasizes the risks of inflation and deficit finance, external constraints, and the reaction of economic agents to aggressive nonmarket policies.”
- Political/populism (Müller 2016; Mudde and Rovira 2017): a style of politics centered on conflict, where a homogeneous “people” is pitted against “the elite,” minorities, immigrants, or foreigners; moralistic interpretation of politics (people = moral; others = immoral).
- Triad characterizing populism: denial of complexity, anti-pluralism, and a personalist approach to political representation.
- Populism as identity politics: “a way of doing politics in which conflict takes center stage” and “a kind of identity politics” — i.e., always us against them.
Empirical puzzles and evidence
- Rich-country narrative: populism driven by economic stagnation, worsening income distribution, and those left behind by technological change and globalization.
- Cultural-backlash thesis: Inglehart and Norris (2016) find “the most consistent evidence supporting the cultural backlash thesis” in 31 European countries.
- Emphasis on emerging-economy anomalies: right-wing populism has thrived in countries with strong economic performance, contrary to an “economic insecurity” narrative:
- India, the Philippines, and Turkey have grown at rates between 6.5 and 7 percent since 2010.
- Poland: average per capita growth rate of more than 4 percent since 1992.
- Czech Republic: unemployment is only 2.3 percent, the lowest rate in the European Union, and the economy grew 4.3 percent in 2017; nevertheless, populist parties attracted four of every ten voters in the most recent election — a tenfold increase in two decades.
- Right-wing populism’s success is notable even where redistribution demand would predict left-wing surges; some populists’ policies may worsen income distribution while still attracting middle-class and working-class voters.
Identity theory and economic behavior (Akerlof and Kranton insights)
- People are willing to pay steep financial and nonfinancial costs to buttress their identity (example: US high schools; Akerlof and Kranton 2002).
- Identity exhibits increasing social and political returns: as group share rises, social pressure to conform rises and individuals minimize distance from group norms.
- Identity-driven politics enables non-economic weapons: toxic and divisive speech is used strategically by populists to mobilize bases and alter the size of competing identity groups; populists are “nasty by design.”
Policy implications and recommendations
- Democratic politicians and policymakers must acknowledge that identity matters and that its effects can be harmful.
- Place-based policies are essential:
- Deindustrialization and outward migration weaken local communities and shared identities; advising individuals simply to move overlooks community and identity costs.
- Place-based responses can help sustain communities, businesses, and shared identity.
- Practice identity politics constructively:
- Leaders should cultivate broadly shared identities grounded in inclusive, universal values rather than exclusionary or racially superior narratives.
- National identity is “a continual contest about who belongs to the national we” (Michael Ignatieff); democratic politics should foster a shared sense of belonging based on noble universal values.
Key quotations and notable lines
- “Populism is a way of doing politics in which conflict takes center stage.”
- “Identity politics is everywhere a struggle for the recognition of dignity.”
- “Populists are not nasty by mistake; they are nasty by design.”
- “National identity is a continual contest about who belongs to the national we.”
References cited in the piece
- Akerlof, G., and R. Kranton. 2002. “Identity and Schooling: Some Lessons for the Economics of Education.” Journal of Economic Literature 40 (4): 1167–201.
- Dornbusch, R., and S. Edwards. 1991. “The Macroeconomics of Populism in Latin America.” In The Macroeconomics of Populism in Latin America, edited by R. Dornbusch and S. Edwards.
- Inglehart, R., and P. Norris. 2016. “Trump, Brexit, and the Rise of Populism: Economic Have-Nots and Cultural Backlash.” HKS Faculty Research Working Paper Series RWP16-026, Harvard Kennedy School, Cambridge, MA.
- Mudde, C., and C. Rovira. 2017. Populism: A Very Short Introduction. Oxford: Oxford University Press.
- Müller, J.-W. 2016. What Is Populism? Philadelphia: University of Pennsylvania.
LSE’s Andres Velasco on Identity Politics and Economics — IMF F&D
Content in this bundle
- LSE’s Andres Velasco on Identity Politics and Economics – IMF F&D
- الاحتفاء بالهوية الإنسانية
- Embanderados con la identidad ● Finanzas y Desarrollo ● Junio de 2020
- 接受身份 - 《金融与发展》 2020年6月号 - 国际货币基金组织季刊