The Rise of Populism

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Friday’s Munk debate — The Rise of Populism: Be it resolved, the future of western politics is populist not liberal: Stephen K. Bannon, David Frum — received quite a bit of attention. As Frum put it “… [populism is] the most important, the most dangerous challenge that liberal democratic institutions have faced since the end of communism …” It’s an important topic, one worthy of better understanding and not shying away from.

In the end, 72% of the audience of the debate sided with Frum. In my opinion, Bannon might have won the emotional debate (he is a smoother speaker) and that is what makes him dangerous. Bannon’s arguments were, in my option, both contradictory and impractical. However, that is not to say that a “Trump with a smile” couldn’t find a compromise position.

Bannon situated the problem with the “little guy”: they have borne the brunt of the failures of international trade deals (globalization), the economic crisis (of 2008), and the costs of the Iraq/Afghan wars (budget deficit and death), while the elites have orchestrated events and outcomes to their benefit.  

Frum accepted that the “little guy” has suffered, and that successive US Administrations have failed to resolve these issues. However, he did not confirm agreement on the role of the elites in directing the outcome.  

Through the debate it became apparent that the difference lies in their proposed policies and the method of execution.  Bannon wants to deconstruct existing institutions, Frum wants to repair them.

In terms of execution: first, Frum accused Trump of being racist, possibly facist. While Bannon disagreed, he conceded Trump is an “imperfect instrument” [1]. Second, Frum laid out a modus operandi of co-operation (with other governments) vs. dominance and bullying. Bannon’s approach takes the position of the primacy of the nation state, to ensure the interests of their citizens, and the destiny of the nation (culture, borders …) vs. dilution from external authorities (“Bad” Trade Agreements, Euro Zone, WTO, “Globalization”).

In wrapping up the debate, Frum asked us not to despair as democracy has survived similar challenges in the past, saying “the cruel always think the good are weak” but in the end “something positive will always defeat something dark.” Bannon, on the other hand, spoke of the inevitability of the outcome: “the only question is whether it will be populist nationalism or populist socialism.” 

Both their arguments, however, exposed gaps.  Frum never really addressed the class issue (elite vs. the little guy) but only agreed to the larger point that there are problems. He never offered how the Republican and Democratic establishments would organize to resolve the problems. This problem has evolved over that last 30+ years; it shouldn’t be a surprise.  Frum did not offer the case that the establishment could get past the impasse; an approach to getting past their track record of broken promises to resolve the issues.  Frum never took ownership. Bannon took ownership to solve the problem.

Bannon’s proposal, however, suffers contradictions as well. His attack on the elite is an argument for “economic democracy”: that we all have the opportunity to share in the fruits and benefits of growth. Yet, he is a proponent of capitalism; when did capitalism ever really help the little guy? It is a system that privileges those with the capital.  As he points out in his opening statement, the little guy is without capital and was thus excluded from the economic gains of the last 10 years. Capitalism is an economic system, not a political one.  Capitalism is for business, democracy is for people.  In the best case, capitalism and democracy have only conflicting objectives; worse case, they are incompatible.  Without guidance (pressure) from governments to contain business practice to operate within acceptable social limits, people will suffer. Why do we have pollution laws? Why do we have safety laws? Why do we have government services? Why do governments define standards? 

The core challenges faced by the little guy are broadly recognised and agreed to, not just in the US, but in many parts of the world.  However, different nations have responded differently.  Canada has a stronger safety-net than the US, which has tended to soften the blow.  Furthermore, Canada has a record of offering compensation for those negatively impacted by trade deals.   Similarly in Europe.  

These [economic] policies — this safety net — is viewed by many is the US as “socialism”, yet it is these little-guy-oriented considerations that Bannon is calling for.  And this to me is the challenge.  Capitalism is so ingrained into American society that any move towards social programs is viewed as the slippery slope to communism.  Socialism erodes the profitability of business and tethers capitalism with the unwieldy ball and chain of taxes and controls. 

To achieve the outcomes Bannon is looking for, through deconstruction, strikes me as impractical.  The American system is geared to making small steps; big steps are difficult as finding a consensus becomes all that much more difficult.

But there is another problem, that Frum touched on, that lies in Trump’s execution. His actions and statements challenge trust and co-operation. He is disingenuous: Trump is leveraging the issues faced by the little guy, that many can agree to, to implement an agenda that goes beyond what is required to solve the problem, to implement policies that many charge as racist, isolationist; internationally he is seen as a bully.

While specific to the United States, until elected officials are decoupled from the influence of financial backers (i.e., the elites) and the electoral system is retuned to make politicians more accountable to voters’ demands (i.e., remove gerrymandering) it is hard to see that the conditions will align to benefit the little guy.


Bannon’s opening remarks were excellent, offering a good overview of his perspective. His departure point was what he referred to as the “inciting incident,” the financial failure of 2008:


“We’re in the oval office, [the] head of the Federal Reserve Bernanke and Hank Paulson, Secretary of the Treasury, walk in and tell the president of the United States, by 5:00 this afternoon, by close of business, we need [a] $1 trillion cash infusion into the American Financial System. If we don’t get it, the American Financial System will implode in 72 hours, the world financial system 3 days after that, [and] we will have global anarchy and chaos.

The greatest enemies of the United States: Mussolini, Hitler, Tojo, the Soviet Union, Al Qaeda, Osama Bin Laden, nobody has ever brought the US to its knees like that day. Who did that? Who is responsible for that? The populist? Donald Trump?

No. The elites: the financial; the corporate; the permanent political class that runs Washington DC. That’s who did it. What was their solution? To create money and bail themselves out.

On the day that happened the balance sheet of the United States was $880 Billion; When Donald Trump took the oath of office January 20th 2017 it was $4.5 trillion … the ‘Party of Davos’, the elite, bailed themselves out; afraid of some sort of inflationary death spiral. That’s not a free bailout. There’s a corollary to that. Savings accounts are zero, pensions funds have the biggest gap in history, you can’t underwrite a bond in the United States because for a public school or water works you only get 2%. The little guy, the little guy would bear the burden of that.

If you owned assets, intellectual property, stocks, real estate, hedge funds, name it, in the last 10 years, you’ve had the greatest run in history [2], for everyone else a disaster. 50% of Americans can’t put their hands on $400 of cash … 60% of our jobs [are] subsistence jobs … it wasn’t Donald Trump, it wasn’t the populist. The populist movement, the nationalist movement, is not a cause and that’s the product of that, Donald Trump’s presidency is not a cause of that, it’s a product of that.

When I stepped into the campaign in mid-August, the central numbers — not how far he was behind — 70% of the American people believed for the first time in our history that the county was in decline, and the elites were OK with that . That managed decline was the wave of the future [3]. Whether it was in education, southern border, China, Korea, Iran, our education, our health system. It was Donald Trump that turned that around. It’s the ‘Party of Davos’ … the scientific, managerial, engineering, financial, cultural elite, that run the world, have left a financial wasteland and decoupled from the middle class and the working class throughout the world [4]. That is why Salvini, Orbán, and Brexit, Bolsonaro … is the day Angela Merkel will leave the stage …

Trump’s economic nationalism doesn’t care about your race, your colour, …, it cares if you are a citizen. Look at the results today: lowest black unemployment in history, lowest hispanic unemployment in 30 years. Wages rising across the board, manufacturing jobs coming back [5].

The populist nationalist message and its policies are working in the United States and it’s spreading. The revolt in Europe and now Latin America and I get contacted every day … we are at the beginning of a new political revolution and that is populism. The only question before us is it going to be populist nationalism that believes in capitalism [6] and deconstructing the administrative state and giving the little guy a piece of the action and break up this crony capitalism of big corporations and big government or is it going to be a Jeremy Corbin and Bernie Sanders type of populist socialism. Because the ‘Party of Davos’ and the elite have blown too many calls, too many existential events[7]: the rise of China, the $7 trillion spent on the wars in Iraq and Afghanistan; the deregulation that lead to the financial crisis in 2008, how the financial crisis was bailed out. Where we are today in this over-leveraged society. Because as you know, most of you in this room that work in finance know, we are heading towards another financial crisis [8]. That is the question before us. What form of populism…”

— Munk Debate: 14:31 – 21:03

[1] By calling Trump an “imperfect instrument” Bannon suggests a distinction between populism as a theory or strategy and Trump as an executioner.

[2] This in contrast with Trump’s regular comments on how well the [stock] markets are doing, and how that is benefiting the little guy.

[3] This generalization implies the elites are a single coherent group with one mind. Was the decline truly managed or was it simply incompetence or a chain of un-co-ordinated actions with limited oversight? However, it is fair to say that the de-regulation that preceded and thus was an enabler of the 2008 crash was pressed by business (who may be termed the elites).

[4] While the objectives of the ‘Party of Davos’ may be to decouple the elites from the middle / working classes, I submit this is nothing new. Has not the subjugation of the little guy gone on since Roman times and before? May be the relevant point is that this is something that we, as a mature society, want to change.

[5] The focus on manufacturing jobs seems short-sighted to me as many of these jobs will be replace by automation. Why not focus on jobs of the future?

[6] Capitalism is fundamentally undemocratic; it puts power into the hands of the capitalist, not the non-capitalist … the people without capital

[7] Yet, it is important to recall that capitalism, by its nature, shifts between boom and bust.

[8] Given the nature of capitalism, its ebbs and flows, a financial crisis is alway in our future.


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