The webinar ‘Austerity and Social Inequality: The rise of the populist right and the European budget crisis looks at a phenomenon that has shaped liberal democracies in a fundamental way over the course of the past years.

In the introduction, Oliver Schmidtke describes that, what we see across Europe and North America, is the rising disengagement from and even contempt for mainstream politics and political elites. The discontent reflects a widespread sentiment in the population of not having a voice in decision-making and not having one’s interests represented by those in power. Currently we find dramatic evidence of this development in the UK’s Brexit debate and in France where the so-called yellow vests have launched a violent protest against President Macron depicting him as out of touch with the social reality of French citizens and  as the ‘President of the rich’.

The disillusionment affects both, the traditional centre-right as well as the centre left. Although the sentiment is not new in liberal democracies, it has reached a level at which traditional parties fight for their political survival. In countries such as Italy or France, some established mainstream parties from the left and right have been erased from the political landscape or dramatically diminished in political status. The discontent with the establishment has primarily benefitted the nationalist right across Europe and in the United States, a movement that has been branded in terms of a nationalist or populist resurgence.

What has spurred this anger and discontent? Why are liberal democracies in such a fragile state in terms of the stability of some of their key institutions and political actors?

The focus of this webinar is on the link between levels of rising inequality, the widely shared experience of a precarious economic status and the rise of populism or nationalist economics that has found its emblematic expression in the slogan ‘America First’. Not least driven by the long-term effects of the 2008 economic and financial crisis, a growing segment of the population feels challenged in its well-being and excluded from the promises of a globalizing economy. We have witnessed persistently high unemployment rates in particular in Southern Europe where a whole generation shares the experience of precarious and temporary employment. As a result, there is a palpable sense of anxieties and insecurity when comes to the economy and to how individuals perceive their socio-economic status. Across the continent social inequality has been on the rise since the 1970s challenging the social contract with its promise of equitable opportunities, fair access to employment opportunities and life chances, a promise integral in particular to the post-war welfare states. 

The political consequences of the rising inequality play out dramatically across Europe as well as in North America. This webinar focuses on Italy where we have had a remarkable manifestation of this phenomenon. The growing social divide between the poor and the rich is an important element in the staggering electoral defeat the old Christian democratic and socialist parties in this country. What has replaced former loyalties to these traditional parties is a contempt for the political believes and a desire for fundamental change in politics. One critical factor in this respect is the experience of a series of centrist governments committed to austerity measures and the related priorities to raise taxes, slash public spending and reassure the financial markets. In the Italian context, the former Prime Minister Matteo Renzi of the centre-left Democratic Party most recently promised to end austerity in 2013 but failed to deliver on the promise.

The last elections in Italy swept populist parties into power. The right-wing, nationalist Lega and the populist Five Star Movement (M5S) ran on a popular platform that promises to end the austerity measures that had shaped country since the 2008 economic crisis. In particular the Lega under Matteo Salvini has pushed for a Trumpian “Italians first” message, a form of economic nationalism that is primarily directed at the European Union. The proposed program of Italy’s prospective coalition government puts forward a blend of neoliberal policies and nationalist, protectionist measures that reflects the political priorities of the two political parties. The proposal for a 15% flat tax displays the pro-market, anti-state stand of the League with its strong support among the business community in Northern Italy. In contrast, the pitch for a monthly basic income of 780 euros was a key demand of the M5S during the electoral campaign and its attempt to shore up support in the less developed south. The Lega and the Five Star Movement have found a calling combining anti-austerity economics with a nationalist approach and, at times, outright xenophobia.

In her presentation Valerie D’Erman interprets the rise of the Lega and the Five Star Movement with a view to two fundamental shifts in Italian society and politics: First, the current budget conflict between Italy and the EU highlights a structural issue in the EU monetary regime. With strict rules regarding debt and deficit levels, Euro zone countries have only a limited capacity to deal with imposed stability and austerity policies, which have a profound impact on daily lives of their citizens. In D’Erman’s view, this development has triggered a populist backlash and nurtured anti-EU sentiments depicting the European Union as an organization that represents a detached supra-national elite. Italy, formerly a staunch supporter of European integration, has become markedly more Eurosceptic.

Second, D’Erman explains how the economic nationalism favored by the Lega and the M5S does not fit into the traditional left-right divide that has ruled Italian politics for the past decades. The social-democratic left is no longer able to provide a political home for those concerned about the growing social divide and precarious living conditions. For her, the newly emerging cleavage between global cosmopolitanism and local nationalism raises some critical questions about how to address the rising popularity of populism with a view to effective and desirable modes of governing the economy in an integrated European Union.

Kurt Huebner continues this discussion on the Italian case by pointing out how the issue of austerity has taken centre stage in political and parliamentary debates. Huebner points to the enormous task for Italy to reduce its large public debt (over 130% of GDP) that has grown over the past decades. For him, the main challenge for Italy is not fiscal but economic in nature (slow economic growth, non-competitive productivity rates, lack of innovation, etc.).  In light of the endemic weakness of the Italian economy, Huebner argues that the economic and fiscal priorities of the new government are counter-productive and might indeed aggravate Italy’s debt crisis. Huebner discusses the unsustainable situation of Italy with reference to the broader challenges to governing the Euro zone, which he characterizes as ‘dysfunctional from the very beginning’. According to his interpretation, the current situation in Italy demonstrates how, due to the different fundamentals of the national economies in the Euro zone, austerity is structurally built into the EU’s system of monetary-economic governance. In Huebner’s view, this has serious political implications that will raise questions about how effective and socio-economically desirable some of the Euro zone rules actually are when considering the concerns of its economically struggling member states.



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