Book Talk: Reclaiming Populism

DISCLAIMER: This webinar transcript was loosely edited and there may be inaccuracies. 

Ricardo Hausmann Thank you, Eric, for doing this. Yeah, I'm very excited by this occasion where we are going to be able to discuss your new book and Eric came to us. I met him when he was doing his master's degree in technology policy at MIT, where he was concentrating on if you want to call it economic data science. He took my advanced course at the Kennedy School, did spectacularly well, innovated in a bunch of things, did things that other people couldn't do. So we hired him and we put him in a dual function, both working with the academic team in in trying to push the boundaries of knowledge and the applied team trying to work on specific countries. He did a remarkable job working on the projects in Western Australia and Jordan and Colombia and in and that's what I asked him to do. But in his spare time, he wrote a book and in the and it's quite an impressive piece of work in a so a without any further ado. I mean, the issue of populism and the causes of populism and what to do if we wanted to prevent populism and preserve democracy is, you know, a top issue in many, many countries, including the US, a less so in his native Canada. And I think the contrast between the two countries is it's constantly in his mind and informs a lot of what the book ended up finding in an exercise with a lot of data, a lot of data science and trying to make the data confess. So without further ado, let me let Eric tell his spiel.

Eric Protzer Well, thank you both to Ricardo and to Chuck for those very kind introductions. I've got a presentation here that I am going to share. There we go, got the spy there, so as was mentioned, the title of the book is Reclaiming Populism: How Economic Fairness Can Win Back Disenchanted Voters. This is a project that my co-author, who is Paul Somerville, an adjunct professor at the University of Victoria, who stops in the School of Business. He and I started work on this about three years ago when we sort of observed a lot of the political reactions to populism in the US and the UK and compared it to our native country of Canada. And we sort of felt that there were reasons that these sorts of things were not transpiring in places like Canada and other countries as well. You can think Australia, arguably Japan, the Scandinavian countries. And so we set out to write a book to try and differentiate why we think that is precisely. So I'd like to begin by giving an overview of the book and what differentiates it from a lot of the other discourse on populism. And then we're going to give sort of three main body arguments of the book. First, how economic unfairness leads to populism. Second, the policy inputs to a fair economy. And third, how to diagnose constraints to social mobility. And then we'll follow up with a conclusion with some high-level takeaways about the book's message and how it can be relevant for anybody who is concerned about pockets movements around the globe. Let's begin with an overview of the book. Now, the typical book on populism cites how worrisome its leaders are, such as some of these gentlemen on the right here, and it tends to offer typically some sort of long-standing political concern as an explanation for voters motives, things like there being too many poisonous ideas in society or too many foreigners or too much income and wealth inequality. And what I really want to emphasize is that the book Reclaiming Populism sharply diverges from that existing conversation. We instead argue that the extant debate really fails to capture the legitimate economic unfairness that citizens are really angry at, and importantly, that that unfairness is not the same thing as simple income and wealth inequality. It also stands out because it offers detailed and actionable policy advice on how to fix the root issues of economic unfairness that substantiate populism around the world. So all being told, reclaiming populism argues that populism strikes hardest when the economy is unfair. It contends that a fair and socially mobile economy is possible through equal opportunity and fair on equal outcomes. And it shows how to diagnose which missing policy inputs most constrain social mobility in a given country.

Let's delve right into that content with the first element of the argument. How economic unfairness leads to populism. So this year is a diagram essentially of the argument for the causal model that we have in mind where the beginning of it is a pool of policy failures and those, in turn, lead to two problems that really are the core of what we're talking about when we talk about economic unfairness. And that's opportunity being less equal and reward being less according to contribution. It's notable, importantly, that these things are not the same as weather outcomes. Economic outcomes are simply equal or unequal. Those problems, in turn, create to really concrete consequences, persistently low social mobility, and also high vulnerability to economic shocks. So you can imagine that whether you have an unlucky start in life or if you've been knocked down by an economic shock, these kinds of problems of economic unfairness make it very hard for citizens in precarious economic positions to get ahead on their own merits, on their own talents and effort. That, in turn, leads to the perception of an unfair system in need of perhaps forceful correction and in turn, the impetus for populism and populist solutions, quote-unquote, that offer stark alternatives to the status quo. In order to take this kind of model seriously or this argument seriously, I'm going to break it down piece by piece and substantiate all the different parts of it. First, for the start, I'm going to skip over policy failures for now, and we'll return to that later. But I really want to first address this. These two issues here of economic unfairness. Why should we think that citizens are especially sensitive to economic unfairness in particular? And in fact, there is strong evidence in behavioral science literature that people care quite a bit about fair economic outcomes in particular. And vitally, these kinds of fair economic outcomes are very different from whether outcomes are simply equal or unequal. Now, that may seem like a confusing or a two statement, because so much of the popular discourse around economic justice assumes that all kinds of inequalities are bad, and it tends to talk about fairness and inequality somewhat interchangeably. So to give you a reason to take that idea seriously, at least from the start, here is a quote from Angus Deaton, who is a Nobel laureate in economics, wrote in an opinion piece a few years ago that inequality is not the same thing as unfairness. And to my mind, it is the latter that has incited so much political turmoil in the rich world today. Some of the processes that generate inequality are widely seen as fair. But others are deeply and obviously unfair. I have become a legitimate source of anger and disaffection. And in fact, once you separate out those two ideas of equality and fairness, there is good evidence, as I said that people are really sensitive to fairness in particular. And this paper by the Yale psychologists Starman, Jessica and Bloom, they write that there is no evidence that people are bothered by economic inequality itself. Rather, they are bothered by something that is often confounded or confused with inequality, economic unfairness and having separated out those two ideas, they argue and know, for example, that one to two-year-old babies expect more resources to be allocated to those who have done more work that six-year-olds prefer to allocate more resources to someone who has done more work, even if they have the option to allocate rewards equally, and that individuals surveyed across 16 different countries overwhelmingly prefer a decidedly unequal distribution of economic outcomes in society, presumably because they understand that different people deserve different rewards depending on their contribution, and that position is hardly an outlier in the literature. And this PhD thesis from Oxfam the debug on the evolutionary origins of human fairness. He writes that it is well accepted in the behavioral sciences that people prefer income distributions with strong work salary correlations preferred to give more to individuals whose input is more valuable and favor meritocratic distributions as a whole in both micro and macro justice contexts. Now in the book, we spend a whole chapter going through even more evidence for whatever that that shows. This is true and shows why this is. But the point here is that is not to dismiss the importance of inequality outright. It's simply to point out that people are especially sensitive to economic unfairness and that this is a different concept from simple inequalities of income or wealth.

Now, having demonstrated that point that people really are sensitive to problems of economic unfairness, naturally, the next question in this argument is, OK, well, is there proof any proof that indicates that problems of economic unfairness and their consequences are actually associated with political discontent and populism, which is where this time this part of the diagram starts to play a role? And one angle in which the book addresses that problem is by looking at low social mobility. And when I say low social mobility, I'm specifically referring to a situation where individual economic success in a country or a region strongly depends on family wealth. And in that kind of situation, that's a pretty clear violation of economic fairness because most people hold, I think that's your family. Wealth is not innate driver of your productivity. You know, it's not your parents do not decide your own talent and your own character and your own effort on the whole. And that's low. Social mobility is a fairly clear violation of economic fairness in particular and reclaiming populism. And the research behind it, which is a Harvard growth lab working paper, demonstrates that low social mobility is in fact a robust statistical predictor of the geography of contemporary rich world populism, both across and also within high income countries. And importantly, alternative factors like income and wealth inequality, immigration and social media are not. They do not have the same systematic, statistically significant correlation in a wide variety of settings. The research behind the book Linking Low Social Mobility to Populism has been cited by the EU, the UN, the IMF, the Inter-American Development Bank. It's been featured by Brookings Professor Philip McCann, who coined the term geography of discontent, cited this research to write, and I quote that social mobility is the crucial indicator of populist voting. In addition to that angle, you can also look at the consequences of major economic shocks because populist language frequently rages against the perceived unfairness of things like the global financial crisis and globalization, and frames it in terms of a purportedly corrupt elites that have unfairly put their interests ahead of the rest of society. So that you can try to look at whether there are channels there by which those kinds of events and their consequences have specifically led to political strife through the channel of economic unfairness in particular.

We go into a variety of evidence for this in the book, but one compelling argument comes from a paper by focus should direct intervention on the politics of financial crises from 1870 to 2014, where they find that on average, far-right parties increase their vote share by 30 percent after a financial crisis. Importantly, we do not observe similar political dynamics in normal recessions or after severe macroeconomic shocks that are not financial in nature. Now, to anyone coming from an economics background, that ought to be a really interesting finding because you have two kinds of losses that are essentially the same in magnitude. And yet the political consequences of them are very different, depending on the reasons for those shocks and to explain why that is, the authors write. What explains the more severe political fallout after financial crises? One possibility is that non-financial downturns are seen as excusable events triggered by exogenous shocks, while financial crises may for sure may be perceived as endogenous and inexcusable. I might use the term unfair the result of policy failures, moral hazard and favoritism. Again, we go into much more evidence in the book, but this is the kind of thing that would leap where I would lead one to conclude that citizens turn to populism when they are fed up with an unfair economy. They feel the system is rigged and must be forcefully reset, and that other factors like social media and immigration are best understood as amplifiers rather than systematic, cross-cutting causes of high degrees of populism across the globe. To try that, to try and make that phenomenon a little more tangible for you. I have a quote from a swing voter from the US who in 2016 ultimately voted for Donald Trump, and he was quoted in the Boston Globe as writing. I see my tax dollars going to handouts for others who didn't work as hard as I did, and I can't afford my health care. Everyone is being taken care of by me. I feel left out and it makes me feel that I want my country back. This voter is evidently very concerned with the unfair, purportedly unfair relationship between contribution and reward in the United States. And the essential thesis of the book is that he's not alone.

Now, if you buy that argument and you understand that economic unfairness is a key contributor to populism around the globe today, the next natural question is OK, well, what can we do about it? What are the policy inputs that substantiate a fairer and more socially mobile economy? And that addresses, if you recall this diagram, the first element pertaining to the policy failures that lead to economic unfairness and its consequences. Something I want to clarify right from the get-go is that a lot of the political discourse around the policy inputs to social mobility is not really close to the mark. You can see that this diagram here on the horizontal axis, it has government spending as a share of GDP in 2018 for different countries and then on the vertical axis, it has social mobility where I've arranged countries with low social mobility at the top of the graph. In countries with high social mobility at the border. And you can see that the traditional prescriptions of we just start to have small government get government out of the way so people can get on or big government have lots of intervention to fix all the problems that are there. Neither of those are really silver bullets. You can see that countries like Switzerland, the US, arguably even the UK, are representative of places with relatively small government and nevertheless suffer from low social mobility. And by the same token, you have places like Italy and especially France that, on the flipside, have large governments and also suffer from low social mobility. So if the solution isn't quite as simple as many politicians might tell you, naturally, that might be one to ask what actually are the policy inputs that really support social mobility? And we argue in reclaiming populism that the most socially mobile countries today use policies that specifically enable equal opportunity and fair on equal outcomes. You can think of countries like Australia, Canada and the Nordics, the Scandinavian countries that terror state-sponsored equal opportunity with competitive markets. And as a consequence, they have high social mobility and they tend to be populism resistant as well. It's not an absolute bulletproof screen, but it's like a firewall against populism that prevents its worst excesses.

You can imagine how Australia and Canada have not had to deal with anything quite like the Trump phenomenon. The Nordic countries have not had to deal with anything quite like Brexit. And in spite of the immense shock of the 2015 European migrant crisis. In fact, in the 2019 European Parliament election, Denmark and Sweden voted for populists at ad rates, respectively of around 10 and 13 percent, whereas the range for other countries like the UK, Italy and France was more like 30 to 50 percent. Quite a difference there. Places, in contrast, that fail on either of these categories of policy inputs tend to suffer the consequences. The United States certainly has competitive market outcomes. But on the whole, it does not support equal opportunity because it has threadbare investment in public goods compared to other countries. France, on the other hand, has a world class social safety net. As you can imagine, everything from education to health care transport infrastructure, but arguably also has an overbearing state that regulates and taxes away the fruits of success, which can make it very hard for people who are trying to move their way up the career ladder to actually work their way up and be rewarded according to their contribution as a consequence of these problems, we argue. Both countries fought for from low social mobility and have fierce populist movements. Ensuring the policy inputs to equal opportunity and fair on equal outcomes are themselves quite complex. I got a diagram here, and if you're familiar with the Growth Lab's work, you'll notice that this is somewhat akin to a diagnostic treat. Now there's a lot going on here, and I promise we're going to break it down, but I want to just make some initial observations about it for you. You can see that economic fairness is at the top of the chart. You can also think of social mobility being supported there, and that in turn relies on equal opportunity and fair on equal outcomes. Those two elements, in turn, depend on a wide variety of categories of policy inputs that support them. You can see that equal opportunity, for example, depends on formal equal opportunity freedom from discrimination, but also substantive equal opportunity or the ability to use public goods to become productive and access economic limitations. And similarly, protection against unfair events like financial crises or even ill health by a health care. By the same token, it is just as important for countries to embrace fair on equal outcomes, which depend on the ability to reward value creation through an efficient market. That, in turn, depends on all the inputs that are conventionally understood as the things that support economic growth. And additionally, the need to punish cheaters through a justice system and taxation and regulation such that unequal outcomes insofar as they occur actually are fair and that reward is really still according to contribution.

Now, there's a lot going on there, but it's easier to comprehend. I argue if you imagine the life trajectory of somebody who personally experiences social mobility, you can think of somebody who is, say, born into a working-classblue-collar family and worked their way up to become a middle-class plumber or accountant. It doesn't really matter if it's blue collar or a white collar. But the key thing to ask is what needs to happen along the way and what is the role of the state and a policy at each of those steps? The very first thing that needs to happen is that somebody has to be able to have the opportunity to become productive and there there are commonly discussed inputs that are relevant, such as access to affordable, high-quality education and childhood nutrition. Now, those kinds of inputs often constitute the entire policy debate on social mobility. But we can tell in the book that it really shouldn't, because that just gets a person to the point where they are productive in theory. And as you'll see, there are a whole bunch of other steps that then need to happen to actually get them to the final destination of making it, say to the middle class immediately after somebody has got that ability to become productive. They then, for example, have to be able to actually physically access jobs with economic opportunity. You can think of cities or towns or simply whatever geography they need to go, where they can find a job or start a business. And relevant policy inputs there include things like housing and transport infrastructure. You might know that these things have featured quite heavily in the recent leveling up debate in the United Kingdom for good reason.

Once somebody has been able to become productive physically access to location, they need to get to in some way, the economy that's there has to be able to actually offer ample job and business opportunities. And this is something that is not frequently discussed in the conversation around social mobility. But we argue quite strongly in the book that this is really only possible with a competitive private sector. If you do not have a private sector so that people can find job opportunities and find opportunities to start a business, then that opportunity remains theoretical and it isn't translated to tangible success. You absolutely need an efficient market and all the inputs that support competition and economic growth to go along with that. When somebody is then competing for those kinds of opportunities, insofar as they exist in society, they must be able to do so in a way that is free from discrimination for one, both in law and in culture. And they also must be able to do so in a way that is free from the influence of economic cheaters who might take away opportunities and unfair ways. You can imagine that it's no good if you're going to start a business to set up, shop right next door to a monopolist or somebody who undercut safety standards when you're really trying to get ahead simply by creating value and getting rewarded for that value creation. The entire wages purge society has a key. Or rather, the state has a key role in minimizing the chance of a society wide, unfair events like financial crises, you can imagine the rule of financial regulation taking a place there and also to insure against unavoidable perennial unfair events, things like PhilHealth or a job loss in a cyclical downturn that can never be totally avoided, but can be mitigate mitigated against through things like health care and unemployment insurance, so that a sudden and anticipated and perhaps unfair shock as unfairly cut someone off from future opportunity by bankrupting them wholly collectively. As such, we argue in the book that there are multitudinous complementary policy inputs to social mobility, and part of the consequence of that is because you have to get so many things right.

In order for social mobility to happen, we argue that's a reason why very few countries actually are able to do that in practice. There's really only about half a dozen countries that are in that upper echelon of the highest social mobility in the world, even if fewer than there are developed countries. And here's that diagram of all the relevant categories of inputs here that we argue for just for consideration once again. Now, having established an RV for all those different inputs that are possibly relevant to social mobility. Next, we want to take things to the lens of a policymaker who is looking to reform social mobility and Peru social mobility in their particular country. And that's where it becomes very important to diagnose the top constraints to social mobility on a case-by-case basis. Now, vitally, we see these inputs to social mobility as complements and not substitutes. And what that means is that, for example, you cannot fix a terrible education system by investing more in transport infrastructure, and the vice versa is also true. You have to actually fix your failing schools, and you have to actually fix your failing trains. You can't just swapping out for each other. And the consequence of that is that it is critical for policymakers to diagnose which missing inputs most severely constrain social mobility in a given country. And the reason for that is so that your reform efforts don't go off in some tangent or some area where you are perhaps already doing relatively well when there's some other failing area that you're doing very badly on and is really holding back social mobility on the whole, that makes that story of somebody going from the working class to the middle class impossible in some way. And in order to do that, we take a leaf from the Harvard Growth Labs diagnostic methods, which of course, is hosting this talking and where I work. And there are a variety of detailed steps that are involved in the diagnostic method and some tweets when you need to apply to the question of social mobility, which we go through in detail in the book, unfortunately, is that it is a bit technical, so I can't cover all of it today. But I want to present sort of the core idea of the diagnostic method, which is to hone in on the most severe or binding constraints to an economic output. And those tend to be both highly desired and also scarce. As a consequence, you can look for signals in the data that something tends to be in low supply and high demand in various ways.

To give one quick example of the kinds of analysis you might look for in the kind of data signals you might look for, we can consider the question very hot topic in the UK today. Does leveling up regional infrastructure actually make a difference? Is this really likely to improve economic opportunity in the regions of Britain apart from London? Now, first, you might turn to the question of supply and try to figure out whether there is a low supply of infrastructure in those regions and a starting point there might be to recognize that the UK has on the whole, arguably undersupplied infrastructure investment across the nation. This is a graph of the average government gross fixed capital investment in G7 countries as a share of GDP from 1995 to 2015, and you can see that the UK is second to last and lags behind a couple of important comparator countries like Canada and the United States on France. Also on the whole, there's perhaps reason to think that infrastructure is undersupplied in the UK overall, but in addition to that, there's further evidence that it is especially undersupplied in regions. Coyle and Sensier in a 2019 paper, show that many infrastructure projects that were approved in London had in fact lower cost-benefit ratios and those rejected in regions. And what that means is that that infrastructure investment that is already scarce in the UK as a whole is especially concentrated in London and therefore doubly scarce in regions. So that's maybe not a complete and thorough analysis of everything you could do to address that question. But that's the kind of evidence you would look for it to indicate that something like regional infrastructure investment is in both supply. And then you want to turn to the question of demand. Is this also in high demand? Because if it is, then expanding that supply will create large payoffs. In the case of regional infrastructure in the UK, one piece of evidence you might consider is a 20 19 Ernst and young survey of foreign investors where they ask these foreign investors, what's your top decision factor for investing in UK regions? And the survey showed that transport and technological infrastructure was in fact the top decision factor ahead even of the availability of local skills in the labor force. Now, of course, these investors are the kinds of people that would be bringing in new business, new economic opportunities in the region so that people can work their way up the career ladder and be rewarded according to their contribution. This is a vital indicator to indicate that regional infrastructure in the UK better regional infrastructure in the UK is in fact highly demanded. As a consequence, this is some of the evidence that you might use to conclude that regional infrastructure in the UK is in both low supply and high demand. It's therefore plausible that it is a binding constraint to social mobility and expanded economic opportunity in the UK.

Now, after identifying that kind of issue as a binding constraint, you might want to ask, Well, that's kind of a weird situation. Why is it that someone is stuck in low supply and high demand? Because usually that is corrected either by market forces or by people going to the ballot box and essentially getting angry about it? And in turn, you might ask, well, why is there that equilibrium? Is there a political economy syndrome that explains why the regional UK is exhibiting symptoms? In the case of the UK, we make an argument in the book, essentially for fiscal over-centralization, you can see this graph here shows on the horizontal axis, the bog of population and then on the vertical axis it has the share of government investment that's conducted by central government, essentially the infrastructure spend and other kinds of spending that are conducted by central government versus regional and local governments. And you can see your story. You can see that there is no other large high-income country apart from the UK that spends so much of its investment and the level of central as opposed to regional and local government. The UK is a definite outlier in that regard. And the same pattern shows up. If you look at the taxation side, this graph is similar, but on the vertical axis it shows the share of taxes collected at the level of central government as opposed to regional and local. And once again, the UK is a clear outlier. Both its tax collection and its spending are quite concentrated at the level of central government, which could explain why there is so little infrastructure investment in the regions that so sorely needed. In the book, we consider other issues as well things like the state of health care and education being unaffordable in the US and how that contributes to social mobility are things like the overbearing taxation and regulation regimes and France that arguably prevent people from working their way up the economic ladder and constrained labor markets and tax administration in Italy. And we go into more detail about the UK as well. This is sort of just a taste of what's possible. So with that in mind, I'd like to conclude the presentation part of this event with a couple of key thoughts that we think are relevant to anyone who is concerned about the state of populism around the globe today. And the first of those is don't mischaracterize populist voters as uniformly deplorable, stupid and racist. This is too often a perception of those kinds of voters. But in fact, those voters also notoriously complain about a rigged system, and the data indicates that they have a point that economic unfairness, low social mobility and other problems associated with economic unfairness are in fact tightly associated with the incidence of populism, and because populism is grounded in very real entrenched economic unfairness. Importantly, it cannot be simply beaten down and defeated. You can't just excoriate that segment of the population and hope the problem will go away. It's systematically entrenched.

The only option is to reclaim the populist vote by substantively rectifying the very real economic unfairness that drives it and turn the way in which to do that is very important. The messaging and policy to win back the populist vote must be precisely targeted at a fairer economy and replace specific binding constraints that underpin and its messaging and policy cannot be confused with conflicting and unfair ideological goals like aggressive redistribution or less. They fear neoliberalism. You can imagine, for example, how in the UK, Jeremy Corbyn's platform completely imploded when he was offering a hard left alternative to the status quo. And as some journalists have noted it, it's because these voters really didn't want equalization. They saw that as unfair and everybody gets the same regardless of their contribution when really most people want the chance to get on. And on the flip side, you can think of issues associated with less fear and neoliberalism where you take the position that the market is always right, even if it's unfair. For example, you can think of Tony Blair's famous quote where he said that some people ask whether we ought to stop and debate globalization. We might as well start and debate whether autumn ought to follow summer. Now, however, pie the cold that might have been too many voters that ignored the very real consequences that globalization can have for them if it's executed under conditions where those disaffected citizens do not have new opportunities to adjust to find new paths to success. I want to thank everybody for listening to the presentation today, reclaiming populism is available on Amazon, on my publisher's website, Polity Bookstore, and in bookstores everywhere, and I'm looking forward to Q&A both with Ricardo and with the audience. Thank you so much.

Ricardo Hausmann Great. That was quite an impressive synthesis. And you, you must have planned it very well because you were just on time. So thank you. Thank you very much. Before I go to the Q&A, let me ask you a couple of questions. I can imagine a world where social mobility aim can also cause problems. I mean, if you start in a situation where, say, some groups of people say and black people, minorities, women, you start with a lower share of of of the pie and lower wages and so on. And they progress and that the people who used to be higher up in the ranks might get concerned and worried, etc. and that I could interpret that some of the malaise in parts of of the populace vote is, is that, you know, the gap between black and white, between men and women has been narrowing. And especially for people with less than high school education. And would you say that there might be some? Is it all? Is it social mobility always good? Or is social mobility in some sense? It puts people. I mean, for everyone that goes up, somebody comes down in the ranking, right? So what happens to people that come down in the ranking when there's a lot of social mobility? Is it? Will they develop a discourse to in some sense entrench their previous rank and that they will favor, you know, policies that would prevent them from moving down?

Eric Protzer Certainly so that if people in the audience are looking for an expanded version of that argument, I'd refer them to the book Identity by Francis Fukuyama, which essentially makes that argument that it's a matter of status threat that's driving populism around the world. The traditional think like white blue-collar men feel threatened by the rise of these new minorities and these new immigrants that are gaining power. I would say that for. I mean, first of all, the data doesn't support the idea that low social mobility is negatively. So the data doesn't support the contention that social mobility is negatively associated with populism. It's quite clear that worse, social mobility is systematically associated with worse populism, so it doesn't really play out empirically. But if you want to address the question from a more of a qualitative angle, I would say that it's important to conceive of this, at least in my view, in the sense that social mobility isn't a zero-sum game. It's not like, you know, some people necessarily lose out when other people run. It's more the way I think of it. More is about a system of complex cooperation where if you have other people who are given the opportunity to be productive, that actually makes you better off. And the way that I see the frustration surrounding populism is not so much that people are worried that there are these other minorities that might surpass them. It's more akin to that. That quote from the Boston Globe that I shared where, you know, you have people who feel that they have worked really hard, they can't afford their health care. They feel like they're being left behind, essentially. So I think that people are perhaps less antagonistic towards the these perceived status threats and then than is frequently claimed, and that it's more about these individuals feeling that they aren't being rewarded.

Ricardo Hausmann Interesting, interesting. And also I mean, Canada, Australia are two countries where immigration rates are much higher than, say, in the U.S. or France. Yeah. Why do you think immigration is so much of an issue in the populist discourse and say, the US and the UK? And why? Why does it not take hold in Canada and Australia?

Eric Protzer Yeah, that's so that's something we address at length in the book. But the basic argument is that in a situation of economic unfairness, where you have people who are already there who feel like they're not being rewarded, they're not getting the opportunities and support that they need to have. Then when you have that immigration coming in or a refugee shock or what have you, it's easy for that lead to lead to a situation where people perceive those newcomers as getting help when they feel that they're not getting help. There was a fantastic quote in The Economist a couple of years ago, for example, where they interviewed populist voters in East Germany, and they essentially were interviewing them about this immigration question and the way they synthesized the respondents answer was that they really hated it when people classified them as racist. They really felt that they weren't racist, and their concern was that they felt like they were being left behind and that newcomers were being helped first. And one of the consequences of that is that you can have these xenophobic spillovers in places that are affected by low social mobility and economic unfairness. And in contrast, you can look at places like the Scandinavian countries where they had a huge migration shock. There was a bit of a populist moment and the vote share in national-level elections even, I think in Sweden went as high as 20 percent for populists. But, you know, there was nothing like Brexit and the easy vote shares in the European Parliament election came down quite a bit. So overall, we see immigration as potentially an amplifier, something that can make the problem of economic fairness seem worse. But we don't see it as really a systematic cause that's leading to the highest echelons of populism around the world.

Ricardo Hausmann I mean, but still, I mean, the difference you the is at about 14 percent, Canada is about 24 percent. Is there something about immigration policy itself that might be different? Or I mean, do you think Canada and the US have the same impact on? I mean, immigration is always a challenge to the perception of social fairness or, you know, people might be. I mean, is it something about the preferences of the Canadians or is it something about immigration system that the Canadians have a differential system that the Canadians have been serving the U.S.?

Eric Protzer Well. I mean, there's sort of two things I would know. First is that both sub nationally and internationally, we don't see a clear correlation between immigration rates in practice, whatever the system behind it might be. And the consequential populism. But I would add that, you know, certainly insofar as that immigration system can amplify whatever pot, whatever you know, threats are, there are concerning economic unfairness. I think there's certainly an argument that it can be amplified more if you have an immigration system that people perceive to be unfair. If you have, you know, for example, a point system like Canada where you're bringing in lots of very high-skilled immigrants, there might be more of a perception that those immigrants are coming in and contributing to the system. Whereas if you have plenty of refugees or low skill immigrants or illegal immigrants coming in, it could be the opposite perception that people could become especially sensitive to that concern. You know, in a situation where they feel like they're already being unfairly treated and we see these people who are coming in essentially, you know, in their view, breaking rules to enter the country.

Ricardo Hausmann We have a question at the core of your thesis in the Q&A that came from Julio Cesar Martinez, and he asks whether you've thought about whether economic unfairness could explain populist leaders in Latin America.

Eric Protzer Great question. So one thing I would say is that to an extent, the book certainly argues that the problem of economic unfairness is a near-universal concern. We explain in the book how both biological and cultural evolution press people to value fairness because it enables complex, four-point cooperation. And that's I certainly would expect that people ought to be sensitive to economic unfairness in Latin America and that it could very well be a contributor to a problem there. I my coauthor and I wrote in a letter to the Financial Times about populism in Chile on that specifically. That being said, our analysis on the whole is concentrated on high-income countries for two reasons. Firstly, because it is perhaps so troublesome that so many beacons of global freedom, like the US and the UK and France have been susceptible to liberal populism, but also because in a lot of other parts of the world. And it's not especially surprising that support for democracy is not as pronounced. There are long histories of trouble, demagogery and a lot of these countries and a wide variety of associated problems that occur there. So on the whole, I would say that it's very plausible that it could be a contributing factor. There might be other things going on there as well, more related to the deep political history of the countries in question.

Ricardo Hausmann Very good. Muhamed asks an interesting question. Obviously there's economic and unfairness and economic inequality. I mean, you argue that there might be unequal but fair outcomes. There might be also inequality that is the consequence of unfairness. If you have a guess or have to explore this question of how much of the economic inequality is the consequence of economic unfairness versus sort of like, fair but unequal?

Eric Protzer Yeah. So, you know, it's interesting you ask that because while I haven't personally explored that question, we do talk about other authors who have. And one common approach in the literature is to do something called inequality, composite body composition, where they take the existing income distribution in a society and they essentially statistically decompose it and they say, OK, what portion of that is arguably unfair because it's explained by demographic determinants that really shouldn't determine your success. Things like your ethnicity, your race, your gender, your place of birth, your parental wealth, your parental education, all those kinds of factors. One really interesting finding was that the growth of inequality in the US, this is one from a paper I think by Q4 can and people. The growth of income inequality in the US was largely there, for the most part from 1970 to 1990, insofar as most of that income inequality could not be explained by these unfair components. But thereafter, since about 1990, it's become more and more unfair. Another really interesting angle on that comes from Serge Aurier, who's the chief economist of the European Bank for Reconstruction and Development, where he did a paper doing the same kind of income inequality de composition for different post-Soviet countries in every country. And he found that the unfair components of income inequality was associated with less support for markets and democracy. But once you take that into account, the remaining spare components of income inequality is associated with higher support. So that's that's an interesting question, and it's certainly the evidence that's available indicates that things are trending in a bad direction.

Ricardo Hausmann Interesting. We have a question about what do you think about citizens' wealth funds? Would you see the establishment of these kinds of vehicles in resource-rich developing countries as an antidote to populism, as if the money in some sense, if individuals could claim property rights on on on the natural resource rents instead of having been channeled through the budget?

Eric Protzer So I guess this is actually somewhat akin to questions we sometimes get about universal basic income in the United States. I guess the idea here is you set up some sort of common fund, whether it's funded by resources or taxes, doesn't matter that people get some sort of payout from that. I suppose my thought on that personally would be that I don't see that as an especially good remedy to the problem of economic unfairness because the issue is not simply a matter of absolute living standards. It's a matter of whether people are getting rewarded for their contributions for their talents and efforts. And that's something that, you know, you can feel very frustrating and it has to be solved much more by complex policy inputs that enable somebody to get an education, get where they need to go. To compete in the market, to compete in a way is fair and to be rewarded for the value they create, simply distributing wealth to people. You know, maybe it can help in other ways to create a baseline freedom from poverty. But I don't see it as a catch all solution.

Ricardo Hausmann There's a question by Juan Pablo Fontana, who wants to know more about measures of social mobility, how do you go about measuring social mobility? What are your indexes for social mobility?

Eric Protzer Yeah, certainly. So the main measure that we use in the book is something that in the academic literature is called intergenerational income elasticity, and the way that's computed is that you essentially track people and their parents longitudinally over time. It's quite data intensive. And what you do is you compute, you know, to sort of simplify things, you compute the of the kids income at a certain age and the parents' income at a certain at that same age when back when those parents were the same age. And then you check, what's the correlation? There are, you know, there are these other things you need to correct for like lifecycle factors if somebody's still in school, things like that. But essentially, it's mostly that parent child income correlation in the same age that we're using as a measure of social mobility. There are some other approaches that people use. For example, the World Economic Forum has a more holistic approach to a social mobility index where they consider what they think are relevant policy inputs to social mobility, things like access to education and, you know, the price of housing, the competitiveness of the market and whatnot. But those are sort of indirect measures. So we feel in our book and in the quantitative work that it's best to hone in exactly on that problem.

Ricardo Hausmann In a very good team, we have another question in the chat by Osé alumnus, he asks If you think that the main problem is populist values endorsed by voters or authoritarian values embraced by voters and boosted by populist rhetoric? So is there, for instance, regarding anti-immigration attitudes? I mean, is it an anti-democracy and pro authoritarian? When people want change, the status quo may in the checks and balances prevent change. And so people say, Well, since I want change and democracy cannot deliver change, in some sense, let's get rid of democracy and in the process, they need a populist rhetoric to justify that. Then that rage and that frustration with the status quo.

Eric Protzer Yeah, so, OK, there's a there's I guess, two ways in which I'd answer that. First is with just the definition of populism that we're working within the book, which is that we're classifying it as anti-elitist, combined with anti pluralism. The sense that there is, you know, some corrupt elite that's rigging society, combined with the sense that only my tribe has the right to make political decisions and that other people are illegitimate. But the way in which you get to that place, I think, is important and speaks to that question. And I would say that it's a mix of those things. Part of the problem is that when you have a situation of economic unfairness, we argue, is that, you know, you feel like you and perhaps your neighbors, your family, your community, you're not being fairly treated, you're not able to get ahead with talent and effort. And that causes people to look inward. You know, however flawed it might be, is the human response to become more inward-looking and tribal in terms of their community as and perhaps a somewhat anti pluralist source of political authority. I certainly think, however, that that is exacerbated by the particular political leaders who then, you know, show whatever direction that can go in. I mean, you might contrast Donald Trump with other political leaders in Europe like, I don't know, you could even think of Nigel Farage or Boris Johnson, where maybe there's a degree of quasi populism or even that degree of skepticism of immigration and things like that, but certainly not any direct attempts at a coup. So I do think that it's a combination of those things. And as the title of the book might suggest, reclaiming populism. I think it's certainly possible to channel those concerns into a liberal democratic direction that really addresses the substantive economic issues without going in a non-democratic direction.

Ricardo Hausmann Very good. You made a very interesting point in your presentation quoting an article. I forget the authors that the in financial crises were different from regular recessions in the public's perception of their fairness. Have you thought about the perception of the pandemic? How is this recession and the pandemic jive with your discourse and your framework?

Eric Protzer Yeah. So I mean, first of all, without even getting into the issue of economic unfairness, I think it's important to note that certainly there's been a populist reaction to the pandemic and the restrictions that come along with the pandemic, perhaps an interesting and surprising ways in my home country of Canada. There is a huge convoy of truckers that are descending on will have descended on Ottawa, as you've probably read in the news. And people are essentially, you know, saying, well, they're very populist. Is this Canada's populist movement? So there's definitely an element of that to begin with. And I would say that that, first of all, comes from certainly a sense of unfairness, however justified or unjustified it may be from those kinds of citizens where they feel that there are, you know, restrictions being placed on them that that, you know, they think are unfair. But I would add that, you know, the trucker convoy into Canada has not made, for example, the country completely unrecognizable. It's not like this has spilled over into a broader grievance that resulted in something like Trump, where the US before and after is not the same country or Brexit, where the UK before and after is not the same country. And the reason for that is because it hasn't tapped into a deeper sense of economic resentment that people can't get ahead on their own, their own talents and effort. I would add to that, though, that there is also an economic element to the book. I are sorry to add to the pandemic, insofar as there has been differential policy responses to it. You can imagine that in some countries, people have had an easier time getting access to monetary relief from the pandemic, or an easier time navigating all the checks and balances surrounding vaccines, Typekit certification and masks and whatnot to be able to go and get back into the workforce. So there certainly is also an economic element to it that can play out.

Ricardo Hausmann Very good, we have a couple of questions, and I think we're running out of time, but let me state them. From Stefan Trim, he congratulates you and asks, you know, does the degree of trust in government, in cross-country comparisons influence toleration of unfairness or in a government in some sense, compensate for unfairness? And from Signa, what if economic policies lead to the populism of the right? As in India, where religion and caste equally affect social mobility? Is economic liberalization enough? Have you thought about the case of India, where were so like the resurgence of a Hindu identity as a core definition of the nation is at stake vis a vis a more, you know, a Congress party approach, which was more ecumenical, if you want? So so those are two last questions.

Eric Protzer Certainly, so to answer the first of those with regard to trusting government and quantitative analysis behind the book, we actually look at surveyed confidence in government from the world Gallup poll and and we use that as a factor to investigate. And we say, well, what leads some countries to have higher confidence in government versus lower confidence in government? So to begin with, I would say that that is an outcome variable that you can sort of use to proxy for populism. Other authors and literature have certainly done that as a proxy for populism. In addition to that, though, I think that to give a short answer, yes, there can always be a country sort of fixed effects that both change the shape that populism will take and perhaps can make it slightly contained or slightly worse. Um, you know, for example, one interesting country is Switzerland, which is such a bit of an oddball case because it simultaneously has relatively high degrees of populist voting, but also relatively high degrees of confidence in government and trusting government. So it's it. You can't have an interest in cases like that where, you know, if you have better institutions and better trust in those institutions, I think there probably can be, to an extent, a mitigating effect. That being said, of course, once you've gotten to a point where people begin to lose trust in those institutions and begin to think of alternative arrangements, you can very quickly go down a slippery slope into another situation where you've got a historical precedent for illiberalism and that can carry on with regard to the question of India. I mean, this is one of the reasons why we concentrated on the developed world in the book because there's sort of a reasonably uniform value standard across those kinds of countries. And there's not these huge issues of, you know, for example, case, which I completely agree with you. That case is a major inhibitor of social mobility in India, and it's not simply a matter of economic liberation to do that. And that's why, for example, in the tree of policy inputs that feed into economic fairness and social mobility, you might recall that freedom from discrimination, both in law and in culture was a critical input, and that's where that would be very, very relevant for the case of India.

Ricardo Hausmann Very good. Well,  thank you so much, Eric. Thanks everybody for participating and this has been, you've really thought deeply about all of these issues and know your own thoughts and the literature amazingly well. So congratulations. A very, very interesting book. And great success with its distribution.

Eric Protzer Well, thank you so much and I want to thank Ricardo. I want to thank Chuck, and I want to thank everybody in the audience for coming to the talk today. I hope this has been illuminating and reminder you can get the book on Amazon, on Polity's bookstore, and at bookstores everywhere.