A striking shift has happened in recent years. Developing countries used to be seen as unstable, while advanced economies were viewed as stable. Investors, for that reason, would expect an extra premium for investing in emerging markets. Nowadays, in contrast, many richer countries look more prone to political risk than emerging ones.

The culprit for this new-found instability is often referred to as ‘populism’ but this umbrella term covers diverse political trends. It includes movements or figures associated with the right (such as Donald Trump in the US and the United Kingdom Independence Party), the left (Bernie Sanders in the US, Podemos in Spain) and the far right (including the National Front in France). 

What their supporters have in common is a feeling of estrangement from mainstream politics. In their view, a distant establishment no longer represents or even cares about their interests.

Rising inequality is the most common explanation for the populist surge. From this perspective the growing gap between rich and poor has created a climate in which backward ideas can flourish. Even on an empirical level this claim is shakier than assumed. There are many different ways in which inequality can be measured and they often give conflicting results. For example, according to Britain’s Institute for Fiscal Studies, a respected research organisation, the bulk of the rise in income inequality in the UK (measured by the Gini coefficient) happened in the 1980s. Yet populism has only recently become a force in the country.

More importantly, objective conditions alone do not determine the public’s political trajectory. When living standards stagnate, the public can react by moving leftwards, rightwards or fatalistically accept its lot.

The political elite overwhelmingly fails to see its own culpability in populism’s rise. At best, it distances itself from ordinary people and often openly expresses loathing for them. It is all too common to hear elite figures and their intellectual fellow travellers describe large swathes of the population as stupid, robotic and inherently racist. When the elite takes such a disdainful view of the public it should not be surprised when they return the favour.

Thankfully, there are a few mainstream figures who understand the drivers of populism. For instance, in this month’s Long Term Matters column Raj Thamotheram points to Michael Sandel in this respect. According to the Harvard philosopher: “citizens are rightly frustrated with the empty terms of public discourse in most democracies. Politics for the most part fails to address the big questions that matter most and that citizens care about.”

Those who are concerned about the rise of populism should engage in a project of democratic renewal rather than heaping contempt on the public.

Brexit: Scheduled for departure