The Populist Temptation: Economic Grievance and Political Reaction in the Modern Era by Barry Eichengreen (review)

Populism is, among other things, a rejection of technocratic expertise. In that sense, the populist revolts of the last several years proved their own point: Experts did not predict them, and experts have been unable to solve them. Eichengreen claims in this book, however, that at least experts can diagnose them. Through brief overviews of several populist episodes over the last century in many different countries, Eichengreen arrives with a reassuring calmness to say that the answers are not that difficult. His tour surveys the Great Depression in America, the Fabians, Otto von Bismarck, and the waning of populism in the mid-twentieth century before reaching the unraveling that resulted in President Donald Trump, Brexit, and the rise of nativism in Europe. In Eichengreen’s view, populism is basically about economic difficulties; although racism and nativism are integral to it, populism does not occur in good economic times.

Even more encouraging is that even if we may not be able to implement the solutions, we do know what can allay populism: “In a variety of times and places, from Bismarckian Germany and Edwardian Britain to the United States in the 1930s, a populist reaction against economic change has been contained by public programs that compensate the displaced and comfort others who fear the same fate” (150). What Eichengreen calls the “plain-vanilla recipe for fostering faster growth” includes spending on education; some deregulation but some regulation; “sound and stable economic policies,” such as stimulus spending, but only when needed; and, particularly, policies to lessen inequality, including stock-option plans, regulating corporate boards, and restraining the growth of finance (148–149). The big lesson of this round of populism is that those who benefit from globalization and automation should defray the costs for those who do not: “High-wage workers ... may be funding transfers to others, but in return they are getting a social consensus favoring economic openness and technical change” (151). The difficulties with this plan, are all in the details (precisely which regulations will be beneficial and which less so?) and one question left unaddressed by Eichengreen is why it took such us to compensate those who lose out from globalization and automation.

But overall, Eichengreen’s diagnosis and recipe are convincing. Eichengreen is surely right to emphasize that globalization and automation create losers whose anger can jeopardize further globalization and automation, and therefore that greater social spending is necessary even if one does not approve of redistribution in general—erase if one only wishes to preserve further globalization and automation. Indeed, it is easy to read the rise of European populism in this framework, as resulting from austerity and probably fixable with greater social spending.

On the American side, the problem seems stranger, however, because the measures that Eichengreen posits to fix the problems are exactly the ones that the populists repudiate—social spending to defray the costs of globalization and automation. Eichengreen’s argument that the failure to implement such policies “is either a failure of courage, to the extent [that politicians] are intimidated by hardcore ideological opponents of government action, or a simple failure of logic,” is completely unsatisfactory (152). Why should intimidation or failure of logic happen in some times and places but not in others? In fact, this failure is not an indication of intimidation or a lapse in logic but of a successful electoral strategy. The reasons for this strategy’s success are the main question.

As this point suggests, the major problem with this book is that Eichengreen does not distinguish between populists of the left and of the right. Huey Long fought against business interests, but he was not a nativist. As Eichengreen acknowledges, he was the exact opposite of Donald Trump (124). But the book’s structure works only if they are in some way manifestations of the same phenomenon. Moreover, the broad application of the populist label hides that Eichengreen’s sympathies...