Your classmate Michel Labib sends me the following excellent observations and questions. My answers are inline, and I hope you enjoy this dialogue!
ML: I would like to share with you some thoughts regarding our first Global Trends class, held on 7/1/2018.
I fully agree with the analysis provided in Module #3 on Populism and Political Disintegration. The election of Donald Trump, Brexit and the Catalan independence movement epitomize the current rise of populism and political disintegration. However, there is a phenomenon currently happening in North America that contradicts this trend: the significant decline of the Quebec sovereignty movement since the year 2010s. At the federal level (Bloc Québécois) and the province level (Parti Québécois), the current electoral results have nothing to see with the levels recorded from the 1970s to the 2000s. As a reminder, in 1993, the Bloc Québécois won the second largest number of seats in the House of Commons, and therefore became the official opposition in Ottawa! This led to the 1995 Quebec independence referendum, lost narrowly by the sovereignists with 49.42% of the votes. As of today, the Bloc Québécois has only 5 seats in the House of Commons and is only the fifth political party. I lived in Montreal from 2005 to 2008 and back then, the promotion of Quebec sovereignty was still strong, before the decline starting in the years 2010s. According to you, why are we observing here an opposite trend?
RW: I should preface my answer by saying that I am not an expert on the Quebec separatist movement! But reading a bit about the decline of the movement (here, here and here, for instance), it appears due to a combination of factors: 1) the growing diversity of the voting population of Quebec, which does not favor the French separatists 2) the aging of the core supporters of the separatist party / bloc and 3) leadership transitions that resulted in increasingly unappealing standard bearers over the years. Once the referendum in 1995 failed, as a result of the above-mentioned forces, the share of voters supporting separatism started to fall, and the electoral support for parties whose entire raison d’être was independence correspondingly collapsed – once the possibility of separation becomes remote, voters turned to bread and butter issues (the economy). The global financial crisis may also have removed some urgency to the issue of separatism, and it was hard to rebuild momentum with lackluster leaders after that. Indeed the main drop-off in electoral seems to date back to 2011, but started perhaps a bit earlier.
We might have observed something similar in Scotland, has Brexit not won. Brexit put new wind in the sails of the Scottish independence movement, though I still think independence is unlikely to be in the cards there.
I view these movements as mostly at odds with modernity and globalization, so while there is a resurgence of separatism in various locations, it should not be surprising that they often fail against the background of ever deeper integration. Quebec seems to be an instance of moving on after the defeat of independence. It’s not so much an instance of an opposing trend as a return to normalcy. The main dynamic is one of globalization and greater integration, it is just that this dynamic is being questioned and reversed in an increasing number of cases (those cases buck the long term trend) – Brexit, Catalonia, etc. That’s why part I of my class started with the “deep” trends of modernization and globalization and highlighted the recent “superficial” (hopefully!) trends of disintegration and populism as reactions against those deeper trends. I don’t believe they will be successful reactions, but that of course can be debated!
ML: During the class, you highlighted the fact that there is no strong correlation between the economical performance of a country and the fact to have a populist leader at its head. I agree with your point: the U.S. and the U.K. economies both remain strong. However, here again, the example of Canada contradicts that point: the impact of the Quebec sovereignty movement on Montreal’s economy has been significant, especially in comparison to Toronto. During the 1970s and 1980s, before the strong rise of the Quebec sovereignty movement, Montreal used to be the main financial place of Canada while Toronto was more of a regional power within Ontario. When the Quebec sovereignty movement has become strong, things have started to change dramatically, with the majority of financial investments being done in Toronto. Now, Toronto is the most powerful economic place in Canada and Montreal’s economical power has significantly declined. The political instability and the corresponding uncertainty is known as being the main reason of the decline of Montreal (even though this a debatable statement, the Parti Québécois would certainly refute such statement). However, back to the U.K. situation, London does not seem to suffer from the Brexit: we have not seen (yet) any significant transfer of activity from London to Frankfurt / Paris / Dublin. According to you, how do you explain that opposite trend for Montreal / Toronto in comparison to London?
RW: My observation in class was mostly about causality running from bad economic conditions to populism. There is no strong evidence that bad economic performance leads to more populism, though a bad economy can be a contributing factor. Your observation in contrast is about causality running from populist / nationalist leaders to economic performance. There I entirely agree with you. I view populist movements, especially due to their anti-globalization message, as inimical to strong economic performance. Britain does not yet seem to suffer much from Brexit, but who knows how she would have fared without Brexit (I would submit: better). If a soft Brexit ends up occurring, the damage will be contained. But that’s not to say there will be no damage. For this reason (and others) I was in favor of “remain”. Similarly it is hard not to see the Trump administration’s protectionist moves as having negative effects on the US economy. Other forces may separately lead to strong US growth, but protectionism won’t deserve the credit (the empirical evidence on this point is very strong!).
ML: In the video module #2, you highlighted that no significant trade agreement has been signed over the past 10 years, thus underlining the on-going trend to protectionism. However, on 6/18/2018, the European Union and Australia have officially launched negotiations in order to achieve a large-scale trade agreement. You can find additional details at the following website: http://ec.europa.eu/trade/policy/in-focus/eu-australia-trade-agreement/. Do you believe this can be the beginning a new trend towards less protectionism (at least outside of the U.S.)?
RW: Here I feel I should clarify: I meant that no significant multilateral trade agreement has been signed. The WTO’s Doha Round of multilateral trade negotiations failed in 2008. That was the last attempt at comprehensive, worldwide reductions in trade impediments. There have, of course, been several bilateral trade agreements, and even some regional liberalization (TPP was a recent failed attempt, but the other participants besides the US may go ahead with the deal anyway). The problem is that economists don’t really recognize bilateral or regional trade liberalization measures as quite as good as multilateral ones. That’s because bilateral / regional agreements can actually reduce welfare if they result in excessive trade diversion. What that means is that if country A and country B lower their trade barriers, that may result in reduced trade between these two and country C as A and B start trading more intensively with each other instead. And that reduced trade might have been more beneficial than the newly created trade between country A and country B.
On your broader question, I think trade policy works like a pendulum. We are now seeing, in large part due to the Trump administration’s overtly protectionist agenda, a policy swing in a protectionist direction. The costs of that swing will soon become apparent. As soon as it does, I expect the pendulum to swing in the other direction, if only by reaction. Also, antagonism to trade by the Trump administration might serve to coalesce other countries into perhaps greater cooperation with each other and integration in trade policy, as a counter-reaction.
Many thanks to Michel for his excellent contribution!