The 2008 financial crisis was devastating to the world economy. Just how devastating is something economists still argue over. It is not easy to add up the costs of bank bailouts, a lost decade of economic growth, spiking public debt, grinding austerity, and surging inequality. But the biggest cost is political: the populist wave has upending political systems, empowering extremists, and making governance more difficult. Polarization and Populismhas has lasted longer and done more damage. 

RISE OF THE RIGHT

The crash in 2008 and the subsequent eurozone sovereign debt crisis led to crisis fighting as long-standing two-party systems in France and Spain were swept away. Far-right forces emerge and sometimes achieved major electoral victories. Right tendency could be seen advancing with the Neo Liberal Reset 1980- 2008.

In 2015 our  Going to Extremes: Politics after Financial Crises, 1870-2014 found that far-right parties are the biggest beneficiaries of financial crashes as their vote share increases more than 30 percent. Government majorities tend to shrink making governing with more parties difficult. These effects are not present in normal economic downturns.

 

Because People want to attribute blame, and the right is willing to present scapegoats.they are manmade disasters, people blame elites for policy failures and cronyism causing the political system to lose trust. Political entrepreneurs turn the people against the "ruling class [oligarchs].” 

Far left’s vote share stays about the same. Social groups fear loss of wealth and turn to right-wing parties for stability, law and order. It was the German petit-bourgeoisie that enabled Hitler’s rise to power and the middle and working class elected Donald Trump.

Right-wing populists exploit cultural cleavages. They blame problems on foreigners and supporters of this global elite. British Prime Minister Theresa May said “If you believe you are a citizen of the world, you are a citizen of nowhere.”

The left has traditionally taken an internationalist outlook and usually avoids rhetoric against foreigners and minorities. People want to attribute blame and the right presents scapegoats: immigrants, China, or the European Union.

THIS TIME IS DIFFERENT 

It usually take 5 years for a voting pattern return to normal, party fractionalization to decreases, and the far right loses momentum. This time is different. Ten years on, fractionalization, polarization, and far-right voting are still present and establishment political system stumble from one shock to another.

Left centered countries usually immune to far-right politics are affected. In right leaning countries populist parties won elections in India (2014), Poland (2015), Philippine (2016) and the U.S. (2016). Right wing reelections occurred in Turkey, Hungary, Austria, and Italy.

Why have politics not returned to normal?

Populism is now a tried and tested political strategy as leaders learned to use TV and social media to enhance polarization and divisions. Dissatisfied voters are given a sense of identity using Nationalism. Simple language creates intimacy. 

Populists are better at surviving in power by cultivating their image as outsiders even after they dominate the political and business. Checks and balances are eroded as they take over the media in the name of “the people. They choose business-friendly policies that foster growth and avoid hyperinflation. Populists are following a similar playbook.

Reasons are most important structural. The financial crisis of 2008, terrorist attacks and surging refugee flows have widen cultural splits. Median incomes in the Western world are stagnant  [perceived]  an inequality  [perceived]  is rising. Lackluster  [perceived] economic performance has meant that financial crisis caused political trust mistrust remains. 

We don’t know how populists perform in office, why they are reelected, and what makes countries immune to populism. But what is clear is that another financial crisis would do enormous damage.