A Liberal View on Populism

To make a liberal dissert of populism, first it should be cleaned of non-liberal and populist additives. What makes me cautious about the concept of this publication, and not only this one, is that populism is presented as a pair to nationalism. Being a clearly anti-liberal phenomenon, nationalism is just one of such phenomena, and lending it such weight indicates a strongly biased approach to populism. That selectiveness could be justified if nationalism were the dominating feature among today´s European populist threats. I dare argue that it is not. I would even say that, unlike economic populism, Europe has proved to have relatively effective immunity against nationalism; I would even go as far as to say that relations between the nations of Europe have never been as good as they have been this century.  The idea of a common Europe is a widely shared value and a daily topic on the political agenda. Meanwhile, xenophobic political parties seem to be vulnerable and unsustainable, unlike those that offer social utopias.

This is a file from the Wikimedia Commons.

Such a biased attitude might also reflect a kind of intolerance and, in this case, it cannot support a liberal campaign. Nationalism has its background rooted, among other things, in liberal values: everyone has the right to individual identity, preference of lifestyle, personal space, mother tongue or national culture. It is only natural, and not necessarily nationalistic, that threats to such values should inspire contradictory feelings; feelings which should be honoured. The fact that many multicultural policies fail is also a reality in different parts of Europe. To my mind, political culture on our continent is effectively controlling xenophobic expressions, but is clueless in case of communist rudiments and unsustainable social models.

What makes me even more cautious is that somehow nationalism is presented as a rightist ideology.  I cannot see any logic here, on the contrary, there is a lot of evidence that xenophobia and nationalism tend to accompany overregulated economies and communist regimes. Intolerance,  deportation of nations, restrictions on education in one’s native language, or Russification were inseparable parts of the Soviet regime, and even nowadays national conflicts or, for example, extreme values at sport competitions are associated more with the countries where communist past has made them more acceptable.

That brings me to my main point; the biggest threat to Europe is economic populism. The European debt crisis has proved what should have been clear much earlier. European governments have been promiscuous in their spending and have purposefully been underestimating the limits to it set by demography, productivity, competitiveness or environment. Overspending has been written into promises, it has created expectations, regulations and, of course, it has been emanating from political rhetoric.

Europe is spending 10 percentage points more on social security than the rest of the developed world. The classic populist feature of European spending is that its selectivity, and thus its effectiveness, is very low; policymakers seek to gain the approval of a larger number of voters rather than address urgent social needs. As a result, it means a higher tax burden for economy, diminishing competitiveness, less investment, fewer jobs, and lower growth. The high level of social welfare and security in turn mean fewer stimuli for economic activity and lower personal responsibility. Liberalism assumes not only freedoms but also the responsibility of every subject, and it should look on feasible personal effort and creativity as the biggest resources of economic welfare, but also justice.

Europe has never been fair enough to acknowledge that government expenditure should in a normal situation be covered by taxes, and in good times reserves should be accumulated to overcome setbacks in economy. Weak compromises of 3% deficit and 60% debt burden with real behaviour have been considered to be bases, while they should not have even been followed. This ignores realistic estimates of growth potential, demography and competitiveness.

The populist message and reaction to the recent financial crisis is that governments have to do “something,” whatever it takes. The excessive fiscal stimulus as a result has led to a debt crisis. Those who were decisive in expenditure cuts and structural consolidation and had reserves that gave time and freedom for loan markets to tackle the crisis were in an advantageous situation. But even after that experience, cutting expenditures and gaining competitiveness have been very slow and rare. Instead of liberalizing labour markets, the rigidity of salaries has been taken as a natural law – the rigidity which is Europe’s most crucial disadvantage. The ease of hiring and firing and availability of qualified employees should be the subjects of any liberal.

Liberals should stand against the economic protectionism in all its forms and be in favour of opening all markets to competition. A lot has been done about goods’ markets in Europe, but high tariffs with the rest of the world and different kinds of non-tariff barriers, even on the internal markets, are still there. Besides the labour markets, liberals should see a huge battlefield in the market of services, the liberalisation of which means percentages of GDP.

An area where a lot of progress can already be recorded is financial markets. Equal rules and mechanisms can break the fragmentation of the financial market and lend additional confidence and growth to economy. Here, the common currency, euro, should be an uncompromised target.  But even though more regulations may be the right answer to the financial crisis that followed deregulations in this sector, overregulation remains a common threat to European competitiveness and resistance to that privilege of liberals.

All of the above mentioned has been the real policy in Estonia, where liberals, the Reform Party, have – exceptionally for Europe – been the leading political force for almost two decades, and the economy the quickest growing one since the middle of the 1990s. I therefore am happy to share our experience in the e-field, where there is also a lot of potential for opening and joining Europe, liberalizing and stimulating economy. We have been successfully developing e-government, e-accountancy, e-tax administration, e-invoices, e-services for businesses etc.   For years already every individual has been able to declare its income on a pre-filled e-declaration form within minutes and more than 95% of people do it. The percentage of e-banking is equally high and we cannot imagine ourselves living according to obsolete standards of traditional banking services.