The rise of populism: far-right parties will influence the future

There has been a surge in popularity of populist far-right parties across Europe, raising concerns about the economic consequences of their policies. While the motivations behind this change are complex, a combination of economic anxiety, cultural fears and political discontent is fueling their growth.

Factors behind the recent increase in popularity of populist politics

The economic effects of globalization and neoliberal policies have left many Europeans unsure of their future. Between job losses, industrial decline, and a widening gap between rich and poor, populist parties have exploited this collective anxiety by offering overly simplistic solutions to complex economic challenges. They appeal to those left behind by waves of change, promising to protect jobs, restore national sovereignty and address economic inequality.

Concerns about immigration, cultural change and the erosion of national identity play a significant role in the rise of populism. Populist parties exploit these themes through nationalist rhetoric, scapegoating immigrants, and advocating for tighter immigration controls. They capitalize on fear by presenting themselves as defenders of traditional values.

Traditional centrist parties were often perceived as out of touch with the concerns of ordinary citizens and unable to solve their problems. This created a vacuum that was filled by populist parties. By presenting themselves as "anti-establishment", they attracted disappointed voters.

The influence of far-right parties on economic policy

Despite their diverse origins, populist and far-right parties have several common features in their economic policies. They often advocate protectionist measures such as tariffs and quotas to protect domestic industries from foreign competition. They believe that protecting the country's jobs and businesses is essential to economic security.

They put the interests of native citizens ahead of those of immigrants. This can manifest itself in policies that restrict immigration, limit social benefits for non-citizens, and favor native-born workers in seeking employment opportunities.

Both far-left and far-right populist parties often perceive UE as an undemocratic force that undermines national sovereignty and imposes unwanted economic policies. Some even support leaving the EU, believing that regaining economic control is essential to national prosperity.

Far-right parties are skeptical about climate change and oppose ambitious climate policies. They portray it as a threat to national sovereignty and economic competitiveness and argue that climate action will disproportionately burden ordinary citizens.

The economic consequences of the far-right's populist policies are complex and uncertain. While some policy decisions may provide short-term benefits to specific sectors or groups, they also have long-term costs and consequences.

Protectionist measures can hinder international trade and discourage foreign investment, potentially slowing economic growth and limiting consumer choice. For example, trade barriers can lead to higher costs and potentially weaken economic activity. Populist parties often promise to increase social spending and cut taxes, leading to larger budget deficits that raise borrowing costs, reduce private investment and increase the risk of economic instability.

Populist rhetoric and policies can contribute to political instability, discourage investment and undermine investor confidence. Political uncertainty makes long-term economic planning difficult for businesses, hampering economic growth.

Sectors influenced by populist politics

Populist parties often propose protectionist measures such as tariffs and quotas. These policies may be beneficial in the short term, but may lead to higher consumer prices, less choice and an overall decline in productivity.

They may advocate for increased government intervention in the health care sector, such as price controls. While these policies aim to make health care more affordable, they can also stifle innovation and limit access to new treatments.

Populist right-wing parties may propose nationalization of energy resources or tighter control over the energy sector. These policies can lead to increased government influence over energy prices, supply chains and investment decisions.

Author Peter Siks, investment coach, Saxo Bank