Andrew Leigh

OPENING ADDRESS, 2018 ADB-ASIA THINK TANK DEVELOPMENT FORUM:
UPGRADING HUMAN CAPITAL AND SKILLS DEVELOPMENT FOR FUTURE ASIA
 
Australian National University, 22 August 2018

Thank you for that generous introduction. Welcome to all of those of you who are visiting Canberra, especially those who are visiting for the first time. I acknowledge we are meeting on traditional lands of the Ngunnawal people and pay my respects to elders past and present. I particularly acknowledge Asian Development Bank Vice-President Bambang Susantono. Thank you to the Australian National University’s Shiro Armstrong for organising today's event. 
 
In 1964. Richard Hofstadter wrote an influential article called ‘The Paranoid Style in American Politics’ in Harper's Magazine. He described a view grounded in dark conspiracies, secret networks of leftist activists. The paranoid style was an apocalyptic world view which held that civilization was in the balance. These paranoid personalities thought that secret bodies were running things and you need secret institutions to fight back. Half a century on, Hofstadter's essay remains relevant. A Gallup Poll this year reported that just 35 percent of US Republican voters believe the scientific consensus that humans are causing climate change. Research by Alberto Alesina, Armando Miano and Stefanie Stantcheva shows that in the United States and Europe, native-born respondents think that there are two to three times as many immigrants in the population as there really are. 

Your forum here today is on human capital. So it’s appropriate to think about the role of information in driving politics and the influence of misinformation in fuelling populist politics.
 
So, what is populism? Simply defined, populism is the idea that politics is a conflict between the pure mass of people and a small vile elite. In the United States, it traces its emergence back to figures such as Charles Coughlin in the 1930s, George Wallace in the 1960s, Ross Perot and Pat Buchanan in the 1990s and the Tea Party in the 2000s. In Europe, you see parties such as the Dutch Wilders Party for Freedom, the Austrian Freedom Party, the French National Front, the Norwegian Progress Party, the Danish People's Party, the Finns Party and the Polish Law and Justice Party. 
 
The rise of populism has been propelled by four big factors. The first is lousy economic outcomes. People focus more on values such as progress, rationality and universal rights as their incomes rise. Conversely, there is a greater focus on the material interests of your own group when times are tough. We hunker down and focus on our tribe. Let’s not forget that for 99 per cent of human history, people lived in small groups of 150 or so. 
 
When the global financial crisis hit it was a big hit to incomes but also a big hit to values. This was especially true in those countries where the economic impact of the crisis was largest. Australian real per capita incomes returned to their pre-crisis level by 2010. But it took until 2015 in Britain, 2016 in France. Even by the end of 2017, there were 10 OECD countries where real incomes were lower than they had been before the crisis. We've seen the malaise gripping parts of the United States most starkly through the fact that the death rate for lower educated whites has risen, due to what researchers have called ‘deaths of despair’: increased suicides, overdoses and alcohol related liver diseases. And an academic analysis looking at hundreds of national elections from 1870 to 2014 finds that extreme right wing parties increase their vote by about 30 per cent after a financial crisis. A hit to incomes tills the soil for populism.
 
A second big driver of populism is the pace at which society and technology are changing. We've seen huge advances over recent decades in cloud computing, genetic sequencing, mobile computing, and artificial intelligence. Just think, if Moore's Law – that notion that the power of computers doubles every two years or so – had applied to cars, then new vehicles today would cost a few cents to purchase, use a few litres of petrol each year and travel at 500,000 kilometres an hour. As Thomas Friedman has noted, exponential technological change can be profoundly unsettling and he likens living in such a fast changing environment to ‘dancing in the eye of a hurricane’. He says voters may turn to extreme politics as a way of saying ‘stop the world, I want to get off’. Technology has also driven a new media ecosystem which is fertile ground for conspiracy theories and misleading news. As Barack Obama put it, ‘an explanation of climate change for a Nobel Prize winning physicist looks exactly the same on your Facebook page as the denial of climate change by someone on the Koch brothers payroll’.
 
Third, populists have benefited from canny political entrepreneurs who are willing to use a range of arguments often not seen in mainstream politics. Jonathan Haidt from New York University argues that right wing populists draw on values such as ‘loyalty versus betrayal’, ‘authority versus subversion’ and ‘sanctity versus degradation’ that are less commonly used by centrist politicians.
 
Fourth, populism has grown because centrist parties have shrunk. One analysis by Barclays found that the vote for centrist parties across 22 advanced countries had fallen by 12 percentage points since the 1990s. In the 1960s, seven out of 10 Australians always voted for the same political party. Now only four out of 10 do. Since the 1990s, the share of Australians who choose not to vote for a major party has quadrupled. We've seen political party membership in 13 European democracies falling in half since the 1970s.
 
The hostility that right-wing populists have towards openness isn’t shared by leading economic policymakers. My friend and colleague Tim Watts MP noted in an important speech in Melbourne University on 8 August, that the central institutions of economic policymaking in Australia - the Treasury, Reserve Bank and Productivity Commission - all agree that immigration has had a positive effect on the Australian economy over the last two decades. It's contributed, according to one analysis, nearly a fifth of the growth of GDP per person in this country over the last 40 years. As Tim Watts points out, four fifths of Australians support multiculturalism. Yet outgoing Race Discrimination Commissioner Tim Soutphommasane has said ‘race politics is back… ‘there has never been a more exciting time to be a dog whistling politician or race baiting commentator in Australia’. Sensible, centrist politicians must help forge a national identity that's fit for purpose for modern Australia. Tim Watts quotes Noel Pearson’s call for a national identity that brings together Australia’s indigenous heritage, British institutions and multicultural migration.
 
We also need to tackle inequality. Shared prosperity isn't just about boosting material living conditions. It also serves as an effective counter-radicalization strategy. Redistributing part of the gains from openness and technology isn't just a matter of fairness - it's also vital to avoiding a populist backlash. We have good examples of effective leaders that have made the case for global engagement and fairness - India's Manmohan Singh, Britain's Tony Blair and Gordon Brown, Australia's Bob Hawke and Paul Keating, and contemporary leaders Justin Trudeau and Emmanuel Macron. We need to meld effective advocacy with sharp thinking about how to deal with technological challenges. I'm really pleased to see looking at your program today your engagement with questions such as how we give people the skills to benefit from cloud computing and artificial intelligence, how we equip workers to ‘learn to learn’. And as a randomista, I must say how pleased I am to see on your agenda a randomised experiment on vocational training in Cambodia.
 
As someone who has been thinking about public policy for most of my adult life, few things frustrate me more than the notion that if only the corrupt dunderheads in power could get out of the way we could just fix the world's problems, without the need for tricky trade-offs and challenging choices. As satirist Henry Mencken once put it, ‘there's always a well-known solution to every human problem – neat, plausible and wrong’. What you're doing in this conference is sharpening our thinking about economics, about human capital, and about creating a world in which the gains of prosperity are shared, in which openness can be celebrated, in which we can value diversity. Let’s work together to build an environment less conducive to the siren song of populism, more globally engaged, and more equal.
 
ENDS

Authorised by Noah Carroll, ALP, Canberra.