What drives populism?

What has led to the rise of populism? The conventional answer involves inequality, flattening wages – and general economic malaise. In Europe, one year after the vote for Brexit, Martin Wolf of the Financial Times claimed that the global financial crisis had ‘opened the door to a populist surge’. In America, thousands rushed out to buy J.D. Vance’s Hillbilly Elegy, a coming of age story about down-and-outs in poverty stricken Kentucky, as a blueprint on the Trump voter. Yet this take is deeply misleading. If populists only required economic hardship to thrive then they would be rocking in Portugal and Spain while collapsing in states that have had some of the lowest unemployment rates in Europe, such as Austria and the Netherlands. The reality is that they are tanking in the former and surging in the latter.

So what’s going on? One possible answer (anathema to economists) is that people do not only care about jobs and GDP and that something else is having a much stronger effect.