Populism does not threaten the Transatlantic partnership; it stands to strengthen it. Recent events such as the election of Donald Trump Jr. in the United States and the Brexit vote in the United Kingdom have had clear, demonstrable strains of nationalism and populism attached to them, and inevitably, attendant negative externalities. Rather than view each negative externality, such as the surge in xenophobia on both sides of the Atlantic, as independent incidents that require immediate solutions, the root causes should be explored and remedied to build consensus amongst leaders and citizens alike. The most obvious revelation from the rise of populism on both sides of the Atlantic is that people are clamoring for immense political change. With this in mind, leaders on both sides of the Transatlantic should view the current predicament through the lens of the maxim “never let a good crisis go to waste”; meaning that times of crisis are the most opportune for making drastic, far reaching political change. Viewed in this way, the current moment is ripe for the leaders of the Transatlantic partnership to make serious, well-publicized changes to policies that have felt so many of those currently voicing populist ideas feeling passed over by the neo-liberal trends of the past three decades.
In both the United States and Europe it is clear that the socio-economic policies that have been put into place and at work for the last three decades have been benefitting the few at the expense of the many. In the U.S., the share of before-tax income received by the wealthiest ten percent of citizens increased from 32% in 1970 to 47% in 2014 (this excludes capital gains).[i] By 2014, in the European Union, “the top 20% of the population (with the highest equivalised disposable income) received 5.2 times as much income as the bottom 20% (with the lowest equivalised disposable income)”.[ii] As time has passed and the Transatlantic nations have grown more inequitable, a vacuum between those who set policy at the highest levels of government and business and those who are most greatly affected by those policy decisions has grown. This vacuum must inevitably be filled, and in this current instance, it has been filled with the strains of populism and nationalism we see today.
The basic conflict within populism occurs when a significant portion of a population feels itself pitted against, and treated inequitably by, a small group of elites. Negative externalities of recent populist events have ranged from a fall in the value of the British Pound, increased incidences of hate speech[iii], and a nearly $1 trillion loss in the US bond market.[iv] These negative externalities affect all levels of society: Because of this, populism’s intrinsic conflict should be used as a mechanism to ally populaces on both sides of the Atlantic around a common cause that benefits all and will help to remedy these externalities – economic equality.
One tactical example of how this would work could start with a very public and very close analysis of the Transatlantic Partnership and the global trade deals and domestic policies that have left so many people feeling disenfranchised. For instance, establishing a closer working relationship to better tax American multinational corporations in Europe (and subsequently distribute tax revenue within Europe and America). Currently, American companies leverage European states such as Ireland and Luxembourg to store excess profits generated outside of the countries themselves. Apple Inc., for example, established headquarters in Ireland that are only nominal in nature, and therefore it has incurred a far lower corporate tax rate than were it to be paying the broader European Union taxes. As a result, Apple’s corporate management has benefitted disproportionately to their rank and file workers via bonuses and stock incentives, and the European Union and United States have both received substantially less tax revenue than they should. By way of utilizing Ireland’s low corporate tax rate of 15% for profits that were earned outside of Ireland and across all of Europe, Apple forgoes paying billions of Euros in taxes. Additionally, because the US has a 35% corporate tax rate, Apple then hoards cash profits lest repatriate those profits and pay corporate income tax. By extrapolating this to the multitude of corporations that leverage similar loopholes, it becomes abundantly clear that both Europe and the US are missing out on billions of dollars that could be used in a multitude of ways to gradually reduce inequality such as infrastructure spending, education, and various other social programs. By publicizing efforts to work closely together on the root causes of inequality, the Transatlantic partnership can loudly demonstrate its commitment to stemming the inequitable policies that have caused so many people to turn towards populism and nativism as perceived solutions to these issues in the first place.
There is no question that the current wave of populism in Europe and the United States has the potential to bring about several deleterious effects, both intra-nationally and internationally; however, by way of leveraging people’s desire for massive political change, there exists ample opportunity for the leaders on both sides of the Transatlantic Partnership to build consensus amongst themselves and amongst the citizens of their respective countries towards a common goal of greater economic equality.
[i] “Federal Reserve Bank of San Francisco Economic Letter,” frbsf.org, October 17, 2016, accessed November 10, 2016, http://www.frbsf.org/economic-research/publications/economic-letter/2016/october/welfare-consequences-of-income-inequality/.
[ii] “Income Distribution Statistics,” Euro Stat, February 2016, accessed November 10, 2016, http://ec.europa.eu/eurostat/statistics-explained/index.php/Income_distribution_statistics#Income_inequalities.
[iii] Miriam Jordan, “Racial Incidents Seem Linked to Donald Trump’s Election,” Wall Street Journal (wsj.com), November 15, 2016, http://www.wsj.com/articles/racial-incidents-seem-linked-to-donald-trumps-election-1479165109.
[iv] “Trump Thump’ Whacks Bond Market for $1 Trillion Loss,” Reuters.com, November 14, 2016, accessed November 18, 2016, http://www.reuters.com/article/us-usa-election-bonds-idUSKBN1380VP.