interview
Liberalism and the Populist Challenge
2020
Summary
In this 2020 Indian Liberals monologue, Dr. Parth J. Shah, President of the Centre for Civil Society, argues that the prevailing explanation for the global rise of populism — that hyper-globalization (especially China's WTO-era entry and manufacturing dominance) hollowed out blue-collar jobs and bred despair across the West — does not fully stand up to scrutiny and cannot explain cases like the current Indian regime. Shah contends that what is broken is politics, not economics: globalization has been broadly positive, but mid-twenty-first-century challenges have outpaced the political institutions meant to address them.
His core diagnosis is institutional. The rules governing the basic unit of the economy — the firm — are detailed, transparent, and accountable, while the rules governing the basic unit of democracy — the political party — are feeble, opaque, and require almost no internal democracy (in India, parties rarely hold internal elections). Drawing on public choice theory and constitutional economics, Shah argues that constitutional rules structuring political and economic interaction must be updated as society evolves.
He identifies electoral system design as a particularly neglected lever: India's first-past-the-post, the U.S. primary system, and other arrangements convert voter preferences into outcomes with very different fidelity, yet receive little deep thought across the world's 100-plus democracies. Until liberals and reformers fix the rules that govern parties and elections, Shah concludes, the populist challenge cannot be answered.
Key points
- The dominant globalization/China-shock narrative for populism does not hold up empirically and cannot explain regimes like India's current one.
- The real breakdown is political, not economic — institutions have failed to adapt to mid-twenty-first-century challenges.
- Rules governing firms are far more transparent and accountable than rules governing political parties, which are the basic unit of democracy.
- Indian political parties rarely hold internal elections, undermining democratic legitimacy from within.
- Public choice theory and constitutional economics show that constitutional rules shape both economic and political interaction and must be updated as society evolves.
- Electoral systems (first-past-the-post, primaries, etc.) convert voter preferences into outcomes with very different fidelity and deserve deeper rethinking.
- Liberals must focus on fixing the rules of politics — party governance and electoral design — to meaningfully answer the populist challenge.
Transcript
Liberalism and the Populist Challenge
Source: https://www.youtube.com/watch?v=B9BJbO9L9aM Duration: 468.8s
Speaker (00:05): I think, broadly, my take is that the current understanding of the rise of populism is not fully accurate. So the standard storyline that tries to explain the phenomena of global populism is that that economics is broken. What has happened is because of the superglobalization, of the last twenty five, thirty years, right, under WTO and the international trading regime, which has given particularly, access to global market for China. Right? So China joined the WTO in 2001, got sort of favored nation treatment from The US. And therefore, China’s export market opened up in The US and which has led to this sudden rise of China. So I think that globalization and the related developments, particularly with with China, is what is seen as the larger reason behind this backlash. And because of this, China becoming the world’s factory, people begin to lose jobs in manufacturing, particularly, which were the sort of blue collar jobs, not just in The US but around Western countries. And that has the loss of those jobs, the breakdown of community, therefore, the despair, which has taken over much of this blue collar world. And that’s the explanation which has been given for the rise of populism in The US and I think much, much around the world. Though, obviously, that does not gel, if you see the current regime in India as a populist regime, then that’s not the reason why I think the current regime has come to power for this from that from that point of view. But, anyway, that’s the larger global story. My sense is that that’s not fully accurate story. I think globalization has been generally very positive. There’s a lot of research being done in terms of impact of China and The US and the western countries particularly. It doesn’t really stand up to the scrutiny. If you begin to look at the data about the imports from China and the the industrialization, in much of the world. Right? To my mind, what is broken? First and foremost is the politics. What is broken is that we have not been able to deal with the challenges or emerging challenges mid mid twentieth century or mid twenty first century. And those challenges are the ones which are having dealt still have been dealt with by the politics in these countries. It’s not so much an economic issue, but much more a political issue. Right? And why is politics broken? I think it’s broken fundamentally because the rules of the game that apply to politics are not as transparent, not as accountable, right, nor as democratic as they are, for the economy. So we look at the, for example, the basic unit of economy being a firm for a company. The rules which govern a company, right, in India or any other country for that matter are far more severe, far more detailed. They require huge amount of transparency and accountability from the companies. Now if you compare those rules that apply to companies, the rules that apply to, say, a political party. A political parties are the basic unit of democracy just like companies are for the economy. The rules that apply to political parties are rather feeble. Right? They are not as watertight. Right? They don’t require much democracy, even within the political parties even though they are supposed to be serving the larger cause of democracy. Right? There are as you know, there are hardly any elections that happens in the political parties in India, and I’m sure that’s true with many, many countries in a similar situation. So I think what is broken are the rules that govern political parties, which is basic unit of democracy, and the larger rules of the govern the democracy itself. So as we know, the public choice theory and the constitutional economics tells us a lot about how the constitution and the rules which are laid down in the constitution are so much more important, right, in structuring the interaction within economic domain as well as in the political domain. And those rules, I think, are not thought through, have not been updated as the society and economy have evolved. And unless we update those rules that govern democracy, that govern particular political parties, I see that that fixing cannot happen. And that’s where I see is the biggest challenge in addressing the problem. Not just from the political point of view. I think one can argue what kind of rules liberals you want to see governing political parties and the democracy. But I think I think generally from any particular point of view, those are the important rules that need to be thought through. Just to give an example, we know that we have India has the first past the post system. The selection in The US is done through a primary system. There are many such electoral systems around the world, and we know that quite often, the result of an election is not so much is what voters want. It is also result as much of the electoral system through which we process the preferences of the voter to convert them into a final outcome. Right? And I think there has not been much thought around the electoral systems, which are better ones, what impact they have currently in the outcome of the elections. Right? So, ideally, you want elect electoral system that converts converts the preferences of the voters as faithfully, as comprehensively as possible into the outcome that voters would like to see in terms of who are the elected representatives and how are they going to be governing the system once they are elected. And I think those rules are not really robust. Those electoral systems are not so robust. And that, I think, fundamental problem of democracy of how effectively are we able to convert voter preferences into final electoral outcomes or in the final election of representatives. That’s the fundamental issue in the whole process, not really deeply thought about. As you know, we want we have probably more than 100 democracies in the world, and each one has a very different system of selecting representatives at the local level, state level, at provincial level, or at the national level. I think there needs to be much deeper thought around that. And my so I suspect that is the really the thinking that needs to be done by liberals as well as by the people who are concerned about the current populism that is on the rise. Unless we are able to fix politics broadly defined, I don’t really see how we can address the populist challenge.
Notable passages
"To my mind, what is broken? First and foremost is the politics."
"The rules that apply to political parties are rather feeble. Right? They are not as watertight. Right? They don't require much democracy, even within the political parties even though they are supposed to be serving the larger cause of democracy."
"the public choice theory and the constitutional economics tells us a lot about how the constitution and the rules which are laid down in the constitution are so much more important, right, in structuring the interaction within economic domain as well as in the political domain."
"India has the first past the post system. The selection in The US is done through a primary system... quite often, the result of an election is not so much is what voters want. It is also result as much of the electoral system through which we process the preferences of the voter"
"Unless we are able to fix politics broadly defined, I don't really see how we can address the populist challenge."
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