Business and Populism: The Odd Couple? 0192894331, 9780192894335

Table of contents :
cover
titlepage
copyright
Preface
Contents
List of Tables
List of Figures
List of Contributors
PART 1 Introduction
1 Business and Populism: The Political Economy of the `Odd Couple'
PART 2 Country Studies
2 The Trump Phenomenon and Right-wing Extremism: Is Donald Trump a Populist?
3 Threats and Opportunities: The Populist Challenge to Business Elites in Trump's Administration
4 Brexit, Populism and Business: The Business Elite Loses Control?
5 Business Reponses to Populism in Denmark: Between Loud Voice and Implicit Loyalty
6 Italy: Populism and Business in a Stagnant Economy
7 Rent-seeking Business Elites and Populism in Poland and Hungary
8 Business Factions, Populists, and the Social Bloc Perspective: The Case of FDI-led Growth Regimes
9 India: Populism, Personalism, and Economic Governance
10 Technocracy and Populism in the Philippines
11 Populist `Order and Progress': Authoritarianism and Loyal Business Elites in Brazil
Part 3 Thematic Analyses
12 Right-wing Populism vs. Climate Capitalism: Climate Change Governance Under Scrutiny
13 Business Associations and Right-wing Populism
14 Populists in Power—the Impact on Interest Representation and Firm-level Nonmarket Strategies
15 Populism and Trade
16 The Populism of Transnational Plutocrats
Part 4 Conclusion
17 Populism, Risk and Business: Present and Future Prospects
Index

Citation preview

Business and Populism

Business and Populism The Odd Couple Edited by

M A GN US F ELD M A N N AND GL EN N MO R G A N

Great Clarendon Street, Oxford, OX2 6dp, United Kingdom Oxford University Press is a department of the University of Oxford. It furthers the University’s objective of excellence in research, scholarship, and education by publishing worldwide. Oxford is a registered trade mark of Oxford University Press in the UK and in certain other countries © The Editors and Contributors 2023 The moral rights of the authors have been asserted Impression: 1 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior permission in writing of Oxford University Press, or as expressly permitted by law, by licence, or under terms agreed with the appropriate reprographics rights organization. Enquiries concerning reproduction outside the scope of the above should be sent to the Rights Department, Oxford University Press, at the address above You must not circulate this work in any other form and you must impose this same condition on any acquirer Published in the United States of America by Oxford University Press 198 Madison Avenue, New York, NY 10016, United States of America British Library Cataloguing in Publication Data Data available Library of Congress Control Number: 2023930419 ISBN 978–0–19–289433–5 DOI: 10.1093/oso/9780192894335.001.0001 Printed and bound by CPI Group (UK) Ltd, Croydon, CR0 4YY Links to third party websites are provided by Oxford in good faith and for information only. Oxford disclaims any responsibility for the materials contained in any third party website referenced in this work.

Preface This book arose from conversations between the two editors during the Brexit referendum campaign in 2016 and after Trump’s victory in the 2016 presidential campaign. From the start, these discussions reflected our shared interest in political economy and also our different but complementary disciplinary backgrounds—in business and management on the one hand and political science on the other. As a result, the conversations began to focus on the role of business in relation to these upheavals in the politics of the UK and the US. In both cases it was clear that contrary to the expectations in much of the theoretical literature on the structural and instrumental power of business, business had been largely ineffective in shaping these processes, with many businesses failing to achieve their goals and left subject to the risks and uncertainties that populist leadership tends to bring. In some cases, the controversy surrounding populism also sparked new divisions between businesses. Once we explored these questions in more detail, it quickly became apparent that there were very few discussions of the interaction of business and populism in the relevant literature. We therefore decided to draw together contributors from different disciplines to provide detailed accounts of this relationship in a range of countries and across a range of themes. We were able to convene a mini-conference at the virtual annual meeting of the Society for the Advancement of Socio-Economics in 2020, where a number of contributors presented first drafts and discussed each other’s contributions. From this point a series of drafts and redrafts followed as various common themes and issues emerged from different disciplinary and geographical perspectives. We would like to acknowledge and thank most sincerely the contributors for their efforts at working with us and their patience as the pandemic disrupted our various timetables for completion. We hope they will think the final volume has been worth the effort. The editors would also like to thank the University of Bristol and our respective departmental homes, the School of Management and the School of Sociology, Politics, and International Studies for their support. Glenn Morgan would particularly like to thank Andrew Sturdy for his encouragement and support for this project as well as acknowledging his intellectual debts to his long-standing collaborators, Richard Whitley and Peer Hull Kristensen, both of whom would, in their different ways, no doubt find plenty to disagree with in this book! Magnus Feldmann would like to thank Michelle Cini and Mark Wickham-Jones at Bristol for

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their support. He would also like to acknowledge his gratitude to Honorata Mazepus, Mircea Popa, and Daniel Kinderman for productive research collaborations on related topics, which have influenced his thinking on these issues. Finally, we would like to acknowledge the patience of our editor at Oxford University Press, Adam Swallow, who has shown willingness to adjust our timetable and the word length as the project has developed and grown.

Contents List of Tables List of Figures List of Contributors

ix x xi

PA RT 1 . I N T R O D U C T I O N 1. Business and Populism: The Political Economy of the ‘Odd Couple’ Magnus Feldmann and Glenn Morgan

3

PA RT 2. C O U N T R Y ST U D I E S 2. The Trump Phenomenon and Right-wing Extremism: Is Donald Trump a Populist? Mark S. Mizruchi and Raul Gălan

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3. Threats and Opportunities: The Populist Challenge to Business Elites in Trump’s Administration Matthew J. Baltz

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4. Brexit, Populism and Business: The Business Elite Loses Control? Magnus Feldmann and Glenn Morgan 5. Business Reponses to Populism in Denmark: Between Loud Voice and Implicit Loyalty Christian Lyhne Ibsen 6. Italy: Populism and Business in a Stagnant Economy Davide Vampa

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98 118

7. Rent-seeking Business Elites and Populism in Poland and Hungary 138 Miklós Szanyi 8. Business Factions, Populists, and the Social Bloc Perspective: The Case of FDI-led Growth Regimes Cornel Ban 9. India: Populism, Personalism, and Economic Governance Andrew Wyatt

158 181

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10. Technocracy and Populism in the Philippines Yusuke Takagi 11. Populist ‘Order and Progress’: Authoritarianism and Loyal Business Elites in Brazil Heike Doering, Amon Barros, Marcus Gomes, and Caroline Rodrigues Silva

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PA RT 3 . T H E M AT I C A N A LY SE S 12. Right-wing Populism vs. Climate Capitalism: Climate Change Governance Under Scrutiny Marcus Gomes and Steffen Bo¨hm 13. Business Associations and Right-wing Populism Daniel Kinderman 14. Populists in Power—the Impact on Interest Representation and Firm-level Nonmarket Strategies Dorottya Sallai

245 263

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15. Populism and Trade Louise Curran and Jappe Eckhardt

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16. The Populism of Transnational Plutocrats Brooke Harrington

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PA RT 4 . C O N C LUSI O N 17. Populism, Risk and Business: Present and Future Prospects Magnus Feldmann and Glenn Morgan

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Index

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List of Tables 1.1. Initial variants of populism—from thin-centered ideologies to specific programmes.

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1.2. A typology of business responses to populism.

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5.1. Organized employers in Denmark—in percent.

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5.2. Socio-demographics of DPP voters in 2020.

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6.1. Trust in European Union Institutions in 2019 (%, difference with 2008 in brackets).

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6.2. Difference between party support in one category and overall party support.

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6.3. Is immigration positive or negative for the economy (2017)?

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10.1. Top 10 richest people in the Philippines in 2020, 2010, and 2006.

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13.1. Swiss EEC/EU-related Referenda and their Outcomes.

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14.1. Type of bargaining and business power in the different phases of populism.

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14.2. Quiet CPA activities in relation to buffering and bridging strategies and monetary contributions.

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14.3. Legitimacy and quiet CPA engagement of firms in ‘bad’ and ‘good’ FDI sectors. 302 15.1. Interviews undertaken for this project.

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17.1. Risks to business from right-wing populism: Scale and scope.

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List of Figures 5.1. Electoral results of the DPP 1998–2022.

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10.1. Ease of doing business ranking.

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10.2. Credit rating.

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List of Contributors Matthew J. Baltz [email protected] Department of Sociology & Anthropology, Bucknell University Cornel Ban [email protected] Department of Organization, Copenhagen Business School Amon Barros [email protected] EAESP, FGV, Sao Paulo, Brazil Steffen Bohm [email protected] University of Exeter Business School, University of Exeter Louise Curran [email protected] Toulouse Business School Education, Department of Strategy, Toulouse, France Heike Doering [email protected] Cardiff Business School, Cardiff University Jappe Eckhardt [email protected] Department of Politics, University of York Magnus Feldmann [email protected] School of Sociology, Politics, and International Studies, University of Bristol Raul Galan [email protected] Department of Sociology, University of Michigan Brooke Harrington [email protected] Department of Sociology, Dartmouth College Christian Lyhne Ibsen [email protected] University of Copenhagen, Department of Sociology/FAOS

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LIST OF CONTRIBUTORS

Daniel Kinderman [email protected]: [email protected] Department of Political Science and International Relations, University of Delaware Mark Mizruchi [email protected] Department of Sociology, University of Michigan Glenn Morgan [email protected] School of Management University of Bristol Caroline Rodrigues [email protected] EAESP, FGV, Sao Paulo, Brazil Dorottya Sallai [email protected] Department of Management, London School of Economics Miklos Szanyi [email protected] Szeged University, Faculty of Economics and Business Administration, Institute of Finance and International Economic Relations Yusuke Takagi [email protected] National Graduate Institute for Policy Studies (GRIPS), Tokyo, Japan Davide Vampa [email protected] Aston University, Department of Politics, History and International Relations Andrew Wyatt [email protected] School of Sociology, Politics, and International Studies, University of Bristol

PART 1

I N TR ODU CTION

1 Business and Populism The Political Economy of the ‘Odd Couple’ Magnus Feldmann and Glenn Morgan

Introduction In 2018, Boris Johnson, then UK Foreign Secretary and later Prime Minister, was reported to have said ‘Fuck Business’ in response to questions concerning the response of British companies to Brexit. This was not a one-off comment. Four years later, Financial Times commentator, Robert Shrimsley (2021), wrote at the time of the Conservative Party conference in October 2021 ‘when Boris Johnson said “fuck business”, he really meant it. The defining characteristic of this week’s Conservative conference has been a unified assault on companies who are failing to adapt to a new economic model’ (see also Anderson 2019). How did the ‘natural’ party of business become so anti-business? In the US, Yahoo! Finance calculated that within 3 months of entering the White House, Donald Trump had used Twitter to criticize by name 62 US companies (Wolff-Mann, 2017). Throughout his administration, he name-checked a wide range of the largest US companies to criticize them for amongst other things, offshoring their production, closing US plants, giving away their intellectual property, weakening US security, and undermining individual freedom of speech (a criticism particularly aimed at Facebook and Twitter as they ‘fact-checked’ his posts and eventually took him off their platforms). In the summer of 2020, Trump’s Attorney-General, William Barr, discussing the growing trade and diplomatic Cold War with China, stated that ‘the American business community has been a big part of the problem’. Adam Tooze commented that ‘Barr came remarkably close to pronouncing a divorce between his ideal of America and actually existing American capitalism’ (Tooze, 2021: 218). As in the UK, the traditional party of business, in this case the Republicans, was attacking business. In India, supporters of Prime Minister Modi’s right-wing Bharatiya Janata Party (BJP) have called Infosys (the Indian company which is one of the largest software companies in the world) ‘anti-national’ for letting down the tax system. The finance ministry ‘summoned’ the chief executive officer (CEO) of Infosys about technology issues publicizing its concern through extensive Twitter activity. In August 2021, the BJP commerce minister publicly lambasted the $106

Magnus Feldmann and Glenn Morgan, Business and Populism. In: Business and Populism. Edited by Magnus Feldmann and Glenn Morgan, Oxford University Press. © Magnus Feldmann and Glenn Morgan (2023). DOI: 10.1093/oso/9780192894335.003.0001

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billion Tata group for criticizing the proposed strict rules for e-commerce and said local businesses should not just think about profits. Previously, Modi’s actions to demonetize the Indian economy, by taking 86% of cash in the form of large bills out of circulation, was made against the advice of business and experts leading to the eventual resignation of the Raghuram Rajan, the internationally renowned University of Chicago economist who had been Governor of the Indian Central Bank (Jafrelot, 2021). Modi’s decision caused chaos for businesses and consumers over a period of months (see Business Today, 2021, see also Wyatt’s Chapter 9 on Modi’s relationship to business). In Hungary, Prime Minister Orba´n instituted rules and regulations with the explicit goal of pushing out of Hungary multinational banks and utilities (Bohle and Regan, 2021). Once again, a right-wing government acted in ways which damaged the interests of certain powerful businesses. The idea that right-wing parties are invariably supporters of, if not subservient to, business has therefore been confounded across the globe as populists have taken over mainstream conservative parties or launched new right-wing movements going out of their way to attack business as part of a corrupt ‘establishment’ that benefits at the expense of ‘the people’. The purpose of this book is to explore the nature of the complex relations between business and right-wing populists across a range of countries and issue areas. For some decades, research has emphasized the power of business to get its own way on major issues of economic policy as a result of its power over key resources (such as capital), over politics (by funding parties), and over legislatures (by its use of lobbying and its access to the sort of expertise necessary for modern government policy formulation and implementation) (Culpepper, 2011). Right-wing governments and right-wing parties have been an essential part of this process. How is it that this set of connections is under threat? Why do right-wing populist parties that express their general support for capitalism and for business direct much of their rhetoric against business? What is business doing in response to these threats? Should it voice its opposition to the rise of these right-wing populists and their more damaging policies or should it loyally accommodate itself to the new situation either by keeping its head down or by collaborating with populists and actively supporting them? Such decisions involve businesses in assessing various risks to their strategies in the present and how these risks might develop in the future. As we show in this book, assessing this risk is complex in part because populism is in Mudde’s (2004) classic definition a thin-centred ideology (see also Mudde and Kaltwasser, 2017; Rovira Kaltwasser et al., 2017); it is not associated with a distinctive policy programme in the way that social democratic or conservative ideologies tend to be. Beyond certain core elements identified in more detail below, it accrues ideas and policies over time that are neither internally coherent nor necessarily anything more than instant responses to crises and electoral opportunities. Tracking the nature of the populist challenge to business in any particular context requires therefore an understanding of the shape-shifting nature of

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this phenomenon and the degree of variation between populist movements and business responses in different countries. In this introductory chapter, drawing on the chapters that follow in the book, we aim to describe in detail the dilemma facing business in dealing particularly with right-wing populism. We begin by discussing what we mean by populism and why this volume focuses on right-wing populism in particular. We then elaborate on the nature of the dilemma facing business in terms of different variants of right-wing populism. We emphasize that right-wing populism often attacks business, but on the other hand it is mainly committed to markets, competition, limited regulation, and low taxes. Business responses to populism therefore depend on the balance between these two elements in any particular context and their impact on existing business strategies. As the chapters in the book show, this balance varies across countries, as does the degree to which other key aspects of populism, such as its critique of liberal democratic political institutions and the values of liberal cosmopolitanism, are emphasized. Such differences influence the degree of risk perceived by business and therefore also business responses. We frame our discussion of business responses by developing and modifying Hirschman’s exit, voice, and loyalty framework (Feldmann and Morgan, 2022; Hirschman, 1970).

Populism: Definitions and debates Echoing Marx and Engels, various scholars have described populism as a spectre haunting Europe or even the world (e.g. Albertazzi and McDonnell, 2008; Mushaben, 2020; Moffitt, 2016), whilst at the same time acknowledging a certain definitional vagueness and somewhat divergent uses of the term (Urbinati, 2019). However, most academic studies tend to agree that the juxtaposition of the ‘true and authentic people’ on one side and the distant and ‘corrupt elite’ on the other is central to populism. Populist movements claim to speak directly on behalf of the people (Canovan, 1981, 2005; Mudde and Kaltwasser, 2017; Mu¨ller, 2018, 2021; Weale, 2018) as expressed in majoritarian institutions such as elections and referenda. They frequently reject intermediary institutions such as the law, the civil service, parliamentary rules and conventions on the grounds that these are non-majoritarian, unaccountable to ‘the people’ and rigged in favour of the elite. For some authors, such as Laclau (2005), populism is a necessary part of any politics that seeks to challenge the status quo; by giving voice to the people, it challenges established hierarchies and opens up the possibility of radical change. For others, populism’s claim to speak for the people ignores the complexities of legitimate differences between groups and parties and the development of liberal institutions that facilitate debate, disagreement and compromise as well as defending certain rules of the game in a democracy, e.g. free speech, a free press,

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judicial institutions that protect the rule of law, electoral institutions that monitor the fairness of electoral processes, the existence of constitutions with rules and procedures including the protection of the rights of minorities. From this perspective, the populist effort to undermine or close down intermediary institutions is a threat to democracy as whole (Applebaum, 2020; Levitsky and Ziblatt, 2018; Mu¨ller, 2021: Mudde, 2021). For Laclau, who seeks to rehabilitate left-wing forms of populism such as have been common in Latin America over the last decades (Conniff, 1999; de la Torre, 2017) and as have emerged more recently in Europe and the US (Prentoulis, 2021; Tamames, 2020; Tormey, 2018, 2019), populism per se is inherently an ‘empty signifier’ in the sense that it says nothing about the content of this challenge itself. Populism may, therefore, be part of either left-wing or right-wing political movements. Mudde’s argument (Mudde, 2021) that populism is a thin-centred ideology similarly implies that the populist label may not say very much about the substance of policy and therefore has to be combined with a variety of other ideologies, such as conservatism or socialism, and other policies in order to develop an electoral appeal. In this way, populisms gain further programmatic content, but the programme may not be coherent, and policies may shift and change quickly depending on circumstances and reflect evolving strategic objectives of the populist leader (Weyland, 2017). These approaches imply the importance of recognizing that there exist ‘varieties of populism’ depending on how particular forms of populism are translated into specific policy agendas. A key aspect of this is how populists articulate their view of who constitutes the ‘people’ and who constitutes ‘the elite’. A basic distinction is often made, for example, between definitions of the ‘people’ which are inclusionary versus those which are exclusionary (Filc, 2015; Kapiszewski et al., 2021 Mudde and Kaltwasser, 2013). Inclusionary definitions of the people seek to appeal to a common sense of identity based on shared economic experience and broadly shared values in favour of a more equal society in terms of wealth, income and power. The 99% versus the 1% slogan used to rally people against inequalities in the Occupy Movement in US after the global financial crash reflects this dynamic and shows how left-wing populism primarily attaches to ideas about curbing inequalities, reducing the power of markets, and increasing the power of the state in redistribution and welfare. Inclusionary populists tend to see similar divisions between the people versus elites in other countries because of the central role of capitalism as an exploitative force in their analysis. They are therefore reluctant to use border control issues, immigration, and cultural differences as ways of gaining support and defining the ‘people’. They prefer to emphasize their internationalism and to include a whole range of struggles against exploitation at home and abroad as part of their mission. They retain the common populist approach of rejecting anti-majoritarian or non-elected institutions as they are seen as controlled by the moneyed and privileged elite and acting as constraints on populist power.

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By contrast, exclusionary definitions of the people tend to confine the definition of the people to some core group in society, defined by ethnic, racial, religious or ‘nativist’ commonalities, that are linked with cultural attitudes and values that are claimed to be historically embedded and performed through the everyday life of an authentic member of the people of a particular ‘nation’ (Brubaker, 2020). The elite may lack these shared characteristics or may have become disconnected from the attitudes and values of the mass of the people, by becoming more ‘cosmopolitan’ ‘citizens of nowhere’. In right-wing populist discourse, the elites are seen to favour and cultivate support from other groups that similarly lack this attachment to the authentic identity of the people, i.e. immigrants, members of minority religions or ethnic groups, by providing them with benefits that are labelled as unfair to the rest of the local population. Therefore, the target of exclusionary populists becomes a wide group, some of whom could be viewed as elite actors, but many others are defined as enemies of the people on the basis of ascribed racial characteristics, ethnicity, religion, and their presumed values and attitudes towards national identity. Exclusionary populism’s elective affinity is with right-wing voters, especially those influenced by traditionalist understandings of identity. A further aspect of how populism’s thin-centred ideology can be fleshed out to attract support can be seen in Tugal’s recent survey article which identifies three families of approaches to populism (Tugal, 2021; see also Berman, 2021), each of which can be attached to either left-wing inclusionary or right-wing exclusionary populism. The first is the focus on the centrality of economic grievances and crises in stimulating a backlash against markets or globalization. These approaches highlight a range of structural trends, such as the decline of Fordism and the rise of neoliberalism, rising inequality, globalization, and associated socio-economic and demographic shifts, and analyse the ways in which they contribute to insecurity and grievances (Franzese, 2019; Iversen and Soskice, 2019; Rodrik, 2018). For left-wing populism, such grievances are linked to a critique of capitalism and the need for actions to curb inequality on a national and global scale. For right-wing populism, economic grievances are coupled with cultural grievances and point to the need to exclude certain groups from the definition of the people and to privilege national sovereignty over global economic forces (protectionism, selective industry support, curbing the power of multinationals) coupled with what is described as ‘welfare chauvinism’, i.e. prioritizing the rights of the ‘native’ population to welfare benefits, education, housing, health, and other forms of state support. The second set of issues which become incorporated in different ways into populism is the critique of political representation with a focus on political institutions and the imperfections of democratic representation. This reflects the increasing consensus amongst mainstream parties from the 1990s onwards on neoliberal policies, leading to a hollowing out of the choices that electorates face, and an avoidance and silencing of debates over certain areas such as immigration, the role

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of supranational regulation and free markets, and their consequences for inequalities (Berman and Kundani, 2021; Crouch 2006; Grzymala-Busse, 2019a, 2019b; Mair, 2013). As disillusionment amongst the electorate deepens, as reflected in declining electoral participation, anti-system parties seize the opportunity to mobilize against the system and to convert apathy and disillusionment into votes (Bale and Kaltwasser, 2021; De Vries and Hobolt, 2020; Hopkin, 2020). The crisis of democracy and the rise of populism is associated with new parties and movements or takeovers of existing parties. Drawing on the core distinction between the people and the elite (plus its clients) populist parties claim to ensure genuine representation of the ‘people’ by focusing on issues on which the main parties have been silent. For left-wing populists, the political system has been corrupted by the power of money allowing elites to buy influence over the state and government policy through lobbying, through manipulation of key media sources, through funding political parties and think-tanks as well as supporting election campaigns of parties advancing neoliberal elite agendas. Thus, the political system becomes weighted against the 99% in favour of the 1% (or even the 0.1%). Right-wing populists, by contrast, portray the state and government policy as increasingly captured by elites and experts that are out of touch with ‘the people’; the elites are seen to shore up their electoral support by offering benefits to their clients or privileged minorities beyond those available to ‘the people’. They justify this in terms of liberal cosmopolitan values that disadvantage the ‘native’ population, disparage traditional cultural identities and empower intermediary institutions such as the judiciary or independent central banks that insulate the government from the ‘people’. Right-wing populists develop and extend this critique of the political system to justify their attack on political institutions and conventions on the basis that the current form of democracy fails to give voice to the ‘will of the people’. This critique of institutions and elites is often bound up with evocations of conspiracies, as highlighted by Muirhead and Rosenblum’s (2019) account of the new conspiracism in the US context. Finally, populism’s thin-centred ideology is filled by what Tugal calls the ‘discursive, performative and ideational’. From this point of view, populism performs a particular style of politics, one that seeks to respond to and build the ‘anger’ of the people (Lonergan and Blyth, 2020) to demonstrate an authenticity in its claims to represent ‘the people’ as opposed to mainstream politicians who conform to norms of behaviour, language and appearance which continuously reveal their aloofness and inauthenticity. The way in which populists demonstrate their authenticity can vary. Styles of language and personal appearance contribute to this; populists may seek to speak like ‘the people’ with few inhibitions about swearing or lying, dress like the people, live like them (Moffitt, 2016, 2020). They make obvious and high-profile efforts to connect to their electoral base by using symbols of their vision of ‘the people’, e.g. Trump waving the bible in front of the church at Lafayette Square opposite the White House during the Black Lives Matter protests

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in June 2020 or Bolsonaro being photographed frequently with guns and rifles. This also leads to a focus on the role of leadership and the association of populist movements predominantly with charismatic strong leaders (a process that occurs within both left- and right-wing populists: e.g., left-wing populism in Latin America has frequently been associated with personalistic leadership, both in earlier cases like Juan Perón in Argentina and in more recent examples like Hugo Cha´vez in Venezuela or Evo Morales in Bolivia). Left- and right-wing performative populism is differentiated by the sort of authenticity that is evoked and the key symbols of the authenticity that they aspire to. In right-wing populism, images of guns and violence have been used to demonstrate an authentic connection and a tough approach to crime in the US, Brazil and the Philippines (see Chapter 7 by Doering et al. and Chapter 11 by Takagi in this book; also on Brazil, Lapper, 2021; Putzel, 2020; on the Philippines,; Ramos, 2021; Thompson, 2022). Evoking religion on the grounds that it is a central part of the identity of the ‘people’ is also common in right-wing populism (e.g. Trump, Orba´n, Modi, Bolsonaro). Demonstrating conspicuous personal wealth as in the case of Trump and Berlusconi was a way of suggesting that their leadership skills could be transferred from the business sphere to the political level. Whilst right-wing populists also stress traditional gender norms and are mostly led by men, it should be noted that women have led such movements in various countries, including Marine Le Pen in France, Frauke Petry in Germany, Pia Kjærsgaard in Denmark, Siv Jensen and Sylvi Listhaug in Norway, and Riikka Purra in Finland. Left-wing populism, by contrast, emphasizes how their leaders share the same material standards, social backgrounds, and commitments to egalitarian and socialist values without recourse to issues of religion or ethnic identity (see e.g. the Podemos leadership group and the way in which Pablo Iglesias in particular authenticated himself as a man of the people: Tamames, 2020). In summary, populist movements may have a thin-centred ideological core, but they rapidly develop more detailed policy agendas as parties and leaders begin to establish their identities across a variety of issues in contrast to mainstream parties and politicians (see Table 1.1). Our approach to populism, therefore, could be described as eclectic as it draws on insights from each of the three approaches identified by Tugal (2021), i.e. the structural, institutional, and performative. We agree with Berman (2021) on the need to consider not only structural determinants on the demand and supply side of politics, including economic grievances and crises of representation, but also to incorporate the role of agency and mobilization, for which the performative dimension is critical. Whilst there are some core elements that are necessary for the label ‘populism’ to be usefully attached to a movement, party or leader, the specific manifestations of those elements will vary across different countries and different periods of history depending on how economic, political, and cultural legacies and contexts (Urbinati, 2019) interact with contemporary challenges.

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Table 1.1 Initial variants of populism—from thin-centered ideologies to specific programmes. Necessary elements in the identification of populism

Manifestations in leftwing populism

Manifestation in rightwing populism

Definition of the people

Inclusionary including international solidarity 1%; wealthy economic groups

Exclusionary—by race, ethnicity, religion The establishment in politics, economics and culture Caused by government commitment to free trade leading to outsourcing, globalization and loss of home based jobs

Definition of the elite The centrality of discourses around structural inequalities between the people and the elite reflected in loss of jobs, regional decline, growing inequality and rise of super wealthy A critique of existing Institutional political deficiencies: convergence of mainstream parties; lack of choice; hollowing out of democracy A distinctive style of language accompanied by performative elements that appeal to the people for whom existing politicians and policies are no longer authentic

Caused by capitalism and globalization

Democracy perverted by the power of money to buy influence

Leaders as authentic representatives of the people demonstrated by their material living conditions. Language and values of solidarity within society and across societies in terms of internationalism

Democracy no longer the ‘voice of the people’; establishment elite captured power and protect it through non-majoritarian intermediary institutions Leaders perform their authenticity through their language, their personal wealth and their messaging with appeals to traditional cultural values: guns, religion, race, and ethnicity

This approach has two implications for our edited book. Firstly, we do not seek to enforce a single view of what constitutes either left-wing or right-wing populism. Some chapters in the book, such as Wyatt’s Chapter 9 on India, Takagi’s Chapter 11 on the Philippines, or Mizruchi and Galan’s Chapter 2 on the US, express reservations about the applicability of the term ‘populist’ to aspects of their cases. Such reservations largely reflect different emphases in the nature of the populist movement under examination and the way in which the elements we identify may combine with other more traditional political processes, e.g. when populist politicians adopt novel mobilization strategies, but pursue more traditional conservative economic policies. Similar reservations can arise when focusing too strongly on particular individual politicians and whether they are in some sense ‘populist’, e.g. Andrej Babiš in the Czech Republic, Boris Johnson in the UK, Silvio Berlusconi in Italy, even Donald Trump in the US, perhaps especially

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when policy and rhetoric are not fully aligned. What is common is that all the cases considered in this volume exhibit many of the populist characteristics which we have identified and can be viewed as part of the global populist turn in the first decades of the twenty-first century (Tugal, 2021). Whilst the relative emphases of individual chapters vary somewhat, all of them focus on the role played by the emergence of a form of politics that emphasizes the failure of mainstream parties to resolve issues about structural inequality, the hollowing out of democracy (Mair, 2013) and the need for the authentic voice of ‘the people’ to be heard. The chapters consider structural and economic factors, whilst also addressing institutional and discursive dimensions of the populist movements. Secondly, this volume seeks to maintain a balance between the structural determinants that open up space for populism and the role of agency in realizing that possibility. Populism does not automatically arise as a result of particular circumstances. There is no automatic transmission from economic and institutional challenges to populist success. Instead, this requires the building of challenger parties (De Vries and Hobolt, 2020), the development of a sense of crisis and a noisy politics (Culpepper, 2011, 2021; Morgan and Ibsen, 2021) that activates potential supporters and keeps them mobilized for key events such as elections and referenda. This underscores the importance of factors such as the strategies adopted by populist leaders and their ability to provoke outrage against elites. In this sense we do not see the rise of populisms in whatever form as an inevitable consequence of grievances or crises of representation: it is a result of how different actors respond to particular conditions, which reinforces the importance of complex and contextually sensitive explanations (Berman, 2021). This takes us on to the core focus of our book—the response of business.

Business and populism This volume focuses on the impact of populism on business and also on business responses and strategies in the face of the populist turn. While there is an emerging literature on populism and the economy and on the economic policies pursued by populists (Rodrik, 2018, Guriev and Papaioannou, 2022), the interplay of populism and business has received limited attention so far. For example, the otherwise comprehensive Oxford Handbook on Populism does not contain any chapter specifically on business and populism (Rovira Kaltwasser et al., 2017). By focusing on how business responds and is affected by the populist agenda, this book is designed to address this important gap in the contemporary debate about populism. As a key elite actor that populists often rail against and with much at stake if economic policy changes, business is a critical actor whose role needs to be understood to make sense of the impact and durability of the populist turn.

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Our approach to business requires some initial clarification. By business, we refer firstly to producer groups, i.e. business and employers’ associations organized at various levels—international (especially EU level), national, sectoral, regional. Cross-nationally there is significant variation in the coverage, strength, and influence of these organizations as many of the chapters here reveal (e.g. Sallai, Chapter 14; Curran and Eckhardt, Chapter 15; Feldmann and Morgan, Chapter 4; Kinderman, Chapter 13; Vampa, Chapter 6; Ibsen, Chapter 5; Doering et al., Chapter 11), and this has significant implications for how they deal with the risks of populism. Secondly, we also refer to business in terms of the strategies of individual firms and how they respond to changes in regulations, markets and laws arising from populism (e.g. in Chapter 2 on the US by Mizruchi and Galan, and Chapter 3 by Baltz; on firms in Hungary, Poland, and Romania see Chapter 8 by Ban and Chapter 7 by Szanyi; on firms in India and the Philippines, see Chapter 9 by Wyatt and Chapter 10 by Takagi; on UK firms see Chapter 4, Feldmann and Morgan). Thirdly, we refer to business as part of a wider global system of capitalism that interlocks with and impacts on societies. The structural power of business and capital over governments is discussed in various chapters. Harrington’s Chapter 16 on the transnational capitalist class and the way in which some populists in government use their power to extend and legitimate tax havens, tax evasion, money laundering, and illegal activities of various sorts illustrates the importance of maintaining this wider perspective on the nature of business (as in the global wealth chains research programme—see Seabrooke and Wigan, 2017). Secondly, we focus primarily on the confrontation between business and rightwing populism. In our view, right-wing populism constitutes a novel challenge to business in a way that left-wing forms of populism do not. Business has a long experience of rallying against movements of the left, and whilst accommodations between business and social democratic parties have been common in Europe, one might expect business actors to be strongly united in opposition to the anti-capitalist agendas of left-wing populists such as Podemos in Spain and Syriza in Greece which have deliberately criticized their more moderate social democratic competitors and taken many of their votes. By contrast, the impact of right-wing populism is more complex and contradictory, as right-wing populists are generally supporters of the capitalist system even when they question some aspects of neoliberalism, globalization, and new patterns of inequality within and across countries. Indeed, it is this tension which raises dilemmas for the business community. On the one hand, right-wing populists tend to be staunchly antisocialist and pro-business by temperament. Traditional right-wing tropes about business are often repeated, e.g. the need for lower taxation, less regulation, lower state debt, anti-trade union laws, more incentives for small businesses, and so on, but such agendas are mixed with policies that are more problematic for businesses. For example, by promoting protectionism and limits to international trade,

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undermining the role of international institutions in regulating trade or advocating tighter control of migration, which may lead to skill or workforce shortages and affect many businesses negatively, right-wing populism challenges key business practices established during the neoliberal era (see in particular Chapter 15 by Curran and Eckhardt, Chapter 5 by Ibsen, and Chapter 4 by Feldmann, and Morgan). Such tensions are not limited to the narrow economic field. As discussed earlier, they also include a rejection of intermediary institutions characterized by rules-based decision-making in the hands of experts, e.g. courts, independent central banks (Goodhart and Lastra, 2018), and regulatory bodies within the national context. At the international level, treaties or organizations such as the EU or the World Trade Organization (WTO) are seen as diminishing national sovereignty through passing authority up from the national democratic level to non-elected experts in international organizations. This reflects the way in which populism disrupts patterns of network governance that gave businesses relatively easy access to policymaking processes and allowed businesses or their representatives to influence rule-making and policies via channels of quiet politics (Feldmann and Morgan, 2022; Stoker, 2019). Right-wing populism with its emphasis on the ‘nation’ and the ‘people’ also undermines more generally the managed flow of labour migrants which businesses have become used to in the era of globalization, by magnifying cultural differences through the lens of national identity into fundamental threats to social stability and social solidarity, a process which can lead to violent confrontation as well as state initiated action against broad categories of people excluded from the definition of the nation. These trends challenge business as populism shifts to more illiberal and authoritarian forms. At a time when large multinationals have signed up to the UN Global Compact to defend human rights, the rights of labour, to protect the environment and to stand against corruption, and many have developed corporate social responsibility policies including in some cases, promoting democracy and the rule of law, right-wing populism’s attack on the rule of law, on minorities and particular ethnic groups, and on democracy itself, raises a challenge. Are businesses willing to take an active stance against populisms which threaten these principles, whether it brings companies immediate economic advantage or not? Therefore, unlike left-wing populism, against which business can be expected to unite in opposition, in right-wing populism there are complicated tradeoffs. Differences in their experience of international competition, international regulation, as well as in basic business models for sustaining and developing profitability and dealing with political risks may lead businesses to adopt different responses. Understanding the varieties of right-wing populism, and the responses of different sorts of businesses is therefore our primary objective in this book.

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Right-wing populism and business: Revisiting the problem Right-wing populism takes a variety of forms which create different risks for business. In this section, we focus on the way in which such movements contain both anti-business and pro-business ideas. One of the key characteristics of twenty-first-century populism is the combination on the one hand, of highly personalistic leadership with the capability of announcing multiple policy initiatives or positions, often lacking coherence or coordination (sometimes via the medium of Twitter) with, on the other hand, the underlying structures of the modern state, including the civil service and its departmental structure, the rule- and expertise-based system of decision-making within state institutions, and principles of transparency and legitimacy linked to the rule of law and liberal democracy. Thus, on the surface, populist leaders like Trump can stir multiple controversies, create a sense of crisis and risk that undermines business strategy. However, beneath the surface in the embedded processes of the modern state, how much is changed? Business may feel that in spite of all the rhetoric of the populists, they can get on with business as usual because the key institutions of the state are more resistant to change. As we discuss later, this is not always the case. Trump in particular has tried to undermine what he calls the ‘deep state’ (Horowitz, 2021) by failing to fill positions or filling key administrative positions with his supporters who are there mainly to negate the function of the body they are charged with leading (Lewis and Richardson, 2021). Similarly in the UK, the churn in ministerial departments and in senior civil servants caused by Brexit and its consequences has considerably disrupted the civil service and its ability to provide ‘neutral’, ‘expert’ advice. Assessing the relationship between these two levels is crucial to understanding the level of risk faced by business and therefore the responses which it is likely to take.

Right-wing populism as anti-business We have argued, following a number of authors (Mudde, 2017, 2021; Mudde and Kaltwasser, 2017; Mu¨ller, 2018), that central to populism has been the idea that ‘the elites’ (including business) had for too long run economies to benefit themselves and that the ‘will of the people’ had been ignored (Canovan, 2005; Weale, 2018). As the chapters in the book show, a key emphasis of right-wing populism in the current period has been on the negative impacts of globalization which has led to deindustrialization and high unemployment in areas previously dependent on manufacturing as firms move their supply chains overseas (Rodrik, 2018). Linked to this, globalization is also seen as the source of an influx of migrant labour. Within the expanding boundaries of the EU, labour mobility has been a central pillar of the Single Market. Alongside this legal movement of labour has been increasing pressure on EU borders from asylum seekers and economic migrants

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fleeing countries ravaged by war, drought, famine, disease, and a basic lack of employment or welfare. Right-wing populists deliberately compound these two phenomena with a particular emphasis on the idea that low-skilled migrant labour (only a part of EU labour migration, where movement into high-skilled professional sectors is also common) holds down wages and puts undue pressure on the institutions of the welfare state, undermining the standard of living of the ‘native’ population (even though economists find little evidence of this effect—see Portes, 2019). Business plays a central role in this system and is therefore, in the eyes of populists, culpable not just for the economic consequences of their policies of offshoring, holding down wages, and using migrant labour but also for the impact on national identity. Business’s globalization and migration policies are seen as undermining social homogeneity, national identity, and traditional values. Populists construct a vision of the ‘real people’ who constitute the nation and who represent these values and have been ignored by the proponents of globalization and cosmopolitanism. National identity discourses can broaden the targets for populist anger to issues of race, ethnicity, religion, as well as reviving homophobic and misogynistic views about who the ‘real people’ are. Therefore, right-wing populism builds a narrative that aspects of globalization need to be challenged in order to ‘take back control’ and rebuild society ‘for the people’, as in the Brexit referendum (Feldmann and Morgan, 2021) As the studies in this book show, the way in which these populist challenges are articulated varies. Some populists focus mainly on controlling migration and on restructuring welfare regimes to prevent outsiders from benefiting; others raise alongside this the question of protecting home industry by introducing tariffs or import quotas; some link this to challenging international treaties and trading regimes, including membership of the EU and WTO as well as international agreement and expertise on climate change (see Gomes and Bo¨hm, Chapter 12, this book), the rise of pandemics and other forms of global catastrophe requiring international coordination. In other contexts, where globalization is perceived less negatively, as in emerging economies such as Brazil, the Philippines, India, the focus is more on identifying the ‘enemy within’ that is both economically powerful and also undermining social cohesion, e.g. in Modi’s India, the enemy within is often identified with the Muslim population (Jafrelot, 2021); in Brazil, Bolsonaro identifies the corrupt interdependence of left-wing politicians with big Brazilian businesses that were portrayed as winning elections by offering benefits to the poor whilst taxing the middle class to reward its own supporters. In East Central Europe, which has also benefited from globalization in terms of Foreign Direct Investment (FDI) and integration with global supply chains, populists have questioned the legitimacy of the post-communist reform process suggesting that it has led to corrupt networks that have benefited post-communist elites (Bill, 2020). In some cases, there has also been a re-emergence of anti-Semitic tropes

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identifying the enemy within as Jewish finance. George Soros is the most used example in several countries, and the Hungarian government has also targeted the Central European University, which was established as a result of his philanthropy. Another key element of populist mobilization is the portrayal of a cultural threat associated with foreign cosmopolitan ‘woke’ liberal ideas that are seen to undermine traditional Christianity or promote a ‘dangerous gender ideology’ based on feminism and promoting lesbian, gay, bisexual, trans, queer/questioning, and others (LGBTQ+) rights (Gwiazda, 2020). Such policies represent a considerable challenge to the business models of many large multinational firms as well as substantial numbers of small and mediumsized trade-dependent firms (Curran and Eckhardt, Chapter 15, this volume) given how they have developed their business strategies, including supply chains, financing, marketing and sales systems and labour market management over the period of globalization (see Curran and Eckhardt 2020; Devinney and Hartwell, 2020). Since the early years of Reagan and Thatcher, businesses, not just in the US and the UK but elsewhere, especially in the expanded EU and in Asia, have built their strategies on relatively free movement of capital associated with FDI, growing integration of supply chains across countries and continents, increasing openness of producer markets and financial markets to overseas companies, and, especially in the EU, dependence on the movement of labour across countries to fill labour shortages. For business, therefore, populism’s attack represents a potential threat to their established way of doing things, often articulated crudely but effectively by Trump, Johnson, and others using social media (Anderson, 2019; Drezner, 2020). At the same time, populists developed a political style that threatened key channels of business influence. As various corporatist forms of governance characterized by negotiations between governments, employers and trade unions declined in previous decades, business had increasingly influenced government policy through the ‘quiet politics’ (Culpepper, 2011, 2021) of lobbying behind the scenes, providing expert advice to ministries, and thereby substantially shaping debates about regulation, competition policy, taxation, and so on (see e.g. the discussion of business lobbying in the EU described by Coen et al., 2021). Revolving doors between the public and private sectors facilitated this integration into what was increasingly described as a form of network governance, based on the creation of extensive formal and informal linkages that served to provide expertise and knowledge into government (Stoker, 2019). Populist leaders undermined this firstly by their attack on such activities as ways of ensuring that decisions benefited only those inside the system. Presenting themselves as outsiders separate from and untainted by these corrupt and self-serving systems, they offered their followers instead a form of personalistic rule based on the idea that they would ‘drain the swamp’ and not succumb to these elitist groupings because of their personal integrity reflected in financial independence (Trump), their personal story of overcoming poverty (Modi), or their distance from any establishment figures

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(as in the case of Bolsonaro and Duterete). They presented themselves as uniquely capable of insights into what ‘the people’ wanted and embraced ‘the deplorables’, as Hilary Clinton had disparagingly described Trump supporters (Gibson et al., 2020), rejecting the cultural condescension of the elites and the caution of experts and relying narcissistically on their own gut feelings or in Trump’s case, his own evaluation of his ‘very stable genius’. In these circumstances, headlines accompanied by policies would emerge with little pre-warning or pre-planning as populist leaders succumbed to their urge to make dramatic and attention catching announcements. For example, Trump’s temper tantrums in response to immediate slights against him or his family by ‘experts’ or the media often led to policy announcements that were out of the blue (Drezner, 2020) and bizarre such as his musings on the use of bleach to ‘kill’ Covid19. The resultant uncertainty left business wondering what might come next out of such a decision-making melee. Similarly, Modi’s decision to demonetize the Indian economy was taken by him personally with no expert evaluation (Jafrelot, 2021). In the UK, Johnson’s government continued to hold out the possibility of No Deal on Brexit and ended up going down to the wire to pass a very thin deal that in the end left many issues hanging and to be resolved in the future (Grey, 2021: Feldmann and Morgan, Chapter 4, this volume), which meant that business was still unsure of the impact of the Trade and Cooperation Agreement (TCA) between the UK and the EU even after it was signed in 2019, an uncertainty continuing into 2022 and potentially beyond. Bolsonaro in Brazil was, if anything, even more personalistic and chaotic in his decision making, even with the presence of Guedes in his government as a signal of stability and economic orthodoxy (see the chapter by Doering et al., Chapter 11, this volume). In relation to China, for example, Brazil had become increasingly reliant on China as an export market for many of its raw materials and commodities. Yet Bolsonaro in his wish to cosy up to Trump embraced an increasingly anti-China discourse, leaving many of the country’s big exporters in a state of confusion and despair (Lapper, 2021) and exacerbating the Covid-19 crisis by refusing to take delivery of Chinese vaccines, having previously contracted with China as its first and main source for such treatments. Brazil was left without a coherent vaccine policy for some months as a result, leading to death rates amongst the highest in the world. In these and other ways, such as many populists’ rejections of climate change (see Gomes and Bo¨hm, Chapter 12, this volume), their espousal of evangelical Christianity often accompanied by forms of creationism and other anti-science doctrines as well as militant rejection of other religions, their casual misogyny, racism, and anti-‘wokeism’, populists attacked business elites as central to the problems which were being faced by ‘the people’. For populists, multinational businesses, in particular, were not only to blame for globalization, outsourcing, loss of jobs, and so on, but were also increasingly embracing diversity programmes, undermining cultural homogeneity, and national identity. Through the use of

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social media postings emphasizing controversial cultural issues and associating them with business activities, populists sought to undermine the legitimacy of business as a voice in policy-making. They attacked the previous status quo of ‘quiet politics’ and network governance and replaced it with noisy divisive politics, personalistic decision-making, and a rejection of expertise and its replacement with gut, ‘authentic’ feelings on the part of the populist leader and their inner circle, constituted often by family members together with economic and political dependents. Often these policies were incoherent, poorly implemented, and, if possible, quietly dropped as their costs and relative lack of benefits became clear. In the UK, for example, the Johnson government issued new guidelines to ministers and civil servants not to use the term ‘Brexit’ as opinion polls showed that over half those polled thought Brexit had gone badly in 2021 and only 18% thought it had gone well according to YouGov poll in the Independent (26 November, 21). On the other hand, it was not uncommon that policies adopted in haste following a social media announcement by the populist leader had to be somehow followed through and justified no matter how problematic (see Grey, 2021 on Brexit; Kahl and Wright, 2021; Tooze, 2021).

Right-wing populism as pro-business If this constituted the sum total of the relationship between business and rightwing populist politics, then one might have expected to see more resistance from business than has in fact been the case in many of the examples discussed in this book. However, the available empirical evidence suggests that the impact of populist governments on business perceptions and strategies is often limited and not necessarily always negative at the aggregate level (Feldmann and Popa, 2022). Indeed, some authors such as Hacker and Pierson (2020) would argue that this is quite simply a case of misdirection as many populists make a lot of noise about being against business in order to gain electoral support, but they rarely follow through on their threats and are, on the contrary, mainly concerned to promote business and even support the acquisition of wealth by both illegitimate (see Harrington, Chapter 16, this volume) and legitimate means. Instead, they suggest, populists engage in a form of ‘bait and switch’. The bait and switch is to replace business as their target with other groups and to blame such groups for society’s problems. Potential supporters are offered the bait of economic benefit and status differentiation. Obvious targets for populists are immigrants (legal and illegal), asylum seekers, ethnic and black minorities, religious groups (most Islamic minorities), or a confusion of all three, e.g. Syrian Muslims from the Middle East fleeing civil war. By ‘dealing’ with these groups, populists promise more money to their potential voters, and more clear identification with a ‘superior’ cultural and national identity. A second switch is to add to these groups a focus on

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liberal intellectuals and their support for a variety of causes that can be presented as supportive of immigrants and cultural ‘woke’ causes. The liberal intellectual and importantly ‘cosmopolitan’ group lacking proper roots in the homeland contribute to the disruption of ‘traditional’ ways and ‘traditional’ values which ‘the people’ have lived by in the past, such as forms of Christian fundamentalism (as is the case with Trump and Bolsonaro and Orba´n’s appeal to ‘Christian European values’) or in Modi’s India, militant Hinduism. This can provide an expanded audience for populist causes by legitimizing attitudes such as misogyny, homophobia, and racism, on the grounds that liberal values undermine the family and its stability. For authors such as Hacker and Pierson, then, as populist electoral support is increasingly stirred by this cacophony of sound and ‘culture wars’ in the Twittersphere and its equivalent, populist leaders get on with their real goal which is to make it easier to make and keep money by reducing regulation and taxation and making evasion easier (see Harrington’s Chapter 16). A central piece of evidence in this argument is that the single most important piece of legislation which Trump managed to get through Congress was his tax cutting bill in 2017. Presented by Trump as cutting taxes for all Americans, it was in truth a bonanza for the wealthy and for corporations (Hacker and Pierson, 2020; see also Mizruchi and Galan, Chapter 2, this volume). This made it increasingly difficult for many businesses, despite their misgivings over his culture wars and some of his trade and immigration policies, to oppose Trump. Another area where Trump and other right-wing populists have been able to back business has been in relation to the ‘administrative state’, i.e. the vast body of regulatory authorities and rules which have developed over recent decades since the New Deal (Peters and Pierre, 2019). Populists, such as Trump, have sought to neuter these organizations and undermine their regulatory abilities in two ways. Firstly, they have placed people in charge of them who were ideologically opposed to the work which the agencies did, e.g. in the US, Scott Pruitt, a long-time critic of the Environmental Protection Agency and supporter of Big Oil was made its head and soon set about rolling back environmental regulations. Secondly, these agencies have been starved of resources, leaving many personnel vacancies for months and even years as well as reducing their budgets and their capabilities to carry out enforcement, e.g. as with Amazon deforestation measures stymied in Brazil by Bolsonaro’s unwillingness to fund and support active monitoring and sanctioning of rain forest destruction. Whilst some businesses might feel that undermining regulation also undermined their plans for the future, e.g. in terms of the transition to electric vehicles from petrol, which necessitated clear guidance from the government on when this would become compulsory, many others were satisfied with the freedom it gave them. In the US, the large donors from the fossil fuel industry such as the Koch Brothers (Leonard, 2019; Mayer, 2016; Pierson 2017, Skocpol and Hertel-Fernandez, 2016) after an initial reluctance to support Trump,

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began to pour funds into Trump’s campaign and that of allied Republican politicians. Many companies were well satisfied by Trump’s willingness to reduce the effectiveness of environmental protection when it came to oil, mining, and so on. Right-wing populists have also sought to align themselves with the military and with military spending that in turn is highly profitable for the large multinational arms contractors. In 2018, Trump, for example, signed the largest defence budget the Pentagon had ever seen and went on to increase it in the following year. He approved more foreign military sales than Obama ($55.6 billion in 2018 compared to $33.6 billion in 2016 under Obama). He sought regular photo opportunities in front of military vehicles and under military aircraft fly-overs, as did Bolsonaro. Trump claimed the US was developing secret weapons including invisible airplanes, a ‘super duper’ missile and a secret nuclear weapon. On overseas trips, he pressed others to purchase US military equipment. As Baltz shows in his Chapter 3, this volume, the vast military defence industry in the US was therefore careful to maintain its tacit support for Trump even when Trump himself started to complain about the power of the military-industrial complex in the final days of his presidency. Other populists such as Bolsonaro, Duterte, and Modi have similarly identified with their military and police, often glorifying state or militia violence against ‘enemies of the people’. Duterte pledged to arm civilians to allow them revolvers to defend themselves against drug dealers and has supported police in adopting a shoot-to-kill policy in the ‘drugs war’ (Associated Press, 2020). In October 2021, the Times of India reported that Premier Modi wanted India to become the world’s biggest military power and had restructured its arms sector in order to concentrate on developing new weapons and technologies. Modi, who is known for his stylish dressing, particularly in colourful kurta tunics has also worn military uniform every Diwali since the 2017 confrontation between Indian and Chinese troops, signalling his solidarity with the Indian armed forces. In other populist-run governments, particularly in East Central Europe (as described in the chapters in this book by Ban (Chapter 8), Szanyi (Chapter 7), and Sallai, (Chapter 14), populists often sought to promote capitalists that would support them even when they launched campaigns against migrants, asylum seekers and EU lawmakers or against opposition stemming from an independent judiciary, the universities, the media, or oppositional social movements and political parties. Building a new group of capitalists who were supportive of populist governments required careful balancing. In some cases, such plans were supported and partly initiated by domestic banks (Naczyk, 2021) and conservative thinktanks (Bluhm and Varga. 2020). However, in East Central Europe, economic growth had been established through maintaining a growing sector of manufacturing multinational firms and their suppliers, mainly from Germany but also elsewhere. Such plants were part of complex supply chains designed to take advantage of relatively low wages in Hungary and Poland. These firms were guaranteed a workforce that was skilled but low paid (compared to their German equivalents,

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though not to other local employees) and not associated with overly rigid regulation; in return the firms generated local employment, local tax revenues, and export earnings that supported the government. By contrast, as a number of authors have shown in this book (especially Chapter 8 by Ban and Chapter 7 by Szanyi), the more aggressive populists such as Orba´n in Hungary were willing to act to push out foreign investment in banking and retail under the cover of regaining control for local capital and to promote a Magyarization of the economy that created a dual system of foreign multi-national corporations (MNC)s and local capital in banking, media, utilities, and retail. These new capitalists, many of whom were Orba´n associates were thereby tied into the system and loyal to it (Szelényi, 2016). In the studies in this book, we see these themes repeated in many countries where populists have become influential. On the one hand, an important first connection which populists make is with communities and individuals whose lives have been disrupted and undermined by globalization processes, either directly or indirectly. This group has felt ignored and taken for granted under neo-liberal forms of governance and economic policy. Therefore, to be addressed as ‘the real people’ whose interests must be placed central, rather than seen as a forgotten and ignored group of ‘deplorables’, became a successful electoral strategy in some contexts, supplemented as it was by placing blame initially onto the shoulders of the establishment, including big business. The rhetoric of policy and, in some cases its reality, was therefore to attack big business as part of the establishment. However, these right-wing populists remained fundamentally believers in the market and in capitalism. In Brazil, as Doering and colleagues show in their Chapter 11, Bolsonaro’s appointment of the Chicago trained economist, Guedes, was a deliberate signal to the markets that an orthodox neo-liberal policy of deregulating markets and low taxes, was going to be pursued. In the Philippines, as Takagi shows in Chapter 10, this volume, Duterte’s economic policy has also been resolutely business-friendly and technocratic and underpinned by the appointment of Dominguez as finance minister. Whether they explicitly believed in a bait-andswitch strategy, they frequently shifted their emphasis over the course of their period of rule towards pitching themselves as the authentic voice of the ‘people’ (reflected in speech forms, dress codes, the use of images and symbols such as the national flag, guns, the bible) and engaging in a cultural rather than an economic war with a combination of opponents, ranging from liberal intellectuals, feminists, LGBTQ+ movements, climate activists, and Black Lives Matter protestors through to desperate asylum seekers, legitimate migrant workers, religious and ethnic minorities. Behind this, they set out tax plans and deregulatory processes that freed the big businesses they had earlier blamed allowing them to grow further and faster. Trump, in particular, focused on the rise in the US stock market as a sign that his policies were working even though the connection of this to the employment opportunities and to the wages and salaries of Middle America was

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often indirect, though it was a boost to the 401(k) personal pension plans held by many citizens. Right-wing populists such as Trump were therefore often concerned to keep the pressure on their ‘independent’ central banks to keep interest rates low, allowing firms to expand and grow. The resulting stock market booms and other asset price rises, however, benefitted most those who held the most assets, i.e. those already wealthy so the result was to increase inequalities in societies rather than decrease them and heal divides. The result was that business in various countries was itself divided on how to respond; should it go along with right-wing populism that reduced regulation, reduced taxation, boosted share prices, kept interest rates, low or should it find ways to oppose or ameliorate impacts when anti-business policies were implemented? This dilemma was in turn affected by the degree to which populists became central to political power in particular contexts over extended periods of time. In some countries, like Hungary, the Orba´n regime managed to consolidate a dominant position after the 2010 election. This means that the government has faced very few domestic constraints when seeking to implement its populist agenda, though it has sought to maintain the support and involvement of the most important foreign investors (Bohle and Regan, 2021). In various other countries, right-wing populist parties have been junior members of governing coalitions, as in Austria, Norway, Finland, and Estonia. In the case of the Danish minority government of 2001–2011, the Danish People's Party (DPP) did not formally join the governing coalition, but it propped up the government by providing key votes to secure a majority for government policy in parliament (see Ibsen’s Chapter 5). In such cases populists have considerable influence over the policy agenda, but it also forces them to make compromises and even attenuate their agendas in the interest of reaching agreements with other parties. The tensions created by government participation can sometimes lead to cabinet crises or even to splits within populist parties, as in the case of the Finns Party in 2017 (see also the case of Italy discussed in Chapter 7 by Vampa). In other countries, like France or Germany, populist parties have been in opposition and generally in a cordon sanitaire or excluded from the group of parties that are deemed to have coalition potential. In these countries populist influence relates in large part to the potential threat of further gains in the future, which induces other political actors either to combat the populists or to adopt elements of their agendas to pre-empt their rise. In such cases, business may be concerned about the rise and future influence of populists and seek to counteract it (Kinderman, 2021; also his Chapter 13, this book), or alternatively it may also seek to prepare for it to some extent. In several countries, including the US and the UK, the influence of populism has emerged not so much through the rise of a single populist party but more through the way in which one of the mainstream parties has become taken over by populist approaches to politics, reflected in the US in the strong personal power of Trump to define who is a loyal Trump Republican and who is

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an objectionable Never-Trumper or Republican-in-name-only (RINO). Johnson made similar efforts when he became leader by expelling from Conservative Party membership MPs who had been opposing his Brexit plans and insisting all Conservative candidates at the 2019 election sign a pledge of allegiance to his Brexit plans. In conclusion, the degree to which business needs to engage directly with populism is much greater if right-wing populists are actually in power or at least an important ally needed to pass key legislation (as in the Danish case, 2001–2011). This is why this book focuses primarily on populists in government (or close to government though formal or informal voting support arrangements in legislatures). The chapters of the volume analyse how business actors assess the threat of right-wing populism to their business models and what options they have for dealing with particular levels of threat.

Understanding business responses: A typology This section develops a framework for analysing business responses to populism. It draws on the typology developed in Feldmann and Morgan (2022), in which we extend Hirschman’s (1970) classic distinction between exit, voice and loyalty as possible responses to adverse developments within organizations or markets. In order to capture the specific dilemmas faced by business in the context of populism, we modify Hirschman’s typology in two key ways. Firstly, we conceptualize loyalty as an active choice to support or signal loyalty to populists and not as a constraint shaping the likelihood of adopting exit or voice, as in Hirschman’s original model. This extension resembles the approach developed by Clark et al. (2017), who also analyse loyalty as a strategic response (see also Barry, 1974). Secondly, in order to capture the importance of one of the key features of populism, namely its noisiness, we also extend the typology by considering two types of voice (loud and soft voice) and two types of loyalty (explicit and implicit). This distinction allows us to analyse the crucial challenge businesses face in terms of the choice between noisy politics (adopting public or even ostentatious stances in the face of the intense mobilization that tends to accompany populism) and quiet politics (seeking to influence populist agendas behind the scenes or in advisory roles) in dealing with populism.

Exit strategies in the face of populist challenges Firstly, exit is a traditional market-based business response to changing conditions. It refers to the decision by a firm to disinvest from a given market. However, it is important to note that under populist governments, exit can be forced by policy

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initiatives, as in the case of Orba´n’s Hungary where overseas banks were effectively stopped from operating profitably by legislation, leading to these banks selling out to local owners (see Chapter 8 by Ban, Chapter 7 by Szanyi; see also Johnson and Barnes, 2015). In the US, the Trump administration increasingly sought to push out Chinese companies from areas of strategic security interest (see Baltz’s Chapter 3, this book), a policy that was largely maintained by the Biden administration. Exit can therefore be voluntary or coerced. This also relates to whether the threat of exit is evoked strategically by business. Home-based MNCs may prefer to restructure and initiate a partial exit without drawing attention to what is going on in order to avoid being dragged into political controversy. Alternatively, companies may threaten to exit, thereby strategically signalling their structural power (Culpepper and Reinke, 2014) and highlighting the adverse economic consequences resulting from a potential exit. This is also a way of underpinning the exercise of voice by business (see below), or the criticisms levelled at the government to make it change its policies before the potential exit actually takes place—which in the case of manufacturing can take a number of years. By strategically announcing their exit plans, foreign-based multinationals may also aim to bring their own government into the argument using diplomatic and other powers to try to change the policies causing exit. In broad terms, globalization makes both partial and full exit increasingly possible as it is easy enough to find other locations which will welcome FDI. Multinationals are used to the process of reorganizing their supply chains in response to developments, including natural disasters, evolving economic conditions, or political instabilities. Exit can be complete if the firm ceases to operate in a country, or partial if the firm decides to scale back its involvement by reducing or postponing investments. International business literature describes a range of advantages which firms potentially get from overseas investment, including accessing larger markets, making use of cheaper resources such as labour, being incentivized through tax breaks, being subjected to less regulation, and joining or benefitting from expert knowledge networks and associated supply chain advantages. The more embedded a firm is in a local context and the more sunk assets it possesses in production and manufacturing systems, the more complex it will be to exit. However, for most MNCs this sort of decision is a common enough event. Responses of foreign car manufacturing MNCs to Brexit has revealed companies’ willingness to take such decisions even though relocation into EU member states will be costly (see Chapter 4 by Feldmann and Morgan on Brexit). Other types of MNC based around professional services and finance are more reliant on the expertise and skills of their staff. They therefore face different kinds of problems of exit and relocation since the major question is whether the staff would follow a relocation or leave the firm for alternative employment in the local context. In the event of loss of expertise due to relocation, would adequate substitute expertise be available?

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Exit can also be envisaged as partial or temporary. One of the key advantages of partial exit is that it offers firms greater flexibility making it easier either to exit completely in the future or to re-enter the market if the uncertainty associated with populism declines. Partial exit as opposed to complete exit is more likely to be the response of MNCs to populist challenges in their own home base. Temporary (and partial) exit is possible in financial services where there are smaller fixed costs than in the manufacturing sector and where appropriate expertise may be available, e.g. moving from London to one of the main EU centres for financial markets such as Frankfurt, Amsterdam, or Paris. For most smaller firms that are heavily reliant on local or national markets or key factors of production within a given country, complete exit is not an option though following Brexit even relatively small UK firms have found that they might need a subsidiary in an EU country if they are going to continue to sell in that market.

Voice options in response to populist challenges Hirschman (1970) identifies voice as an alternative to exit. He states that ‘voice is here defined as any attempt at all to change, rather than to escape from, an objectionable state of affairs’ (Hirschman, 1970: 30). Hirschman argues that ‘the voice option included vastly different degrees of activity and leadership in the attempt to achieve change “from within” .…. voice is essentially an art evolving in new directions’ (Hirschman, 1970: 38, 43). There are two key questions to be considered by businesses before voice is exercised in relation to the actions of right-wing populists. Firstly, is the issue of concern so important that voice should be exercised? Secondly, does the nature of populist rule and noisy politics necessitate ‘loud’ voice, or is it best handled using ‘soft voice’ mechanisms? As Brian Barry (1974: 89) noted in this discussion of Hirschman’ typology, ‘it will pay to exercise voice only if the value of a given probability of a given improvement is higher than the value of the best alternative plus the cost of exercising voice’. Given that the cost of loud voice is generally very high and the chances of success are uncertain, this is a complex dilemma. Such decisions are complicated by the fact that populists frequently carry a dual agenda—on the one hand, deregulation, lower taxation, and a preference for shrinking the state and on the other hand, a more overt use of the state to firstly protect home based industry and in particular home based jobs including excluding migrant labour and secondly a commitment to expanding state expenditure to rebuild public infrastructure, not least bolstering the military and the police as protectors of national identity and public order (as with Trump, Bolsonaro, Modi, Duterte). Voice can be exercised by individual businesses (or even individual business executives) or collectively by business or trade associations advancing shared concerns of the business sector as a whole or by some parts of it. The traditional type

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of business engagement, notably as part of individual consultations or activities organized by business associations, is based on ‘soft voice’. This ties in with the general business preference for quiet politics (Culpepper, 2011). High salience and politicization of issues tends to reduce the effectiveness of business lobbying, as politicians are less likely to defer to business under the intense glare of the media and a highly engaged electorate. By contrast, under conditions of quiet politics governments are more likely to draw on the technical expertise of business, not least given the importance of business investments to the health of the economy. Whilst the volume documents various instances of soft voice (see Vampa, Chapter 6, for some Italian examples)—or attempts to influence or modify the populist agenda using these traditional channels—the main challenge for business relates to the noisiness of politics associated with populist mobilization, which is likely to reduce the impact of soft voice. Loud voice, by contrast, entails more active involvement in noisy politics and challenging populists outright. This response raises several challenges for business. Firstly, the exercise of business influence under conditions of noisy politics is uncertain and may not succeed, especially if it is perceived as self-serving by populist politicians eager to fight back against critical voices. Secondly, in addition to their uncertain success, such interventions are also very costly, both in terms of the direct costs of mounting a large public campaign and also in terms of other costs, such as the possibility of losing government contracts if populists are in power or alienating customers who are populist sympathizers. As our cases reveal, whilst a small number of business executives may choose to speak out in this way, as some US executives have against Trump, loud voice is rarely used against right-wing populism as a wholesale critique. The most powerful examples of such comprehensive condemnation are described in Kinderman’s Chapter 13. In his discussion of Germany, he shows that the historical legacies of the complicity of business with the rise of Nazism remain potent and have led many business associations to fiercely oppose the Alternative fu¨r Deutschland (AfD) and seek to keep it out of government (see also Kinderman, 2021). This has been a factor contributing to the AfD’s failure to grow consistently in recent national elections. Similarly, Kinderman’s Chapter 13 shows that in Switzerland, business has faced challenges from populists over migration and citizenship in referenda allowed under the Swiss Constitution. Swiss businesses have evolved tactics and ways of campaigning that have enabled them more recently to defeat populist referenda initiatives which might have threatened their interests (see also Mach et al., 2021). Rather than wholesale condemnation of populists in government, our chapters reveal that most businesses and business associations pick their battles very carefully and only use loud voice when there are very significant challenges to their business strategies especially in relation to specific issues. Ibsen’s discussion of Denmark, for example, shows that business associations have not sought to engage in outright conflict with the Danish People's Party (DPP) over immigration and

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welfare chauvinism, but they have sought to make sure that their requirements for labour mobility are not threatened. In negotiations over the form of Brexit, business associations have sought to focus on particular issues such as the Northern Ireland protocol or maintaining a smooth flow of traffic at UK ports, rather than the principle of Brexit and the use of populist discourse and tactics by the Johnson government (see Chapter 4 by Feldmann and Morgan). US business was reluctant to confront Trump’s whole style of governance, instead trying to appeal to the ‘adults in the room’ to keep some stability and order in trade talks (see the Chapter 3 by Baltz). Whether the exercise of voice is loud or soft depends on the strength of the threat felt by business, the policies pursued by populists that support business and therefore offset the negative policies, and finally the overall strength of the populists—do they control the government, are they in coalition, are they significant in terms of legislative seats and electoral votes or are they shouting from the sidelines? Such considerations affect assessments of how successful loud voice is likely to be. The more embedded populists are in the mechanisms of government, the more dangerous it is for business to voice opposition as governments have many ways to retaliate, ranging from economic measures, to threats of legal prosecution (e.g. using corruption laws) to ideologically attacking businesses as acting in their own interests.

Loyalty as a response to populism For Hirschman, and other scholars who faithfully apply his model, like Gehlbach (2006), ‘loyalty is a psychological characteristic that increases an actor’s propensity to choose voice over exit’ (Clark et al., 2017: 720). It results from an attachment to an organization or state that makes exit more difficult to contemplate. By contrast, we conceptualize loyalty as an active choice of whether to show support, in this case to a populist government, or not, in a way that resembles Clark et al.’s (2017) model. In the case of business responses to populism, such loyalty may result from a normative commitment to the populist programme, or from instrumental motivations associated with expected material benefits, or from an unwillingness to see tensions as other than minor blips in the relationship. As noted, we distinguish between two forms of loyalty—implicit and explicit loyalty. Implicit loyalty is very common, especially when populist rule is entrenched. If voice is too costly or risky and if exit is not a viable option, then implicit loyalty is likely to be the default strategy. As such, it is often an uneventful strategy, in that it simply entails that businesses keep their heads down and avoid antagonizing the populists or getting involved in highly controversial and polarizing issues in a context of noisy politics. For this reason, implicit loyalty is the preferred strategy of a wide range of firms, including both firms that are critical of the populist

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agenda, but unwilling or unable to challenge it, and firms that are more genuine supporters (either for normative or instrumental reasons), but who nevertheless view it as more prudent not to get actively involved in noisy politics, given the high cost and uncertainty surrounding such interventions and the risk of antagonizing other groups in society. As Clark et al. (2017) point out, loyalty is often chosen when actors are powerless to do anything else. In the case of entrenched populist regimes there may thus be an element of coercion, in that other options are simply too costly or risky for business to countenance. Like exit (as discussed previously), loyalty can be coerced by threats by populist leaders to damage businesses economically by withdrawing licenses or state takeover of ownership either directly or indirectly. Populist leaders often create a fear amongst businesses of being called out on social media or TV by a powerful leader such as Trump or Johnson. Similarly, where populists have undermined the independence of the legal authorities by placing their own nominees in crucial positions of power, threats to find causes to arrest and prosecute can coerce loyalty, especially in contexts where populists have encouraged all types of financial manipulations in order to avoid tax themselves (see Harrington’s Chapter 16, this book). Where the security apparatus of a state has been similarly suborned, information that has been secretly obtained can be stealthily released to undermine the reputation of a company or individual. Explicit loyalty is based on a greater public commitment to populism by business. As such it relies on a greater investment of time and resources and is associated with the general risks of involvement in noisy politics, namely that it can backfire or alienate influential groups. For these reasons explicit loyalty is a strategy that tends to be adopted by businesses which are normatively committed to the agenda developed by the right-wing populists in power. In our cases, we saw a number of situations where there was definite normative commitment to the populist programme among business executives who were ideologically committed to ideas advanced by populists, as in the case of some prominent business leaders who advocated Brexit in the UK, like Lord Bamford of J C Bamford Excavators (JCB) or Tim Martin of Wetherspoons (Feldmann and Morgan, 2021) and in the case of companies in the extractive industries that have supported climate change denying governments such as Trump and Bolsonaro. Normative commitments may also reflect a deep connection between business and right-wing populist government, as in the case of capitalists promoted by Orba´n to run state-supported businesses. In many cases, they had purchased such businesses on favourable terms in return for supporting the illiberal policies of the populists based on a Weberian prebendalist logic, in which property rights are conditional on being in the good graces of the regime (Szelényi, 2016). More generally, in cases where business expects populist influence to be durable, there is the expectation that by showing loyalty, businesses can expect good access to the key decision-makers in future, which will make it easier for them to exercise influence over any issues of concern or secure other concessions. Such a strategy of establishing a reputation for strong

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and explicit loyalty may induce some businesses to demonstrate loyalty in adverse situations when such views are controversial and there are many criticisms of the populists. Such a proof of loyalty can be particularly powerful where populism revolves around a personality cult such as Trump or Modi. Right-wing populists show little concern about treating some people (including their family—the ultimate loyalists in the case of Trump and Bolsonaro) favourably, bestowing them with an imprimatur of approval as well as with direct economic benefits. Loyalty then can have a higher long-run payoff so long as populists remain in control, particularly when it shades over from financial support to public endorsement. However, when the situation changes, the fragility of loyalty may be revealed, as when many businesses loudly withdrew their support for Trump after the Capitol riots. On the other hand, the degree of distancing by business has been questioned, as the continued maintenance of support for Trump and financial support for Republican politicians opposed to the certification of Biden’s victory in the US shows that the mix of calculation and normative commitment may produce unexpected outcomes of continuing loyalty. In part this is because populist leaders are rarely themselves loyal to their business supporters (other than their direct family and friendship network) and are more than willing to play the role of being the Table 1.2 A typology of business responses to populism. Response

Core logic

Rationale

Exit (full, partial, temporary) Soft voice

Disinvestment and relocation: reorganization of the supply chain Influencing populists by means of informal consultations, lobbying, policy advice Ostentatious resistance and public opposition

Minimizing the losses associated with populism

Loud voice

Implicit loyalty

Keeping one’s head down and avoiding taking any strong positions: calculative and pragmatic.

Explicit loyalty

Demonstrative and public support for populist leaders and policy agendas Normative and calculative, mixed with potential coercive use of power by populist government

Modifying populist platforms to maximize gains and minimize losses Signalling normative disagreements or seeking to undermine populists’ standing and credibility Avoiding involvement in noisy politics or controversial/polarizing issues and maintaining at least tolerable relations to all relevant parties Signalling ideological commitment or seeking to gain economic advantages from affiliation with populists (contracts, licences, favourable treatment, and so on)

Source: authors’ analysis; it also builds on a similar table in Feldmann and Morgan (2022)

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outraged representatives of ‘the people’, piling mercilessly into scandals which will damage their former ‘loyal’ servants and may lead to imprisonment and disgrace. Showing loyalty to populist leaders may draw business deeper into a Faustian pact that becomes impossible to break and where a separate influence dwindles to nothing as they become increasingly complicit in the populist programme, see Table 1.2.

Overview of the volume In conclusion, business shows a variety of responses to the rise of populist governments and parties. These may vary over time as the populist threat waxes and wanes and as businesses evaluate the degree of risk to their strategy. They vary across sectors depending in part on how sectoral business models have developed that may allow relocation and exit or reorganization of supply chains. They also vary between countries according to institutional structures, historical legacies, forms of political representation, and the nature of public administration and expertise in policy making processes. This requires that we treat populism seriously as a global phenomenon (Tugal, 2021) with manifestations in the Global South as well as the Global North. In this book, therefore, we commissioned a series of chapters from the Americas, from Europe, and from Asia in order that readers could appreciate the varied ways in which populism and business interacts. However, we also decided to supplement these chapters with a series of thematic chapters, examining areas where populism was particularly important, e.g. international trade, climate change, international taxation systems, the use of non-market strategies, and the role of intermediary business associations. While these chapters differ in certain respects, all of them share a general concern with the impact of the populist turn on business. If right-wing populism moves almost inexorably to forms of illiberal democracy, as most of the chapters in this book indicate, then its ability to carry with it as supporters large parts of business is crucial to its hopes of staying in power and winning elections. However, this cannot be taken for granted even if most right-wing populists broadly favour a continuance of neo-liberal policies. For one reason, many populists, as shown in this book, attack business in general, or specific firms in particular, sometimes imposing policies that damage existing business models, e.g. on trade, on labour migration, on central bank independence, on international treaties, and international organizations. Whilst they may support neo-liberal economic policies, electoral considerations push them towards a rhetoric of attacking ‘the elites’ and supporting ‘the people’. Secondly, populism thrives on conflict, noisy politics, and a sense of crisis. It is invariably drawn into forms of culture wars to reinforce its electoral support. Culture wars cannot be conducted quietly; they only work if the simple message has a great reach that arises from its rapid spread across

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social media, such as Facebook and Twitter, often achieved by sensationalizing the debate in some way that leads the key algorithm to draw more people’s attention to the argument. Business, by contrast, prefers to influence governments quietly, behind the scenes, building networks of trust and reliability. Noisy attacks on ‘woke’ practices on diversity, sustainability and transparency are generally anathema to large businesses which over the last decades have broadly signed up to these values in their company reports and in their membership of various campaigns (e.g. the UN Global Compact). How long can the tensions between these modes of governance be sustained without leading to breakdown? Thirdly, populism undermines intermediary institutions such as the judiciary, the independent civil service, the separation of powers in written or informal constitutions (Applebaum, 2020; Mu¨ller, 2021). Is there a point at which at least some businesses decide to fight back against this erosion of liberal democracy, partly out of self-interest, partly out of normative commitments? The various chapters in this book offer detailed accounts of these interactions. In the concluding chapter to the book, we consider how to make sense of this diversity and reflect on the durability and long-term prospects of the populist challenge and its implications for business.

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Mudde, C. (2021) Populism in Europe: An illiberal democratic response to undemocratic liberalism (The Government and Opposition/Leonard Schapiro Lecture 2019). Government and Opposition, 56(4): 577–597. Mudde, C. and Rovira Kaltwasser, C. (2013) Exclusionary vs inclusionary populism: Comparing Europe and Latin America Government and Opposition 48(2): 147–174. Mudde, C. and Rovira Kaltwasser, C. (2017) Populism: A Short Introduction. Oxford: Oxford University Press. Muirhead, R. and Rosenblum, N. L. (2019) A Lot of People Are Saying: The New Conspiracism and the Assault on Democracy. Princeton: Princeton University Press. Mu¨ller, J-W. (2018) What is Populism? London: Penguin. Mu¨ller, J-W. (2021) Democracy Rules. London: Allen Lane. Mushaben, J. M. (2020) A spectre haunting Europe: Angela Merkel and the challenges of far-right populism. German Politics and Society. 38(1): 7–29. Naczyk, M. (2021) Taking back control: Comprador bankers and managerial developmentalism in Poland. Review of International Political Economy, Doi: 10.1080/09692290.2021.1924831. Peters, B. G. and Pierre, J. (2019) Populism and public administration: Confronting the administrative state. Administration & Society, 51(10): 1521–1154. Pierson, P. (2017) American hybrid: Donald Trump and the strange merger of populism and plutocracy. British Journal of Sociology, 68: S105–S119. Portes, J. (2019) The economics of migration. Contexts, 18(2): 12–17. Prentoulis, M. (2021) Left Populism in Europe. London: Pluto Press. Putzel, J. (2020) The ‘populist’ right challenge to neoliberalism: Social policy between a rock and a hard place Development and Change, 51(2): 418–441. Ramos, C. C. (2021) The return of strongman rule in the Philippines: Neoliberal roots and developmental implications Geoforum, 124: 310–319. Rodrik, D. (2018) Populism and the economics of globalization. Journal of International Business Policy, 1: 12–33. Rovira Kaltwasser, C., Taggart, P., Ochoa Espejo, P., and Ostiguy, P. (eds.) (2017) The Oxford Handbook of Populism. Oxford: Oxford University Press. Seabrooke, L. and Wigan, D. (2017) The governance of global wealth chains. Review of International Political Economy, 24(1): 1–29. Shrimsley, R. (2021) Boris Johnson can battle business but he can’t ignore economics. Financial Times, 6 October. Available at: https://www.ft.com/content/3746531f3425-4d7c-bb87-45f61ce4d3c6 (accessed 19 December, 2021). Skocpol, T. and Hertel-Fernandez, A. (2016) The Koch network and republican party extremism. Perspectives on Politics, 14: 681–699. Stoker, G. (2019) Can the Governance paradigm survive the rise of populism? Policy & Politics, 47(1): 3–18. Szelényi, I. (2016) Weber’s theory of domination and post-communist capitalisms. Theory and Society 45, 1–24. Tamames, J. (2020) For the People: Left Populism in Spain and the US. London: Lawrence and Wishart. Thompson, M.R. (2022) Duterte’s Violent Populism: Mass Murder, Political Legitimacy and the “Death of Development” in the Philippines. Journal of Contemporary Asia 52(3): 403-428. Tooze, A. (2021) Shutdown: How COVID Shook the World’s Economy. London: Allen Lane. Tormey, S. (2018) Populism: democracy’s Pharmakon? Policy Studies, 39: 260–273.

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Tormey, S. (2019) Populism. London: One World Publications. Tugal, C. (2021) Populism studies: The case for theoretical and comparative reconstruction. Annual Review of Sociology, 27(2): 327–347. Urbinati, N. (2019) Political theory of populism. Annual Review of Political Science, 22: 111–127. Weale, A. (2018) The Will of the People: A Modern Myth. Cambridge: Polity Press. Weyland, K. (2017) Populism: A Strategic-Political Approach in Rovira Kaltwasser, C., Taggart, P., Ochoa Espejo, and Ostiguy, P. (eds.) (2017) The Oxford Handbook of Populism. Oxford: Oxford University Press, pp. 48–72. Wolff-Mann, E. (2017) 62 businesses Trump has targeted on Twitter. Yahoo Finance, 8 February, available at: https://finance.yahoo.com/news/61-businessestrump-has-attacked-on-twitter-181623705.html?guccounter=1 (accessed on 19 December 2021).

PART 2

COUN TR Y ST UDI E S

2 The Trump Phenomenon and Right-wing Extremism Is Donald Trump a Populist?* Mark S. Mizruchi and Raul Gălan

Movements labelled as populist have proliferated world-wide in recent years. They have resulted in elected national leaders in Poland, Hungary, Brazil, and the US, the Brexit phenomenon in Britain, and insurgent movements in France, Germany, and several other countries. All of these movements have been based on ideologies that most observers associate with the right-wing of the political spectrum. Yet populism has had a complicated history, and many populist movements have exhibited left- as well as right-wing orientations. Perhaps no country illustrates this complexity better than the US. Populism in the American context, which dates back to the founding of the nation, has been associated with the redistributive politics of William Jennings Bryan in the 1890s and Huey Long in the 1930s, the anti-communist hysteria of Joseph McCarthy in the 1950s and the John Birch Society in the 1960s, and the anti-tax movements of the 1970s. Our focus in this paper is on the contemporary movement in the US associated with the nation’s 45th president, Donald J. Trump. Although he has not used the term himself, countless commentators and scholars have referred to Trump as a populist. Yet to what extent is this actually the case? Our goal in this paper is to assess Trump’s rhetoric, as well as his policies, within the context of American populism. We shall argue that although certain elements of Trump’s rhetoric—especially his nationalism, stoking of racial resentment, and ‘America-first’ language—are consistent with various strands of nineteenth- and twentieth-century populism, his economic policies as president, with few exceptions, had little in common with them. In his actions, Trump, with the possible exception of his stance on trade, operated as a conventional contemporary Republican, whose policies focused on benefiting corporations and the wealthy at the * Portions of this research were funded by the College of Literature, Science, and the Arts and the Office of the Provost at the University of Michigan. We thank Magnus Feldmann, Glenn Morgan, and Daniel Kinderman for their helpful suggestions on the paper, an earlier version of which was presented, remotely, at the Annual Meeting of the Society for the Study of Socio-Economics, in June, 2020. Please direct correspondence to the first author at [email protected]. Mark S. Mizruchi and Raul Ga˘lan, The Trump Phenomenon and Right-wing Extremism. In: Business and Populism. Edited by Magnus Feldmann and Glenn Morgan, Oxford University Press. © Mark S. Mizruchi and Raul Ga˘lan (2023). DOI: 10.1093/oso/9780192894335.003.0002

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expense of the larger population, including those who formed the base of his support. We begin with a brief overview of earlier populist movements in the US. We then describe the rightward shift of the populist economic orientation dating from the 1950s, and show how the Republican Party began to exploit and channel various aspects of populist sentiment to its own electoral advantage. Finally, we examine the rise of Donald Trump within this context, as well as the relation between Trump’s rhetoric and his actions.

What is populism? Before we examine whether Donald Trump was a populist, we should make an effort to define the term. This is not easy. Some authors spend entire articles (Brubaker, 2017) or even books (Mu¨ller, 2016) attempting to define the phenomenon. The primary definitions in the literature do share a set of common themes, however. Ronald Formisano (2008: 3), for example, defines populism as ‘mobilizing masses of ordinary people, arising at least initially from the grass roots and invoking the name of “the people” against established or corrupt elites’. Michael Kazin (2017: 1) defines it as ‘a language whose speakers conceive of ordinary people as a noble assemblage not bounded narrowly by class, view their elite opponents as self-serving and undemocratic, and seek to mobilize the former against the latter’. Chip Berlet and Matthew Lyons (2000) draw on a multidimensional conception provided by Margaret Canovan (1981), who distinguishes between agrarian and political populism. Both versions, in Canovan’s view, involve an ‘exaltation’ of ‘the people’ and opposition to elites. Exactly who these elites are has shifted over time, however, and to a great extent determines whether a populist movement is primarily on the left or right side of the political spectrum. Some authors have suggested that populism defies a general definition. Robert Jansen (2011) argues that rather than an ideology, populism must be seen as a form of political mobilization. Rogers Brubaker (2017) goes further, suggesting that populism should be treated as a ‘discursive and stylistic repertoire’. Yet the forms of mobilization and discourse described by these authors align quite closely with the more standard definitions of the concept. In Jansen’s case, populist mobilization involves ‘any sustained large-scale political project that mobilizes ordinarily marginalized social sectors into publicly visible and contentious political action, while articulating an anti-elite, nationalist rhetoric that valorizes ordinary people’ (Jansen, 2011: 83). In Brubaker’s case, the core element of populist rhetoric is a claim to speak and act in the name of the people, as opposed to economic, political, and cultural elites (Brubaker, 2017). For the purposes of this article, we adopt a definition that contains the common elements of all of the previous conceptions.

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By populism, we mean a movement that glorifies average, or ‘common’ people, who view themselves as dispossessed and see the source of their predicament in a group of powerful elites. Although populists have historically drawn their support from broad masses of these so-called common people and directed their wrath toward elites, populism, at least its American version, has not been associated with Marxism, or socialism more generally. Moreover, the populist movements of the nineteenth century, whose members supported redistributive economic policies, also contained elements of xenophobia, racism, and anti-Semitism, although the extent to which these forces were present has long been a source of controversy (Hofstadter, 1955; Pollack, 1962; Schwartz, 1976). Given these differing emphases among populist movements, we believe that it is useful to distinguish between two strands, which we shall term economic and cultural populism respectively.¹ Economic populists focus their ire on business elites, including the heads of large corporations and (especially) banks, as well as the wealthy and privileged in general, viewing members of these groups as responsible for the condition of the economically struggling masses. Proponents of this position advocate for various forms of redistribution of economic benefits. Cultural populists focus their ire on outgroups, including foreigners, immigrants, members of racial and ethnic minorities, and (more recently) white-collar professionals such as government bureaucrats, journalists, and academics. Proponents of this position tend to oppose economic aid to the poor and/or members of disadvantaged minority groups, and to express resentment toward educated professionals rather than corporate and financial elites. The common thread, then, in conceptions of populism, is the valorization of ‘the people’ and resentment of elites. Economic and cultural populists define the elite differently, however, and cultural populists direct their ire at various national or ethnic ‘outgroups’ as well.

Early American populism Populism in the US dates back to the American Revolution. Most Americans at the time were small farmers, and there was a strong suspicion of centralized authority among much of the population. This occasionally led to uprisings, including the Whiskey Rebellion (1791–1794)—in which thousands of farmers in Western Pennsylvania protested a federal tax on distilled spirits—as well as campaigns against groups such as the Freemasons, who advocated ‘cosmopolitanism, religious tolerance, and Enlightenment liberalism’ (Berlet and Lyons, 2000: 36). ¹ We do not know the origin of this distinction, but Matthew Dowd, a political consultant, used the terms economic and cultural populism in a 2012 article in the Huffington Post. See https://www. huffpost.com/entry/obama-state-of-the-union_b_1231489.

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A major early American populist movement was associated with Andrew Jackson, who was elected president in 1828. Jackson is known today for being a supporter of slavery, as well as for his draconian (and arguably genocidal) treatment of American Indians. Although he was wealthy, Jackson portrayed himself as a defender of white small farmers and workers, and he famously destroyed the Second U.S. Bank, which he accused of being ‘an institution of artificial privilege’ (Berlet and Lyons, 2000: 45–46) due to its ties to Northern industrialists. The majority of the white workers who formed much of Jackson’s base were supporters of slavery, a position that Jackson encouraged. This combination of anti-elitism and racism was at the heart of Jackson’s support. It may therefore be no surprise that Jackson is one of Donald Trump’s heroes.

Populism as a mass movement Despite American populism’s eighteenth-century roots, the version for which the US is best known emerged in the late-1800s, during the rise of large corporations and the associated concentration of economic power. The base of late nineteenthcentury populism was among small farmers, primarily in the South and Midwest. American farming was extremely productive (Prasad, 2012), and large numbers of farmers were hurt by the consequent low prices for their crops. One response to this crisis was the formation of the Peoples’ (later the Populist) Party, whose candidate, James Weaver, received more than 8% of the vote in the 1892 presidential election. A second response was a movement supporting the ‘free’ coinage of silver, based on the rationale that flooding the market with silver coins would encourage inflation, which would mean higher prices for the farmers’ crops and thus (relative) reductions in their debts. William Jennings Bryan, a congressman from Nebraska, became the leading advocate for free silver, and became the Populist and Democratic presidential candidate in 1896. Free silver was opposed by financial interests, especially in the Northeast, who benefited from the deflation of the period (which preserved the value of the debt they held; see Carruthers and Babb, 1996). This scene—Northeastern financial interests benefiting at the expense of heartland farmers—corresponded closely with the populist narrative. Populism largely faded after 1900, but it experienced a resurgence in the late1920s with the rise of Huey Long as governor of (and later senator from) Louisiana. Long based his candidacy on progressive taxation, including of large corporations. Once installed as governor, he used his increased tax revenue to build highways, hospitals, and prisons, and to enact education reform, including the distribution of free textbooks and the expansion of the state university system (Sanson, 2006). Long became a US senator in 1933 and proposed a ‘share the wealth’ programme, which included a ‘soak the rich’ tax proposal. He apparently had ambitions to challenge Franklin D. Roosevelt in the 1936 presidential election but was assassinated

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in 1935. Long has been described by numerous historians as an extremely corrupt leader who ruled in a dictatorial fashion (Prasad, 2012). Like the populists of the late nineteenth century, however, his economic policies clearly placed him on the left-wing of the political spectrum.

Right-wing populism After Long’s death, American populism experienced a significant shift. Although subsequent movements continued to exhibit the anti-elitist rhetoric of the earlier populist phenomenon, these new forces largely dropped, or sharply repackaged, populism’s left-wing economic orientation. Instead, the label was increasingly applied to movements on the far-right of the political spectrum. Early examples included the anti-Communist crusade of Senator Joseph McCarthy, who in the 1950s attacked the ‘Eastern upper crust’ (Berlet and Lyons, 2000: 168), the John Birch Society, a group seen as part of a ‘lunatic fringe’ (Diamond, 1995: 52–58), and the 1964 presidential candidacy of Barry Goldwater. They later included the anti-tax movements of the 1970s and 1980s, the confrontational Republicanism of Patrick Buchanan in the 1990s, and the emergence of Donald Trump. A development with particular relevance for this discussion was the rise of George C. Wallace, the segregationist governor of Alabama. Wallace, a Democrat, was able to garner support among working-class white Democrats in the North during his three presidential campaigns, from 1964 through 1972. He did this by glorifying the average (implicitly white) American, whom he portrayed as at the mercy of government bureaucrats and ‘pointy-headed’ liberals (Rohler, 1999). Wallace’s racism—which he had toned down in his rhetoric for his presidential campaigns—along with his railing at elites, adhered to the traditional populist style. His criticism of ‘big government’, however, and his hostility not toward economic elites but toward presumed cultural ones, suggested a new approach, one that helped usher in the movement of white working-class voters toward the Republican Party. The idea of tapping into white working-class resentment of liberals and intellectuals, as well as government social programmes that in their view were biased in favour of African-Americans, became a staple of Republican politics by the 1970s. These efforts were sometimes couched at least partly in populist language—as in Richard Nixon’s appeal to the ‘silent majority’ in his 1968 presidential campaign— but only occasionally did Republicans attack big business or the wealthy. In fact, by the time of Ronald Reagan’s election in 1980 there was an effort by Republicans to glorify wealth and to disparage government. Not until Patrick Buchanan’s challenge to George H. W. Bush in the 1992 Republican primary did we witness an explicitly populist appeal by a Republican. Buchanan railed against multinational corporations, and in particular against ‘globalists’, emphasizing an isolationist

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‘America First’ orientation and opposition to free trade. Buchanan also appealed to racist sentiments, including an opposition to immigration of people of colour. Buchanan experienced little success in his challenge to Bush, but his approach represented a clear precursor to Donald Trump’s campaign a quarter century later.

Donald Trump: Rhetoric, and reality This brings us to the candidacy and presidency of Donald Trump, and to the primary question of this paper: to what extent is Trump actually a populist? We argue that in terms of rhetoric, at least in his 2016 election campaign, Trump is a descendant of Andrew Jackson, William Jennings Bryan, George Wallace, and (especially) Patrick Buchanan. There were significant elements of populism, including the economic as well as cultural variant, in Trump’s campaign rhetoric. In his actual governing, however, Trump, with minor exceptions, proved to be anything but a populist, at least on economic issues. He did maintain his cultural populism throughout, however. Trump began as a real estate developer in New York, taking over a large empire run by his father, Fred. Given the liberal environment in which he was operating, Trump was a Democrat, and expressed generally moderate-to-liberal views on issues such as gay rights and abortion rights. His views and actions with regard to race were a different story. Fred Trump had been implicated by the Justice Department in the early 1970s for discriminating against African-Americans who sought residence in his properties, and Donald was named as a defendant as well. By the early 1980s, Donald had already become a major player in the Manhattan real estate market (and a celebrity in the local tabloids). In 1989 he took out a fullpage ad in the New York Times advocating the death penalty for the five young men accused of the rape of a white woman who had been jogging in Central Park. When, in 2002, it was revealed that the five men had been wrongly convicted, Trump refused to retract his message or apologize for his false accusation. When Barack Obama became president in 2009, Trump became a major figure in the so-called ‘Birther’ Movement, in which he questioned, with no evidence, Obama’s American citizenship. In his 2015 speech announcing his candidacy for president, Trump made several racist comments about Mexican immigrants to the US, and during his campaign he made several disparaging comments about Muslims as well.² He also refused to disavow the support of far-right hate groups and individuals, including David Duke, a former Ku Klux Klan leader. In his cultural rhetoric and actions, then, Trump relied heavily on barely coded appeals to racism. ² On immigrants, see https://time.com/3923128/donald-trump-announcement-speech/. On Muslims, see https://www.washingtonpost.com/opinions/2019/03/15/short-history-president-trumpsanti-muslim-bigotry/.

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In his proposed economic policies, however, Trump took a series of positions that were more consistent with the left-wing aspects of populism. He spoke as an ally of working people who had lost their livelihoods as manufacturing shifted overseas in recent decades. He assailed the free trade policies that, he argued, had been the primary cause of this job drain, and he promised to use tariffs on foreignproduced goods to protect American workers. He railed against the financial industry, promising to increase the capital gains tax and repeal the carried interest loophole, which allowed hedge fund officers to treat consulting income as capital gains, which were taxed at a far lower rate than ordinary income. He promised to protect Social Security and Medicare, programmes with broad support that have provided lifelines for average Americans. Although critical of Obama’s signature health care reform, the Affordable Care Act, he promised to institute a health care plan that would cover all Americans. Even his anti-immigration rhetoric was couched in terms of protecting American jobs, which he claimed were being taken by immigrants. Trump also played on resentments that Americans outside the East and West Coasts had toward elites. Consistent with the Republican playbook of recent decades, however, the elites in question were in most cases not the heads of large corporations and banks, but rather intellectuals, government officials, journalists, and members of the helping professions, whom he described as disdainful of ‘people like you’. He played on the anti-intellectualism that has long characterized the US (Hofstadter, 1963), describing global warming as a hoax, and—noting that the core of his base consisted of white Americans without college degrees—he stated, in a campaign appearance, that ‘I love the poorly educated’. And yet Trump did rely on economic rhetoric similar to that promoted by populist leaders in the late nineteenth century. The following quotes, taken from Trump’s acceptance speech at the Republican national convention in 2016, provide several examples of such rhetoric: A number of these reforms that I will outline tonight will be opposed by some of our nation’s most powerful special interests. That is because these interests have rigged our political and economic system for their exclusive benefit. Believe me, it’s for their benefit. Big business, elite media and major donors are lining up behind the campaign of my opponent because they know she will keep our rigged system in place. I have visited the laid-off factory workers, and the communities crushed by our horrible and unfair trade deals. These are the forgotten men and women of our country. And they are forgotten, but they’re not going to be forgotten long. People who work hard but no longer have a voice.

Rhetorically, then, Trump adopted a playbook that followed in the tradition of Andrew Jackson, had similarities with the economic arguments of the late

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nineteenth century populists, and even dovetailed with left-wing critiques of big business. On the other hand, he also made references to the positions of the far right, with his railing against immigration, his thinly veiled racism, and his conspiratorial thinking regarding the ‘deep state’ and liberals, and he claimed that concerns about climate change were lies perpetrated by foreign elements set on taking control of the country. At the time of his election, there were reasons to believe that Trump was indeed going to be governing as a populist, economically as well as culturally. This may have been one reason that virtually none of the leading American corporations supported Trump’s campaign (Chu and Davis, 2016).

Trump as president As president, Trump was far more faithful to his initial proposals on social and cultural issues than he was on economic ones. He did promote at least some economic policies that were consistent with his populist-oriented promises, however. Among Trump’s campaign promises was a call to ‘drain the swamp’, by which he meant disrupt the culture of Washington lobbyists, who were able to gain favours for special interests, including corporations and wealthy individuals. Officials in government agencies had often been recruited from the industries that the agencies were designed to regulate, and were often hired by firms in those industries subsequent to their government service, a phenomenon known as the ‘revolving door’. On 28 January, 2017, just eight days into his presidency, Trump signed an executive order to ban employees of the executive branch from engaging in lobbying related to their employment agency for five years after leaving their positions. The order also barred these employees from lobbying for foreign governments. Both of these decisions were fully consistent with Trump’s promise to reduce government corruption. Three months later, in April 2017, Trump issued an executive order that encouraged government agencies to make every possible effort to ensure that the firms to which they extended contracts gave preference to American-made products and to the hiring of American workers. In February 2019 he issued another order to develop a more explicit set of practices, although here too the order only encouraged rather than required the purchase and hiring policies. Perhaps Trump’s most prominent populist-inspired economic policy was his March 2018 decision—in line with his campaign promise to put America first and protect American jobs—to place tariffs on imported goods from China, the European Union, Canada, and Mexico. These included a 25% tariff on foreign steel, a 10% tariff on foreign aluminium, and tariffs of 10 to 25% on a number of Chinese goods. The theory behind these tariffs was that they would help American companies in the industries toward which the tariffs were directed. With tariffs on foreign steel, for example, American companies that purchase steel would presumably

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be more likely to do so from American firms, thus benefiting the American steel industry and its workers. The American firms that purchase the steel, however, would have to pay higher prices, which could hurt their profitability and ultimately harm their workers as well. In addition, foreign nations can, and did, retaliate. China, for example, placed tariffs on hundreds of American-made goods as well as agricultural crops such as soybeans, which harmed American farmers and American workers in those industries. It is unclear at this point whether the tariffs ultimately benefited or harmed the American economy. An analysis by the nonpartisan (and centre-right) Tax Foundation in February 2020, however, indicated that the tariffs, if fully enacted, would lead to a decline in the long-run gross domestic product of 0.51%, a decline in wages of 0.35%, and a loss of nearly 400,000 jobs. A follow-up report, in September 2020 (https://taxfoundation.org/tariffs-trumptrade-war/), noted that the already imposed tariffs represented a tax increase of $80 billion. Regardless of its impact, Trump’s advocacy and implementation of tariffs, designed to protect American industries and jobs, was consistent with a historically populist position. It stands as his most significant populist-inspired economic policy decision.³

Trump policies with potentially populist components Some of Trump’s policies as president involved positions that, at least in theory, could have benefited wage workers and other non-elite employees, even as they were otherwise conservative in orientation. One of these involved environmental policy. Since the emergence of the environmental movement in the 1970s, tensions have existed between proponents of the movement and various elements of the manufacturing and extraction sectors. Environmentalists have supported controls on air and water pollution, for example, which has led to attempts to regulate the corporations that contribute to them. These regulations have created costs for companies, and opposition to increased production and/or extraction (such as drilling for oil or fracking for natural gas) has increased constraints as well. Although corporate profits have sometimes suffered as a consequence of these policies and protests, firm employees have suffered as well, in terms of reduced wages, layoffs, or the disappearance of opportunities. This has created occasional conflict between environmental activists and organized labour, groups that have traditionally been on the left side of the political spectrum. One of Trump’s most consistent policies as president was his repeated efforts to reduce or overturn measures put in place to protect the environment. After taking ³ Trump also kept his promise to renegotiate the much-criticized North American Free Trade Agreement (NAFTA), although an analysis of the revised treaty by the Brookings Institution (https://www. brookings.edu/policy2020/votervital/did-trumps-tariffs-benefit-american-workers-and-nationalsecurity/) indicated that the changes were ‘mostly cosmetic’.

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office, Trump hastened environmental reviews (making it easier for firms to avoid anti-pollution measures) and reduced environmental regulations. Although these policies primarily benefited the companies whose regulations he loosened, such moves in theory could also have helped their workers. Shortly after taking office in January 2017, for example, Trump signed an executive order reversing Obama’s halting of the construction of the Keystone and Dakota Access oil pipelines, both of which had been opposed by environmental activists and indigenous Americans, through whose land both pipelines were to traverse. A State Department analysis during the Obama presidency (https://www.state.gov/keystone-pipelinexl/) predicted that the Keystone pipeline would create fewer than 4,000 jobs, the vast majority of which would be temporary. The project received support from multiple unions, however (https://www.insidesources.com/unions-applaudtrump-keystone/). Trump also supported repeal of the Stream Protection Rule, which had made it more difficult for coal mine operators to dump their waste in nearby waterways. Although employment among coal miners had been in decline for many years, and although there was little evidence that repeal of this bill would reverse that trend, there appears to have been widespread public support for Trump’s action in mining areas. Coal mining regions of West Virginia and Eastern Kentucky voted approximately 80% for Trump in the 2020 election. Also consistent with his campaign rhetoric, Trump issued a ban on entry into the US from seven predominantly Muslim countries, despite the fact that not a single one of the nineteen participants in the September 11th massacres was from one of these seven nations. The stated goal of the order was to prevent the possibility of terrorism on American soil. This was an extremely controversial policy, but the ban was consistent with the promises that Trump made during his 2016 campaign, and with some of the extreme forms of nationalism that have been historically associated with populism, especially its right-wing variants.

Trump actions that were contrary to economic populism Although we have pointed to some of Trump’s economic policies that were either populist in character or at least potentially consistent with populism, the vast majority of Trump’s policies as president were those advocated by the mainstream of the Republican Party. Republican economic policy, dating at least back to Ronald Reagan in the early 1980s, has emphasized tax cuts for corporations and the wealthy, deregulation (focused on protecting corporate profits rather than workers), and contraction of the social safety net. Trump’s trade policies caused considerable distress among conventional Republicans, but in almost all other respects his economic actions adhered closely to the party line. Trump’s most significant legislative achievement was the Tax Reform Law of 2017. The most important feature of this act was a reduction in the corporate

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tax rate, from 35 to 21%. The law reduced the income tax rate for all individuals except those making below $38,000 per year, but the largest cuts accrued to those with very high incomes. Other aspects of the law, such as the cuts in allowable deductions for home mortgage interest and state income tax, harmed primarily relatively well-off salary earners in Democratic states, especially in the Northeast. Overall, however, the primary beneficiaries were large corporations and wealthy individuals. As Habib and Howard (2019: 117) noted, the tax law most certainly does not directly favor the bulk of Trump’s constituency since the individual tax reductions are concentrated in the upper-income brackets, and especially for the very rich. The cut in the corporation tax will have a similar effect because the wealthy disproportionally own the corporations. So, the overall impact will be to further increase inequality and would appear to be more in line with the congressional Republican agenda than any populism.

In a February 2020 opinion piece, New York Times columnist (and Nobel Prize winning economist) Paul Krugman echoed this assessment (https://www.nytimes. com/2020/02/10/opinion/trump-budget-2020.html?): Trump’s only major legislative achievement, the 2017 Tax Cut and Jobs Act, was absolutely standard modern Republicanism: huge tax cuts for corporations, plus tax breaks that overwhelmingly benefited the wealthy …. In other words, Trump in practice, as opposed to Trump in pretense, has turned out to be every bit as committed to trickle-down economics as Republicans have been for decades.

The importance of this example for our purposes is the extent to which it illustrates the disjuncture between Trump’s campaign rhetoric and his subsequent actions as president. As Krugman noted (ibid): One thing many people forget about the 2016 election is that as a candidate, Donald Trump promised to be a different kind of Republican. Unlike the mainstream of his party, he declared, he would raise taxes on the rich and wouldn’t cut programs like Social Security, Medicare and Medicaid that ordinary Americans rely on.

The 2017 tax law provides a strong indication of the extent to which Trump deviated from those promises. He also proposed cuts to Social Security Disability Insurance and massive cuts to Medicare, although neither was enacted due to Congressional opposition (https://www.nbcnews.com/politics/2020-election/ live-blog/2020-08-27-rnc-updates-n1238267/ncrd1238640#blogHeader). A second major initiative of Trump’s administration was its attempt to repeal Obama’s Affordable Care Act (ACA, also known as ‘Obamacare’), the first

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programme in American history that established the possibility of universal health coverage. One controversial aspect of the ACA was the individual mandate, the requirement that every American adult either acquire health insurance or pay a penalty. This rule, which was ironically originally developed by the far-right Heritage Foundation (https://www.forbes.com/sites/theapothecary/2011/10/20/ how-a-conservative-think-tank-invented-the-individual-mandate/?sh=1bfda53f 6187), was necessary to ensure that the pool of insured individuals included enough healthy adults to cover the costs of the unhealthy ones. The 2017 tax law included repeal of the individual mandate, which had been upheld by the Supreme Court five years earlier. This repeal may have helped some of Trump’s constituents, since they were no longer penalized for failing to purchase health insurance. It also meant an increase in the number of uninsured, however, as well as higher costs for those who remained in the system. As part of his plan to abolish Obamacare, Trump issued an executive order allowing insurance companies to sell short-term plans, which contained little coverage, high deductibles, and no requirement that the plans provide, at the same cost, coverage for those with pre-existing conditions. The Republican plan to replace Obamacare—the American Health Care Act—would, according to the Kaiser Family Foundation, have led more than 20 million Americans to lose their health insurance, and the costs of the plan relative to Obamacare would have fallen almost entirely on those making under $50,000 a year. Moreover, the Trump-supported plan would have repealed two taxes that fall exclusively on high-income earners, one a payroll tax on high incomes, and the other a surtax on net investment income (https://www. cnbc.com/2019/11/04/the-rich-will-receive-billions-in-tax-cuts-if-obamacare-isoverturned-report.html). These facts suggest that repeal of the ACA would have provided little benefit to the vast majority of Trump’s supporters. In addition to these two major bills, Trump implemented a number of further policies that benefited corporations and the wealthy at the expense of average Americans. In 2018 he signed four executive orders that reduced the rights and bargaining power of workers, including making it more difficult to organize unions, and easier to fire employees. He rescinded Obama’s Fair Pay and Safe Workplaces order, which had required agencies to have labour compliance advisors and to ensure that the company had not violated labour laws prior to receiving a federal contract. He signed an order to repeal online privacy protections, a move that benefited large internet companies but increased the vulnerability of most Americans, including the majority of Trump’s base, to unauthorized use of their personal information. Trump, contrary to his campaign rhetoric, also worked to protect the financial industry. He suspended the component of the Dodd Frank Act of 2010—passed in the wake of the 2008 financial crisis to reduce the probability of a future financial meltdown, as well as to protect consumers from unscrupulous bank practices—that allowed government to use discretion regarding bailing out banks

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that had taken excessive risks. He also worked to weaken the Consumer Financial Protection Bureau, which during his presidency significantly reduced its enforcement of consumer protections against unscrupulous financial firms. As Dennis Kelleher, the chief executive officer of Better Markets, a group that supports stricter financial regulations, put it, ‘the Trump administration is probably the most anti-investor and consumer protection administration in decades, if not ever’ (quoted in Emily Stewart, ‘Trump is Tearing up the System that Protects Ordinary Americans from Financial Scams’, Vox, 26 February, 2018). Trump also made no apparent effort to increase the capital gains tax or to abolish the carried interest loophole, as he had promised to do during his campaign. The massive programme that Trump had promised to repair the US’s decaying infrastructure failed to materialize. Trump also suspended an Obama administration programme that provided cuts in Federal Housing Authority mortgage interest charges, a programme that benefited many first-time homebuyers. It is difficult to argue that any of the policies described in this section benefited the ‘forgotten men and women’ to whom Trump appealed in his 2016 election campaign. They appear to have provided significant benefits to large corporations and wealthy individuals, however. Even Trump’s cuts in social programmes, which fell most heavily on the poor—who were generally not viewed as a part of his base—may have negatively affected many of his supporters. Trump’s 2018 proposed budget included nearly $2 trillion in cuts to social programmes, including not just to Medicaid and food stamps (which primarily help the poor), but also, as noted earlier, to Medicare—a programme that benefits all Americans over 65—which he had explicitly promised not to cut. Finally, it is not possible to do justice to Trump’s legacy without mentioning his court appointments. American presidents are charged with appointing justices to the Supreme Court, as well as judges in the federal appeals and district courts, subject to approval by the Senate. These appointments are extremely important because an increasing number of legislative and executive actions have been challenged in the courts in recent decades. Trump during his presidency appointed three new Supreme Court justices and, as of 3 January, 2021 had appointed 234 federal judges, more than 25% of the entire federal bench. In an analysis of the decisions of the court appointees of presidents since the 1960s, Manning, Carp, and Holmes (2020) compared the proportion of liberal decisions among the presidential appointees in three areas, including economic and labour regulation. According to Manning et al. (ibid: 5), liberal judges making decisions in this area would tend to ‘uphold legislation that benefited working people or the economic underdog’, ‘whereas a conservative judge would tend to side with business, especially big business’. Because Trump presented himself as the champion of the ‘little guy’, one might expect him to have appointed judges who sided with workers rather than employers. Manning et al. found, however, that Trump’s appointees supported liberal

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positions in economic and labour regulation cases only 45.1% of the time, by far the lowest of the ten presidents, including the five Republicans, with whom he was compared. The fact that Trump’s judicial appointments were significantly more likely than any president over the past six decades to favour employers over workers provides further evidence that in terms of economic policy, Trump was far from a populist.

Discussion Populism is based on a glorification of the average person and a critical, suspicious view toward elites. There have been numerous examples of populist-inspired movements over the course of American history. Some have directed the public’s ire toward business elites, who were viewed as benefiting financially at the expense of common people. Others, even while containing an economic component, have shifted this anti-elite resentment toward another set of actors—often those based in government and the professions rather than business and finance—on primarily cultural grounds. The latter have also focused their ire on those viewed as outsiders, including immigrants and members of particular racial or ethnic groups. If we consider these two forms of populism—economic and cultural—to what extent can we describe Donald Trump as either? In terms of the history of American populism—from Andrew Jackson in the 1820s to Steve Bannon today—Trump clearly qualifies as a cultural populist. His strong anti-immigrant position, his appeals to bigotry against Muslims, Mexicans, and African-Americans, his anti-intellectualism and disregard for science, and his demonization of liberals, the press, and the ‘deep state’ are all consistent with this strand of the populist vision. In terms of economic policy, as opposed to rhetoric, however, Trump as president was closer to a conventional, contemporary Republican, whose primary concern was to protect large corporations, banks, and the wealthy. The one possible exception to this stance was his view on trade, in which he instituted tariffs, ostensibly to protect the jobs of American workers. Even on this score, although his tariffs may have provided temporary protections for manufacturing workers in a few industries, they may have harmed at least as many workers in others (https://www.brookings.edu/policy2020/votervital/ did-trumps-tariffs-benefit-american-workers-and-national-security/). American farmers, for example, lost so much revenue as a result of China’s response to Trump’s tariffs that the administration found itself providing financial payouts to appease them. Tariffs hurt domestic consumers as well, by raising prices on both imported and American-made products. Meanwhile, on virtually every other economic issue, Trump took the side of the wealthy, the employer, and the seller/lender against the middle class, the worker, and the

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consumer. In that sense, Trump’s economic policies appeared to align with those of other right-wing populists, including Victor Orba´n in Hungary and Jair Bolsonaro in Brazil, although even Orba´n enacted at least some policies directed toward helping the poor (https://www.nytimes.com/2019/06/17/opinion/trumppopulist.html?searchResultPosition=1). Now that Trump has been defeated in his attempt at re-election, it may be tempting to view his rise as an idiosyncratic, one-time aberration. Several observers have warned against doing so, however, and for good reason. First, as we have noted, the rise of right-wing populism is a world-wide phenomenon. The apparently growing divide between those who have benefited from globalization and those who have not has had a significant impact in many countries. Second, one could argue that Trump’s emergence was the culmination of trends that have dominated the Republican Party since the presidency of Ronald Reagan in the 1980s, and that elements of an anti-democratic mentality had been present since the Joseph McCarthy era in the 1950s. The reaction of a large segment of the Republican Party following Trump’s defeat, in which they refused to accept the results of the election despite virtually no credible evidence to question them, suggests that the mentality promoted by Trump is likely to continue, regardless of whether he maintains his leadership of the party. Our goal in this paper has been to evaluate Trump’s actions as president to discern the extent to which he has promoted populist policies. We have not attempted to account for Trump’s rise. Countless commentators have attempted to do so, and theories of his political success are likely to proliferate well into the future. We do want to close with some remarks regarding the broader environment within which Trump’s emergence was made possible, however. This discussion is largely speculative, but we believe that it is supported by a considerable amount of evidence. In an examination of the roots of American political polarization and gridlock, the first author (Mizruchi, 2013, 2020) has suggested that Trump’s rise is a logical consequence of a process that began in the 1980s: the fragmentation of the American business community. In the three decades following World War II, Mizruchi argues, the heads of the largest American corporations maintained a relatively high level of unity, in terms of their ability to act collectively to pursue shared political goals. These business leaders also adopted a generally moderate perspective, characterized by an acceptance of the role of government in ameliorating the deleterious effects of the market economy, support for at least a modest social safety net, and a willingness to tolerate, if not actively promote, organized labour. The Committee for Economic Development, a major business organization that produced policy ideas, many of which were subsequently adopted, referred to this orientation as ‘enlightened self-interest’. One characteristic of the corporate leadership at the time was that it played a key role in marginalizing the far-right elements within the larger business community, who had strongly opposed the New Deal

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reforms of the 1930s. In the post-war period, these far-right views were seen as outside the realm of acceptable political discourse. In the 1970s, faced with an emerging economic crisis, increased foreign competition, and a decline in public trust in major societal institutions, American business leaders began to reassess their previously moderate and pragmatic approach to politics. In doing so, they mounted a counteroffensive which included allying themselves with the far-right elements they had previously shunned. This alliance proved to be so successful that by the early-1980s, the corporate elite had achieved all of its main goals: a delegitimizing of government (and its regulation of business), a significant weakening of organized labour, and sharply reduced taxation. Given the group’s success, however, political organization was no longer necessary, Mizruchi argued. As a result, the American business community became increasingly fragmented, as firms focused on gaining specific favours from government rather than the broader, system-wide goals that had preoccupied them in earlier years. This process was already well under way when, in the mid-1980s, American firms experienced a torrential wave of acquisitions. Nearly one-third of the 500 largest American corporations disappeared during the decade, the vast majority by hostile takeover. This upheaval decimated corporate management. Chief executive tenure declined, and those who remained were forced to focus primarily on narrow, short-term concerns rather than on the broader issues that occupied the corporate leaders of earlier years. Meanwhile, the far-right elements of the 1970s coalition had slowly gained control of the Republican Party. By the mid-1990s, big business was no longer able to effectively address a series of issues that required collective action. This was most notably the case with health care, an area in which costs had escalated rapidly, threatening to overwhelm the corporations that—in the absence of the kind of government-administered plan present in virtually all other developed societies—were faced with having to cover the costs themselves. It was under this set of developments—dating back to the 1970s—that the Republican Party began its decades-long shift to the right, a consequence of which was an increasing unwillingness to acknowledge the legitimacy of its opponents. From the beginning of Barack Obama’s presidency in 2009, Republicans in Congress actively worked to obstruct and undermine virtually every plan that Obama proposed, even if it might have benefited their own constituents. An analysis by political scientist Keith T. Poole demonstrated that the increasing polarization in American politics, dating from the early 1980s, could be accounted for virtually entirely by the growing conservatism of the Republican Party.⁴ It is true that Trump exhibited authoritarian characteristics that went considerably beyond those of recent Republican officeholders. The difference was primarily quantitative rather than qualitative, however. All of the elements of ⁴ See https://voteview.com/about, as well as https://voteview.com/articles/party_polarization.

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Trump’s behaviour, as well as those of his fellow Republicans, were visible during the Congressional leadership of Newt Gingrich in the 1990s. The Democrats were, not surprisingly, willing to fight the Republicans at every step, and to do what they believed was necessary to prevent the enactment of policies they opposed. The degree to which the Republicans were willing to ignore longstanding norms of democratic political behaviour went far beyond anything the Democrats attempted, however.⁵ Our argument, then, is that the fragmentation of the corporate elite left a vacuum in American politics that was filled by the far-right actors with which the group had allied itself in the 1970s. The ascension of these elements within the Republican Party is what ultimately paved the way for Trump. Two recent studies, of Germany and the UK respectively, provide further evidence consistent with this argument. Kinderman (2021: see also his chapter in this volume), in a study of business reactions to right-wing populism in Germany, showed that business mobilization, in particular among export-oriented manufacturers, has acted as a buffer against the rise of right-wing populism. The German business community has not exhibited a unified front, and those that have mobilized have tended to be mid-sized rather than the largest firms. Kinderman’s study demonstrates, however, that business can play a role in minimizing the strength of right-wing movements, a finding consistent with Mizruchi’s claim about the mid-twentieth century US. A study of the UK by Feldmann and Morgan (2021: see also their chapter on Brexit in this volume) provides further support for the argument that the business community can prevent (or facilitate) the rise of right-wing populism. Drawing on Culpepper’s (2010) concept of ‘quiet politics’—political activity that occurs behind the scenes and receives little publicity—Feldmann and Morgan use the term ‘noisy politics’ to describe the British corporate elite’s handling of two widely publicized referenda involving European Union membership: the 1975 vote to remain in what was then called the European Communities, and the 2016 vote (known as ‘Brexit’) to leave it. Feldmann and Morgan argue (2021: 3) that ‘the fragmentation of the British business elite since the 1970s has weakened its capacity to exercise influence in a cohesive and effective way’. Business was highly unified in the 1975 referendum, which passed with 67% of the popular vote. In 2016, however, business was divided. Whereas virtually 100% of leading firms supported continued EU membership in 1975 (2021: 9–10), in 2016 one-third of the major British firms supported Brexit (ibid: 10–11), and only 48% of the voters supported remaining. As Feldmann and Morgan note (2021: 19), during the Brexit campaign, ⁵ See https://www.washingtonpost.com/business/2020/11/12/republican-party-trump-authoritariandata/?utm_campaign=wp_post_most&utm_medium=email&utm_source=newsletter&wpisrc =nl_most&carta-url=https%3A%2F%2Fs2.washingtonpost.com%2Fcar-ln-tr%2F2cb38ef%2F5fad6db69d2fda0efb658366%2F5a9571869bbc0f2c6315871e%2F14%2F70%2F116f2b90057bfed3b40b0d5497c62303.

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The fragmentation of the business elite, according to Feldmann and Morgan, was driven primarily by changes in the economy—most notably the sharp increase of foreign ownership, which brought business leaders from overseas who lacked the network ties that had characterized the earlier British business elite—and the shareholder value movement, a phenomenon parallel to what occurred in the US during the 1980s, in which corporate managers became increasingly vulnerable to pressure from the investment community. Significant elements of the British news media also promoted anti-EU sentiment. Moreover, unlike in 1975—when organized labour was still viewed by business as a threat—by 2016, labour had become politically weak. As described by Mizruchi for the US, the weakness of organized labour in the UK rendered business unity less necessary. One important difference remains between the British corporate elite’s role in Brexit, as described by Feldmann and Morgan, and the role of the American corporate elite with regard to Trump, as described by Mizruchi. In the British case, there were significant elements of the corporate elite that actually supported Brexit. In the American case, virtually no major corporations supported Trump, at least initially (Chu and Davis, 2016). Once Trump became president he did receive support from some segments of the business community, although primarily because he was willing to pursue traditional Republican (and non-populist) economic policies, but he also faced visible opposition from others, including Bill Gates and Warren Buffett, as well as from traditional pro-business Republicans such as Mitt Romney and the Bush family (Feldmann and Morgan, 2022; see also Chapter 1), who were concerned about his authoritarian tendencies. What both Kinderman’s and Feldmann and Morgan’s studies show is that a business community that is willing to act collectively can play a crucial role in minimizing the rise of far-right political elements.

Conclusion We conclude by reiterating our primary finding with regard to Donald Trump. Trump’s campaign rhetoric in 2016 was consistent with what is historically known as populism in the US. He claimed to speak for the ‘average American’, who had been neglected and condescended to by coastal elites, ravaged by globalization and free trade, and threatened by immigrants and racial minorities. Once in office, Trump lived up to the cultural elements of his populist rhetoric, invoking antiMexican and anti-Muslim policies, evoking little sympathy for racial minorities,

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and refusing to disavow white supremacists. In terms of economic policy, however, Trump, except perhaps with his trade policies, emerged as a conventional contemporary Republican, focusing on tax breaks for corporations and the wealthy, a reduction in regulations that protected consumers from unscrupulous financial institutions, and support at every point for employers at the expense of workers. These actions placed Trump in league with his counterparts in Hungary and Brazil. They were a far cry from the economic populism of William Jennings Bryan or Huey Long. Trump talked as a friend of the ‘little guy’, but he governed as a servant of the wealthy and powerful.

References Berlet, Chip and Matthew N. Lyons. (2000) Right-Wing Populism in America: Too Close for Comfort. New York: Guilford Press. Brubaker, Rogers. (2017) Why populism? Theory and Society, 46: 357–385. Canovan, Margaret. (1981) Populism. New York: Harcourt Brace Jovanovich. Carruthers, Bruce G. and Sarah Babb. (1996) The color of money and the nature of value: Greenbacks and gold in Postbellum America. American Journal of Sociology, 101: 1556–1591. Chu, Johan and Jerry Davis. (2016) Corporate America’s Old Boys’ Club is dead— and that’s why big business couldn’t stop Trump. The Conversation. 20 October. Available at: https://theconversation.com/corporate-americas-old-boys-clubis-dead-and-thats-why-big-business-couldnt-stop-trump–67035. Culpepper, Pepper D. (2010) Quiet Politics and Business Power: Corporate Control in Europe and Japan. New York: Cambridge University Press. Diamond, Sara. (1995) Roads to Dominion: Right-Wing Movements and Political Power in the United States. New York: Guilford Press. Feldmann, Magnus and Glenn Morgan. (2021) Brexit and British Business Elites: Business Power and Noisy Politics. Politics & Society, 49: 107–131. Feldmann, Magnus and Glenn Morgan. (2022) Business Elites and Populism: Understanding Business Responses. New Political Economy, 27: 347–359. Formisano, Ronald P. (2008) For the People: American Populist Movements from the Revolution to the 1850s. Chapel Hill: University of North Carolina Press. Habib, Jasmin and Michael Howard. (2019) The political economy of Donald J. Trump. In Jeremy Kowalski (ed.) Reading Donald Trump: A Parallax View of the Campaign and Early Presidency. Cham, Switzerland: Palgrave Macmillan, pp. 103–125. Hofstadter, Richard. (1955) The Age of Reform: From Bryan to F.D.R. New York: Alfred A. Knopf. Hofstadter, Richard. (1963) Anti-Intellectualism in American Life. New York: Alfred A. Knopf. Jansen, Robert S. (2011) Populist mobilization: A new theoretical approach to populism. Sociological Theory, 29: 75–96. Kazin, Michael. (2017) The Populist Persuasion. An American History. Ithaca: Cornell University Press. Kinderman, Daniel. (2021). “German business mobilization against right-wing populism.” Politics & Society, 49: 489–516.

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Manning, Kenneth L., Robert A. Carp, and Lisa M. Holmes. (2020) The decisionmaking ideology of federal judges appointed by President Trump. University of Massachusetts, Dartmouth Working Paper. Available at: https://papers.ssrn.com/ sol3/papers.cfm?abstract_id=3716378. Mizruchi, Mark S. (2013) The Fracturing of the American Corporate Elite. Cambridge, MA: Harvard University Press. Mizruchi, Mark S. (2020) Large corporations contributed to our political polarization: Here’s how they can fix it. Washington: Niskanen Center. Available at: https://www. niskanencenter.org/large-corporations-contributed-to-our-political-polarizationheres-how-they-can-fix-it/. Mu¨ller, Jan-Werner. (2016) What is Populism? Philadelphia: University of Pennsylvania Press. Pollack, Norman. (1962) The myth of populist anti-Semitism. American Historical Review, 68: 76–80. Prasad, Monica. (2012) The Land of Too Much: American Abundance and the Paradox of Poverty. Cambridge, MA: Harvard University Press. Rohler, Lloyd. (1999) Conservative appeals to the people: George Wallace’s populist rhetoric. Southern Communication Journal, 64: 316–322. Sanson, Jerry P. (2006) ‘What he did and what he promised to do …’: Huey Long and the horizons of Louisiana politics. Louisiana History, 47: 261–276. Schwartz, Michael. (1976) Radical Protest and Social Structure: The Southern Farmers’ Alliance and Cotton Tenancy, 1880-1890. New York: Academic Press.

3 Threats and Opportunities The Populist Challenge to Business Elites in Trump’s Administration Matthew J. Baltz

Introduction Even before Donald Trump assumed office in January 2017, there was broad agreement that his candidacy represented the American face of a broader populist moment. The contours of Trump’s populism on the campaign trail and in office have since been documented by both journalists and scholars. Typical of right-wing populists, Trump’s targets of rhetorical attack have been racialized minorities, immigrants, the ‘liberal left’, and an assembly of corrupt or incompetent elites from the political establishments of both parties, the media, and business. For the Financial Times (2017), Trump’s ‘anti-corporate populism’, and ‘protectionist wrath’ were especially concerning, presenting a clear threat not only to ‘the dominant position of multinational firms in the world economy’ but also to business leaders who ‘benefited so greatly from globalisation in the markets for goods, services, capital and people’. And while the FT reported that the ‘wider business reaction remains unclear’ it counselled business leaders ‘to take a stand against Mr. Trump’s wilder protectionist urges’ and ‘spring to the defense’ of ‘free trade and free markets’. Written just days after Trump’s inauguration, this editorial provides a useful starting point for the retrospective analysis of business responses to Trump’s populism examined in this chapter. First, by appearing under the title, ‘The Mounting Challenge of Economic Nationalism’ the editorial framed (rightly, I argue) the main challenge posed by Trump’s populism as rooted in his apparent embrace of the nation. Trump’s brand of populism intertwined ‘the people’ and ‘the nation’ in a way that created, as Brubaker (2020: 6) describes, a ‘substantial zone of overlap between populist and nationalist discourses’. Indeed, on the campaign trail Trump encouraged his supporters to unapologetically ‘use that word’ (Baker, 2018) and vowed when he accepted the Republican Party’s nomination that ‘Americanism, not globalism’ would be his administration’s ‘credo’. Now that Trump was at the helm of a powerful nation-state bureaucracy, business elites (whether identified

Matthew J. Baltz, Threats and Opportunities. In: Business and Populism. Edited by Magnus Feldmann and Glenn Morgan, Oxford University Press. © Matthew J. Baltz (2023). DOI: 10.1093/oso/9780192894335.003.0003

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as foreign nationals outside the nation or co-nationals insufficiently loyal to it) had a special interest in the question of whether and how Trump’s willingness to invoke the powerful resource of the ‘nation’ in tweets and campaign rallies would be translated into policy and statute. Second, the FT editorial characterized (wrongly, I argue) ‘anti-corporate populism’, and ‘wilder protectionist urges’ as the main threat to business elites. As I show in this chapter, the populist economic nationalism embodied by Trump was just one variant of economic nationalism found in his administration with which they would need to contend. Business elites soon discovered very different sorts of economic nationalists occupying positions of power within Trump’s administration, distinct from Trump both in their normative priorities and in their expertise and discipline for achieving their goals. Moreover, while it may have been true that Trump’s presidency constituted a ‘mounting challenge’ boldly proclaimed in the editorial’s headline, it would be wrong to characterize this challenge solely in terms of threats. However threatening Trump’s rhetoric, governing style, priorities, and appointments may have been to the neoliberal status quo that had been institutionalized in the arrangements of various policy areas (a status quo which the FT frankly admits business leaders and multinational corporations have been beneficiaries), Trump’s presidency also offered numerous opportunities to influence and profit from policy. These considerations inform the main question taken up in this chapter: what threats and opportunities did Trump’s populist economic nationalism, as well as the economic nationalisms expressed by other members of his administration, pose to business elites? Its primary goal is thus to assess what exactly business elites confronted when the American state was under the leadership of an undisputed populist. Here, it is worth recalling that what Trump and his administration represented was, at least initially, far from clear. Some early forecasts anticipated that Trump’s populism and ‘pseudo-economic nationalism’ would be revealed as lacking substance, as driven by a cynical political calculation, and exhibiting little efficacy (Evans, 2017). Others saw in Trump’s populism a more significant break with the neoliberal ‘Washington consensus’ and the ‘liberal international order’; a new era of ‘neonationalism’ was dawning according to this view (Blyth, 2016). The conclusion of Trump’s term in office presents an auspicious opportunity to assess, with the benefit of hindsight, the actual threats and opportunities his administration posed to business elites and to sketch their patterns of response. To do so, I utilize Feldmann and Morgan’s novel adaptation of Hirschman’s ‘exit, voice, loyalty’ model of business responses to populism presented in this volume (see Chapter 1). Reasons of space preclude a more systematic analysis of these business responses, though this chapter’s findings on the array of threats and opportunities they confronted in Trump’s administration lays the groundwork for such an analysis in the future.

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The chapter begins by highlighting the nationalist aspects of Trump’s populist discourse and their implications for business elites. It argues that Trump’s populist economic nationalism created distinct threats and opportunities for business elites rooted in the representative and bureaucratic institutions of modern nation states. It further argues that Trump’s embrace of a populist nationalist discourse also fostered within his administration other variants of economic nationalism that I call ‘liberal’ and ‘militarist’. After examining the distinct set of threats and opportunities each of these variants posed to business elites in more detail, the chapter concludes by considering their prospects beyond Trump’s term in office.

Trump’s populism and implications for business elites Trump has been categorized as a populist leader on many grounds, including his embrace of a distinctive ‘style’ or ‘repertoire’, his mode of political organization and popular mobilization, and his attitudes toward pluralism and institutional checks on power (Judis, 2016; Moffitt, 2016; Oliver and Rahn, 2016; Brubaker, 2017; Weyland and Madrid, 2019). In this section, I focus on specific aspects of Trump’s discourse that mark him not only as a populist, but also as a populist nationalist, and develop the implications of this discursive move for business elites. I then turn to Trump’s populist mode of political organization and leadership as the titular head of a political movement, and, following his election in November 2016, chief executive of the American nation state. Trump’s discourse levelled multiple grievances at political, corporate, media, and (rare for a Republican candidate) military elites. Like all populists, he claimed to do so on behalf of ‘the people’, an ambiguous category that, as Brubaker (2020: 6) notes, can convey three overlapping meanings. These are ‘the people’ as the common or ordinary people (‘people as plebs’); as a sovereign collectivity (‘people as demos’); and as a bounded or distinct people (‘people as nation’). Trump’s rhetorical construction of the ‘people’ in the latter two senses had two noteworthy aspects. The first, widely noted in public debates and confirmed by more scholarly analysis (Lieven, 2016; Bonikowski, 2019; Schertzer and Woods, 2020), was Trump’s construction of the ‘people as nation’ along narrowly ethnonational lines. For business elites, the stakes attached to this deployment of the people were not particularly high, apart from the reputational damage that might arise from any association with it. The exodus in August 2017 of business leaders from the symbolic Strategic and Policy Forum and Manufacturing Jobs Initiative in the wake of Trump’s failure to unequivocally condemn lethal violence committed by white supremacists in Charlottesville, Virginia (Glazer, Krous, and Cherney, 2017) constituted the most high profile example during Trump’s presidency of what Feldmann and Morgan refer to as ‘loud voice’ (Chapter 1). Here, corporate responses to Trump’s

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ethnonationalism ranged from direct and unambiguous condemnation to more indirect distancing. Potentially far more consequential for business elites was Trump’s framing of ‘the people’ as a sovereign political community—understood, in a world of nation states, as a specifically national political community—to whom obligations and loyalty are required. To understand why, the recent revival of scholarship on economic nationalism (Crane, 1998; Abdelal, 2001; Helleiner, 2002; Helleiner and Pickel, 2005; Clift and Woll, 2012) provides a useful starting point. Breaking from past approaches that treated certain policies (e.g. protective tariffs, controls on investment) or orientations towards state power as defining the boundaries of economic nationalism, revisionists have convincingly argued that what makes economic nationalists distinctive is their normative commitment to the nation and their embrace of the nation as a category upon which to make political claims and mobilize political support. To apply this conceptualization to Trump, what makes him an economic nationalist as well as a populist is not his policy preferences (i.e. for tariffs) per se, but his willingness to deploy a distinctly nationalist rhetoric or discourse to make claims on behalf of the nation. What does it mean to make claims on behalf of the nation and why should business elites be potentially concerned about such claims? Nationalist claims, as Weber (1978: 922) once argued, have at their core the idea that ‘it is proper to expect from certain groups a specific sentiment of solidarity in the face of other groups’ and that certain ‘concerted action should result from such solidarity’. To illustrate Weber’s point, consider two of Trump’s own statements. The first is taken from remarks delivered at the Economic Club of New York on 15 September, 2016 after Trump secured the Republican nomination. The second was made by Trump on Twitter on 4 December, as the President-Elect: Ford has announced just yesterday that they're moving their small car production facilities to Mexico. And I've been talking about this a long while and I think that's maybe one of the reasons that we’re doing so well in Ohio and Michigan and lots of other places where cars and parts are involved. But to think that Ford is moving its small car division is a disgrace. It's disgraceful. It’s disgraceful that our politicians allow them to get away with it. It really is. (Trump, 2016) The U.S. is going to substantialy (sic) reduce taxes and regulations on businesses, but any business that leaves our country for another country, fires its employees, builds a new factory or plant in the other country, and then thinks it will sell its product back into the U.S. … without retribution or consequence, is WRONG! (Twitter, 4 December, 2016)

In both pronouncements, Trump is making a political claim that specific concerted action (investment and production decisions by firms) should be influenced by

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one’s national membership. In the first passage, his references to ‘disgraceful’ behavior attacks two elite targets for being insufficiently attentive to the interests of the nation: ‘our politicians’ for not sufficiently disciplining a corporation’s production decisions, and the Ford Corporation for showing disloyalty by taking advantage of the negligence of political elites. Similarly, in the second passage, Trump warns ‘any business that leaves our country for another country’ (emphasis added) with ‘retribution’. Regardless of the seriousness of the attack, the key point is that economic nationalist discourse of this kind pushes against treating economic action (like investment decisions) solely in terms of market logics that prize profitability, efficiency, and innovation, or political values that only valorize individual liberty and property rights. Hence, the potential threat to corporations and business elites who have historically guarded their ‘right’ to maximize profits and their ‘freedom’ from interference from political authorities claiming to speak on behalf of ‘their country’ or the nation who occupies it. Given that the nation continues to be a potent source of collective identification and social solidarity and given the enduring power of nation states, this is a potential threat not to be taken lightly. To be sure, while the potential threat posed by such claims is clear, whether they constituted an actual threat to the profits and power of business elites is a more complicated question. As Harrington rightly notes in this volume, not all populists—even right-wing populists who more typically deploy nationalist rhetoric—make nationalism central to their politics.¹ For those who do, I have argued elsewhere (Baltz, 2021) that their political significance is best understood by situating nationalists within the state organizations they target or work from— not solely by their claims or professed goals. It is here where rhetoric and discourse meet ‘reality’ in the formulation of policy and where priorities are revealed. To return to Trump, like all economic nationalists he explicitly or implicitly references national categories, attempts to mobilize national sentiments, and draws upon a series of culturally resonant national framings and scripts. But as I argue in the next section, Trump is a distinctly populist economic nationalist who targets specific institutional settings or loci within the state to achieve his goals and is driven by priorities that differ from other economic nationalists. The term ‘priorities’ best captures the fact that while it is possible for nationalists like Trump to hold multiple objectives or goals in their pursuit or exercise of power, where those goals rank constitute a significant axis of division. Some (e.g. Trump) may prioritize consolidating power and using the state to bestow favours to clients ¹ Harrington argues in this volume that commercial-political elites have become less likely to care about a particular place or nation due to their ownership of financial assets and their desire for selective ‘liberation’ from state power (see Chapter 16). This was exemplified, Harrington notes, in an instance where Trump described his presidency ‘in strangely un-American terms’. Such instances, however, were no doubt rare. Like other elites, Trump may understand his personal power, wealth, and interests in ‘multinational’ terms and have a sceptical view of any state power that might discipline or regulate his ‘economic freedoms’. But the politics of his movement and administration were unmistakably nationalist.

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and loyalists, while others may target the state to build up a territory’s productive capabilities as an end in itself. Still others may concern themselves with productive capabilities only to the extent that it fulfils their perceived requirements of ‘national security’.² For business elites, the type of nationalist who controls different corners of the state—and the capacities they have at their disposal—has obvious stakes. They will not only affect their opportunities for profit and risks of loss, but also have consequences for their own relative power over investment, production, and distribution decisions. And as they soon discovered in Trump’s administration, the president represented only one, populist variant of economic nationalism that contained two others.

Trump’s populist economic nationalism at the helm of the American state Not surprisingly, Trump represented the variant of economic nationalism that is best described as ‘populist’. Populist economic nationalists invoke the nation and propose economic programmes in ways that prioritize mobilizing, winning, and retaining political power. Their primary focus thus rests on the institutions of political representation, i.e. party politics, popular mobilization, and electoral contestation. To achieve their goals, they build a base of popular support using a political style or ‘repertoire’ designed to strategically mobilize national sentiment for their economic policies. The intent of populist nationalist discourse, as Johnson (1965) perceptively described using a market metaphor, is to generate a kind of ‘psychic income’ for supporters by deploying rhetorical appeals to national pride, making claims on behalf of the nation, and identifying targets as threats to the nation. In Trump’s case, he skillfully interwove populist nationalist rhetoric of the sort quoted in the previous section with promises to improve the material conditions of his supporters by lowering their taxes and creating a trade and regulatory environment that would raise their wages, create jobs, and boost asset prices. This strategy proved remarkably successful, securing Trump the presidency in 2016 and expanding his base of support even in defeat in 2020. As Frieden (2018: 46) describes, the economic nationalist strand of his populist discourse expressed hostility ‘to internationalist big business, to big finance, to the international economy more generally, to immigrants, and to many traditional foreign policy commitments’. In doing so, Trump mobilized grievances threatening to many, though not all, business elites and segments of capital. This posed easily identifiable, but difficult to quantify, threats and opportunities. Deciding whether to exercise ‘voice’ or show ‘loyalty’ to Trump in his public attempts to use mass ² See Baltz (2021) for a fuller description of this typology of economic nationalism.

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rallies and social media to generate ‘psychic income’ for his supporters required a complex, context-dependent cost-benefit analysis. This was well illustrated by the publicity surrounding Goya brands after its chief executive officer (CEO) showed ‘explicit loyalty’ to Trump by praising him as a ‘blessed’ leader during a White House meeting. Being made a target during rallies or in Trump’s Twitter eruptions also constituted a potential threat that many businesses managed by exercising ‘soft voice’ behind the scenes and showing sufficient ‘loyalty’ to Trump with strategically made public concessions. The minimal commitments extracted from, and favours bestowed upon, the Carrier Corporation—a favourite target of Trump’s jawboning on the campaign trail—was no doubt met with sighs of relief by business elites concerned about the depth of Trump’s political commitment to his own rhetoric (Schwartz, 2016). In addition to navigating the relationship between Trump and his mass of supporters, business elites also contended with another aspect of populist economic nationalism, one rooted in an organizational tendency associated with all charismatic leaders. To apply Weber’s famous typology of legitimate domination,³ the populist variant bases its legitimacy on the charismatic authority of the leader, with social power radiating from this centre to their immediate staff and a broader network of personalized alliances. The exchange of specific benefits and favours hold this network together. Once Trump captured the White House, business elites needed to navigate this aspect of Trump’s populist economic nationalism by following the typical ‘rules’ associated with regimes based on clientelism and cronyism (a feature of American democracy that has historically taken both legal and illegal forms). The convening of Trump’s ‘Leadership Council’ in the summer of 2016 illustrated well both the overtly transactional logic of support and who his core business backers were at that time. According to reports, the few executives from Fortune 500 companies or leading business groups on the Council were outnumbered by the heads of more obscure, privately held corporations who had stronger ties to Trump’s campaign than to mediating institutions like the Republican Party or business organizations like the Chamber of Commerce and Business Roundtable. Trump’s election brought them access to federal agencies and the chance to turn their ‘wish lists’ into reality. Consistent with the policy agenda of right-wing populists described by Harrington in this volume, these included rolling back regulations and cutting taxes. They also included, in the case of aluminium and steel producers, the promise of tariffs (Kroll, 2019). In sum, Trump’s brand of populist economic nationalism—centered on a populist leader making claims, a movement, and power base held together by a web of personalized relationships—required business elites to follow the rules governing political access and favours and be ever attentive to opportunities to generate the symbolic gestures that Trump found useful to highlight in press conferences and ³ For another application of Weber’s typology that inspired this one, see Riley (2018).

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tweets (or, in most cases, simply avoid attracting his ire unnecessarily). But there were two significant limits on the efficacy of these strategies due to the separation of powers and the nature of the American federal bureaucracy nominally under Trump’s executive authority. First, businesses have many avenues for buying access and influence in American politics. The statutes and government regulations that had previously been fought over by corporations, business advocacy groups, and other ‘special interests’ presented real checks on Trump’s presidential discretion. And while certain businesses seeking favours gladly bestowed by Trump might have chafed under the rule of the so-called ‘administrative state’, (as Steve Bannon scornfully called it), there were good reasons for business elites to prefer this state of affairs beyond its mere predictability. For the political terrain involved in legislative mark-ups and the minute crafting of the government regulations presents clear advantages to business interests equipped with vast resources, expertise, and a peculiar interest in obscure issues of low political salience. As Culpepper (2011) has argued and Feldmann and Morgan note in this volume (Chapter 1), they thus have good reason to keep politics ‘quiet’ and confined to a relatively closed network of Congresspeople and staff, state bureaucrats, and industry representatives. Deciding to try to work through Trump’s network thus either required assurance of his influence in that particular domain, or, in its absence, a willingness to allow Trump to try to make the politics ‘noisier’ on their behalf. Second, Trump’s populist economic nationalism ironically created conditions that would limit its own efficacy. The opportunistic and indeed instinctive nature of his populist variant of economic nationalism made Trump’s administration more accommodating to others that spoke a similar language of the nation, albeit with a different accent. This opened spaces within his administration for the bearers of other variants of economic nationalism more at home, so to speak, in these ‘quiet’ spaces where business elites and their representatives had come to expect a relatively undisturbed dominance over the past several decades. These variants of economic nationalism, as I will discuss, were the liberal and the militarist. Business elites thus found themselves navigating, on the one hand, Trump’s populist variant which represented the ever-present potential of turning ‘quiet’ politics noisy with a single tweet or subjecting bureaucratic routines and regulations to the will and interests of the populist leader and his coterie of supporters. On the other were the normative priorities and projects of the other economic nationalists in Trump’s administration, namely Robert Lighthizer (Trump’s United States Trade Representative, (USTR)), Peter Navarro (Director of the Office of Trade and Manufacturing Policy), and a network of lower-profile state officials within the broader national security establishment. The influence of the latter two variants—and the extent to which business elites needed to take them seriously as representing potential threats and opportunities—depended on the Trump network’s success in capturing powerful

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corners of the state and subjecting it to his populist logic. It also depended, it should be noted, on the enduring strength of the neoliberals also populating certain outposts in Trump’s administration and whose ideas had been institutionalized in the state to varying degrees over the previous decades. I return to this dynamic in my discussion of these two variants, starting with the liberal.

Lighthizer’s liberal economic nationalism Liberal economic nationalists prioritize market-based prosperity, profess a normative commitment to the nation, and justify their economic programmes on the basis of national interests. They are thus distinct from other liberals who embrace a cosmopolitan identity, prize individual liberties and property rights above all else, or are otherwise unmoved by sentiments of national solidarity. But being liberals, they see capitalist markets—understood as efficiency maximizing engines of economic growth—as their preferred means for achieving prosperity. This leaves a far more circumscribed policy agenda for the state and is why liberal nationalists—of which Robert Lighthizer constitutes a typical example—target and work through the ‘outward facing’ organizations of the state tasked with negotiating trade deals and managing foreign economic relations with other countries and organizations. In the US, this has historically been the task of Congress, the Treasury and State Departments, and, for the past half century, the office of the USTR. Thanks in part to the historic role that protectionism has played in American capitalist development, liberal nationalists in the US have historically taken stances that veer between a kind of isolationism and internationalism. Those in the former camp are somewhat sceptical of free trade doctrines and thus seek to insulate domestic markets through means like tariffs or by limiting the activities of multinational corporations. Such nationalists have become more marginal since the Republican Party’s shift on tariffs in the twentieth century, though former presidential candidate Patrick Buchanan offers a more contemporary exemplar of this view (Worth, 2002: 307–310; Harmes, 2012: 73–74) noteworthy for reportedly being influential on Trump’s thinking. Far more significant in recent decades have been those liberal nationalists in the second camp who try to assume the role of a ‘market missionary’: they seek to use state power to actively break down the trade and non-trade barriers of other countries and reform laws not seen as adequately deferential to the interests of (American) capitalists. Lighthizer has at times expressed views on trade (2008, 2010, 2020) that appear somewhat sympathetic with the more ‘isolationist’ strands of liberal economic nationalist thought; his occupation of the USTR office, however, casts him in a role more consistent with the ‘market missionary’. Lighthizer’s background as a Deputy USTR in the Reagan administration and as a corporate lawyer representing companies (particularly steel) in trade disputes

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established a clear continuity, as Wraight (2019) rightly argues, between the Reagan and Trump administrations. However, Wraight misleads by labelling this continuity ‘neoliberal protectionism’. Rather, Lighthizer, like (former Commerce Secretary) Malcolm Baldrige and (former USTR) Bill Brock (both of whom shaped Lighthizer’s views during the Reagan administration) is best categorized as a liberal nationalist due to his normative commitment to the nation. This was expressed clearly not just in his public statements, but also in the three priorities outlined in his first official document as USTR: defending ‘U.S. national sovereignty over trade policy’, strictly enforcing U.S. trade laws, and using ‘all possible sources of leverage to encourage countries to open their markets to U.S. exports of goods and services’ (Office of the United States Trade Representative, 2017). Neoliberals, strictly speaking, seek to break down ‘distorting’ barriers to trade and investment as ends in themselves. Lighthizer’s commitment to national sovereignty and reflexive hostility to multilateral or supranational institutions proved especially significant: he supported not only the removal of the controversial Investor-State Dispute Settlement provisions in the revised United States-Mexico-Canada Agreement (USMCA) over the wishes of organized business groups, but also the administration’s decision not to consent to new appointments to the World Trade Organization Appellate Body. But true to his ‘market missionary’ stance, Lighthizer made his mark during Trump’s presidency by taking a ‘muscular kind of approach’ in trade negotiations (Lighthizer, 2017). In practice, this meant the use in 2018 of the authority granted by Section 301 of the 1974 Trade Act to impose tariffs of 25% on 818 categories of goods imported from China. This was followed the next year with more tariffs imposed on an increasing range and value of Chinese products. The rationale for the usage of these tariffs was not to build tariff walls as ends in themselves, but to use them as leverage for freer market access for American imports and investment, non-discrimination against ‘American firms’, and above all protection for intellectual property. As he told a worried audience at the Center for Security and International Studies in 2017, I believe, like many of you, that removing market distortions, encouraging fair competition, and letting markets determine economic outcomes leads to greater efficiency and a larger production of wealth both here and abroad … The real policy difference, I submit, is not over whether we want efficient markets, but how do we get them. Lighthizer, 2017.

Despite handwringing about the tariffs implemented under Section 301 authority, these objectives designed to knock down Chinese developmentalism and militarism enjoyed the ‘explicit loyalty’ of business groups like the Business Roundtable (Edgecliffe-Johnson, 2018). In attempting to carve out new spaces

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where business leaders could operate relatively free from ‘government interference’, Lighthizer’s strategy, if ultimately successful (an unlikely prospect in China), did offer the potential for long-term rewards. But such a strategy was not without risk, and Lighthizer’s liberal economic nationalism posed two important threats to business elites: a loss of influence and loss of certain profits. According to reporting from the Wall Street Journal (2020b), American multinationals and financiers had far less influence than they were used to over Lighthizer’s tariff policy despite the fact that a coalition of farm organizations, retailers, technology groups, and manufacturers had mobilized ‘loud voice’ around this issue and even formed a lobbying arm, Tariffs Hurt the Heartland.⁴ To be sure, several segments of the American corporate elite had soured on relations with China over the years since the country became a member of the World Trade Organization in 2001. But few supported the imposition of tariffs, which hurt the bottom lines of corporations across the global supply chain. In a snap poll of chief executives invited to a conference held in September of 2019 at the Yale School of Management, 80% were unconvinced of Lighthizer’s strategy and agreed with the statement that ‘business confidence is suffering as a result of U.S. trade policy’. Their biggest complaint was over the tariffs (Lynch, 2019). In sum, Lighthizer represented a disciplined liberal economic nationalism backed by the routine capacities of the USTR office. He could thus hold at bay when required not only the influence of hostile business elites, but also the threat that US-China negotiations might become overshadowed by the personalized, transactional logic that characterized so much of Trump’s dealings. Chinese negotiators soon discovered that awarding timely trademarks to Ivanka Trump’s brands or extending finance to her husband, Jared Kushner, and his family’s real estate empire would not produce a material impact in the conduct of Lighthizer’s negotiations. Davis and Wei (2020a) report that after the New York Times and other outlets had broken a series of stories related to Chinese investment deals being courted by Kushner’s family members that Lighthizer and national security officials convinced Trump to keep his daughter and son-in-law at arm’s length with trade negotiations. As noted previously, ‘national security’ interests exerted a significant influence on Trump administration policy. Here, business elites confronted another, militarist, variant of economic nationalism with its own distinct profile of threats and opportunities.

⁴ This does not mean that Lighthizer was entirely unreceptive to the views of business groups and corporations (Lynch, 2019). In addition to meeting regularly with business leaders, their influence on the United States-Mexico-Canada Agreement (USMCA) was reportedly far stronger compared with negotiations with Beijing (Davis and Wei, 2020a).

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Navarro’s militarist economic nationalism and the national security state Militarist economic nationalists are distinct from populists and liberal nationalists in prioritizing military strength and preparedness for real or imagined external threats. Like the mercantilists of the sixteenth and seventeenth centuries, they seek to build up the state’s military capabilities by harnessing the wealth generated by production and commerce. Advances in military technology since the nineteenth century have placed increasing demands on the state, transforming those with the largest armed forces into sprawling networks that consist of formal state organizations (e.g. defence ministries, general staffs, and laboratories) as well as contractors and universities with varying degrees of embeddedness with it. Most militarist economic nationalists emerge from this organizational locus of the state, lending their support and expertise to the political projects of party leaders and higher-level appointees. Like liberal economic nationalists, militarists in the US have historically varied in terms of the strategies they use to achieve their power objectives, falling into a continuum occupied by two opposing camps. Locating individuals and groups on this continuum—and their relative power in the policymaking process—is crucial for understanding the threats and opportunities presented to business elites. One camp leans more autarkic and prizes the capability to produce within the territory (or at least by fellow nationals) the equipment and technologies needed to make war, while the other prizes the ability to acquire it most inexpensively and efficiently regardless of where it is produced or the nationality of the producers. The militarists in the first camp tend to call for an active state that regularly promotes and protects industries, technologies, and workforces. Those in the second have counselled selective state intervention and tend to be more sanguine about relying on globalized supply chains to equip warfighters, especially when such supply chains are located in allied countries. In this, the logic of empire supersedes the logic of nation. Over the past several decades, those in the second camp have tended to prevail in the US as its ‘defense industrial base’ globalized (Weiss, 2014: 205–209) and domestic productive capabilities experienced steady declines (Pisano and Shih, 2012; Berger, 2013). For business elites who have profited from these trends, any shifts in policy toward the autarkic camp (and this camp’s willingness to use state power and regulation) would have posed an obvious threat to their business plans and profit streams. Did this come to pass under Trump’s administration? Peter Navarro—Trump’s controversial director of the Office of Trade and Manufacturing Policy and co-author of Death By China (2011)—fell within the first camp but appeared to have a marginal impact on the formulation of actual policies save in government procurement (to be discussed later). Where significant legislative reforms have been made—namely, in the governance of foreign

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direct investment, technology transfer, and procurement—we find the continued influence of militarists who lean more toward the second camp. Like Trump, Navarro showed a willingness to publicly confront American corporations and financiers about their investment decisions and sale of sensitive technologies. For example, in November 2018, he criticized financiers for attempting to undermine Lighthizer’s ongoing negotiations with the Chinese government, saying that ‘if they want to do good, then spend their billions in Dayton, Ohio, in the factory towns of American where we need a rebirth of our manufacturing base and an end to the opioid crisis, which they helped create by offshoring our production’ (Lubold, McBride, and Gordon, 2018). Beyond rhetoric, Navarro drafted a series of executive orders designed to strengthen ‘Buy American’ government procurement guidelines and spearheaded an interagency study focused on the health of the so-called ‘manufacturing and defense industrial base’. The latter was noteworthy for calling for ‘an industrial policy in support of national security efforts’, more investment in the lower tier of the industrial base, and the diversification of ‘sources of supply in politically unstable countries who may cut off U.S. access’ (U.S. Department of Defense, 2018: 5). Such recommendations indicated where one camp of militarist economic nationalists stood within the administration but their actual policy impact appear to have been modest—at least in the short term. On the other hand, Navarro proved more successful in using executive orders to try to undo decades of exceptions, carve outs, and regulations blamed for standing in the way of the administration’s policy to ‘enforce the Buy American Act to the greatest extent permitted by law’ (Trump, 2019). According to one legal analysis, these orders constituted a reversal of ‘government policies that have been in place for 65 years’ and threatened to ‘significantly disrupt many government contractors’ supply chains and internal compliance programs’ (Gallacher, 2019). Business elites arguably had even more reason to be concerned about the threats posed by legislative reforms in the governance of foreign direct investment, technology transfer, and procurement. In these policy areas, it was not mainly controversial appointees like Navarro agitating for reform, but military officers, defense technocrats, and members of Congress less easily ignored. This coalition succeeded in passing in 2018 the Foreign Risk Review Modernization Act (FIRRMA) which expanded the mandate of the Committee on Foreign Investment in the United States (CFIUS) to allow it to review noncontrolling investments in ‘critical infrastructure’ and ‘critical technology’ companies, and companies that store data. The debate over FIRRMA also led to separate reforms outside the CFIUS process that would govern export controls on ‘emerging and foundational technologies’. Finally, this coalition also succeeded in inserting Section 889 into the National Defense Authorization Act of 2019, which prevents government contractors from selling or using telecommunications equipment or services produced by Chinese firms including Huawei, ZTE Corporation, and all of their subsidiaries and affiliates.

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For the business elites who had profited from the previous policy consensus in these issue areas, each of these measures constituted a potential threat, albeit one that could be managed through the corporate exercise of ‘quiet’, and occasionally, ‘loud’ voice. With respect to foreign direct investment, since the 1980s organized business had compromised with the concerns raised by militarists while remaining implacably opposed to CFIUS becoming a more activist and developmentally oriented investment review mechanism (Baltz, 2017). This dynamic continued with the passage of FIRRMA; aggressive industry lobbying (Mohsin and Brody, 2018) ensured that most joint ventures would not be subject to CFIUS review and that special exceptions would be made for private equity investors and for investors from allied countries so as to minimize their regulatory ‘burden’. The ‘losers’ in these compromises were Chinese firms seeking unfettered investment opportunities, US-based companies eager to sell to them or attract their capital with minimal scrutiny, and the various intermediaries who profit from such mergers and acquisitions. Potentially more serious was the deal struck to get FIRRMA passed: the legal mandate calling for the commerce secretary to establish controls on the export, reexport, or in-country transfer of ‘foundational’ technologies essential for national security to firms from countries subject to arms embargoes (i.e. China). Depending on how this law is implemented, legal observers have noted that this may prove to be the most significant change to export control laws since 1979. If Commerce chooses to operate under a broad definition of ‘foundational’ technology, American firms with highly valuable intellectual property to sell will find doing business with Chinese firms a process in which the state (and legal counsel) will be even more intimately involved in their dealings. In addition to Navarro’s executive orders described previously, new legislation governing procurement were perhaps the most significant policy area targeted by militarist economic nationalists during Trump’s administration. Based in part on the testimony given by the heads of six US intelligence agencies to the Senate Intelligence Committee, the resulting law prohibited contractors from not only selling to the government equipment or services that incorporates technology from the Huawei Technologies Company, ZTE Corporation, and other select Chinese firms, but also using covered products or services regardless of whether they were used in the context of a federal contract. Federal regulations have been phased in gradually, however, and business elites have ample opportunities to make their voices heard. But if the extent to which broad segments of organized business groups have united in a lobbying effort to weaken or delay its implementation is any guide, the threat posed to business elites by militarists remains high in this case (Whalen, 2020). Developments in this policy area were noteworthy for another reason: it was understood as a direct rebuke to a concession personally made by Trump to try to spare ZTE from a ban imposed by the Commerce Department on the sale of

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technologies vital to its business (Hughes and O’Keeffe, 2018). While the precise impetus for Trump’s intercession on this matter are still a matter of debate, reporting suggests that personal relationships with the firm intermediated by the son of Trump’s ambassador to China (who was himself an early supporter of his presidential run), may have played a role in this outcome (Areddy, 2018). Should this be substantiated, this case illustrates well how the militarist variant of economic nationalism imposes limits on the transactional logic of the populist. In sum, the militarist economic nationalism of Trump’s administration offered a mixture of opportunities and threats to businesses who contract with the government or are involved in the development and production of ‘critical technologies’. On the one hand, defense budget appropriations have soared under Trump’s term in office and administration officials like Navarro have touted Trump’s policy of supporting the manufacture of combat ships, ensuring the vitality of two shipyards (Rogin, 2018), and subsidizing the manufacture and worldwide sale of Abrams tanks and Bradley Fighting Vehicles (Navarro, 2019). On the other hand, changes to the review of foreign direct investment, in the control of exports of ‘technology’ and end products, and to government procurement add up to a changed legal landscape within which businesses must operate. The threats posed by these legal restraints take the form of less freedom to make decisions regarding investment, production, and technology transfers and more costs to ensure compliance with new regulations. Only time will tell if these new laws and regulations will unravel to any significant degree the global supply chains that have been crafted over the past several decades to maximize profits for managers and shareholders.

Conclusion In this chapter, I have argued that Trump’s administration combined populist economic nationalism with other variants. These presented business elites with distinct sets of threats and opportunities. To review, Trump’s populist economic nationalism did threaten the ability of businesses to earn profits and extract favours from government without sudden, and in some cases public, disruptions. But his Twitter eruptions, and the favouritism that he and his administration extended to allies were familiar and manageable threats that also presented the opportunity to win significant favours. Moreover, given that Trump occupied a position within a federal state bureaucracy that posed significant limits on his executive discretion and his clientelist proclivities, business elites could take solace from the fact that politics would remain largely outside of Trump’s reach in the many, less politically salient, policy areas over which they have historically exerted considerable influence. This ensured ample opportunities for their continued exercise of ‘quiet voice’.

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Less manageable from a business point of view was the liberal and militarist variants of economic nationalism for the very reason that that the normative commitments and expertise of their representatives in the administration could serve as a more even match with the strengths business could bring to the field. Lighthizer’s liberal nationalist trade agenda, enabled by Trump’s instinctive embrace of tariffs for both political and idiosyncratic reasons, brought an unfamiliar set of challenges. More familiar, but more significant given the broader base of support within the military establishment and committees responsible for their oversight that was independent of Trump, was the threat posed by the militarists keen to reform the governance of foreign direct investment, procurement, and technology transfer. At stake were the global supply chains that business leaders and multinational corporations had so carefully constructed over the past several decades to take advantage of state subsidies and regulatory and labour arbitrage. Such threats, however, were of course tempered by various opportunities described in this chapter to influence, and profit from, law and government policy. The expiration of Trump’s term in office ended the distinctive threats and opportunities posed by his populist nationalism; the prospects for the liberal and militarist nationalism that his administration fostered remains uncertain as of this writing. Lighthizer’s trade agenda depended heavily on Trump’s sponsorship but was also noteworthy for enjoying some bipartisan approval and popular support. On the other hand, such approval does not extend to the donors and advisors (of which business leaders and financiers are highly represented) who have circled around Biden throughout his political career. Prospects for the militarist variant of economic nationalism are comparatively clearer. Because militarists had already gained influence within Congress and the defense bureaucracy prior to, and largely independent from, Trump’s presidency, we can expect a continuation of this trend. Here, the key question for business elites, as it has been for the past several decades, will be over where the balance is struck between the more ‘autarkic’ voices within the broader national security establishment and those militarists whose instincts and professional interests make them more sanguine about globalized supply chains and thus conceive of productive capabilities in terms of military alliances, not national territory.

References Abdelal, R. (2001) National Purpose in the World Economy: Post-Soviet States in Comparative Perspective. Ithaca: Cornell University Press. Areddy, J. T. (2018) Eric Branstad, son of U.S. envoy to China, used Trump ties to lure business. Wall Street Journal, 29 June. Available at: https://www.wsj.com/ articles/son-of-u-s-envoy-to-china-used-trump-ties-to-lure-business-1530306803 (accessed: 2 November 2020).

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4 Brexit, Populism and Business The Business Elite Loses Control? Magnus Feldmann and Glenn Morgan

Introduction On 23 June, 2016, the UK electorate voted by a majority of 51.9% to 48.1% to leave the EU. The result followed a referendum campaign characterized by populist mobilization, notably attempts by the Leave campaign to portray themselves as representatives of the people and the Remainers as part of an elite project (Feldmann and Morgan, 2021). Over four years later, on 31 December, 2020, the UK left the EU having agreed a 1,200-page Trade and Cooperation Agreement just seven days earlier which was in turn passed at the last possible moment by the Houses of Parliament on 30 December, 2020. The debate about the UK’s membership of the EU had lasted many years. By the 2010s, British business had become increasingly integrated into and dependent on the EU market. Although there were some points of friction on the nature and extent of EU regulation, most businesses were supportive of staying in the EU and concerned about the potential consequences of Brexit. No specific model of Brexit had been on the ballot and misunderstandings and misinformation were rife, contributing to the uncertainty facing business (Grey, 2021). This left Theresa May, who had become prime minister in the wake of David Cameron’s resignation after the referendum, with an almost blank slate. For months, she repeated the mantra ‘Brexit means Brexit’ whilst she and her small group of advisers sought to make sense of what Brexit could mean (Shipman, 2017). As we have shown in previous research, business did not play a prominent role during the Brexit referendum (Feldmann and Morgan, 2021). This chapter focuses on the period after the referendum and the struggle to identify a model for implementing Brexit, and it demonstrates that business failed to exercise any significant influence over this process. The most it was able to do was to wage a quiet battle against the so-called ‘no deal scenario’, a battle which it was never able to win and close down before Johnson’s ‘Brexit deal’. It was not able to control the uncertainty over the form Brexit would take as negotiations were disrupted by two UK general elections as well as elections to the European Parliament, significant judgements made by the UK Supreme Court, numerous cabinet and civil service Magnus Feldmann and Glenn Morgan, Brexit, Populism and Business. In: Business and Populism. Edited by Magnus Feldmann and Glenn Morgan, Oxford University Press. © Magnus Feldmann and Glenn Morgan (2023). DOI: 10.1093/oso/9780192894335.003.0004

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resignations, growing street protests, and demands for a second referendum, failures to get parliamentary majorities for a deal, and the ever-present and looming threat of no deal. Almost for the whole of this period politics was noisy, and there was uncertainty about where the UK’s trade relations with the EU would end up in terms of tariffs, non-tariff barriers, regulatory alignment, dispute mechanism procedures, border controls and customs checks, and the movement of labour. The chapter consists of the following sections. Firstly, we identify the context of these processes, stressing how the rise of populist politics led to greater uncertainty for business. Secondly, we relate this to the struggle that collective business organizations had to find a legitimate place or voice in the negotiations. In the third section, drawing on our development of Hirschman’s exit, voice and loyalty model discussed in our Chapter 1 (see also Feldmann and Morgan, 2022), we briefly identify the range of options open to business, both collectively and individually, in terms of how to respond to and influence the Brexit negotiations. We focus particularly on the main UK export-dependent sectors such as manufacturing and financial services. In the concluding section, we discuss why business found it difficult to influence government policy over this period. We emphasize the specific way in which populist politics had entered the UK political system. Faced with the uncertainties generated by the Brexit process and the impact of a populist style of politics, business adopted a reactive response, rarely being able to set the agenda. We reflect on the wider implications of these developments for understanding the role of business in contexts of noisy populist politics.

The Brexit negotiations and populist politics Theresa May became prime minister within three weeks of David Cameron’s resignation on the day after the referendum as other candidates fell by the wayside. May took over with a small 12-seat majority in the House of Commons. Since 2010, she had been home secretary and, in this position, developed a reputation for hard work, conscientious if unimaginative and rigid implementation of policy, and a willingness to tackle entrenched interests such as the police and the prison service. May had cultivated support within the Conservative Party in the country through frequent visits to constituency associations. She had sought to present herself as an authentic voice of the one-nation Conservative party against some of the more showy and public-relations (PR)-aware politicians that had dominated the Cameron years, relishing the description of her by the Tory elder statesman, Kenneth Clarke, as ‘a bloody difficult woman’. May had supported the Remain campaign in the referendum, but from the sidelines and without getting too involved. The context in which she became prime minister was one in which populist politics had become increasingly influential. The predominant characteristic of

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populism on which most commentators agree is that it articulates a division between ‘the people’ and ‘the elite’ (see Chapter 1 for a more detailed discussion of the concept of populism). ‘The people’ are seen as virtuous and hardworking, but their interests are ignored by the elite who use their position and power to promote their own material and cultural interests, often by denigrating and undermining the behaviour and lifestyles of ‘the people’. Populist politicians claim that they represent ‘the people’ against ‘the elite’. This frequently involves attacking intermediary non-democratic institutions such as the judiciary and the civil service for placing obstacles in the way of fulfilling the wishes of the people. Moffitt (2016) has described populism as a style of doing politics where performance is central. Populists portray themselves as the voice of the people, often refusing to conform to traditional political modes of expression and instead engaging in demotic, inflammatory language or unorthodox behaviour that is perceived as ‘authentic’ in comparison to other politicians. Populist rhetoric invokes and emphasizes the idea of a crisis requiring urgent leadership and action against the elite or other forms of outside influence. Populism as style and rhetoric may swirl around the edges of many political contexts but it only becomes effective and has an impact when it is translated into specific threats to the existing political establishment through the rise in support for populist parties. In the UK context, this took two forms. The first was the growing influence of the UK Independence Party (UKIP) under Nigel Farage’s leadership. The core goal of UKIP was to ensure the departure of the UK from the EU. Farage’s performance as a populist leader, seeking to portray himself as an authentic voice of the people, chastising the establishment for its failure to defend the UK’s sovereignty and culture against EU bureaucracy, regulation, and immigration, was particularly resonant at a time when disillusionment with traditional parties was high and years of austerity were deepening inequalities within and between regions. Fearful of the rise of UKIP, Prime Minister Cameron announced in January 2013 that he was in favour of an in-out referendum. In spite of this, in the 2014 elections in the UK for the European Parliament, using a proportional representation system, UKIP topped the poll winning 24 seats and 27% of the popular vote; by comparison, Labour won 25% of the popular vote and 20 seats whilst the Conservatives won 24% and 19 seats (a net loss of seven). Two Conservative members of parliament (MPs) defected to UKIP in 2014. In 2015, with a manifesto committing the party to an in-out referendum, the Conservatives won 36.9% of the votes and a majority of parliamentary seats in the general election based on the first-past-the-post electoral system whereas UKIP failed to break through. Cameron’s plan to spike their guns by promising a referendum seemed to work and the UKIP vote, also hampered by the first-past-the-post system, declined in significance. UKIP held just one seat with 14% of the vote in 2015 and slipped further down in the post-Brexit general election in 2017 to less than 2% of the vote share after Farage’s resignation as leader. With the referendum won

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for Brexit, there seemed little future for UKIP as it failed to broaden its appeal and became increasingly fractious. However, UKIP supporters remained a potential source of electoral pressure as the chaos of implementing Brexit followed in the period from 2017–2019 when the Conservatives had lost the majority in the House of Commons after May had called the early general election of 2017. In 2019, an unwilling UK government had to hold elections for the European Parliament, even whilst deadlines for its exit were passing and its elected members of the European Parliament (MEP)s would serve only briefly. As the elections were based on proportional representation, forces beyond the mainstream parties stood a chance of winning seats. This encouraged Farage to form a new party called the Brexit Party. Farage and colleagues topped the poll with 30.9% of the vote and 29 seats with the Conservatives in fifth place with just four seats and 8.8% of the vote, precipitating May’s resignation and the election of Boris Johnson as Conservative leader and prime minister. The Conservatives were therefore under pressure the whole of this period to retain their own supporters who had deserted them in the European elections and if possible, to gain Brexit voters from the Labour Party. As a result of this, a second form of populism had developed inside the Conservative Party reaching beyond traditional anti-EU MPs towards a clearer take-up of the populist argument that they were defending the ‘voice of the people’ against the elite which wanted to ignore the result of the Brexit referendum. Like Farage, they demanded that Brexit be done and became increasingly critical of intermediary institutions such as the judiciary or even parliament itself that could delay or stop this process. Against the advice of most economists and businesses, they argued that a no-deal Brexit was perfectly acceptable and would not cause any significant disruption. Institutions that were seen to delay Brexit were vilified by this group. The Supreme Court was labelled as ‘enemies of the people’ by the tabloid press following the judgement in the influential Millar case (Salter, 2021). Parliament itself and its conventions and procedures were increasingly challenged, firstly in terms of the powers of the Speaker of the House and secondly in terms of time for debate and for the presentation of alternatives. The civil service mandarins were seen as too attached to the establishment and the EU, and experts in general but particularly economists who had predicted dire consequences if Brexit went ahead, were frequently condemned from within the Conservative Party itself. When the Conservative Party lost its majority at the 2017 general election the group of MPs which Grey (2021) calls the Brexit Ultras for their willingness to espouse the possibility of No-Deal held even more sway over the government which needed them to secure a majority. Thus, making a consensus either in parliament or across civil society groups including business associations was extremely unlikely because of these populist actors inside parliament and outside. Populism in the UK in this period, therefore, set the terms of the debate about Brexit, the language which was used, the political styles that were effective in vote

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gathering even though Theresa May, in particular, and many members of her cabinet found this style of politics difficult to perform. For business, the result was not simply that they were faced with a policy that many of them found threatening to their whole strategy, but also that there was very limited space for them to influence how the negotiations proceeded. As supporters of the Remain position, they were associated with opposition to the Brexit process; they were ‘remoaners’ unwilling to accept the voice of the people. In the new era, they lacked the legitimacy and authority which they once held. In the noisy politics that prevailed in these years (see Feldmann and Morgan, 2021 for a discussion of noisy versus quiet politics), they could barely be heard and indeed few in the government wanted to listen (Anderson, 2019).

Business responses to the Brexit process Once the referendum campaign had ended and the result was known, one might have expected the period of noisy politics to end and business to be able to exercise more influence on the Brexit process through traditional channels of quiet politics as in principle there were highly technical issues to be resolved and much was still unclear about what Brexit meant. During the referendum campaign, the Leavers had never explicitly rejected membership of the EU customs union or the single market, instead preferring to refer to the variety of trade linkages that already existed between non-EU countries and the EU such as those Norway and Switzerland or European Free Trade Association (EFTA) or the European Economic Area (EEA), all of which involved various combinations of financial contributions to the EU, accepting certain aspects of EU law and regulations, and being subject to European Court of Justice (ECJ) rulings in return for preferential market access. However, as discussed in the previous section, politics remained noisy even after the referendum; it was also highly salient to the electorate which expected Parliament to resolve the Brexit issue quickly as the pro-Brexit campaign had said before the referendum that this would be possible. . There was, therefore, little possibility that in spite of the highly technical nature of the process, business would be able to exercise significant influence over the negotiations. Populists inside and outside the Conservative Party highlighted the ways in which the collective voice of business had lost legitimacy due to its perceived role in ‘Project Fear’, or eliteled attempts to warn against the adverse economic consequences of Brexit. Whilst the Confederation of British Industries (CBI) and other sectoral employers’ associations did seek dialogue with the government about the form of Brexit (for an overview of key arguments, see CBI, 2019), the May government wanted to avoid the perception of being very close to business (Anderson, 2019). This meant that there was limited scope for ‘quiet politics’ and ‘soft voice’ to shape the formulation of key Brexit policies.

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May’s first moves were to establish new departments (Department for Exiting the EU and the Department for International Trade) which were to be led by leading Brexiteers such as David Davis and Liam Fox. Boris Johnson, another leading Brexiteer, was made Foreign Secretary. By the time of her speech to the Conservative Party conference in October 2016, May was emphasizing that she wished to end the jurisdiction of EU law and free movement of labour. By January 2017, May’s Lancaster House speech had set out her ‘red lines’ which ruled out membership of the single market and the customs union so that the UK could make its own trade deals with other countries. It also rejected any jurisdiction of the European Court of Justice over trade disputes or the interpretation of law. Instead, she argued for a ‘bespoke’ deal that would enable ‘frictionless trade’ outside the single market and customs unions framework between the EU and the UK. For business, these ‘red lines’ raised multiple issues. In relation to financial services which had benefited from what was called ‘passporting’ enabling banks and other financial and professional services firms to set up in any EU state, leaving the single market meant that this was no longer available. The UK would need to engage in negotiations to establish ‘equivalence’ between regulatory regimes. For manufacturing, the loss of single market access and customs union membership could mean delays at the border, tariffs, the re-emergence of non-tariff barriers and concerns about rules of origins that would delay and disrupt cross-border supply chains and a lack of access to EU pools of labour. In the White Paper in February 2017, issued prior to invoking Article 50 and beginning the actual negotiations, the government sought to allay business concerns by articulating ‘a vision of what we are seeking to achieve in negotiating our exit from, and new partnership with, the European Union’ and discussing the possibility of ‘frictionless trade’. However, as the CBI was aware, this relied on the EU allowing the UK to ‘cherry-pick’ which rules and regulations it was willing to accept and therefore implied disrupting the unity and cohesion of the single market and the customs union which was a key benefit for all EU members. In the light of this uncertainty, the CBI was most concerned that there was insufficient time to negotiate a new treaty that could resolve some of the issues at the treaty level and allow for necessary changes to be implemented within companies and in the bureaucratic and logistical necessities of cross-border trade. Its Chief Executive, Carolyn Fairbairn pressed the government in mid-2017 to ensure an extended transition period to allow business to prepare and not to leave the single market and the customs union immediately once the two years notice under Article 50 had expired (which would have meant leaving at the end of March, 2019). Theresa May accepted this argument and began to discuss a transition period beyond the two years. This prompted Nicole Sykes, head of EU negotiations at the CBI to write on the UK in A Changing Europe website in July 2017 that it appeared that there was a ‘welcome step up of business engagements since June’s election …. it looks like a new premium has been placed on the business voice. That has come not a moment

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too soon’ (Sykes, 2017). In her Florence speech in September 2017 (following the election in which the Conservatives had lost their majority), May announced that she would aim for a two-year transition period as requested by the CBI. In the same speech, however, May continued to press the case for a bespoke free trade deal, even though as an Institute for Government commentator noted, ‘The risk remains that this is wishful thinking’. The UK may still seem essentially to be asking to leave the single market and customs union but to retain as many benefits as possible’ (Maddox, 2017). Certainly, a month later, the European Council felt that there had not been sufficient progress on the first stage of negotiations (the withdrawal agreement) and refused to proceed to discussions on the future relationship. The UK’s future trade policy was ‘still just a wish list’ (Datta and Dhingra, 2017) and uncertainty prevailed for business. In January 2018, the government was forced to publish its Impact Assessments which looked at the likely impact of Brexit on various industrial sectors. These reports demonstrated that this was potentially devastating for many firms in terms of loss of markets and disruption to supply chains unless major concessions were made by the EU or the UK swung back more definitively to following EU rules and regulations. The former was unlikely as the EU continued to reject any cherry-picking granting certain sectors special deals. The latter looked similarly impossible due to the number of hard Brexiteers in the House of Commons, which meant May could not command a majority there for moving back towards a form of soft Brexit. On the contrary, the threat of no-deal was continually emphasized by the European Research Group (ERG) of hard-line Brexiteers and echoed by May and some of her ministers. In July 2018, May met with her cabinet to agree on the approach to future trade with the EU. Her ‘facilitated customs partnership’ approach relied on the UK levying its own tariffs on its trade with the rest of the world whilst maintaining EU tariffs in trade with the EU. Goods entering the UK would be liable to different levels of tariff depending on whether their ultimate destination was the EU or the UK. Such a system would allow the UK to conclude its own deals with other countries whilst still having frictionless trade in goods with the EU provided it maintained a common rulebook with the EU in terms of rules and regulations. As well as being hugely complicated in terms of how this could operate, the scheme failed to satisfy either the Brexiteers (some of whom resigned from the cabinet in the days following the Chequers meeting) or the EU (whose chief negotiator rejected the proposals within weeks of them being released). May’s proposal was formally rejected by the Salzburg European Council in September 2018. However, work on the Withdrawal Agreement continued in the last few months of 2018 and reached a draft form which needed to be approved in parliament in December 2018 or early in 2019. From the point of view of business, two things were increasingly clear and try as they might, they seemed to have little influence over stopping them occurring.

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Firstly, even if there was to be a deal with the EU, it would be based solely on goods; there would be no deal for services. The deal would therefore be a ‘thin one’ that left services to fend for themselves in the post Brexit environment. The goal of a complete and comprehensive free trade agreement had effectively been pushed to one side as too complicated to achieve within the timescale. As the UK was primarily a service-based economy, this was likely to be highly problematic, impacting on financial services, professional services, creative and digital businesses, amongst others. The fact that this happened with very little protest reflected both the lack of understanding of many of the Brexiteers of the nature of the UK economy but also the fact that at this stage many individual service firms had already given up waiting for an agreement and begun to make their own arrangements for the future based on a hard Brexit. In the next section we describe these firm-level arrangements in financial services and manufacturing in more detail. Secondly, the prospects for no further extensions were growing and this in turn reinforced the idea of a thin deal, much to business’s chagrin but perhaps more damagingly raised the possibility of a No Deal scenario. No Deal would potentially be hugely disruptive to business as all existing cross-border trade with the EU would be affected from Day One of exit. The new Secretary of State at the Department for Exiting the EU, Dominic Raab, began to set out a number of technical notices outlining how businesses and individuals should prepare in the event of a No Deal Brexit. None of these were very convincing and few businesses took any notice even though members of the ERG were becoming increasingly vociferous that ‘No Deal’ could work. The arithmetic in the House of Commons meant that over late 2018 and early 2019, efforts by the government to gain approval of the Withdrawal Agreement failed due to a coalition of ERG members and opposition parties whilst efforts to make a No Deal Brexit impossible gained narrow support. What did not emerge, however, was an alternative to the government’s proposal forcing May to seek an extension to the Article 50 period by three months. May’s effort to build support by inviting Labour for talks also failed. In March 2019, a joint statement issued by the CBI and the Trades Union Congress (TUC) stated that Britain faced a national emergency. They stated that

Decisions of recent days have caused the risk of no deal to soar. Firms and communities across the UK are not ready for this outcome. The shock to our economy would be felt for generations to come … Avoiding no deal is paramount … the current deal or no deal must not be the only choice. A Plan B must be found—one that protects workers, the economy and an open Irish border, commands a parliamentary majority and is negotiable with the EU. A new approach is needed to secure this. (O’Grady and Fairbairn, 2019)

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Buffeted by parliamentary defeats, May made little effort to reach any rapprochement with the CBI or the TUC. Anderson reports that the ongoing failures of the May administration to resolve Brexit and its side-lining of business meant that by May 2019, ‘any morsel of trust between business and government had gone’ (Anderson 2019: 260). In the meantime, because the UK had not left the EU as scheduled, it had to participate in elections to the EU Parliament in June 2019 and partly as a result of the poor performance of the Conservative Party coupled with her inability to command a majority for a withdrawal agreement in parliament, Theresa May resigned. By July, Boris Johnson had been elected leader on a platform of getting Brexit done, whatever the costs, including a renewed and explicit rhetorical willingness to leave the EU without a deal. Johnson ramped up the no deal rhetoric and engaged in various manoeuvres to prorogue parliament in such a way that it might not have the time to stop the UK tipping into a no deal scenario. Although these were thwarted, Johnson pressed on and in October 2019 published a No-Deal Readiness report detailing the UK’s preparedness ahead of the deadline at the time of 31 October. A few days later following a meeting with the Irish Taoiseach, Johnson claimed that he had replaced the May’s Irish backstop proposal and now had an acceptable Withdrawal Agreement and political statement. However rather than test this in a vote in Parliament, Johnson managed to get the agreement of other parties to a general election, fighting it almost solely on ‘Get Brexit Done’, by claiming that he had negotiated a great deal with the EU that was oven-ready. The Labour Party by contrast failed to articulate a clear position on Brexit and under a leader highly unpopular amongst many Labour voters and with a manifesto that failed to convince, suffered devastating losses in Brexit voting seats that had previously constituted the ‘Red Wall’ of supposedly impregnable Labour seats, because of their trade union and working-class heritage. Instead, Johnson won a large majority on 12 December, 2019 and the new parliament passed Johnson’s Withdrawal Agreement days later meaning that on 31 January, 2020, the UK would leave the EU with a transition period of no-change ending on 31 December 2020. Over the following year, desultory efforts were made by Johnson to negotiate a new trade deal to follow on from the Withdrawal Agreement. In the process, the government still threatened no deal, questioning aspects of the already signed Withdrawal Agreement particularly over the Northern Ireland protocol. The Trade and Cooperation Agreement—TCA- (signed on Christmas Eve, 2020) consisted of 1,200 pages published on 26 December, passed by the UK Parliament with minimal scrutiny on 30 December, and on 31 December, 2020, the UK left the transition period and formally left the EU. Multiple issues remained to be resolved, as various sectors, businesses and individuals began to see the implications of Brexit in terms of access to markets, adherence to new rules, regulations, and bureaucracies, and additional barriers and delays at borders. Whilst a Brexit deal of sorts was accomplished, for businesses, the uncertainties created and the barriers that emerged looked likely to have major costs, and many business representatives

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remained frustrated by the lack of government attention to their concerns (Make UK, 2021). The noisy populist environment coupled with the focus of many leading Conservatives on delivering Brexit at any cost meant that business was not able to able to shape the Brexit process or to elicit any significant changes when it voiced key concerns about the government’s approach. The fact that the next stages in terms of ironing out the deal post the Trade and Cooperation Agreement(TCA) occurred in the context of the coronavirus pandemic and the wholesale disruption this caused made it hard to identify the specific impacts of the pandemic separate from Brexit effects as well as forcing business itself to concentrate closely on the everyday problems of sustaining their businesses when lockdown was in progress.

Sectoral responses to Brexit negotiations As discussed in the introduction to this book (see Chapter 1), individual businesses had a number of possible responses to this process: extending Hirschman’s (1970) typology, we distinguish between exit, soft voice, loud voice, explicit loyalty, and implicit loyalty. Firstly, a passive stance or implicit loyalty was a very common approach. Businesses could do nothing and had to carry on as before. Certainly, small- and medium-sized businesses that were trading with European partners tended to hang back and wait even when the government started to urge companies to make preparations for exit. It was only after the UK actually left that the consequences started to be visible by which time there was little that could be done. Secondly, businesses could exit in full or partially from the UK, relocating to areas inside the EU in order to maintain continuity. Thirdly, businesses could use voice to try to press for arrangements that were minimally disruptive; voice could be loud or soft, though given the cost of loud voice and the way in which business legitimacy had been undermined, as discussed earlier, soft voice was more likely. Finally, it is worth emphasizing that some businesses were loyal to the Brexit project, in some cases signalling explicit loyalty, partly because of the politics of their leaders and in part because economically their focus was either on the UK or export markets outside the EU. In the following sections, we consider these different responses in the most trade-dependent sectors of the UK economy.

Manufacturing Whilst the share of gross domestic product (GDP) of manufacturing has fallen over time, it remains a very important part of the British economy, in part because it accounts for almost half of the UK’s exports and because of linkages to other sectors of the economy, with many service sector jobs related to manufacturing (Bailey and Rajic, 2020). Engineering and related industries, including

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the production of cars and other transport vehicles, electronics and chemical industries, notably pharmaceuticals, are the most significant parts of the British manufacturing sector. Given the nature of manufacturing, firms in these sectors have been deeply affected by the Brexit process. These industries are characterized by a high degree of internationalization, especially in terms of their reliance on European/global supply chains and frictionless trade to facilitate just-in-time production. In many cases there was also internationalization in terms of ownership, as especially car manufacturing is dominated by foreign multinationals that have invested in Britain. Access to the EU market was often a key reason why foreign investors came to the UK in the first place, as Britain was a hub guaranteeing tariff-free access to the EU market whilst also taking advantage of frictionless trade to build integrated supply chains. The uncertainty surrounding market access and the viability of existing business models based on European (and sometimes global) supply chains coupled with the high fixed costs created complex challenges for many of these firms. In the case of pharmaceuticals, there are additional challenges beyond supply chains and labour mobility, such as uncertainty surrounding research and development (R&D) funding and various regulatory issues, including rules, standards, and market authorization processes. Such barriers constitute a greater challenge than trade barriers in the case of pharmaceuticals, given that tariffs tend to be very low. Considering how much was at stake, manufacturing firms were surprisingly cautious during the campaign, largely avoiding high profile involvement. Even when they were invited to get involved, they either declined such invitations or restricted themselves to relatively low-profile interventions, such as signing petitions (Feldmann and Morgan, 2021). Manufacturing firms generally continued to maintain a low profile after the referendum. In many respects this stance is unsurprising as businesses generally prefer quiet politics and tend to eschew high profile political engagement (Culpepper, 2011). To the extent that concerns are voiced, this generally happens quietly or in the context of business association activities as discussed in the previous section. At the level of firms, a distinctive response to the referendum outcome adopted by many manufacturing firms, notably multinationals, was exit (Hirschman, 1970). Whilst such exit could imply a complete withdrawal from the British market, in many cases firms were likely to choose partial exit, i.e. scaling back their existing activities or abandoning plans for future investment or expansion, which entailed relocating some but not all resources to other countries, Brexit is an important factor affecting manufacturing, but it is not the only issue that matters to business. If a business withdraws from Britain, it will lose out on key advantages in terms of access to the British market, including both customers, the labour market, and other intermediate goods and inputs. Britain has various locational advantages and remains a significant market, as it is one of the ten largest economies

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in the world. This is why partial exit is a more common strategy of managing the uncertainty surrounding Brexit. This provides a way of maintaining access to the UK market, whilst also facilitating an orderly departure if necessary. Examples of complete exit include Philips (which closed its manufacturing facilities in Glemsford in Sussex and relocated production to the Netherlands), Schaeffler (an automotive and industrial supplier, which announced the future closure of its factory in Llanelli) and Panasonic and Sony (both companies moved their European headquarters from London to Amsterdam). After the Brexit referendum car producers, like Ford, Honda, and Toyota, either scaled back operations in Britain or announced that they were monitoring the situation and considering a range of options. Over the period 2019-2022, Nissan, another leading car manufacturer, has announced various contractions and expansions of its large plant in Sunderland, at times giving the impression that it is staying and continuing to invest. whilst at other times announcing closures. (BBC 2021a). For example, in May 2021 it was reported that Nissan was renewing its commitment to the Sunderland factory and also considering establishing a giga-factory to produce electric car batteries in Sunderland (Neate, 2021) This highlights one of the main advantages of partial exit, namely that it provides greater flexibility. Once the outcomes of Brexit became clearer, it was easier either to rebuild capacity in the UK or to reduce activities further. However, there are some notable exceptions to these patterns. A small number of manufacturing firms played a very prominent role in the Brexit referendum and continued to advocate in favour of a clean break with the EU afterwards. Two of the most notable examples are J. C. Bamford (JCB) and Dyson. Their chairmen, Lord Bamford and James Dyson, adopted explicit loyalty and expressed strong support for the Brexit agenda. Lord Bamford sent a letter in the run-up to the referendum to all JCB’s UK employees as well as JCB pensioners making the case for voting Leave (BBC 2016). Such strong interventions, either for or against EU membership, were exceedingly rare in 2016, unlike 1975, when many businesses were urging their employees to vote in favour of Europe (Feldmann and Morgan, 2021). Lord Bamford also criticized the role of the CBI, suggesting that its approach was too pro-European and neglected the preferences of small- and medium-sized enterprises, and even ensured that JCB left the organization over this issue (Chan, 2016). Dyson adopted populist rhetoric about leaving the EU to avoid ‘being dominated by Germans’ (Swinford, 2014) and campaigned very actively during the referendum period. He maintained his engagement throughout the Brexit process, declaring in 2021 that ‘We’ve got our freedom, we can make trade agreements with other countries outside Europe [and] we can employ people from all around the world’ (BBC, 2021b). What distinguishes these two businesses from other large UK based multinationals is their limited reliance on EU markets and supply chains along with a strong ideological commitment to Brexit by their chairmen.

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In summary, the most common responses by manufacturing firms have been soft voice (usually exercised by business associations) and (partial) exit. This reflects the preferences of these businesses for quiet politics on the one hand and the high internationalization and dependence on European markets and supply chains on the other.

Financial services and associated business sectors As manufacturing had declined in the UK in terms of employment and share of GDP, financial services and associated business sectors such as law and accountancy had increased in importance. For these services, presence in the single market had been an important growth factor. The City had become the central point in connecting European firms and European capital to global sources of funding, thereby acting as a conduit for funds into other parts of the world both for foreign direct investment (FDI) and for avoiding taxes. Although Paris, Amsterdam, and Frankfurt had strong financial markets of their own, the breadth and depth of London markets meant that many EU financial institutions conducted their more complex and high-end activities in London via subsidiaries located there, as was permitted by the passporting arrangements of the single market. Overseas banks, particularly from the US, were also drawn to make London their central EU location because of its role as the hub of a network of capital flows, financial institutions, relevant professional expertise and a light-touch regulatory regime. The passporting rules of the single market gave both wholesale banking and retail banks the freedom to set up across the EU. Following along beside the banks were associated professionals, most importantly lawyers who were central to contractual negotiations particularly on complex financial instruments such as derivatives as well as on constructing the legal framework for EU and global mergers & acquisitions (M+A) activity. Single passporting meant that UK corporate and tax lawyers could establish themselves in other parts of the EU, a singular advantage where so much business contractual law was based on UK law. However, as a number of authors have pointed out (Thompson, 2017, James and Quaglia, 2019), tensions had emerged between the City as a global centre for finance, financial innovation, and financial wealth chains (see Seabrooke and Wigan, 2017) and the EU. In particular, as the EU moved to develop the Eurozone amongst a core set of countries, it established its own regulatory agencies that were designed to oversee financial markets with the aim of preventing any repeat of the 2008 Global Financial Crash. In the period before Brexit, therefore, Cameron’s government had sought opt-outs and exclusions from various emerging regulatory processes that might affect the City’s ability to attract hedge funds, speculative and risk capital and new forms of derivatives, financial markets, and associated

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clearing houses. The City supported the British government’s attempts to protect it from new regulations, and by the time of Brexit there were clear divides within the financial sector. Whilst the big public financial institutions, such as large internationally oriented banks, continued to support Remain for fear that anything else might disrupt their access to the EU, hedge funds with more specific trading strategies that could involve high risk speculative activities with potential systemic consequences in the event of unexpected crashes, feared that the EU regulatory regime was going to restrict their freedom of action. Some hedge fund managers therefore moved to supporting Brexit. As the reality dawned that the UK would be leaving the Single Market, these tensions within the City led in a number of directions. Philip Hammond, the Chancellor of the Exchequer was closely aligned with traditional City interests who were immediately concerned about the withdrawal of single passporting. Retail banks, who wished to operate inside other EU countries, were faced with having to set up subsidiaries under local law conforming to local regulations. Similarly, wholesale banking functions would require the establishment of new subsidiaries domiciled inside the EU and be subject entirely to EU rules if they wished to trade in Paris, Frankfurt, Amsterdam and other European financial markets. It was also emerging that the EU wished for all clearing house activity for Euro-denominated derivatives trading to take place in EU financial centres under EU regulations to ensure that potential collapses could be monitored and addressed by EU regulatory authorities, potentially including the European Central Bank. On the other hand, there were strong arguments articulated by the Brexiteers and some investors and hedge funds that exiting from the EU regulatory regime would enable the City to become even more dynamic in attracting business from elsewhere. The ‘Global Britain’ slogan was picked up and amplified to counteract the gloom felt by others in the City about Brexit. Such ideas were actively promoted by new organizations representing pro-Brexit sentiment in the City, notably the City for Britain group as well as the Financial Services Negotiating Forum, and they also received support from a range of free market think tanks, including the Legatum Institute, the Institute for Economic Affairs, and Politeia (James et al., 2022), This reflects a longer association between anti-EU sentiment and key strands of neoliberal thought especially within the think tank community (Cornelissen, 2022). Over the years of negotiations, the idea of a single City voice gradually weakened, as it became harder for leading representatives of the financial sector, such as CityUK, to articulate a clear position once early ambitions for maintaining passporting rights were unattainable and the perception of divides between large investment banks and their associated retail banking arms on the one side and hedge funds, private equity and other more dynamic financial sectors linked with high risk derivatives products or innovative fintech and crypto currency

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developments became increasingly salient and weakened the discursive power of finance as a unified force (James and Quaglia, 2021). Once single passporting was inexorably lost, discussions started to centre on issues of regulatory alignment, equivalence and/or mutual recognition, and it became harder for the financial sector to articulate a common position. In addition, the EU definition of equivalence in financial services was extremely tight in recognition of the systemic risks posed by this sector as demonstrated in 2008– 2009. The EU insisted on including the provision that an equivalence agreement could be withdrawn with just 30 days’ notice if the EU regulators perceived a major change in the regulations that could threaten system stability. In reality, only two equivalences had been agreed between the EU and the UK on financial services up to 2021, both in relatively limited areas. Although the final Treaty left open the possibility of further equivalences, a Memorandum of Understanding on the issue published in March 2021 was abstract and general in tone, indicating little progress (Hall, 2021). By 2018, many City firms had started to recognize the inevitable end of passporting and began to set up subsidiaries in EU financial centres, relocating some staff into the EU. Fears of a massive job loss in the City have not materialized though numbers employed have declined as a result of these relocations, and this could increase in the future. It is unlikely that this will lead to large numbers of full exits of financial firms from the UK as the City retains its global links and its attractiveness as a financial centre. However, the extent of partial exits may accelerate if the EU successfully tightens rules on where Euro-denominated debts, derivatives, and stocks can be traded. By the time the negotiations reached their final stages, it had become clear that any agreement on trade would be primarily about goods. This chimed well with the populist context that many Brexiteers reinforced. Brexit was discussed in terms of bringing manufacturing jobs back to the UK, of facilitating the employment of people in the old manufacturing areas, the ‘Red Wall’ seats which had traditionally been highly unionized and supported Labour switching to UKIP, then the Brexit Party in the 2019 European elections, and moving to the Tories in the general election that December. This sort of trade deal that focused on manufacturing and goods spoke directly to ‘the people’. Other totemic industries such as fisheries could be incorporated within the Brexit rhetoric, no matter that the detailed agreements might in the end prove counter-productive for a lot of British fishers. Financial services evoked a different world, one in which the established elite sought to protect their privileges and wealth in London and the South East. There were few votes in this and little connection to the populist upsurge that powered Johnson to government. More generally, the issue of services could not be solved in the period allowed; as many trade treaties had already proved, reaching agreements on services is very difficult. It seems that most large UK service companies

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had become reconciled to that after long fruitless discussions about equivalence etc. Instead, they had started to make their own arrangements, often by relocating and setting up inside the EU to ensure that they could continue to access the market. The strength of the UK in services was reflected in their ability to manage this transition. Most services required investment not in tangible assets such as factories but in human and financial capital which was in principle highly mobile and could go quickly where markets might develop. The loss of free movement of labour worked both ways in that it became disruptive of UK professionals and creative artists working in the EU and was not just a means of reducing migration to the UK.

Conclusions The Brexit process has created complex dilemmas for British business. It has deepened the divides between different sectors and between firms within sectors, as in the case of finance. Two aspects of the Brexit process have complicated business involvement—firstly, the persistence of populism and noisy politics has made it harder to use traditional channels of quiet politics, raising challenges for businesses seeking to influence political developments. Secondly, the uncertain and unprecedented nature of the process, exacerbated by the fact that the process of ensuring support for any proposal was fraught with difficulty, complicated the formulation of business responses. As a result, many interventions, such as discussions about passporting within the financial sector, became obsolete as government red lines ruled out such approaches. It is therefore unsurprising that many firms chose implicit loyalty as the default strategy, effectively avoiding more high-profile involvement in an uncertain, controversial, or even toxic issue. This approach also dovetails with general business preferences for quiet politics (Culpepper, 2011). Yet given the stakes of the Brexit process, it is also inevitable that many businesses would have wanted to respond in some way. The most common responses to Brexit among firms that did get involved include soft voice and exit, but a small number of firms have also adopted explicit loyalty (or in very rare cases even loud voice). Yet each of these strategies created its own problems, ultimately weakening business influence. Soft voice is a common strategy for businesses seeking to influence the Brexit agenda, without challenging it outright. Yet the context of populist politics has weakened the effectiveness of soft voice. As noted, the salience of populist noisy politics along with the uncertainty and unpredictability of the Brexit process made it harder for business to articulate clear positions. In many cases, competing perspectives, notably the explicit loyalty voiced by hedge funds and pro-Brexit

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financial institutions and their representatives, partially drowned out the soft voice exercised by CityUK and reinforced the impression that finance did not have any unified position on Brexit or related issues, such as passporting or mutual recognition. Exit has been an important strategy for trade-dependent firms with strong EU links, including financial institutions, other service sector firms, and various multinational enterprises in manufacturing industries. This strategy is important for firms that rely heavily on access to the EU market and want to avoid trade or regulatory barriers to their activities. Exit is also an important way for firms to hedge their bets. By adopting partial exit, firms can insure themselves against a range of adverse outcomes by maintaining a presence in the UK market, whilst also ensuring that they have a presence in the EU. This makes it easier to expand or reduce activities in the UK, depending on the impact of the Brexit process on the British economy and their ability to maintain EU supply chains or operate in the EU whilst based in the UK. Finally, high-profile positions have been relatively rare. Loud voice has been very unusual, as only a very small number of business leaders, such as Richard Branson, have been outspoken opponents of Brexit and advocated a second referendum. Explicit loyalty was also relatively rare among manufacturing firms and mostly associated with a small number of businesses, like Dyson and JCB, as discussed in this chapter. However, explicit loyalty has been more common in the financial sector where some estimates suggest that as many as a third of City firms were in favour of Brexit (James et al. 2022), and key organizations like the City for Britain group also advanced this agenda. All the businesses adopting such positions shared two characteristics. Firstly, the pro-Brexit firms tend to be less dependent on EU markets and supply chains and more connected to Asian markets and supply chains. Secondly, in addition to economic incentives, the business leaders taking either of the strong positions of explicit loyalty or loud voice tend also to have a strong normative commitment to these agendas. As a result of these challenges and divisions, it is clear that business has found it very difficult to influence the Brexit process. Traditional understandings of business as a dominant elite actor in British politics, as it had also been in the 1975 referendum (Feldmann and Morgan, 2021), do not capture the challenges that business faced after the Brexit referendum. Above all, it has exposed and, in many cases, deepened divisions between sectors and firms. It remains to be seen whether businesses will be able to find more common ground and articulate more cohesive public policy preferences and shape policy-making once the Brexit process recedes further into the past. Much is also likely to depend on the medium-terms effects of Brexit on the British economy and on whether traditional channels of quiet politics are re-established.

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5 Business Reponses to Populism in Denmark Between Loud Voice and Implicit Loyalty Christian Lyhne Ibsen

Introduction Business elites in the small, open economy of Denmark depend on global free markets for products, services, and labour. As such, the rise of nationalist rightwing populism in Denmark is the antithesis to Danish business interests. However, right-wing populism might also provide political opportunities for business in terms of welfare state retrenchment and lower taxes. This chapter shows how organized business elites in Denmark manage these strategic trade-offs, analysing how they have responded to the populist party, the Danish People’s Party [Dansk Folkeparti] (DPP) on anti-migration policies, welfare state reforms, and anti-EU threats. The chapter traces business responses to the DPP using the argument by Feldmann and Morgan about exit, voice, and loyalty by business (Feldmann and Morgan, 2022). They argue that the rise of populism has challenged business elites to rethink their strategies towards exercising influence over policymaking. Using Hirschman’s (1970) typology of exit, voice, and loyalty, they argue that business elites will respond to populism using voice or loyalty, but rarely exit. Further, they distinguish between soft voice and loud voice, and explicit vs. implicit loyalty. Employing their typology, the chapter identifies both loud voices and implicit loyalty of business in Denmark. Loud voices pertain to the DPP’s policies on restricting labour migration when they affect labour supply negatively. Implicit loyalty pertains to welfare chauvinism when refugees and migrants have seen their benefits and eligibility reduced. Thus, even though the material interests and cultural values of business and the DPP rarely coincide, the relationship is relatively pragmatic and peaceful (Mudde, 2020). I find clearly different interests on the issue of free trade and labour migration between the anti-globalism of populist parties and the pro-globalism business elite. However, I also find converging interests on welfare state retrenchment for certain migrant groups, so-called ‘welfare chauvinism’, in the name of making work pay. In the conclusion, I discuss the emergence of a new welfare state chauvinist coalition across mainstream parties that hitherto had been opposed to the antiglobalism of the populist parties. This coalition formation suggests that some Christian Lyhne Ibsen, Business Reponses to Populism in Denmark. In: Business and Populism. Edited by Magnus Feldmann and Glenn Morgan, Oxford University Press. © Christian Lyhne Ibsen (2023). DOI: 10.1093/oso/9780192894335.003.0005

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populist ideas have become mainstream in Denmark and that these ideas are generally accepted or tolerated by business elites as long as they do not seriously interfere with core business interests on free trade, free movement of labour, and expansion of labour supply. Support of the EU remains a key divider between the DPP and old mainstream parties, but it is one that is becoming less and less important as there is no serious debate about EU membership after Brexit. The chapter proceeds as follows. First, I present the main characteristics and strategies of organized business in Denmark. Second, I present the history, political project, and voter constituencies of the DPP. Third, I analyse business responses to the DPP historically using the metaphors of loud voice and implicit loyalty. Fourth, I conclude with a discussion of what we can expect from the relationship between business and the DPP in the future.

Organized business in Denmark: Unified and pragmatic The Danish business elite is a relatively homogenous and organized group, often centred around family foundations which have amassed great fortunes over the twentieth century (Larsen and Ellersgaard, 2018). Instrumental for the coherence of the business elite are the business associations that effectively represent Danish business interests at home and—increasingly—abroad (Navrbjerg and Ibsen, 2017). While Danish business is usually considered as very well organized in business associations, the organizational density was never as high as in other macro-corporatist countries, such as Sweden and Austria (Due et al., 1994). 2014-estimates by the Confederation of Danish Employers [Dansk Arbejdsgiverforening] (DA) set the private sector business association-density at 53% (as percentage of employed persons and only including DA and the Danish Employers’ Association for the Financial Sector, [Finanssektorens Arbejdsgiverforening] (FA). This figure has been rather stable over recent decades (Navrbjerg and Ibsen, 2017), see Table 5.1. A survey from 2010 estimates business association-density in the private sector to be 63% of employed persons—the 10-percentage-point difference owing to the inclusion of other associations outside DA and FA (Larsen et al., 2010). Table 5.1 Organized employers in Denmark—in percent.

Public sector Private sector

2004

2009

2015

100 53

100 58

100 53

Source: Navbjerg and Ibsen, 2017 taken from DA Arbejdsmarkedsrapport 2004, 2009 plus table from DA 2017. Including DA, FA og (i 2004 og 2009) SALA. These numbers do include employers organizations like Kristelig Arbejdsgiverforening, Dansk Håndværk, Arbejdsgiverne.

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Both estimates show that there is a substantial share of unorganized companies, especially in private sector service industries, such as hotels and restaurants, tech companies, design and information technology (IT); office and administration, and commerce. Danish companies historically organized on the foundations of the guild system which—after its abolition, gave way to handicraft and trade associations. The peak level federation, DA, came into being in 1896 as a response to the growing power of the Danish labour movement (both party and trade unions) vis-à-vis a weak right-wing party (Due et al., 1994; Martin and Swank, 2012). Alongside the DA family there are independent associations, such as FA, the Christian Employer Association, and some minor associations for trades. At the end of the twentieth century, business associations merged into a multiindustry confederation, making Danish business elites highly unified. By far the largest business association is The Confederation of Danish Industries [Dansk Industri] (DI) covering multiple sectors and industries, although dominated by manufacturing companies. DI constitutes more than 60% of the total wage sum in DA and is the clear leader in both collective bargaining and political lobbying (Ibsen, 2016). The second largest association is The Danish Chamber of Commerce [Dansk Erhverv] (DE) which is also multi-sector but does not cover manufacturing. It tallies just under 20% of the total wage bill in DA. The other associations organize employers within certain industries and trades—except for the Christian Employer Association which is also cross-sectoral. The organizational concentration of business elites facilitates a high degree of employer coordination in corporatist policy-making and collective bargaining as shown in multiple studies (Martin and Swank, 2012; Rommetvedt et al., 2012; Ibsen and Navrbjerg, 2019; Ibsen, Ellersgaard and Larsen, 2021). Danish business elites overwhelmingly agree on a pragmatic pro-market, proEurope strategy. With an increasing share of services and products sold abroad, Danish businesses and the Danish economy in general depend on free trade in Europe and beyond. A recent study found that 47% of private sector employment is generated by indirect and direct exports to other countries (Copenhagen Economics, 2018), and since 1970 the export share of gross domestic product (GDP) has increased steadily from below 30% to over 58% in 2019 (World Bank, 2021). Nevertheless, business by and large support an extensive welfare state, not least when it comes to education. And while business associations continuously argue for lower taxes, the kind of full-frontal attack on the universal welfare state to lower taxes as seen by business associations in other countries has not occurred. To some extent, businesses see the welfare state as a productive factor for dynamic markets, and even business leaders are supporters of the flexicurity model of flexible labour markets with high social security (Andersen, Dølvik, and Ibsen, 2014). This pragmatic approach to policy facilitates a sharp focus on key demands to governments and trade unions. A key concern for Danish business associations is

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labour supply. Two topics have driven this concern. First, the public educational system should provide the skills demanded by employers. Second, the extensive welfare benefits should not deplete the economy of workers. Governments of both left and right have agreed with this concern from the vantage point of fiscal sustainability of the welfare state. With large cohorts retiring, labour force participation and making work pay has been a top priority in most reforms since the 1990s. Thus, while benefit levels are still generous, eligibility criteria and duration of benefits have continuously been the target in reforms of unemployment benefits, and other benefits like educational stipends have been capped. Some of the reforms have directly targeted migrant groups—whereas others indirectly affect migrant groups by disproportionally reducing their access or level of benefits (Careja et al., 2016). I return to the issue of so-called welfare chauvinism later. Related to labour supply, business associations have been especially vocal in their support of free movement of labour within the EU (Arnholtz and Andersen, 2018) and have supported various work permit schemes—such as the Green Card scheme—to allow foreigners entry to Denmark. Since the EU enlargement, the large influx of workers from Central-eastern Europe either through posting or regular employment, has caused major political upheaval in Denmark. Businesses—especially in labour-intensive sectors such as construction, transportation, cleaning, and agriculture—have come to rely on this workforce. Concerns over the employment and wage effects of migrant workers on Danes have united a coalition of trade unions, left-wing parties, and the DPP that pushes for tighter enforcement of collectively agreed wages for migrant workers who typically receive lower wages and benefits than Danish workers. Some trade unions have even argued for extension of collective agreements or statutory minimum wages to ensure a level playing field, something which most employers vehemently oppose as it would infringe on their autonomy to set wages with or without trade unions (Arnholtz and Andersen, 2018). Danish business associations—and trade unions—have a long tradition of supporting political parties financially to influence partisan politics. Especially the four traditional political parties—Social Democrats, the Social Liberal Party, the Liberal Party, and the Conservative People’s Party—have received financial support from interest groups along the traditional capital vs. labour divide. Contributions by individuals or companies are less common, but also exist, and especially larger companies have made contributions to the Liberal Party and the Conservative People’s Party. Likewise, some new parties such as the neo-liberal party, Liberal Alliance, receive support from business elites. The DPP has, however, traditionally not received much financial support from business. In 2019, the DPP got contributions from A. P. Møller Mærsk A/S, Dansk Erhverv (DE), and two individuals. DE is thus the only business association which gives to the DPP, and this organization gives to many centre-right parties and also the Social Democrats.

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Right-wing populism in Denmark: From protest to mainstream The Danish multi-party system based on proportional representation developed on a stable group of four parties—Social Democrats, Social Liberal Party, the Liberal Party, and the Conservative People’s Party—which represented the Left, Centre, and Right up until the 1960s (Rydgren, 2004). To be sure, other parties such as the Socialist People’s Party and the Danish Communist Party gained parliamentary seats but it wasn’t until the landslide election of 1973 that alternative parties shook the monopoly of the four old parties. Most notable was the entrance of the Progress Party (PP) which was led by the charismatic Mogens Glistrup who famously announced that he paid zero taxes. The PP was a protest party with libertarian views and firmly anti-government. Whilst extremely successful in its first election in 1973, it gradually lost appeal and increasingly became radically antiMuslim into the 1990s. Mogens Glistrup was jailed in 1984 for tax fraud and was replaced during this time by Pia Kjærsgaard (Kosiara-Pedersen, 2019). The PP experienced strong internal rifts over the future of the party with Glistrup and supporters favoring a radical protest-party strategy, whereas Kjærsgaard and her supporters wanted a more pragmatic traditional party strategy. The DPP was established in 1995 by a breakout group of PP. Pia Kjærsgaard and her group built an effective and highly centralized party organization build on principles of ethno-pluralist xenophobia, welfare chauvinism, and antiestablishment populism (Rydgren, 2004). Important for its success was how it borrowed key elements from the radical right-wing populist parties elsewhere in Europe, notably Front National in France (Mudde, 2014). The DPP claims to be anti-establishment, but not anti-democratic, and argues for a return to values based on national conservative democratic values which according to the DPP are under threat from migration and globalization driven by the political elites (Siim and Meret, 2016). The DPP distinguished itself from the PP in several important ways. Firstly, it clearly distanced itself from biological racism or any connotations of fascism (Rydgren, 2004). The DPP does not want to convert the world into being Danish. On the contrary, it claims to protect Denmark from being converted by migrants. This distinction from the PP made the party much more palatable for Danish voters. Second, Kjærsgaard wanted a professional party organization with paying members and a strong local party structure, something the protest-party nature of the PP had not allowed. To do so, Kjærsgaard centralized power among a few selected individuals who carefully monitored party members and consistently got rid of the ‘town loonies’ and neo-Nazis (Kosiara-Pedersen, 2020). Third, the DPP wanted to be successful in parliamentary politics and were willing to compromise, especially on economic issues to get restrictions on migration and asylum-seeking. Fourth, the DPP is pro-welfare for Danes, especially senior citizens, and consistently emphasize social cohesion as a priority (Siim and Meret, 2016). Kjærsgaard’s

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past employment as a caretaker increased her credibility as guardian of the Danish welfare state. The pro-welfare stance of the DPP distinguished the party from its predecessor, the PP. This distinction is most evident on income taxation but can also be detected in wage inequality and social dumping (see below). While Glistrup boasted of having paid zero in taxes, the DPP acknowledged that high-levels of taxation are needed to sustain the welfare state and social cohesion. As such, the welfare state and equality is part and parcel of Danish society and national identity (Jønsson and Petersen, 2012; Siim and Meret, 2016). At the same time, immigration, and the costs of immigrants to the Danish welfare state, are portrayed as a threat to national identity based on equality and national belongingness and—by consequence—as a threat to Danish society (Jønsson and Petersen, 2012). The nativist, welfare chauvinist strategy proved very attractive, and the party immediately gained traction with voters with a solid debut of 7.4% of votes in 1998 (see Figure 5.1). During the 2000s, the vote share grew and stabilized at 12–13% before the extraordinary result in 2015, when the party gained 21.1% of the votes. In the 2019 and 2022 elections, however, the DPP plummeted to 8.7% and 2.6%. There were several reasons¹ for the spectacular electoral defeat in 2019. First, mainstream parties, especially the Social Democrats, the Liberal Party, and the Conservative People’s Party to a large extent adopted the anti-migration policies of the DPP making their voter niche smaller. Second, many voters were disappointed that the DPP victory in 2015 was not converted into government participation and

25

8,00,000 7,00,000

20

6,00,000 5,00,000

15

4,00,000 10

3,00,000 2,00,000

5

1,00,000 0

1998

2001

2005

2007 Votes

2011 2015 Percent

2019

2022

0

Figure 5.1 Electoral results of the DPP 1998–2022. Source: Statistics Denmark, 2022; FT.dk 2022.

¹ In addition, the highly salient Movement for a Europe of Liberties and Democracies (MELD)/ Foundation for a Europe of Liberties and Democracies (FELD) scandal linked to Morten Messerschmidt’s use of EU funds may also have damaged DPP electoral success with voters.

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executive power. Third, two new anti-migration parties made the ballot, stealing voters from the DPP. DPP voters come from all groups of Danish society, but there are some clear patterns, that set the party apart from mainstream parties. A recent study from 2020 shows the distribution of voters across key demographics (see Table 5.2). Most striking is that DPP voters are mostly out of the workforce or blue-collar

Table 5.2 Socio-demographics of DPP voters in 2020. Occupation

Sector

Highest education

Age

Gender Personal Income

Blue-collar White-collar Professional Student Retired Unemployed Private Public Out of workforce Lower Secondary Upper Secondary (Gymnasium) Vocational Education Short Tertiary Long Tertiary 18–24 25–29 30–39 40–49 50–59 60–69 70+ Female Male >99,999 100,000–199,999 200,000–299,999 300,000–399,999 400,000–499,999 500,000–599,999 600,000–699,999 700,000–799,999 800,000–899,999 900,000–999,999

Source: Hansen/Altinget, 2020 (https://www.altinget.dk/artikel/hvem-stemmer-paa-danskfolkeparti-her-er-partiets-typiske-vaelgere).

25.6 17.3 5.2 6.4 39 3 33.5 15.3 51.2 37.3 5.1 35.1 19.9 2.6 5.7 8.5 8.7 17.9 17.5 16.3 25.4 45.8 54.2 6.5 30.3 21.1 21.7 13.9 3.1 1.9 1.4 0.1

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workers. Their highest attained education is shorter than the average Dane, and they are typically older than the average Danish voter. There are slightly more men than women who vote for the DPP, and finally, income levels are typically below the median. These results are in line with international studies of radical rightwing voting (Lubbers, Gijsberts, and Scheepers, 2017), except with regards to the age profile. The DPP is mainly a rural/small town party with low support in the urban areas, especially the capital. In Denmark, however, the low support in urban areas can largely be explained by the different educational and demographic characteristics in rural vs. city areas (Hansen and Stubager, 2019). It can be argued that the typical DPP voters disagree with typical business interests in terms of material interests. Most voters are out of the workforce, typically due to retirement, and therefore care less about or disagree with what business cares about, i.e. pro-business industrial policy on free trade, labour supply, education, and tax reductions. Moreover, some of the DPP constituency interests are the orthogonal of Danish businesses, especially when it comes to anti-EU and labour migration. These interest conflicts have produced loud clashes between business associations and the DPP. However, on some issues related to welfare state retrenchment, the parties have common interests or at least not opposing interests.

Business responses to the Danish People’s Party In the following, I analyse the business responses to the DPP. The analysis is structured around three types of business responses: explicit and implicit loyalty, and loud voice. Loyalty comes in two forms: explicit and implicit. This type of response pertains to the DPP policy stances on chauvinist welfare state retrenchment. The explicit loyalty in Denmark appears when business leaders with a clear political agenda align with the policies proposed by the DPP (Hansen and Stubager, 2019). In Denmark, this form does not entail a normative commitment to populist ideas, but to pragmatic, material self-interest. Implicit loyalty ‘… eschews any high-profile statements of support and basically entails taking a passive stance of keeping one’s head down’. Loud voice, as argued by Feldmann and Morgan (2022 355), entails ‘… outright resistance to populists and involves taking a public stand or opposing the populist agenda’. This type of response pertains to the DPP’s policy stances on anti-EU and labour migration. To the limited extent that businesses have used threats of exit to counter the DPP, it has been done as part of loud voice. Actual exits by Danish businesses as a response to the DPP may have occurred, but it is beyond the scope of this chapter to observe them. I focus particularly on the period, 2001–2011, when the DPP became the key parliamentary support for several Right-wing governments, basing their support on exchanges on welfare state retrenchment for anti-migration policies. As

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noted by Christiansen, Bjerregaard, and Frølund Thomsen, 2019, during these ten years, the DPP proved itself as a ‘normal party’ with high governing capacity and lay to rest concerns on both side of the political spectrum that it would cause havoc to the Danish political-economic consensus based on international competitiveness of Danish business and a generous welfare state. After this period, the DPP found itself in opposition during the first Social Democratic government in 2011–2015, and then returned as parliamentary support for a right-wing government in 2015–2019 but in a different position due to the electoral victory in 2015. The first period is the most interesting as the DPP could position itself as a niche party pushing the limits of what was possible in Danish politics, especially on refugees and migration. When the DPP went into opposition in 2011/2015, its policies were marginalized as its opposite, the Social Liberal Party, set the tone on migration and economic policies (Christiansen, Bjerregaard, and Frølund Thomsen, 2019). And in 2015, when the DPP was back as parliamentary support for the right-wing government, other mainstream parties, including the Social Democrats began adopting policy positions of the DPP on migration. I base the analysis on secondary sources and on 120 news reports² which featured the DPP and the two main employers/business associations, the Confederation of Danish Employers [Dansk Arbejdsgiverforening] and/or the Confederation of Danish Industries [Dansk Industri] during the period 2002–2020, with special attention to 2002–2011. Moreover, I focus on responses to the DPP on welfare state (including taxation), migration, and employment policies. With fiscal, monetary, trade, and investment policies largely constrained by the EU convergence criteria, Denmark retains policy autonomy in a few policy fields. Thus, welfare state, migration, and employment policies have become some of the most salient policy fields in Denmark (Pedersen, 2011) and thus where we can expect most interaction between the DPP and businesses.

Explicit and implicit loyalty: Taxation and chauvinist welfare state retrenchment In 2001, a centre-right coalition government led by Anders Fogh Rasmussen from the Liberal Party took over from the Social Democrats. Its parliamentary support was among others the DPP which gained 12% of the votes, a considerable ² Thanks to Frida Lilli Schlanbusch Nørkjær for excellent research assistance which included gathering and analysing media content from all major Danish news outlets. We used Infomedia to collect media content which featured DPP and the two main employers/business associations, the Confederation of Danish Employers (Dansk Arbejdsgiverforening) and/or the Confederation of Danish Industries (Dansk Industri). We then coded the content with regards to whether DPP and business associations agreed or disagreed on the policy issue. Out of the 120 media reports, DPP and business associations agreed 31 times, and disagreed 89 times. These figures should not be considered representative of agreement/disagreement.

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increase from the 1998 election when the DPP gained 7.4%. It was clear that the attempt by the Social Democrats to establish a cordon sanitaire against the DPP had failed. The new government and business were faced with a handful of large questions; how would the DPP behave on EU policies, taxation, and— importantly—migration? It quickly turned out that the DPP would be a very stable coalition partner. EU policies—while controversial—had become less conflictual as a result of the 1994 opt-outs, that placed Denmark outside any common European security and defence policy, citizenship moves, integrated EU police, and justice policies, and the adoption of the euro. Taxation promised to be more controversial. The incoming government wanted to introduce the ‘Tax Freeze’ [Skattestoppet] which entailed that that no tax or levy could be increased. Rather, the ambition was to lower taxes. As noted, previously, a key feature of the DPP is its pro-redistribution stance on economic policy. Being the self-proclaimed party for the ‘ordinary Dane’, proposals by business to lower taxes, especially for top-earners, have been rejected by the DPP. As stated by the current chairman, Kristian Thulesen Dahl, when confronted with an income tax reform proposal by the Confederation of Danish Industries (DI): ‘We prioritize tax relief in the bottom because of societal cohesion. If we proceed with DI’s agenda, society breaks in half and many less fortunate will be left behind’ (Politiken, 2002, p. 15—own translation). It would thus seem that the DPP was in direct conflict with business on taxation. Nonetheless, the DPP supported tax reforms that substantially reduced marginal income taxes, the major beneficiaries of which were middle-income groups. In 2009, the middle-income tax bracket (6% of yearly income) was removed, and the low-income tax bracket was reduced by 1.5%. Also, importantly, the limit for paying high-income taxes was increased, meaning less wage-earners would have to pay the high-income tax. The latter part of the tax reform was repeated in subsequent reforms. As such, the DPP gave business the second-best option; reductions and caps on taxation, whilst retaining a somewhat pro-redistribution profile (Christiansen, Bjerregaard, and Frølund Thomsen, 2019). Another key issue in the 2001 election was migration and the size of the welfare state (Andersen, 2007). Migrants—especially from Muslim countries—were identified as putting a heavy burden on the fiscal sustainability of the welfare state due to higher welfare dependency rates. The employment policy and chauvinist welfare retrenchment reforms should be seen considering the other migration restrictions passed during the early 2000s. Important reforms on family reunification, residency requirements, and citizenship requirements significantly restricted the entrance of foreigners to Denmark. Thus, the DPP and the right-wing government followed a three-pronged strategy of restricting access, reducing incentives to come, and making staying harder. As noted by various scholars, the DPP was an extremely successful alliance partner for right-wing governments during the period 2001–2011. Skilfully avoiding

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blame for welfare state retrenchment that might hurt Danes, it took credit for multiple reforms that cut benefit levels and eligibility for migrants. As Careja et al. (2016) argue, it is useful to think of reforms as direct or indirect welfare chauvinism: Direct welfare chauvinism occurs as a result of legislative changes that explicitly exclude recipients from social protection or reduce the level thereof on the basis of ethnicity. Indirect welfare chauvinism is the result of policy measures that apply to both natives and immigrants, but which deliberately negatively affect immigrants the most.

The DPP succeeded in both forms but were often very explicit about how indirect chauvinism targeted migrants. One of the most significant direct policies aimed at reducing dependency rates and alleviating fiscal pressures was the so-called ‘Start Assistance’ scheme [Starthjælp] of 2002. The scheme cut cash benefits for non-EU³ migrants coming to Denmark after 1 July, 2002 by 35–50% (Andersen, 2007). Eligibility for the scheme required that applicants had exhausted any job opportunities or activation schemes within the active labour market policy system. The scheme was passed in parliament with support from the DPP and immediately put into action. 2002 also saw a significant indirect reform ‘More people into work’ [Flere i Arbejde] and in 2004 the so-called Cash Benefit Ceiling [Kontanthjælpsloftet] was introduced to cap the accumulation of different benefits for households. In both reforms, the make work pay and tightening of activation measures affected migrant workers disproportionately but applied to all citizens and residents. The DPP were very clear about the intentions of the reforms: ‘It’s true that this hits hard on the huge Somali family living in a big apartment. But that is exactly the purpose because it should prompt one of the parents to seek a job.’ (Representative of the DPP cited in Careja et al. (2016: p. 16).) Business associations were silently supportive of the reforms to begin with but later applauded how the focus on welfare benefits and making work pay had increased labour force participation of migrants. ‘It [increased labour market participation of migrants] is to a great extent due to the stronger economic incentives inherent in the Start Assistance and the Cash Benefit Ceiling’. (Representative of DA in Berlingske (2007).) In general, business associations kept the focus on making work pay and ignored discussions about whether reforms would break with the universalist principle in the welfare state or could be considered discriminatory (Andersen, 2007). Arguably, this response is consistent with the focus on labour supply and competitiveness of Danish companies. By making work pay—especially for groups at the margin of the labour market—labour supply might increase making recruitment in hard-to-fill positions easier. ³ Citizens from Norway and Lichtenstein were exempted from the rules.

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However, the positive employment effects of reforms in the 2000s were contested (Rosdahl and Petersen, 2006) and the left-wing parties and organizations began framing the direct chauvinist reforms as attempts to create poverty among migrants to make them leave the country. Business associations and mainstream right-wing parties in government insisted that reforms worked to reduce disincentives to take employment and championed the reforms as conducive to integration of migrants through employment. DA produced numerous reports and policy papers on the employment gap between Danes and non-Western migrants, putting more emphasis on the societal costs of lower labour market participation of the latter. However, the framing was very different from that of the DPP. Whereas DA spoke of costs and opportunities, the DPP saw compliance to stricter rules as an ultimatum: An ultimatum is required. It is necessary to tell the groups of immigrants that are still outside the labour market; that if they want public benefits, they must meet the demands we pose in terms of taking an education or job training … otherwise the consequence is to accept a repatriation benefit and then return to the original home country. DPP representative on the 2011 Higher Ambitions Reform, cited in Careja et al. 2016: 17.

In the end, business associations agreed with the policy direction of tightening eligibility and reducing benefit levels, but refrained from adopting the anti-migrant rhetoric, which could have alienated many of the member companies managed by or employing foreigners. The 2001–2011 period showed that the DPP was ready to compromise its prosocial policies for concessions on refugee migration (Kosiara-Pedersen, 2020). In other words, the cultural new-politics dimension was the most important. However, the DPP was also ready to make difficult decisions, showing its movement from niche-party to mainstream party. In the aftermath of the Financial Crisis the right-wing government introduced austerity policies for around 24 billion Danish Kroner (DDK). The DPP provided the votes for the austerity plan and found money in the 2010 reform of unemployment insurance, halving the benefit period from four to two years. While the move shook the pro-social profile of the DPP, the party attempted to brand itself as a responsible party able to make difficult decisions. Business associations could not believe their luck—reducing the benefit period was a key policy goal for them, whereas trade unions condemned the DPP, arguing that it had shown its true neoliberal colours. The right-wing government was replaced in 2011, and the 2011–2015 CentreLeft Government seemingly put an end to the DPP’s relentless victories on refugeemigration issues. For one, the Start Assistance was repealed as it was deemed responsible for creating poverty and no employment. It was later re-introduced. However, other ‘make work pay’ policies, also the ones that indirectly targeted

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migrants, remained. More importantly, while already under way in the 2000s, Social Democrats made a strong strategic commitment to adopt most of the DPP’s policy stances on refugees and migrants in the aftermath of the 2015 election defeat. This strategy of ‘adoption’ of the populist policies (Heinze, 2017) had already taken place in the Liberal Party and the Conservatives. Indeed, the 2015–2019 right-wing government prided itself on passing 114 restrictions on refugees and migrants (Udlændinge-og Integrationsministeriet, 2019), but the political premium on passing them decreased as the Social Democrats joined many of the reforms. The policies of the DPP had become mainstream (Christiansen, Bjerregaard, and Frølund Thomsen, 2019; Kosiara-Pedersen, 2020).

Loud voice: Labour supply and labour migration Business associations are most vocal and speak with the loudest voice to the DPP when it comes to labour supply and labour migration from the EU and beyond. In 2004, the EU enlargement began a gradual opening of the Danish labour market to workers from the new member states. The opening was welcomed by Danish business associations seeing bottleneck problems and high wages as a key impediment for competitiveness and growth. Denmark, with its small population and—at the time—generous early retirement schemes often ran into labour supply shortages which in turn drove up wages. While trade unions and business associations never agreed on the extent of the problem, economists and politicians made labour supply the major problem to solve in the 1990s and 2000s (Larsen and Andersen, 2009). The DPP was staunchly against the inflow of migrant workers and in many ways framed their resistance in alignment with concerns of trade unions about dumping of wages and conditions of employment when migrant workers entered Denmark at levels below provisions in collective agreements (Arnholtz and Andersen, 2018). These issues are most pronounced in construction and transportation, but also in agriculture and facility maintenance. The coupling of labour supply and EU labour migration was a clear winner for the DPP. Not only could the DPP appear as the champion of Danish wages and employment for Danes. It could also bash the EU for introducing foreign workers who undermined the Danish collective bargaining model and exploited generous welfare state benefits while they were in the country. The inability of trade unions to organize migrant workers similarly made the issue a winner for the DPP. As long as foreign workers were not a significant part of the union movement (Arnholtz and Refslund, 2019), the DPP could team up with unions against employers hiring or engaging foreign workers, the EU, and pro-EU parties. This uneasy alliance (union leaders are overwhelmingly Social Democrats and thus in partisan conflict with the DPP), supported the DPP’s narrative about being a party for the working-class Danes.

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The loud voice of business against DPP’s anti-labour migration platform has manifested itself in many ways. In 2002, two years before the EU enlargement, the DPP wanted to suspend new member states’ access to the Danish labour market for seven years due to concerns over wage dumping and job losses for Danes. The right-wing government passed a reform that stated that the terms and conditions of migrant workers should be equivalent to those of Danes. In other words, terms and conditions should align with provisions in collective agreements. Moreover, the transition period agreement allowed parliament the right to halt migration if deemed necessary for the preservation of employment and wage levels of Danes. The DPP and the left-wing Red-Green Alliance [Enhedslisten] did not join the agreement. Business associations were generally happy with the agreement which allowed migrant labour from the new member states but at the same time upheld the collective agreements that they were party to. However, the accession agreement was temporary and did not end the regulatory challenges of migrant labour (Arnholtz and Andersen, 2018). Danish collective agreements are framework agreements that set minimum wages upon which actual wages are settled at the company level. Therefore, actual wages are typically much higher than minimum wages. Migrant workers and especially posted workers oftentimes were paid minimum wages or below (Arnholtz and Hansen, 2009). The DPP framed this as social dumping and thus aligned itself with trade unions in construction, transportation, and agriculture. While trade unions argued that they wanted equal wages for migrant workers, the DPP went further and wanted a stop for labour migration. Business associations, on the other hand, argued that a stop for labour migration would severely hamper labour supply. Furthermore, they argued that collective agreements were deliberately flexible, and as long as migrant workers were paid the minimum, there was no social dumping problem (Arnholtz and Andersen, 2018). This difference about how to implement collective agreements pitted trade unions and business associations against each other, bargaining round after bargaining round, and the DPP used this conflict to champion itself as a pro-labour party, causing strife between business and the DPP. This conflict continued into the 2010s and does not seem to have ended despite multiple collective agreement revisions, new EU directives, and countless studies of wage and employment effects of labour migrants. When confronted with research by DA showing that Eastern European workers contributed with around a billion DKK in taxes, the DPP Party Chairman, Kristian Thulesen Dahl, simply replied: There is no doubt that many employers are quite content having cheap Eastern European workforce at their disposal—a workforce which is more flexible than many parents in Danish families with kids can be. I consider this [research] to be a policy position statement more than anything. Kristian Thulesen Dahl, 4.10.2014 cited in Berlingske Nyhedsbureau.

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The DPP’s stance on high-skill labour migration has fluctuated over the years. In 2007, Denmark introduced the so-called Greencard Program to attract highskill workers. Like programmes in Canada and the US, the Danish Greencard allowed non-EU migrants to enter Denmark without a concrete job if they fulfilled certain requirement regarding level of education, age, and labour market experience. The DPP was initially a strong critic of the programme, arguing that it created an open door for cheap migrant labour and welfare tourism. Business associations, who had championed the programme, condemned the DPP’s critique as a stumbling block for talent recruitment internationally. In the end, the DPP reached an agreement on the programme with the government in 2006. However, the party would continuously contest the programme and call for either its end or reduced scope due to media stories about abuse of the programme not leading to high-skill work immigration but mid-level to low-skill jobs for migrant workers (Berlingske, 2010). However, the DPP position was clearly based on defending working-class jobs of Danes, rather than Danes with graduate degrees. In other words, the DPP only criticized the Greencard Program when it seemed to threaten its constituencies. Finally, in the wake of the 2015 refugee crisis, business and the DPP were in conflict over labour market entrance of refugees. The neo-liberal think tank Centre for Political Studies (CEPOS) and right-wing parties aired proposals about a ‘refugee inclusion-wage’ to facilitate work and employment for refugees. The wage was supposed to be significantly below the normal minimum wage in collective agreements to incentivize hiring refugees. The DPP was staunchly against the proposal, arguing that refugees should not work in Denmark to begin with, and should not undercut Danish wage levels if they were to work. Interestingly, business associations were on the side of the DPP on this one, and thus went against some of its members. DA argued that the inclusion-wage would undercut collective agreements. In 2016, a tripartite agreement between the government, Landsorganisationen (LO), and DA allowed refugees to work as apprentices (and on apprentice wages) temporarily until they could transition into regular employment (the Basic Integration Training Programme (IGU)). The programme was a success and meant work for thousands of refugees. Indeed, it was such a success that the DPP wanted to get rid of it in 2018, arguing that it had gone too far and took away jobs from Danes. Also related to labour supply, a conflict between Danish business and the DPP arose on early retirement. The process was peculiar, because the DPP supported a gradual phasing-out of the early retirement scheme in the 2000s but had a change of heart in the 2010s. In 2017, the DPP launched a campaign to re-introduce early retirement for ‘worn-down workers’ together with the Social Democrats and the General Workers’ Union (3F) organizing blue-collars workers with limited education. Business associations reacted loudly with strong concerns about the effects on labour supply and fiscal viability of the welfare state

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if workers retired too early. The early-retirement proposal was testament to the rapprochement between the DPP and the Social Democrats, and launching it together with the trade unions, seemed to undergird the pro-social profile of the DPP. Despite criticism from business associations, an agreement on early retirement for workers with long labour market experience was made in 2020 between the Social Democratic Government, the DPP, and the Socialist People’s Party. In sum, Danish business has spoken with a loud voice when it comes to labour supply and labour migration. Clearly, this is a subject that affects businesses to a great extent, and business associations have not minced words—even when it meant going up against both the DPP and pro-business right-wing governments. In the end, the loud politics of labour supply and labour migration has not gone against business interests, except with regards to early retirement. EU labour migration is here to stay, and while the DPP has gained many voters on their antilabour migration stance, they have not stopped the influx of workers from new EU member states. Instead, their wins on refugee and migration policy have come on restricting the number of non-work refugees and migrants allowed into Denmark and reducing generosity and eligibility for welfare state benefits when foreigners are in Denmark.

Discussion and conclusion Danish business associations are known for a pragmatic pro-market, pro-Europe strategy which favours political results, rather than ideological positioning. A lean but universal welfare state is accepted if it undergirds competitiveness of Danish companies. Moreover, Danish businesses prefer political stability. As such, the responses of Danish business to the rise of right-wing populism resemble the responses of business elites in many other countries (Mudde, 2020). As long as the DPP did not interfere fundamentally with a pro-market public policy, business associations have remained relatively quiet, or even shown implicit loyalty. Loyalty is most pronounced on chauvinist welfare state retrenchment which directly or indirectly affects non-Danes negatively. However, this chapter has also shown the limits to business’ silence. On the issue of labour supply and labour migration, business associations have consistently and loudly opposed the policy proposals of the DPP. Increasing labour supply is at the core of the political strategy of the business association and permeates policy issues from education, taxation, pensions, and—not least—migration. Thus, any political proposal from the DPP which counters this strategy has been met with loud voices of Danish business. Other issues have also caused loud business responses from time to time. AntiEU stances by the DPP have regularly upset business and spurred conflict in

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the media. Danes are known to be Euro-sceptics as evidenced by the 1994 optouts, and the DPP—together with anti-EU left-wing groups—continue to question Danish EU membership. In the 2014 European Parliament election, the DPP candidate, Morten Messerschmidt, received a record level number of votes, fuelling more concerns about Danish membership. The year before this election, the Confederation of Danish Industries and trade unions in manufacturing went together to fund a pro-EU think tank (Tænketanken Europa) to focus on European issues and disseminate EU-related research. Clearly, the economic elite was afraid of the EU question might appear again in Danish politics—as it did in Britain, albeit later. However, the anti-EU stance of the DPP has become somewhat gratuitous— especially since Brexit—given that it is very unlikely that Denmark—with its highly export-led growth model—would leave the Single European Market. Perhaps for this reason, business associations find the DPP less of a threat on this issue. Tellingly, the pro-EU think tank restructured in 2019–2020 to focus more on the position of the EU in global affairs, instead of the EU in Danish affairs. Other—perhaps more symbolic, but important—issues have also elicited a strong business response, for example, the Muhammed drawings conflict in 2005–2006 which severely affected exports, or the introduction of tighter border control. Business leaders have looked at these issues with concern about how it would damage Denmark’s image abroad. And some business leaders have called for caution. But these issues and years of tightening rules for asylum seekers and migrants have not stopped exports from soaring. Similarly, international talent recruitment does not seem to have suffered badly. Denmark is still very much integrated into international markets, and the DPP’s cultural defence of Danish values has not had a negative effect on the national accounts. In many ways, the pro-welfare, anti-migration policy of the DPP has now become mainstream in Danish politics (Green-Pedersen and Odmalm, 2008; Christiansen, Bjerregaard, and Frølund Thomsen, 2019; Kosiara-Pedersen, 2020). On the left, the Social Democrats seem steadfast in their newly adopted strictness of refugee and migration policies, and Social Democrats are—after all—more credible when it comes to pro-welfare policies. On the right, the Liberal Party and the Conservatives have a long history of strict refugee and migration policies, and the DPP was never in the business of outbidding these parties on neoliberal policies. The DDP could become more radical on migration, but this space seems occupied by the New Right [Nye Borgerlige]. Arguably, the Danish version of right-wing populism has triumphed, but the DPP may have lost in the end. It therefore also stands to reason that Danish business associations are conforming to this consensus, and only respond loudly, when necessary, i.e. if the DPP or other parties seriously interfere with core business interests on free trade, free movement of labour, and expansion of labour supply.

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6 Italy Populism and Business in a Stagnant Economy Davide Vampa

Introduction Since the late 2000s, when the financial crisis and Great Recession hit the global economy, the Italian political landscape has changed significantly. The party system that had emerged in the 1990s and had consolidated in the early 2000s was altered by the emergence of a new populist challenger, the Movimento 5 Stelle (M5S) [Five Star Movement]. This was accompanied by the collapse of Silvio Berlusconi’s ‘neo-liberal populist’ party, Forza Italia (FI) [Forward Italy], and the transformation of a regionalist populist party, the Lega Nord (LN) [Northern League], into a full-fledged ‘state-wide’ populist radical right party, rebranded Lega (League, the reference to the North was dropped). These developments occurred in a context of stagnating (and even declining) economy, migration crisis, and rising Euroscepticism. Business elites thus had to respond to multiple political and socio-economic shocks. The question that this chapter seeks to address is how their relationship with a political class increasingly dominated by populist themes has evolved. How have they adapted to shifts in political and policy-making dynamics? And, in turn, how have new populist actors engaged with the demands coming from groups representing the business community? Italy is a particularly interesting case because it is one of the Western European countries where populism achieved its earliest and most significant successes, well before the recent wave of anti-system politics (Hopkin, 2020). Italian rightwing populists initially occupied a clearly pro-market position in the political space. Gradually they adopted a more nativist and culturally ‘authoritarian’ political profile, while blurring their economic policy stances. This radicalization of the cultural dimension accompanied by an increasingly centrist, and ambiguous, approach to economic issues is a phenomenon that has been identified in the programmatic development of many other populist radical right parties (de Lange, 2007; Eatwell and Goodwin, 2018). This chapter shows that this is in part linked to broader electoral (re-)alignments. In Italy businesses are far from being a cohesive, homogeneous category. Deep differences exist between small businesses, mainly focusing on the domestic market and wary of further European integration, and Davide Vampa, Italy. In: Business and Populism. Edited by Magnus Feldmann and Glenn Morgan, Oxford University Press. © Davide Vampa (2023). DOI: 10.1093/oso/9780192894335.003.0006

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large, export-oriented companies, generally supportive of the European Single Market and the regulatory role played by EU institutions. The right-wing populist League, which in 2019 became the largest Italian party, could rely on significant support from the former group, while being underrepresented in the latter. Additionally, it has forged an electoral coalition which also includes manual workers, attracted by the party’s ‘authoritarian’ tendencies. The growing fractures between business categories, the creation of a ‘Eurosceptic’ coalition combining important sectors of lower and middle classes and the radicalization of the League have all shaped the relationship between populists and business elites in Italy. Today the party has not fully abandoned its ‘anti-tax’, ‘anti-state’ rhetoric but, at the same time, it supports a ‘social nativist’ agenda (Piketty, 2020: 245–246), promoting protection of the national economy and the expansion of welfare rights limited to Italian-born citizens and excluding immigrants. This is also because, following its transformation from regionalist to ‘state-wide’ party, the League competes with the more socially oriented M5S, which achieved its most significant successes in the poorer areas of the country (southern Italy). In this chapter, I first offer an overview of how populism has evolved in Italy since the 1990s, focusing in particular on the political changes which occurred after the crisis of 2008. I pay particular attention to the transformation of the League accompanied by the emergence of the M5S. I look at the socio-economic coalitions that the two populist parties have created and how they relate to their economic and social policy agendas. I show that the League provides an interesting case of a populist party characterized by high levels of ideological ‘adaptability’— confirming the ‘chameleonic’ nature of populist parties (Taggart, 2000)—and oscillating between support for neo-liberal economic policies and pro-welfare positions (filtered through the lens of its nativist ideology). This is then linked to a discussion of how business groups have responded to the new wave of populist politics started during the Great Recession. I show that the ambiguous position of Italian populists on economic issues is mirrored by ambiguous responses from business elites, which also reflect the divide existing between small/medium sized enterprises and large industrial and financial companies. Overall, a ‘soft voice’ business response to populism seems to have prevailed (see Chapter 1)—it became louder only when confronted with clearly redistributive policies proposed by the M5S. The last part of the chapter also considers more recent developments following the start of the Covid-19 pandemic, which marks a new critical juncture in Italian (and world) politics.

Populism before the crisis Populism is not a recent phenomenon in Italy and its ‘economic’ dimension emerged very soon. In the 1990s the Italian party system underwent a deep transformation, which was accompanied—and, to a certain extent,

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determined—by the rise of new political actors. Among these, the Lega Nord (LN) [Northern League], a ‘regionalist populist party’ (McDonnell, 2006), achieved significant electoral success. Since the beginning, it presented itself as a challenger to the political establishment and, in the early 1990s, it contributed to accelerating the decline of the old ruling elite by appealing to the more economically prosperous and dynamic constituencies of northern Italy, which were also more exposed to globalization and Europeanization (Golden, 2004). Central government was seen as corrupt and inefficient and excessive bureaucracy was identified as one of the key obstacles to entrepreneurship and economic growth. Therefore, the LN demanded more autonomy for the regions of northern Italy, bringing the issues of fiscal federalism and devolution to the top of the political agenda (Giovannini and Vampa, 2020). Yet, while triggering change, the League paved the way for the rise of another populist actor. In 1994, the media tycoon Silvio Berlusconi saw the collapse of the system as an opportunity to launch a new political project: Forza Italia (FI) [Forward Italy]. Also, this party relied on a populist, ‘anti-political’ discourse. Additionally, it was based on what Hopkin and Paolucci (1999) defined as a ‘business party model’, which was characterized by a light, marketing-oriented organization dominated by a leader-owner. As highlighted by Edwards, (2005), Berlusconi offered leadership that defied ideologies and interest groups. In some respects, by creating a sense of his own celebrity through publicizing his wealthy style of life as something to be aspired to, he was a precursor of more recent populist leaders—including, for instance, Donald Trump. Generally, while his personal image was central—as often happens in populist parties—Berlusconi was not just seen as a charismatic political leader but as a successful businessman, who could bring entrepreneurial virtues into the political sphere. His anti-tax and anti-state campaigns and his direct appeals to the Italian electorate, without any intermediation of traditional political structures, gave life to a form of populism that has been defined as ‘neo-liberal’ (Mudde, 2007, 47). Hence, since the beginning, populism and business were closely interlinked in the Italian political system. Lega Nord and Forza Italia soon formed a right-wing coalition, which would alternate in power with a centre-left one until the late 2000s. The period leading to the financial crisis of 2007–2008 was characterized by relative political stability accompanied by a general slowdown of economic growth. In the 1980s Italy had experienced a period of sustained economic expansion, also known as the ‘second economic miracle’ (Mignone, 2008: 143) after the first one in the 1950s and 1960s. Yet this growth had been fuelled by a significant increase in public spending. By the beginning of the 1990s, Italy’s public debt had skyrocketed to 120% of gross domestic product (GDP) (Francese and Pace, 2008), becoming the largest one in Europe. Therefore, the 1990s and early 2000s were years of fiscal adjustment and consolidation, which were also driven by the convergence criteria established by the Maastricht Treaty in 1992. These imposed control over inflation, public debt and the public deficit, exchange rate stability, and the convergence of

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interest rates. Having a massive public debt was therefore a clear obstacle on Italy’s path to European integration, which was regarded as a top priority by a large part of the political and economic establishment. Therefore, when the financial crisis hit the country, Italy had already been subject to almost two decades of strict deflationary policies (Blyth, 2013): cutting or freezing public expenditure, privatizing state-owned assets, and, more generally, downsizing the role of government in the economy. All these adjustments, while allowing Italy to be one of the eleven EU member states joining the Eurozone immediately after its creation, clearly contributed to the slowdown of its economy, which in the 1980s had been propelled by growing public spending and competitive devaluations.

Populism after the crisis Even though the Italian economy was not booming at the start of the financial crisis—unlike the Spanish one (Vampa and Gray, 2021)—it was still hit by a sudden shock in 2008. The recession was accompanied by rising popular dissatisfaction with the political system, which became even more evident after the meltdown of the last Berlusconi government in 2011. The sovereign debt crisis in the Eurozone led to the creation of a technocratic government under the leadership of former EU commissioner Mario Monti (Marangoni and Verzichelli, 2015). This government was not just ‘technocrat-led’ (McDonnell and Valbruzzi, 2014) but, in fact, it did not contain a single party representative. It was ‘externally’ supported by both centre-right and centre-left main parties—but not by the League—and had the clear mandate to implement harsh economic and social reforms. The Italian employers’ association, The General Confederation of Italian Industry, commonly known as Confindustria, strongly supported this technocratic turn and the set of austerity policies promoted by the new government. Indeed, the daily Italian business newspaper, Il Sole 24 Ore, which is owned by Confindustria, launched an appeal on 10 November, 2011, a few days before the creation of the Monti executive, asking Italian politicians to ‘be quick’ [Fate presto!] and give life to a ‘national emergency government’. This government was expected to include personalities ‘who have demonstrated to be familiar with the language of markets and states and, therefore, have what it takes to negotiate … and convince investors of the solidity and reliability of the Italian sovereign bonds’ (Napoletano, 2011). Thus, in a situation of emergency, the main employers’ association immediately sided with technocracy rather than populism. The mix of economic and political crises accelerated the de-structuring of the established party system (Karremans, Malet, and Morisi, 2019) and favoured the emergence of M5S. Founded by the comedian Beppe Grillo, this ‘party-movement’ did not clearly position itself on the left-right political continuum. Rather, it has been defined as a form of polyvalent populism (Pirro, 2018) or valence populism (Zulianello, 2020). Indeed, the M5S managed ‘to push the “thin-centered” nature

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of the populist ideology to its zenith by being able to detach itself from any particular ideology, and/or to attach itself to diverging but coexisting ideologies’ (Pirro, 2018, 445). Generally, however, the M5S campaigned for pro-welfare and proenvironment policies that were also central for more clearly left-wing populist parties, such as Podemos and Syriza, which were gaining increasing support in other southern European countries. On the right of the political spectrum, the crisis resulted in Berlusconi’s irreversible decline. Initially also the LN was identified with the old system and was no longer regarded as a ‘challenger’ (Scantamburlo, Alonso, and Gómez, 2018: 615)—quite ironic for a party that had in turn contributed to the collapse of the established party system in the 1990s. The LN itself was hit by corruption and party funding scandals, one of which even involved Umberto Bossi, leader of the party for more than two decades. He was forced to resign in 2012 (Cento Bull, 2013). Bossi’s successor, Matteo Salvini, therefore inherited a party that in 2013 was electorally and organizationally very weak. The new leader soon realized that in order to revive the League in the new political context, he needed to radically reshape its political message and put aside the core regionalist character of the LN (Vampa and Gray, 2021). Albertazzi, Giovannini, and Seddone (2018) have empirically shown that in his political communication on social media, Salvini (but also the party organization as a whole, which followed the leader) gradually deemphasized the importance of themes linked to the traditional territorial focus of the party. Messages that resonated well beyond the North were instead privileged by the leadership. The declining role of the ‘federalist’ agenda was accompanied by an increasing relevance of more anti-immigrant, law and order positions, which in the 2010s became clearly dominant. Additionally, the party moved from a clearly pro-European stance in the 1990s (Chari et al., 2004; Giordano, 2004) to radical Euroscepticism in the 2010s (Vampa and Gray, 2021). The so-called ‘refugee crisis’, which intensified in 2015 and saw Italian southern coasts particularly exposed to new arrivals, marked another important critical juncture in Italian politics. By overlapping with previous financial and EU crises, it contributed to conflating migration with a general sense of insecurity within public opinion (Castelli Gattinara, 2017), creating a fertile breeding ground for the nativist and Eurosceptic discourse of right-wing populists. The League would then emerge as the main beneficiary of these political shifts.

Populism, the economy and Europe If we consider its economic positions, the League, like many other populist radical right parties, started as a pro-market, anti-state party (McGann and Kitschelt, 2005) with a clear ‘fascination with neo-liberal economic policies and its demand for lower taxes, stronger anti-trust and state privatizations’ (Zaslove, 2008: 171). For instance, the party supported legislation aimed at dismantling the state’s monopoly over the economy and the dominance of large industry. Yet, over time,

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the LN became less openly neo-liberal and took a more critical stance towards the free market and, particularly, towards globalization. After 1996, the League ‘intensified its attacks on what it perceived as an unholy alliance between economic elites at both the domestic and at the international levels’ (Zaslove, 2008: 174). Again, this was a general trajectory in Europe, which was followed by many populist radical-right parties becoming more anti-globalization and adopting more ‘centrist’ positions on economic issues (De Lange, 2007). In sum, the LN distanced itself from the mainstream right, not only by becoming more radical on sociocultural issues but also by rejecting the idea of the ‘flat world’ (Friedman, 2006) advocated by pro-market supporters of globalization. It is therefore not a coincidence that the League was able to gain support from a rather heterogeneous set of constituencies. Various studies and surveys have consistently shown that the LN is not only successful among small business owners and artisans but also among blue collars. Beirich and Woods (2000: 132) showed that, already in the late 1990s, the League had become ‘Italy’s largest working-class party’. This was possible because the League articulated ‘a populist ideology of Northern identity grounded in local communities and economic interests’. By defying the traditional left/right socio-economic dichotomy, it started challenging ‘cosmopolitan large-scale capitalist industries and bureaucrats’, who were seen as ‘a threat to the people, that is, as foreign elements that do not understand people’s real needs and interests’ (Beirich and Woods, 2000: 133). This hostility towards supranational and transnational forces grew as Italy’s economy continued showing signs of structural weakness, which, as already mentioned, had become even more noticeable once the country joined the Eurozone. It is not surprising that, particularly after the crisis, Euroscepticism grew considerably in the two key constituencies of the League, small businesses and manual workers. Table 6.1 is based on data from Eurobarometer in 2019 (Eurobarometer 91.5) and shows differences with a previous Eurobarometer survey conducted in 2008 (Eurobarometer 69.2). Small business owners were still clearly pro-EU in 2008. Yet in 2019 the share of people classified in this category, who declared not to trust EU institutions, increased by 16.6 percentage points, thus tilting the whole group to the Eurosceptic camp. Manual workers were already quite Eurosceptic in 2008 but became even more so in 2019. However, this trajectory was not followed by other two key professional categories. Managers and professionals, including high-skilled self-employed voters and managers in large firms, actually became more pro-EU in the same period of time. The same happened in the case of whitecollar workers, most of whom are employed in the public sector. A striking aspect of these data is the increasing polarization of the electorate, which is also highlighted by the significant reduction of respondents who opted for ‘don’t know’. In 2008 a sizable sector of the public did not have strong views on the EU. Clearly, in 2019, this was no longer the case.

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Table 6.1 Trust in European Union Institutions in 2019 (%, difference with 2008 in brackets).

Tend to trust Tend not to trust Don’t Know

Small business owners

Manual Workers

Managers, professionals

White Collars

43.6 (−5.1) 48.9 (+16.6) 7.5 (−12.5)

30.9 (−5.4) 59.3 (+14.1) 9.9 (−8.6)

56.6 (+8.5) 34.1 (+3.5) 9.3 (−11)

53.6 (+12.4) 42 (+5.6) 4.4 (−18)

Source: author’s own calculation based on Eurobarometer 69.2 for 2008 and 91.5 for 2019.

Table 6.2 Difference between party support in one category and overall party support.

League (populist) M5S (populist) PD (centre-left)

Small businesses

Manual Workers

Managers, highly skilled professionals

White Collars

Unemployed

+6.2

+5.9

−4.5

−2.9

+0.8

−1.1 −6.1

+4.1 −6.5

−1.7 +3.7

−3.2 +0.1

+4.3 −8.5

Source: Ipsos post-election survey.

In the 2018 general election, the League increased its share of the vote from a meagre 4.1% to 17.4%, thus becoming the third-largest party in Italy and the largest party on the right (Vampa, 2018). Matteo Salvini’s new ‘national’ League was no longer confined to the North of Italy but, for the first time in its history, became electorally relevant in most of the country. Yet in the South another populist party turned out to be dominant: the M5S. Interestingly, both parties were particularly strong among manual workers. Table 6.2 shows that the League’s share of the vote was 5.9 percentage points greater within this category than in the whole electorate. The M5S had a similar positive score. On the other hand, the main centre-left party, the Partito Democratico (PD) [Democratic Party], was underrepresented in this group, thus reflecting a general European pattern of social democratic weakening in working-class constituencies. League and M5S diverge in the smallbusiness owners’ category. Here only the League confirmed its strength. Again, the PD has a negative score in this sector of the electorate, while performing particularly well among managers and highly skilled professionals (and also among pensioners, not included in the table). The M5S is particularly strong among the

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unemployed¹ and this reflects the geographical distribution of the vote. Whereas the League, despite expanding its territorial base, remains particularly successful in the industrial and economically dynamic North, support for the M5S is strongly and positively correlated with deprivation and unemployment, which are pressing issues in the South. Another important characteristic of the Italian North is that it has experienced a more significant increase in immigration than the South. While it is true that during the refugee crisis southern regions were more exposed to new arrivals, data of the Italian Statistical Office (ISTAT) show that the majority of immigrants eventually find jobs and settle in the North. Additionally, a significant share of the immigrant population does not come from Africa, Middle East, and Asia but from Eastern Europe (Romanians form the largest group) thanks to freedom of movement within the EU. Unsurprisingly, the same categories that have become more Eurosceptic and have cemented the League’s support over the last years are also the ones that have a very negative view of immigration in connection to the economy. This is shown in Table 6.3, which links social conservatism (Norris and Inglehart, 2019) to the economic dimension. Once again, the gap between small business owners and managerial/highly skilled professional categories is quite evident—the latter having largely positive views of the economic impact of immigration. This clearly points to a fracture existing within ‘business-oriented’ constituencies, which, as is shown below, also affects the relationship between business elites and populism. In sum, by relying on welfare and economic ‘nativism’, the League was able to attract support from a heterogeneous coalition of small business owners and blue collars/manual workers. Welfare chauvinism increasingly became an important aspect of the policy platform of the party, combined with ambiguous positions on protectionism. Generally, the League was more aligned with the interests of small and medium sized businesses than with managerial

Table 6.3 Is immigration positive or negative for the economy (2017)?

Positive Negative Don’t Know

Small business owners

Manual Workers

Managers, highly skilled professionals

White Collars

41.8 56.1 2

42.7 53.8 3.5

54.5 39.4 6.1

45.2 49.5 5.3

Source: Eurobarometer 2017.

¹ Results for the unemployed are not presented in Table 6.1. However, it is worth mentioning that in the 2019 Eurobarometer survey 70.3% of Italian unemployed stated that they did not trust EU institutions, a jump of almost 20 percentage points from 2008.

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categories and large firms. This also resulted in concrete programmatic statements and policies once the party formed a coalition government with the M5S in the aftermath of the 2018 general election.

The populist government of 2018–2019 The simultaneous victory of the M5S and the League in the 2018 general election eventually led to the formation of a populist coalition government. Despite both coming from years of opposition to previous executives, the two parties had to compromise on a wide set of policies. The League’s manifesto for the 2018 election reflected the party’s attempt to adapt its original pro-business approach to its nativism and its appeal to working-class voters (Lega, Salvini Premier, 2018). Apart from focusing on anti-immigration and law and order policies, a key theme for right-wing populists (Mudde, 2007), the party supported the creation of a ‘flat tax’ rate at 15%, a radically neo-liberal policy. It also advocated a loosening of the power of tax authorities. At the same time, it opposed relocation of businesses to other countries, a move against large companies and multinationals. This pro(Italian)business approach was combined with pro-welfare positions. The party pledged to reverse the 2011 pension reform, which had increased retirement age. It also supported more public investment in poorer areas of the countries (particularly the South—quite a significant development for a party that in the past had mobilized against southern Italian regions). Lastly, it advocated the introduction of a minimum wage and the repeal of the job market reform approved by the previous government, the so-called ‘Jobs Act’, which had increased flexibility, reduced job market segmentation, and favoured the swift reallocation of workers from slow- to fast-growing firms (Pinelli et al., 2017). There were some similarities between the League’s programme and that of the M5S (Movimento 5 Stelle, 2018), particularly their willingness to change the pension reform and job market reform. Yet, unlike the League, which relied on support from wealthy constituencies in the North of Italy, the M5S mainly appealed to lower social strata (as shown in Table 6.2). Hence, for instance, the M5S supported the introduction of a ‘citizenship income’ [reddito di cittadinanza], which was different from and more radical than the minimum wage proposed by the League and was originally presented as an anti-poverty instrument (Stamati, 2020). Additionally, the M5S was more sensitive to environmental issues than the League, and was against investments in large infrastructural projects with high environmental impact, particularly the high-speed train line connecting Turin and Lyon (Biancalana, 2020). Eventually, the two parties reached a compromise and signed the ‘Contract for the Government of Change’ (Contratto per il Governo del Cambiamento, 2018—Contratto, 2018, from now on). They easily agreed to repeal the more restrictive aspects of the previous pension reform (Contratto, 2018: 33), thus

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allowing Italians to retire earlier. It was also relatively easy for them to announce their joint intention to curb flexibility introduced by the Jobs Act and favour job stabilization (Contratto, 2018: 29). The League obtained a concession with the introduction of a flat tax (Contratto, 2018: 19), while the M5S persuaded the new ally to accept the creation of a citizenship income (Contratto, 2018: 34). This set of reforms would result in a significant increase in public spending, which would not be matched by an increase in revenues. In fact, the flat tax, while being clearly regressive, would further contribute to worsening the budget deficit in a country with a very large overall debt (Marzinotto, 2020). In light of these economic and fiscal policies, it does not surprise that the EU and its public finance recommendations soon became an easy target of the populist government (Marzinotto, 2020). In the Contract (2018), the two parties agreed that EU treaties should be revised and deficit rules should be changed. More expansionary fiscal policies were accompanied by political and legislative initiatives aimed at limiting immigration from outside the EU. Salvini relied on his new privileged position as deputy prime minister and interior minister to maximize his influence on security and migration policies. He soon promoted a Security Decree Law (Decree Law 113/2018), then implemented by Law 132/2018, which abolished ‘humanitarian protection’ granted to asylum seekers and replaced it with ‘special permits’ of variable length. Other provisions of the decree introduced a ‘procedure for manifestly unfounded asylum claims’; a list of ‘safe countries of origin’, whose nationals would be required to demonstrate ‘serious reasons’ for seeking protection, and provisions revoking international protection for migrants who commit a number of crimes or return without ‘serious and provable reasons’ to their countries of origin (Geddes and Pettrachin, 2020: 237). Another Decree Law approved in 2019 (Decree Law 52/2019) toughened sanctions on non-government organization (NGO) ships seeking to bring migrants rescued in the Mediterranean to Italy. Security decrees also included harsher ‘law and order policies’—for instance, legalizing self-defence against petty crime. As in the case of economic and welfare policies, the EU became a scapegoat. Salvini and the League were particularly critical of the Dublin regulation, which established that asylum-seekers reaching the EU via Italy and then travelling onwards to another member state could be sent back to Italy as the country of first arrival in the EU. Consequently, ‘negative representation of the EU fed into what has effectively become a “stop migration” policy’ (Geddes and Pettrachin, 2020: 228). Overall, the mix of pro-welfare and anti-immigrant/law and order stances can be regarded as the triumph of ‘social nativism’ (Piketty, 2020). This model did not reflect the preferences of important sectors of the business community, which had to resort to a mix of ambiguity, assertiveness and pragmatism—a ‘soft voice’ response (see Chapter 1)—in order to navigate a political environment in which populism had become the new mainstream.

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The relationship between populists and business elites How did organizations representing businesses respond to the political and policy shifts highlighted previously? Before answering this question, it is important to stress the fact that the Italian business community is far from being a homogeneous group. To a certain extent, it mirrors the diverging attitudes and voting patterns discussed previously. Business representation is in fact divided along multiple intersecting differentiations (sectoral, dimensional, political, and juridicalinstitutional) leading to considerable fragmentation. Lanza and Lavdas (2000) have stressed that in Italy ‘the most remarkable aspect is the coexistence of different peak associations representing often overlapping interests’. The General Confederation of Italian Industry [Confindustria], founded in 1919, is the oldest and most established of these organizations. Yet, since the beginning, its membership mainly included large companies. Industrial restructuring processes, which took place in the 1970s, and in particular the decentralization of production and the development of small enterprises in the industrial districts of the so-called ‘third Italy’—a macro-region in the North-east of the country, which experienced rapid economic growth in the 1980s and 1990s—had the effect of further weakening Confindustria among smaller enterprises (Lanza and Lavdas, 2000). Today, a significant share of small businesses is part of Confcommercio and Confartigianato, representing service-oriented companies (particularly in the retail sector) and artisans. Thus, the polycentric and rather competitive nature of interest groups representation in Italy further complicates an analysis of the relationship between populism and business elites. As already mentioned above, back in 2011 Confindustria had been one of the key sponsors and supporters of the technocratic executive led by former EU commissioner Mario Monti, which implemented harsh austerity policies in the midst of the European sovereign debt crisis. Therefore, while adopting a generally pragmatic approach, its relationship with rising populism and the new government formed by M5S and League in 2018 was far from unproblematic. Initially, the president of the association, Vincenzo Boccia, expressed cautious support for Salvini’s policy statements, particularly those aimed at relaunching competitiveness and fighting bureaucracy (Confindustria, 2019). Boccia also declared that Confindustria ‘strongly believed in the League’ as the more pro-business partner in the new ruling coalition, hoping it would limit the influence of the less business friendly M5S (Querzé, 2018). Yet it soon became clear that Confindustria could not (and was not willing to) fully embrace the proposals of either populist party. For instance, during the annual meeting of the association in spring 2019, Boccia criticized the flat tax and the strict immigration policies sponsored by the more right-wing sectors of the government (Querzé, 2019). Emphasizing Confindustria’s general support for fiscal orthodoxy and its suspicion towards rising deficit, Boccia argued that any reduction of taxes should be accompanied by

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a spending review and other initiatives aimed at improving the sustainability of public finances. This would in turn reassure financial investors and European partners. The leader of the employers’ association also stigmatized populists’ approach to politics, based on ‘unrealistic promises’ and aimed at maximizing electoral support in the short term, while destabilizing financial markets (Corriere della Sera, 2019). Moreover, Confindustria voiced its opposition to the revision of pension and labour market reforms. This in turn triggered a response from the League. Not long after having become interior minister, Salvini had already addressed Confindustria’s growing criticism by accusing its leadership of colluding with the previous governments, particularly the technocratic one, while ‘Italians, entrepreneurs and artisans were slaughtered’ by excessive austerity (Lopapa, 2018). He also expressed ‘more interest in blue collar workers’, thus stressing the working-class appeal of his party and portraying himself as the main defender of vulnerable economic and professional categories against the interests of business elites. However, despite Salvini’s increasing assertiveness, the M5S remained Confindustria’s main concern and target. In particular, the party’s proposal to introduce a citizenship income was regarded as dangerous for the Italian economy and its competitiveness. In an interview immediately after the 2018 general election, Boccia had already stated that the citizenship income would reduce incentives to actively look for jobs and, consequently, would have a negative impact on the job market and employment (Senaldi, 2018). Additionally, Italian entrepreneurs were clearly in favour of large investments in public infrastructures, including the highspeed rail line Treno Alta Velocità (Tav) linking Turin to Lyon, which would better connect the Italian economy to its strategic partners on the other side of the Alps and would further integrate it into the Single Market. This project was strongly opposed by the M5S, which expressed environmental concerns and also lamented that the Tav would be a waste of public resources. On the other hand, the League sided with the business community, although it had to accept M5S’s commitment to renegotiating and delaying the Tav when the two parties signed the government agreement. Yet the strengthening of the League after its electoral success in the 2019 European election, accompanied by the collapse of the M5S (Chiaramonte, De Sio, and Emanuele, 2020), led to new tensions between the two coalition partners. Eventually Salvini used the high-speed train project as an excuse to bring the government down (Biancalana, 2020) and try to force an early general election, which he thought he would easily win. He became more and more insistent that the train-line works should go ahead, since, as had already become clear in 2018, by blocking the project Italy would breach international contracts and would have to pay very expensive penalties (Gaetano, 2018). In the end, the League voted with the opposition, and against the M5S, on a motion presented in the senate supporting the Tav (Casadio and Cuzzocrea, 2019). This quickly caused the collapse of the M5S-League executive, but instead of resulting in an early election, it surprisingly led to the creation of a new government coalition including M5S and PD.

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Before ending his governmental experience with the M5S, Salvini had also started to play a more active role as a mediator between different employers’ associations and trade unions, thus seeking to replace the prime minister as the focal point of the executive. For instance, in July 2019, the leader of the League met representatives of 40 different associations in order to discuss economic, pension, and labour market reforms and relaunch public investment in a wide range of infrastructures (Barone, 2019). This move also signalled Salvini’s intention to reconcile his party’s pro-business and pro-welfare tendencies. Indeed, the meeting involved not only representatives of Confindustria, Confcommercio, and Confartigianato, but also those of the main (left-wing) Italian trade union: the Italian General Confederation of Labour (CGIL). Within the universe of interest groups and social partners, Confcommercio, the business association representing the retail sector, was expected to be more supportive of Salvini’s proposed policies. Indeed, as already shown in the analysis of public opinion and voting intentions, small business owners, including shop owners, are more likely to agree with the League’s positions, particularly on Europe, law and order and immigration. Yet the leadership of Confcommercio remained relatively cautious in its assessment of government initiatives during the time of the M5S-League coalition. For instance, after the introduction of the Security Decree Law, which established the right to self-defence, Confcommercio on the one hand expressed its concern for the risk of creating a ‘Wild West’ scenario by allowing shop owners to use weapons against burglars. On the other hand, the association welcomed the introduction of a state guarantee, covering legal fees for those citizens that faced trial but then were acquitted on the basis of the right to self-defence (Confcommercio, 2019a, 2019b). An amendment to the Security Decree Law also introduced a limit to opening times for so-called ‘ethnic shops’, corner shops usually owned by non-EU immigrants, which Salvini saw as potential hotspots for drug trafficking and illegal activities. Again, Confcommercio supported any initiative aimed at ‘preserving safety and decency in Italian cities’ but, at the same time, it argued that this should not lead to ‘any discrimination based on ethnicity’ (Confcommercio, 2018). Confcommercio’s support for the flat tax was also quite lukewarm, since the association feared that a general reduction in income tax would be compensated by an increase in value-added tax, which, of course, being a consumption tax, would be particularly damaging for the retail sector (Confcommercio, 2019c).

New developments in the aftermath of the pandemic It is undeniable that the Covid-19 pandemic opened up a new chapter in Italian (and global) politics. This also affected the relationship between populist actors and business elites, as the economic consequences of lockdowns and social

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distancing were at the core of the political debate since March 2020. Italy was the first European country which was seriously hit by the new virus. The League, which in the meantime had left the government and had moved into opposition, initially supported a strict lockdown policy and criticized the government for being too cautious. Yet after the pandemic reached its peak, the party completely changed its approach and advocated a quick reopening of the economy, thus siding with Confindustria, which feared that a long lockdown would have a deep negative impact on an already stagnant economy (Mari, 2020). Generally, the crisis can be seen as a ‘critical juncture’ (Capoccia and Kelemen, 2007), which might reshape alliances and positions of key economic and political actors. In April 2020, Confindustria elected its new president, Carlo Bonomi, an entrepreneur from Lombardy—a stronghold of Salvini’s party—who had previously been rather critical of the strict measures implemented by the central government to respond to the health crisis. Senior members of the League immediately expressed their enthusiasm after Bonomi’s election (Fontanarosa, 2020). In November 2020, Salvini also tried to forge a strategic alliance with the new president of Confindustria aimed at strengthening the opposition and putting the government under increasing pressure. The two met privately but this did not seem to lead to any significant shift in political equilibria (Barbera, 2020; Colombo, 2020). Confindustria did not side with any political party and maintained its traditional neutrality, seeking to give life to a more ‘systemic’ alliance, involving a plurality of political, social and economic actors to relaunch the economy—this was defined by Bonomi as a ‘Patto per l’Italia’, a [Pact for Italy] (Galgliardi, 2020). Confindustria’s call for more consensual politics and cooperation beyond ideological divides seemed quite ambitious at the end of 2020, when relations between government and opposition were deteriorating and fractures were even emerging within the ruling coalition. Yet in a typically Italian twist of events, tensions eventually led to the collapse of the government, which was quickly replaced by a new executive under the leadership of Mario Draghi, former president of the European Central Bank (ECB). Surprisingly, Draghi’s election was welcomed by both trade unions and employers’ associations (Gagliardi, 2021) and was supported by a very broad and heterogeneous parliamentary coalition, ranging from sectors of the left to Salvini’s right-wing League and including also the PD and M5S. Additionally, unlike the technocratic government that was formed in 2011, this time representatives of the different parties entered the cabinet. This marked an interesting development in the dynamics of competition between populist and anti-populist forces in Italy. The League, which had previously embraced Eurosceptic and anti-establishment positions, pragmatically decided to join forces with its former enemies. The reasons for this unexpected decision are multiple and, as is often the case in Italian politics, rooted in a mix of strategic repositioning, short-term tactics, and personal ambitions, with ideology and programmatic

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stances playing an ancillary role. To be sure, this unconventional alliance was forged in a policy environment which was very different from that of 2011. The key institutions in European economic governance—the Commission, the Council, and the ECB—had significantly altered their understanding of what responsible fiscal policy entailed (Garzia and Karremans, 2021). They had moved away from uncompromising support for austerity, which had proved to be clearly incompatible with the Italian domestic growth model. Therefore, Mario Draghi’s institutional mandate was not derived from the budgetary orthodoxy of the Fiscal Compact but was shaped by the more expansionary—and politically rewarding— Recovery Fund, which incentivized convergence between diverse political actors and interest groups.

Conclusion This chapter has sought to show that populism is far from being a recent and static phenomenon in Italy. Additionally, since the collapse of the established party system in the early 1990s, the relationship between political leaders and business community has been crucial in the development and success of populist actors. Starting from the anti-tax and anti-state ‘revolution’ promoted by the Northern League, which was soon co-opted by the media tycoon Silvio Berlusconi in the late 1990s and 2000s, the analysis moved to a discussion of the more recent wave of anti-establishment politics. This was characterized by the rise of a new political movement (the M5S), which did not clearly fit into the left-right continuum, and the transformation of the League into a full-fledged populist radical-right party under Matteo Salvini’s leadership. The reshaping of political supply was accompanied by significant shifts in society and in the electorate. Italian voters have become increasingly polarized on issues such as Europe and immigration. Such divisions cut across the business sector, which cannot be regarded as a monolith. In fact, the chapter has stressed the existence of diverging preferences between small business owners, on one side, and large companies and dynamic professional categories, on the other. The former were clearly attracted by the political message conveyed by the League, which, at the same time, was able to appeal to workingclass constituencies. These developments also shaped policy-making processes. The alliance between League and M5S gave rise to what can be defined as ‘social nativism’. This was a mix of pro-welfare and socially conservative policies, which tried to strike a balance between key constituencies’ ‘authoritarian’ tendencies and economic concerns associated with globalization. The ambiguity of the League, which started as a relatively neo-liberal party and then embraced a more eclectic approach to economic and welfare issues, clearly influenced its relationship with key business associations. The chapter considered the period of the populist government between the League and the

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M5S in 2018–2019. The fragmentation of business representation and the division between large and small enterprises can be regarded as another key factor shaping dynamics between the main employers’ association, Confindustria, and populist leaders. Confindustria mainly adopted a ‘soft voice’ response to populism (see Chapter 1). It kept supporting a fiscally prudent and EU-friendly agenda, which reflected the preferences of just one section of the business community. At the same time, its pragmatism allowed the association to cautiously engage in a dialogue with Salvini’s populist right, also in an attempt to limit the influence of the M5S, which was seen as a too socially progressive and radically redistributive political force. Yet Confindustria was not the only business association which tried to find a balance between moderation and pragmatic collaboration with populist actors. Also Confcommercio, the association representing businesses in the retail sector, seemed torn between ideology and pragmatism, even though its membership mainly included small entrepreneurs supporting Salvini’s agenda. Generally, business associations and the elites that lead them do not seem to be fully representative of their respective categories. Italy does not have a tradition of corporatism and institutionalized bargaining between different interest groups, which is comparable to that of Austria, Germany, or Sweden. Fractures exist between representatives and represented not only within parties but also within employers’ associations and interest groups. This loosely structured political and social environment is characterized by frequent repositioning of key actors and high unpredictability. The creation of a new government led by a technocratic figure and supported by a wide spectrum of forces, including the League, was just the another manifestation of this constant state of flux and did not result in a more stable and cooperative political equilibrium.

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7 Rent-seeking Business Elites and Populism in Poland and Hungary Miklós Szanyi

Introduction: Patterns of development in Europe’s regions The East Central European (ECE) transition from communist party rule has been widely regarded as a historic success story (Kornai, 2006). Of course, the various countries in the region did not experience identical transformation processes. Both institutional designs and the timing and sequencing of changes varied (Hellman, 1998; Roland, 2000). However, there has been a consensus that the development of the ECE countries was successful and that it met the (neoliberal) expectations of the international advising community and the EU. This was confirmed by the accession of the ECE countries to the EU. Further to the East, the transition in most post-Soviet countries has not been viewed as favourably. Another south-eastern borderline could also be identified, though the influence of the EU and the international advising community has always been significant in the Balkans. Romania, Bulgaria, and Croatia became EU members, and membership negotiations with Serbia are in an advanced state. Nevertheless, the admission of the three previously mentioned countries was postponed because of institutional weaknesses, and in some important areas (corruption and organized crime) there has been additional monitoring. Such differences may have been deeply embedded in these countries. Research on the historical evolution of different European feudal and capitalist models has been a key topic in contemporary comparative history. However, such studies usually concentrate on selected periods like the main religious and social divide in ancient feudalism (Szűcs, 1983) or more frequently on the big historical divide of the long nineteenth century (Berend and Ra´nki, 1974; Morys, 2021). Consideration of even longer periods and patterns of historical path dependence is rare (Janos, 2000). One reason for this relates to the extreme methodological challenges of such longitudinal comparisons. Another is the risk of historical determinism that would absolve statesmen in any historical periods, including the most recent times, from responsibility. In the ideal Western development model that was applied most effectively in the Visegra´d countries (V4—Czechia, Hungary, Poland, and Slovakia) in the 1990s, Miklós Szanyi, Rent-seeking Business Elites and Populism in Poland and Hungary. In: Business and Populism. Edited by Magnus Feldmann and Glenn Morgan, Oxford University Press. © Miklós Szanyi (2023). DOI: 10.1093/oso/9780192894335.003.0007

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the political sphere was by and large characterized by party competition in the context of democratic political institutions with control of corruption. The ECE economies underwent fundamental restructuring and modernization in terms of their economic structures and patterns of production, technological sophistication, and ownership. Foreign direct investment (FDI) played a crucial role in this process. V4 became an integrated part of the single European economic space and of multinational firms’ global production networks. Political and economic institutions evolved independently. Both spheres relied on the buoyance of competition and the competition state (Szanyi, 2016). However, the two ECE frontrunners, Poland and Hungary, began to change during the 2000s, especially after their 2004 accession to the EU. The presence of a different logic of the economy and politics that is not competition-based became more obvious in various ECE countries after the 2008 crisis. While Romania, Bulgaria, and Croatia had never enjoyed the same level of trust in their institutional stability as the V4, a U-turn and surprisingly speedy departure from the competition state model occurred in the V4 countries too after 2008 (Kornai, 2015; Blaszczyk, 2017; Kozarzewski and Baltowski, 2017; Szanyi, 2016). Appel and Orenstein (2018) attributed this to the ‘signalling effect’. After achieving the fundamental political goals and joining the key Western clubs based on choosing the cumbersome neoliberal path, ECE countries were quick to return to another development path. I argue in this chapter that the relatively easy and unimpeded illiberal transformation of Hungary, but also the similarities with the Polish and to some extent the Czech institutional changes, reflects major differences in the ECE region’s historical development path compared to the ideal type of a Western competition state.¹ This chapter describes the process and attempts to identify the primary drivers of this change, focusing on elite struggle. This analysis seeks to add a new dimension to the varieties of capitalism (VoC) debate. The VoC literature has mostly engaged with variation within the Atlantic model of capitalism or the competition state (Hall and Soskice, 2001; Amable, 2003 and their followers; for a recent overview, see Rapacki et al., 2020). More recently, attempts were made to expand the analytical framework and shift the focus from the Atlantic model’s competitive markets to other social and political spheres, including the role of the state and social governance (No¨lke, 2014; Feldmann, 2019). However, the ECE region is usually not the focus of the alternative VoC approach (except in the case of the dependent market economy model of No¨lke and Vliegenthart, 2009). Analysts usually relate the region to the standard competition state framework and examine to which of that basic model’s varieties the region or its countries might fit. This chapter establishes a fundamentally new conceptualization for the region: ¹ In this volume, Cornel Ban addresses the same puzzle from a different angle in his Chapter 8 and makes interesting comparisons also with the Romanian experience.

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the rent-based model that is rooted more in the historical development patterns of the Balkans than the Atlantic region. The Byzantine heritage determined the development process of the Balkans, but also extended historically to the ECE region. ECE countries have shuttled between the East and West in their development. This ‘ECE-pendulum’ is similar to the well-known Polanyian pendulum (Polanyi, 1944) in the sense that there is a major difference between the Western (Atlantic) model, which is regarded as more liberal, and the Eastern (Balkan) model that is more autocratic and centralized. Historically, two general patterns of social development evolved in Europe. In the West the fragmented economic and political structure of medieval times required strong self-organization and governance. More centralized forms of political power evolved only at the dawn of capitalist development, and political centralization largely relied on the increasing economic power of the bourgeoisie. Therefore, the Atlantic model has been associated with a high level of social consensus and competition which was also constitutionalized. By contrast, the Byzantine models (Russian and Ottoman-Balkan) inherited and maintained the ancient imperial political and economic institutions. The mandate of the autocracy was not rooted in mundane legal constructions but in sacred traditions. Instead of a rapidly expanding bourgeoisie the state bureaucracy and military took the lead in social development. Their political and economic positions depended on the decisions of the almighty ruler. Therefore, the main driver of social action has been compliance with the authoritarian regime. In the case of weak central power this mechanism has worked in the opposite way: by bypassing these bodies to enjoy more personal wealth yet surviving as a ‘loyal’ state servant. In the long run the Byzantine social models featured strong rent-seeking instead of competition (Szanyi, 2020). From the perspective of these historical models the post-World War II socialist era can be interpreted as the dominance of the Russian-Byzantine model. Pervasive state ownership, strong central economic and political control, leadercentric and highly ideologized social institutions, repression of private initiative were the main characteristics. Some of the most orthodox features were relaxed, and the illusion of some elements of the Atlantic model emerged as part of the reform efforts of the Polish and Hungarian governments during the 1970s and 1980s. These modifications did not amount to systemic change, but the ECE satellites collapsed economically and politically by the end of the 1980s along with the Soviet Union, the archetype of this model. The resulting transition process meant a sharp break with the Russian tradition and the re-introduction of the Atlantic model’s institutions in the ECE area. These efforts seemed to be a historic success. However, the more recent U-turn of Poland and Hungary and the departure of other ECE countries from the Atlantic mainstream means that after the failure of the Russian model and given the historical heritage of the region, it could not fully

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consolidate the elements of the Atlantic model either. In some countries there was no comprehensive introduction of key Atlantic institutions (such as institutions for combating corruption and organized crime in Romania and Bulgaria). Others, like Poland and Hungary, have made serious efforts to roll back many Atlantic institutions in recent years. This chapter interprets these changes as a swing of the ECE pendulum back towards the Balkan model. The chapter is organized as follows. The second part interprets the posttransition ECE story as a struggle of local business elites and changing sources of rent. One elite group enjoyed the international assistance when establishing the institutions of the Western competition state in the transition period. In more recent times another populist elite gained power and attempted to revise this development process. The third part discusses the stages of this struggle with emphasis on the process of capturing state power and developing new forms of rents. The examples of Hungary and Poland demonstrate these tendencies. The final part of the chapter concludes.

Elite struggles for rents in the ECE transition process After the collapse of communism which could be interpreted as a Byzantine phase of ECE development, the transition process was designed through the interplay of the ‘global advising community’ (Appel, 2004) and local political forces. These groups were rather fragmented, but their main political ambition was similar as they sought to make the transition process politically irreversible. This ambition coincided with the international community’s main political goal. Since local societies largely lacked the expertise, capital and political vision to develop a feasible transition model of their own, they relied on international recommendations. This was underpinned by a broad social and political consensus. Some criticisms were raised in relation to privatization policies or rapid trade liberalization, but they were dismissed. Some aspects of the advice were not implemented by more pragmatic governments (Czechia, Romania, Bulgaria). Other countries, like Hungary and Poland, did not seriously delay any of the most important reforms. In addition to the anticipated political benefits in the long run, key parts of the local elite sought to derive more immediate personal benefits. The main source of rents was corruption in privatization transactions.

First phase: FDI-based development and privatization (1989–1998) Privatization was an important part of the transition programme in political terms. The reduction of state property was regarded as a crucial element of institution building mainly because of its role in ensuring that paternalism between managers

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of state-owned enterprises (SOEs) and politicians at various levels did not persist (Boycko et al., 1996; Rapaczynski, 1996). The liberal reform conception emphasized the importance of eliminating the incumbent management’s position of power to make the transition process irreversible (Frydman and Rapaczynski, 1996). It quickly became clear that this objective had not been fully achieved (Stark, 1996; Stark and Bruszt, 1998). Yet the fears of a reversal of transition proved to be exaggerated. Instead, incumbent managers found a new and more profitable way of preserving economic influence as the new proprietors of privatized companies. Others became chief executive officers (CEOs) of large firms sold to foreign investors. Thus, a new business elite emerged. In some countries (Russia, Slovakia, Ukraine) the new proprietors gained access to state property through insider privatization deals with political allies in power, leading to the emergence of a new oligarchy. In other countries where the privatization process was more transparent and overseen by foreign advisers, asset transfers were less overt, but practices like ‘asset tunnelling’ in Poland or ‘spontaneous privatization’ in Hungary facilitated quick and cheap access to valuable state assets (Blaszczyk, 1994; Blaszczyk and Woodward, 1999). Another important feature of the ECE privatization process was the high level of foreign participation. V4 economies became dominated by multinational affiliates in many branches by the end of the 1990s (Szanyi, 2016). A new elite emerged around foreign-owned companies. Drahokoupil (2008) regarded this elite as the ultimate winners of the transition process in the V4 countries (compared to the incumbent technocratic-managerial elite and the new entrepreneurs). He called this elite ‘foreign investors with their comprador intellectual allies’ and claimed that ‘the domestic comprador forces rather than their foreign allies had … a major role in domestic politics’ (p. 361). The rise of this elite was intertwined with the consolidation of the Atlantic model’s competition state. Their main aim was to insert the local economy into the structures of global capitalism. The other main elite group, the local bourgeoisie, was formed by incumbent managers of state-owned enterprises and former petty entrepreneurs (Lengyel, 2007). The empirical analysis of the Hungarian business elite of the 1990s showed that most influential entrepreneurs at the time had had some kind of pretransition career, either as party members and leading or second-tier managers of state-owned enterprises (SOEs) or as petty entrepreneurs (Laki, 2002). Local entrepreneurs could not keep up with the accelerating pace of technological development and capital concentration of the global businesses and were therefore not competitive in international terms (Laki and Szalay, 2015). The local entrepreneurs’ main field of activity remained the least globalized areas of services, real estate development, gambling and construction, but not manufacturing. Some sporadic evidence of successful companies (e.g. Solaris, Synthos, or BIOTON) in manufacturing shows that Polish patterns were slightly different.

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Second phase: Struggle of comprador and patriotic elites and renationalization (1998–2008) The liberal conception separates the state and business both in institutional and personal terms. Actual practices sometimes diverge from these principles in liberal economies too, as in the case of lobbying or more problematic personalistic ties. The Atlantic model has also shown signs of significant incoherence in the recent past, but the transition economies’ track record is rather confusing in this regard. For example, Andrej Babis, the prime minister of Czechia, used his business career as a strong argument in his election campaign claiming that he no longer needed any political position to get rich. Networks of cronies and politicians have been identified in other ECE countries as well. State and corporate functions of the elites are integrated through personal ties, institutional channels, material benefits, and recruiting patterns. There is a frequent exchange of personnel between business, politics, and supporting institutions (consulting firms, development agencies, law offices, amongst others). Many people hold several positions across various areas. Interactions between the state and business are usually institutionalized. The flow of material benefits between government and business is also common, thereby facilitating rent-seeking and corruption. Personal careers usually combine positions at the intersection of business and politics. Drahokoupil (2008) provided evidence on the establishment of FDI-based elites in various ECE countries. Other authors described similar processes related to local business (Schoenman, 2014; Naczyk, 2014; Stark and Bruszt, 1998; McDermott, 2002). Politicians and their clients serve on corporate boards and advisory committees in various countries. Taking controlling positions in state-owned companies is an easier path to personal enrichment for political clients than attempting to become successful entrepreneurs. It is general practice that changes in government lead to personnel changes on SOE boards and in many cases also to a complete turnover of management. Skuhrovec (2014) finds the highest incidence of personnel changes on Czech SOE supervisory boards after election years. This practice provides opportunities to milk the SOE through various channels. A SOE is useful for this purpose regardless of its potential efficiency. The social cost of this is not just foregone profits, but it could also involve continuous cash flow from the state budget through SOEs to private uses. SOEs are also used to reward politicians’ clients, for example in the form of expert fees. After the privatization bonanza of the 1990s the main area of rent-seeking shifted to controlling and running enterprises. First, the privatization logic was reversed to maintain potential direct interfaces to segments of business, which was a new kind of paternalism that contradicted the liberal conceptions of institution building of the 1990s (Szanyi, 2016a). During the early 2000s, the slowdown in privatization in Poland and nationalizations in Hungary reflected ambitions to

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maintain and expand political influence and rent-seeking from SOEs. These initiatives mainly served the interests of the elite that could not join the ‘comprador elite group’. Another important phenomenon was the spread of partisan firms, or the control exercised by politicians and their clients over significant parts of private business in addition to SOEs. New forms of rents were tied to ongoing business activity, and many of them could be accessed in lawful ways by means of ‘legal corruption’ (Kaufmann and Vicente, 2011). Legal corruption refers to transactions conducted with the participation of public actors that serve private interests at the expense of the public interest, even if the transaction is not illegal. A new source of rent-seeking based on awarding public procurement contracts to partisan firms became common after the V4 accession to the EU. The centralized and in many cases personalistic distribution of licences and contracts to political allies aligns with ECE’s Byzantine heritage. The political implementation of this system is closely tied to more recent political developments.

Third phase: Business capture by populist elites (2008–?) The circumstances in which democracy was introduced in transition economies after 1989 differed greatly from the situation in Western European democracies. The stable party competitions and Weberian states of post-war Western Europe were founded on strong elite commitments to democracy and socially embedded through sustained productivity growth and universally rising living standards. But those conditions never existed in Central Europe. Consequently, their states were not consolidating as those of post-war Western Europe … (Innes, 2013: p. 1.)

Already, during the early phase of the transition process, the successor states of more orthodox communist regimes were reluctant to build strictly regulated state institutions. ‘What followed was less the incidental exploitation of the state than the evolution of parties into brokerage firms, a … systematically corrupt development’ (Innes, 2013: pp. 6–7). But the erosion of the political advantages of reform-socialist countries² together with the global weakening of traditional programmatic parties paved the way for similar political party development also in Poland and Hungary. Kopecky (2006) found that political parties in ECE had weak ideological bases, and their voters frequently moved between parties in large numbers. Much of the ² Party failures in ECE can be largely attributed to failed government policies based on programme promises of parties that could not be fulfilled because they were more ambitious than what ECE economies could afford. Kornai (1992) drew attention very early to problems of ‘premature welfare states’ in ECE warning against fiscal challenges.

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ideological content was adopted from the neoliberal agenda and the old nationalistic political movements of the interwar period. In later years populist promises started to replace liberal values. The weak ideological commitment of voters and parties and the high rates of vote switching contributed to the failure and collapse of programmatic parties. Cohen (1999) calls the supporters and leaders of traditional parties ‘ideological elites’. In contrast to ideological elites and programmatic parties Cohen introduced the concept of ‘mass elite’, a term that describes a political elite with the characteristics of the masses or the average voter. This elite is fiercely hostile to communism but ideologically uncommitted and primarily motivated by short-term personal self-interest (Cohen, 1999). The ‘mass elite’ forms ‘business-firm’ parties that do not follow ideological principles but concentrate on populist manipulation of society to secure political support. Business-firm parties define themselves as true ‘people’s parties’ in the sense that they carry out the people’s wishes whatever these are.³ This process was described for the Czech Republic by Innes (2013) and Romania by Schoenman (2014). Poland’s Prawo i Sprawiedliwos´´c (PiS) and Hungary’s Fiatal Demokrata´k Szo¨vetsége [Alliance of Young Democrats] (FIDESZ) are also populist ‘businessfirm’ parties. The weak ideological background does not constrain ‘business-firm’ parties’ policies and communication, and they can easily apply populist messages suitable for gaining the support of the masses. Their hands are not tied by principles when deciding about coercive mechanisms (threats or use of force) or remunerative measures (buying votes). This flexibility and freedom from considerations of principle allowed ‘business firm’ parties to change their orientation and main messages at will. Naczyk (2014) explained the most recent changes in Polish and Hungarian economic policy as shifts in the content of ‘economic patriotism’. He argued that, during the 1990s, the most important national goal was the quick departure from communism and central planning supported by the neoliberal idea. When these goals were effectively achieved, from the 2000s new content was added to economic patriotism: strengthening national businesses and preventing further internationalization of ECE economies. Both the Hungarian and the Polish transition stories provide many examples of political chameleons.⁴ The changes in political narrative provided opportunities to choose new populist topics to appeal to mass electorates. Beyond the usual nationalistic phrases ³ Previously, the comprador elite delivered the ideological messages of the neoliberal agenda. In contrast, the messages that business-firm parties deliver are not based on any ideology but rather on the people’s emotions. These are strongly influenced by the parties themselves. They use mass media to whisper citizens what they want to hear from the mass. I regard these kinds of message populist. ⁴ Naczyk (2014) mentioned, among others, Krzysztof Bielecki, who was prime minister in 1991 during the period of Polish shock therapy. Later, in 2014, he called himself a ‘pragmatic liberal’, and as a member of the Council of Economic Advisers he supported the Tusk government’s promotion of national champions and other steps reflecting increasing economic patriotism in Poland. In the case of Hungary, the political career of the current Prime Minister Viktor Orbán and his party reflects a similar flexibility in ideological underpinnings ranging from liberal ideas during the first half of the 1990s to economic patriotism and the vision of the illiberal state in contemporary Hungary.

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and hostility against ethnic minorities (Szanyi, 2019b), other tropes of right-wing populism were picked up. The 2015 migration crisis caused serious social tensions in Budapest when over 200,000 refugees camped in the parks of the city. It was a real shock for the citizens. However, instead of doing anything positive to solve the problem the Hungarian government immediately took the opportunity to blame all possible political enemies for launching and sustaining immigration. Responsibility was assigned to George Soros, whose evil ambitions for European culture involved fuelling immigration and were not effectively stopped by the EU. The most telling example was the reaction of the PiS government of Poland which immediately echoed the same arguments although Poland received virtually no immigrants. The fundamental social division (us and them) made by populists (Mudde, 2004; Guriev and Papaionnou, 2022) was reinforced in all possible ways. A simple yes or no message was quickly prepared: we do not want refugees. The rigid rejection of any EU proposals for resolving the problems, especially the allocation of refugees, also fits nicely with the populist anti-EU and anti-expert sentiment highlighted in the populism literature. This policy enjoyed the strongest support in the most backward and remote areas of Hungary and Poland where most people have never seen any foreigners, let alone war refugees. The advance of ‘business firm’ parties was combined with the deliberate demolition of democratic political institutions. This also corresponds to the populist checklist: there is no need for feedback, checks, and balances, since the world is simple and people’s interests are best expressed by the reliable party and its honest leader. This is also a necessary precondition for capturing the state: there should be no strong voice commenting on the pervasive rent-seeking actions of the ‘business firm’ parties and their leaders. Less political competition resulted in further state capture. This process created new opportunities for rent-seeking and legalized corruption. What is new is the form and pervasiveness of rent-seeking, which has become institutionalized through state capture by ‘business firm’ type parties. Institutionalized rent-seeking is cynically called a ‘system of national cooperation’ by the populist FIDESZ government in Hungary.

Business capture and populism after 2008 in Hungary and Poland: The illiberal state in practice Yakovlev (2006) analyses business capture by the authoritarian Russian state. He conceptualizes business capture as unhealthy collusion of business and politics. Traditionally, the relationship was dominated by influential business elites that captured the state. However, after Vladimir Putin’s rise to power, the relationship was reversed. The state started to dominate business and not vice versa. Yakovlev called this phenomenon business capture with reverse analogy to state capture.

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Obviously, business capture fits well with the traditional Byzantine social structure of Russia, but business capture became a feature of the Polish and Hungarian governments too, especially after the 2008 crisis. Poland and Hungary had taken important steps towards establishing liberal democracy and market economies, the main elements of the Atlantic competition state model. Their subsequent reversal is somewhat surprising, but several factors can account for it. In the case of ECE societies historically imprinted behavioural patterns and convictions have been less supportive of liberal democratic values than in the classical democracies. ECE history features regular oscillations between the Atlantic model of democracy and Byzantine autocracy (the ECE pendulum). Poland’s interwar Piłsudski era and Hungary’s Horthy regime were autocratic regimes run by charismatic leaders, despite their functioning parliaments and political party systems. There is still some appreciation for these autocracies today. Hungary’s and Poland’s departure from the concept of liberal democracy can be interpreted as returning from democracy to historical models of autocracy. The ECE pendulum is treated by the ‘business firm’ parties as a normal function of ECE societies, and according to them there is nothing strange about the concept of illiberal democracy.⁵ In some ECE countries, notably in Czechoslovakia, the democratic track record was longer and included the 1920s and 1930s.⁶ The populist rhetoric of the ‘business firm’ parties frequently engages with the concept of economic patriotism (Clift and Woll, 2012). Re-establishing national sovereignty means regaining national (state) control of the economy from multinational business. Renationalization of multinational firms’ property is regarded as an effective tool to achieve this ambition (Szanyi, 2019a). During and after the 2008–2009 crisis, the Polish and Hungarian governments went against the current and did not limit economic intervention by the state, like their Western counterparts, but rather continued and even increased it after the shock of the crisis eased. This action was regarded as an opportunity to get rid of the Atlantic model’s market control and to increase the kind of state control that is typical of the Balkan model. Poland was reported to have undertaken steps to strengthen statist policies in property management. Some of these measures were already taken by the Civic Platform before the crisis (Naczyk, 2014). The right-wing populist PiS government continued and expanded this policy. In Hungary, the populist FIDESZ government also introduced protectionist policies in favour of local businesses ⁵ The term was coined in political science with pejorative connotation by Fareed Zakaria: ‘Democratically elected regimes … are routinely ignoring constitutional limits on their power and depriving their citizens of basic rights and freedoms …. [W]e see the rise of a disturbing phenomenon in international life—illiberal democracy’ (Zakaria, 1997: p. 22). ⁶ Nevertheless, Cisar (2017) reported that trust in democratic institutions in Czechia has been also low, that allowed the populist ANO to win the votes of especially the young generation in the 2013 elections. Similarly to Poland and Hungary, Czech traditional programme parties also lost much of their popularity due to serious corruption scandals.

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that run counter to various EU regulations, especially competition policy. But Miha´lyi (2015) showed that the previous socialist governments of the 2000s had also adopted similar interventionist policies. Hence, the departure from the neoliberal model started before the crisis in both Hungary and Poland. This can be interpreted as a general political and societal reaction to the perceived crisis associated with the application of neoliberal policies. This departure revitalized the socially embedded appreciation for various forms of state paternalism that were depressed during the 1990s. The other purpose of economic patriotism in ECE is the reconfiguration of power relations among various elites. The Hungarian and Polish cases show that selective measures have been applied to favour particular agents. The aim of such steps is not building general support among citizens (as suggested by the concept of economic patriotism), but the promotion of certain clients and members of a politically loyal local elite (Szanyi, 2019).

Business-firm parties capture the state The dominance of politics over the economy has been enhanced by the monopolization of political power. The ‘business firm’ party governments in ECE began rolling back democratic political institutions to establish a monopoly over politics. Kornai (2015) described the process in Hungary. The Hungarian case can be regarded as the archetype of restructuring towards the Balkan model. The governing party’s constitutional majority in parliament allowed the government to fundamentally change the legal system, thereby weakening the role of democratic institutions and introducing authoritarian elements. For example, the constitution was rewritten and passed by FIDESZ MPs’ ‘voting machine’ in the parliament. In other ECE countries with less powerful populist governments this process was less straightforward. In Hungary, the executive and legislative branches were essentially fused and became controlled by the governing party through personnel changes. The constitutional court, the state audit office, the fiscal council, the competition office, the monetary council, the National Bank of Hungary, the ombudsman’s office, as well as the central statistical office were all filled by loyal personnel. The super-majority in parliament allowed the government to change any law, whenever required to pursue party leaders’ political or business interests, so people in power became exempt from the law. In several cases laws were changed retrospectively to justify unlawful, fraudulent actions of party members. This obviously undermined the basic principles of the rule of law. The judiciary has also been placed under party control. The prosecution service has regularly rejected investigations of fraudulent cases involving members of the governing party and their cronies. Members of the Supreme Court and the judicial colleges were also appointed in a partisan manner.

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The democracies of the Atlantic model have another political control system as well, namely civil society organizations. The Balkan model’s business-firm party-led governments treat non-governmental organizations (NGOs) as public enemies. Witch-hunts originated in Russia, but were soon emulated in Hungary, later also in Poland. Government-controlled Hungarian mass media launched massive campaigns in 2014 stigmatizing NGOs as enemy agencies of foreign powers. Any support that came through uncontrolled foreign channels was suspicious. The stigmatization of foreign-sponsored civil society organizations was reinforced by legal actions as well.⁷ FIDESZ’s almost unlimited political license was used to destroy the Atlantic model’s democratic institutions and for populist manipulation of public opinion in Hungary to cement the party’s political dominance. Similar tendencies and practices emerged in other ECE countries as well. This process reflects a kind of systemic similarity and the impact of the Balkan model in the region. Until now the process of destruction has been less pervasive in Poland, mainly because of the Polish government’s more limited power. Nevertheless, the PiS government openly declared that it wished to copy the Hungarian authoritarian development pattern (Naczyk, 2014). Blaszczyk (2017) provided a comprehensive list of the antidemocratic measures taken by the Polish PiS government that were very similar to the Hungarian policies. The Polish constitutional court and the judicial system in general, the competition office as well as the Polish financial supervision authority were weakened when their remit was curbed, and key positions were filled by cronies of the government. The Hungarian example was also copied through actions against the free media, the weakening of NGOs and the centralization of public services from local governments to national institutions in health, education, and public utilities.

Details of business capture Hungarian and Polish governments were also active in demolishing market institutions. The rule of law was replaced with the Balkan model’s patronage system. State property management stood out in this respect. The privatization logic was reversed to strengthen paternalistic linkages in the economy, which is the exact opposite of the goals of institution-building during the transition process (Szanyi, 2016a). Instead of strengthening the rule of law, widespread state ownership and other types of market interventions create opportunities to build a new type of paternalism. Rapaczynski (1996) emphasized that the expansion of the state sector sends the wrong message to the market, especially if it is achieved by ⁷ Further details on how Viktor Orbán has destroyed democratic institutions and established a system of patronage in Hungary is available in Kingsley (2018) or Kornai (2015).

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curbing private property rights. This has frequently happened in both Hungary and Poland (Voszka, 2013; Kornai, 2015; Szanyi, 2016a; Miha´lyi, 2015; Baltowski and Kozarzewski, 2016, 2017; Blaszczyk, 2017). The Hungarian government declared privatization completed in 2008 (Hungarian Government, 2009), although substantial state ownership remained in place. The statement could be also understood as an intention to pave the way for nationalization, which happened sporadically before 2010 and then on a larger scale under the FIDESZ government. Re-nationalization reflected various political aims. The first large transaction was the nationalization of the second pillar of the pension system at the turn of 2010/2011. The government narrative suggested that the pension savings were not secure and did not yield the expected returns, and therefore they had to be redirected to the first, government-controlled, pillar. Account holders of private pension funds were instructed to withdraw their deposits and channel their savings to the state pension system. 2.8 million people followed these instructions involving deposits worth approximately 3000 bn Hungarian Forints (10 bn euros) or the equivalent of 10% of Hungarian gross domestic product (GDP). The risk they faced was losing their pension rights in the pay-as-you go state pension system. Most observers believe that the goal of the ‘voluntary’ nationalization of private pension funds was to use these assets for debt relief. Several transactions and regulatory changes were implemented under the umbrella of limiting the service costs of public utilities. FIDESZ promised lower utility costs in both the 2010 and 2014 election campaigns.⁸ First, the government prohibited price increases, and prices were later reduced by government agencies, thereby eliminating profits from this sector. New taxes were later introduced on financial transactions, mobile telephone calls, ATM cash withdrawals, and advertising revenues of the media. These actions undermined the profitability of the affected companies. Their owners soon felt compelled to sell loss-making assets. The process is referred to as regulatory taking: company revenues dry up because of unfavourable changes in market regulations or excessive taxes. Many privately held utility firms were then sold to central or local government bodies, with some of them receiving generous compensation. The re-nationalization of the banking sector was also an important political goal, which was also achieved through regulatory changes. The Hungarian government repeatedly enacted market regulations and changed the tax system, curbing revenues of selected large multinational firms and thus creating more favourable conditions for domestic capital owners. The policy was applied in relation to selected companies: financial institutions, media firms, large retail chains, and telecom companies.

⁸ This was a populist, anti-globalist action to cut foreign business’ ‘luxury profits’ that ‘we’, ordinary citizens unduly pay, a profit which is on top of all repatriated from the country.

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The Hungarian list of nationalizations and anti-market measures can be extended by considering similar cases in other ECE countries. The Polish government initiatives to increase the size of the state sector and curtail the activity of multinational businesses (‘polonization’ of the economy) were very similar. Actions such as the confiscation of the second private pillar of the pension system, the introduction of additional sector-specific taxes affecting mainly multinational companies, and regulatory changes affecting public utilities were also copied (Blaszczyk, 2017, Baltowski and Kozarzewski, 2017). Baltowski and Kozarzewski (2016) stated that the government could also increase state control over companies even when the state was only a minority shareholder. This happened in a fairly large number of Polish firms, along with those where a majority had been acquired. According to their estimates, in addition to state-owned enterprises, in state-controlled firms state influence increased by a further 50%. Moreover, state control was significantly higher in big business, making the role of the state even more significant (Baltowski and Kozarzewski, 2016). After 2010, the Hungarian government sought to fragment the strong representation of foreign firms and undermine their political influence, and selective measures were introduced (Szanyi, 2016). In many cases, measures were designed to support favoured partisan firms’ position against foreign-owned competitors (e.g. in retail trade and banking). But selected multinational firms were also treated as ‘friendly business’. The ‘strategic partnership programme’ of the Hungarian government re-established lobbying platforms for selected foreign firms. In exchange, the government requested support for politically important programmes. ‘Friendly’ multinational business has also benefited from important changes in the regulation of the labour market. The Hungarian opposition calls these changes ‘the slave laws’ because they unilaterally increased the authority of employers to define various important conditions of employment contracts, including issues addressed in collective bargaining. The favours granted to multinational business are designed to strengthen Hungary’s competitiveness in terms of attracting capital. The government needs multinational business to maintain the macroeconomic stability of the country that uncompetitive local and partisan firms cannot guarantee. This is a clear sign of economic dependence that characterized the ECE region throughout its modern history.⁹

New forms of rent, business capture, and partisan firms Control by means of state ownership and special relationships with multinational firms are only two forms of growing state intervention in ECE countries. A third ⁹ Dorottya Sallai writes in more details in Chapter 15 about the relationship of multinational firms with Hungarian government and authorities.

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type, which is even more important, is the increasing role of partisan business in the region. The process of business capture is based on direct ownership of businesses by politicians and their cronies. There is convincing evidence of increasing partisan control of the Hungarian economy. Stark and Vedres (2012) conducted a survey of 1696 large- and medium-sized companies in Hungary over the period 1987–2001. Party members and cronies had controlling positions in less than 10% of the firms on the eve of the transition process in 1989. This number steadily grew to almost 20% by 2001. In terms of capitalization, the share of politicized firms grew from less than 10% in 1989 to over 40% in 2001. The authors distinguished between the political influence of the two main political coalitions competing for power at the time and found that after elections, the winning parties’ influence increased and the losers’ influence declined. Skuhrovec (2014) reports similar empirical findings for Czechia. However, the amplitude of the fluctuations declined over time. Personnel changes in the boards became less dependent on government changes. This implies a marked shift from control over SOEs towards privately owned companies—the management of which remained largely immune from political changes. The struggle for dominance over SOEs became a less significant way to combine political and economic power by the end of the 1990s. Beyond multinational firms’ influence, partisan private firms started to capture the lion’s share of business in Hungary during the 2000s. Partisan firms can be supported with public procurement orders if tender conditions are formulated appropriately. Limiting competition in public procurement tenders is frequently used as a means of legal corruption in Hungary (Fazekas et al., 2013). There is ample evidence that the market share of partisan companies participating in public procurement tenders has increased (Fazekas et al., 2013). This reflects the political leadership’s changing preferences with respect to key clients’ firms (for details see Sallai and Schnyder, 2015). The low level of competition in the public procurement process was also established. An analysis of EU-sponsored projects in Hungary showed that 33.8% of the contracts signed between 2009–2012 received only one bid. Furthermore, 17.7% of the contracts were modified after being granted, offering a possibility to extract rents (Fazekas et al., 2013). Tóth and Hajdu (2018) collected new empirical evidence of partisan firms’ increasing activity in Hungarian public tenders. Their database included 126,330 contracts over the years 2010–2016. Several measures indicated the presence of corruption. The first was the number of contracts involving a single bidder. The share of such contracts fluctuated between 20% and 40%, with the highest values in election years (2010 and 2014). The index of a relative price drop (an indicator of achieved price reductions via competitive bidding) was marginally lower in at least half of all cases and showed a significant drop from 2010 onwards. The data reflected the decreasing efficiency of public procurement tenders and growing corruption. The winners regularly provided bids with prices that only differed

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marginally from the estimated contract value. This phenomenon was interpreted by the authors as reflecting insider knowledge of tender conditions. The authors’ model showed that negative perceptions of business capture were most significant in relation to the businesses connected to the highest levels of politics.

Conclusions Forty-five years of communism destroyed the relatively weak traditions of ideological parties in ECE countries. Over two generations, their societies became acquainted with authoritarian social structures. During the post-socialist transition process the Polanyian pendulum moved back towards the more liberal Atlantic model. Political and economic institutions of the competition state were introduced again. Nevertheless, these institutions could not fundamentally improve the social acceptance of the model. Political opposition and the segments of the political and business elite that were not part of the core FDI-based development model waited for the opportunity to take revenge. The time came with the meltdown of the neoliberal consensus and the phoenix-like revival of economic nationalism after the 2008 crisis. By then ECE countries had also achieved their primary goal of EU membership. After accession much less compliance was required from their external anchor, the EU Commission. Subsequently the comprador elite’s position deteriorated along with some of the multinational businesses. Their positions were taken by a new expanding elite. Some multinational businesses fell victims to regulatory capture, and the comprador elite’s position was weakened by their exclusion from public procurement tenders to partisan firms. Political, social and economic constraints on government policies were weakened, and in many cases associated institutions were destroyed. This process was most visible in Poland and Hungary, but also occurred in other ECE countries. The social acceptance of this elite shift was underpinned by massive populist propaganda. The new populist governments of Poland, Hungary, and Czechia manipulated public opinion to gain support, and competing voices were muted in the process. The interests of ECE countries’ business sectors are fragmented with respect to government policies. Businesses related to the populist governments’ cronies are the major beneficiaries of these economic policies. They are supported by selective measures and extremely successful in winning public procurement tenders (mostly financed by EU funds). The situation of multinational businesses is ambiguous. In sectors where government cronies are also active their activity is impeded by selective regulations. This applies, for example, to banking and financial services, retail, construction, information and communication services, and the media. Other branches, especially capital-intensive manufacturing activities (electronics, automotive industries), enjoy generous subsidies for new

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investments. The rationale for this is that they generate the successful economic performance that is necessary to maintain macroeconomic balance. The efficiency of rent-seeking local businesses is poor and likely to remain poor without the stimulus of competition. Another interesting question relates to the role of non-partisan domestic business in the ECE countries. There is some, but it has suffered during the whole transition process. Yakovlev (2006) indicated that independent Russian business could hardly survive and many of the affected businesspeople moved abroad. There are no corresponding estimates for ECE countries. There is mounting empirical evidence of a similar trend in the ECE region. Some well-established and still relatively small firms could maintain their positions in niche markets. Their situation seems better in Poland than in Hungary. There are some larger Polish companies that became multinationals and remain independent of the Polish government. In Hungary the situation is worse. The Hungarian government seeks to control all the larger companies. The rent-seeking business model of the populist ECE governments seems to work if it can secure sufficient external funding to keep the economies afloat. In the long run rent-seeking has no chance of matching competitive multinational firms. However, the current stability of the model is also rooted in its widespread social acceptance, which reflects the long tradition of Byzantine silent acceptance of authoritarian regimes and weak social organization.

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8 Business Factions, Populists, and the Social Bloc Perspective The Case of FDI-led Growth Regimes Cornel Ban¹

Introduction Much of the existing work on this nexus between business and populism is dominated by research on business mobilization against the populist right. This is based on the assumption that the perception of business vulnerability by exportdependent companies should spur them to engage in collective action against the threat of right-wing populism’s deglobalization promises. One of the main implications of this work (Iversen and Soskice, 2020; Curran et al., 2020) is that size, internationalization and sectoral differences matter. Highly internationalized firms are likely to mobilize against right populists more than domestically-oriented ones, while the political commitments of other sectors can be all over the map, depending on context. According to Kinderman (2021), small- or medium-size firms should also be in the anti-populist coalition, out of a heightened sense of vulnerability to disruptions in international markets. But how do these insights travel in dependent market economies in East-Central Europe, where domestic capital has a small share of the export sector and where the right-wing populists may want to deglobalize banking, telecom, or energy but boost foreign-owned manufacturing capital? In such contexts domestic business may mobilize for a right-wing populist force rather than against it. This chapter dwells on how populists dealt with various business factions and how these factions responded to government attempts to calibrate their economies’ growth models. The distinctiveness of the analytical approach used herein consists of the organizational linkage between populists and business: the dominant social bloc of the growth regime. Drawing on the approach to social blocs initiated by Bruno Amable and Stefano Palombarini (2014) and applied

¹ Research partially funded by NO Grants 2014–2021, under Project contract no. 22/2020 - Precarious labor and peripheral housing. The socio-economic practices of Romanian Roma in the context of changing industrial relations and uneven territorial development. Cornel Ban, Business Factions, Populists, and the Social Bloc Perspective. In: Business and Populism. Edited by Magnus Feldmann and Glenn Morgan, Oxford University Press. © Cornel Ban (2023). DOI: 10.1093/oso/9780192894335.003.0008

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to growth models by Baccaro and Pontusson (2019: 3), the paper focuses on populists-business relations as part of broader ‘constellations of sectoral and class interests that are organized in a hierarchical manner, with certain components of the social bloc being privileged relative to others’. In this conceptualization, there is only one dominant social bloc in any given time and space and that within that bloc the owners and managers of large companies (domestic and multinational) in sectors that are key to the regime tend to occupy a privileged position. As Evans (2018) showed in his iconic study of Brazil, the key element of that constellation under dependent forms of development is the alignment of interests between multinational and local capital. At a minimum, the social bloc approach entails several specific steps: the identification of sectoral and property regime-based interests, the analysis of how these interests relate to class interests, how the power resources of various social classes differ, and the analysis of the role of forms of discourse that ‘secure the acquiescence, if not the active consent, of social groups that are excluded from the dominant social bloc (or occupy marginalized positions within it)’ (Baccaro and Pontusson (2019: 5). For example, business can have both structural and instrumental power, while labour can deploy leverage either via unions or exiting the labour market via emigration. Baccaro and Pontusson focus on the sectoral dimension of class structures (export sector, domestic sector etc.), which enables them to see how the interests of social classes in the middle and the bottom of the social bloc pyramid are glued together in the bloc. For example, certain aspects of the growth model can favour the interests of corporate managers and business owners and export sector-skilled and low-skilled labour, but not of the petite bourgeoisie, labour in the domestic sector, and the precariat. In this case, to achieve hegemony, one needs a combination of side packages (such as easy credit or public work programmes) and ideological tricks. Also, given the financialization of capitalism and the state’s debt, populist projects that aim to marginalize/discipline the financial sector in the dominant social bloc may be constrained by external financial pressures. The chapter draws on previous work (Gabor and Ban, 2016) to underscore the importance of institutional capabilities (central banks ready to monetize public debt, revenue agencies able to collect taxes to avoid persistent deficits) that can protect the populist state if it tries to constrain financial actors in order to deliver to the social bloc interests that it favours. The selection of Hungary and Romania as case studies is analytically interesting. While both experienced populism as a policy regime that blended conservatism and what has been termed ‘national-neoliberalism’ (Ban et al., 2021), populism experienced a ‘hard’, lasting, and ultimately illiberal form in Hungary (from 2010 onwards) and a comparatively milder, fleeting, and ultimately still liberal form in Romania between 2016 and 2019). While key domestic and multinational business factions showed strong support for the former, they went from cautious support to

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outright opposition in the latter. What explains these different outcomes in populism and its relations to business? The chapter suggests that the answer can be found in a combination of institutional capabilities and strategic choices about how to tamper with the dominant social bloc. Before going forward, two caveats are in order. First, while the analysis looks at the social blocs as a whole, the focus is on the business sections in the bloc. Second, this analysis adopts the view (Tamames, 2020 Bakke and Sitter, 2020) that not all forms of populism entail democratic backsliding. Indeed, while we agree that at least as of 2020, Hungary had clearly crossed outside the lines of liberal democracy and that the PiS government in Poland had gone far down a similar track, the uses of populism in the Czech Republic, Slovakia or Romania remain within the boundaries of liberal democracy and far removed from the serious and substantial democratic backsliding taking place in Budapest and Warsaw (Bakke and Sitter, 2020). The chapter is organized as follows: the first section introduces some context about the demand side of populism in Hungary and Romania. The next two sections discuss the Hungarian and Romanian case studies themselves. The last section concludes.

Populism in Hungary and Romania While the political forces centered around Fiatal Demokrata´k Szo¨vetsége [Alliance of Young Democrats] (FIDESZ) (and its leader Viktor Orban) have been extensively covered in the literature (Levitsky and Ziblatt, 2018; Pappas, 2019; Halmai, 2019; Szabo, 2020), the literature on populism does not look at Romania as having generated a populist government. This is an important omission because the nominally centre-left Social-Democratic Party (PSD) checks most of the boxes of nationalist-populism posited in the relevant literature, without actually becoming a ‘hybrid regime’, as has happened in Hungary. Unlike many European countries, between the 2008 and 2020 elections, Romania did not have a parliamentary party that could easily fit the definition of illiberalism and/or authoritarian populism/capitalism used in the literature. Of course, ‘second generation’ nationalist-populists tried their luck at regular intervals but never managed to make it to parliament until 2020 (Soare and Tufis, 2019; Coman and Volintiru, 2021). An important part of the explanation is the robust, albeit unsystematic permeability of mainstream Romanian political parties (Soare and Tufis, 2018; Dragoman, 2021; Kiss and Szekely, 2021). But while the rightof-center mainstream parties are generally situated on the neoliberal spectrum in terms of economics (which in turn was anchored in the merger of anti-leftist and anticorruption discourses) (Ban, 2016; Kiss and Szekely, 2021), and their populist whistling is reinforcing the neoliberal status quo as far as business is concerned,

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the PSD is a different and more interesting variety of a mainstream party dipping into the populist toolbox. The reason for this is that between 2016 and 2019 at least, the PSD deployed select, albeit fickle, and very uneven elements of both right and left populism in ways that make it more similar to FIDESZ than to a populist left party such as Podemos or Syriza. Thus, the PSD’s political discourse was geared around a (silent) people vs. the multinational elites and their domestic compradors, claiming that the PSD truly represented ‘the people’ and their true interests on the basis of their exclusive ‘national’ representation of ‘the silent majority’. While authoritarian inclinations per se are rare in the party, the Social-Democrats blended ethnic nationalist appeals (the anti-Hungarian sentiment appears at regular intervals), social conservatism and welfare chauvinism with economic protectionism, all very much in line with the markers of populism in the literature. Similarly, the PSD used an identity discourse constructing the political community along the binary oppositions highlighted in the general literature (see Tamames, 2020 for an overview) by pitting ‘patriots’ against the alliance of supranational actors and their local compradors. However, in so doing, the PSD did not call for a direct, unmediated representation of ‘the People’, as consummate populism would require. All this helped the PSD secure the acquiescence, if not the steadfast consent, of social groups that were traditionally marginalized within the liberal social bloc, such as the bureaucracy, the poor, the minimum wage workers, the undereducated precariat, and the struggling petite bourgeoisie. Furthermore, if favouring domestic capital and vilifying foreign capital is indeed a marker of populism, then PSD had a lot of it between 2006 and 2020. There was also much in the communication content and style of important party leaders that deployed conspiracy theories about George Soros’ networks, critiques of progressive cultural discourse on lesbian, gay, bisexual, and transgender (LGBT) rights, victimizing discourses about domestic capital operating in a ‘colony’ of Western Europe. Indeed, on this front, the convergence with FIDESZ was quite advanced. Such cultural frames were complemented by political narratives that attributed the woes of Romania’s underpaid and overworked labour to exploitative, scheming multinationals, with domestic capital painted in a positive contrast. Indeed, the PSD followed FIDESZ and Prawo i Sprawiedliwos´´c (PiS) by narrating the Europeanization of the Romanian economy as a hostile takeover by European capital abetted by the domestic liberal opposition and the ‘useful idiots’ of the civil society (understood either as non-governmental organizations (NGOs) or as the liberal/progressive intelligentsia) (Gagyi, 2021). In contrast, domestic capital and low-wage workers were described as ‘slaves’ of multinationals whose hold on the Romanian economy was politically reinforced by pro-Western state institutions (revenue agency, central bank, anticorruption bodies). While many of the downsides of dependent capitalism highlighted by the PSD would be conventional knowledge in the literature on the region (see Scepanovic

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and Bohle, 2018; Ban, 2019. Ban and Volintiru 2021 for overviews), the politicaleconomic narrative generated by the PSD dramatized them while downplaying the problems that domestic capital posed to domestic labour (lower wages, worse work conditions, louder resistance to redistribution than the multinational sector) and to the state itself (rampant tax dodging in the small- and medium-enterprise (SME) sector) (Ban and Rusu, 2020). Indeed, rather than see Romania’s real dependence on multinational capital as demanding rebalancing measures such as pro-labour and pro-poor revenue reforms, strengthening collective bargaining, well-funded and targeted sectoral policies, or an end to patronage to insider firms, the PSD adopted instead an antagonistic discourse pitting foreign and domestic interests. Furthermore, it also adopted institutionally, financially and fiscally contradictory policies that genuinely tried to incorporate key labour and some domestic capital sectors in the social bloc, while failing to secure the support of all domestic as well as of critical multinational capital factions, as happened in Hungary. As such, the PSD may appear as a mix of FIDESZ and (left) Peronism.

Context: Opportunities and constraints for the populist backlash To understand the relationship between business and populists in Romania and Hungary we need to first understand what cultural and material conditions they emerged from and reacted against. As such, while this chapter sees in nationalneoliberalism a policy regime that grafts non-market coordination to benefit ‘national’ business onto the old neoliberal core, very much in line with a growing literature echoed by Szanyi (Chapter 7, this volume), it nevertheless aims to go beyond rent-seeking and identify the incentive structures that competitionminded rather than simply rent seeking businesses have in supporting the populists who manage the policy regime in question. In terms of culture, while a slew of studies showed the presence of nationalistpopulist tropes in the mainstream media, their intensity has been much stronger in Hungary than in Romania, with a recent study noting that ‘in Hungary the radicalright media are to a certain degree incorporated into the wider media networks, while in Romania, radical-right media are observed to be in isolated positions in both of the media networks we examined’ (Szabo et al., 2019: 34). Likewise, while in Hungary national-populism was steeped in at least a decade of systematic intellectual entrepreneurship in conservative intellectual circles (Buzogany and Varga, 2018; Greskovits, 2020), in Romania such an organized endeavour did not take place. In terms of material conditions, populists in both countries saw important openings in the opportunity structure, with growth model crises inviting a backlash against the status quo. Thus, although domestic consumption always played a bigger role in Romania, by the 2000s both Romania and Hungary were post-Fordist

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growth regimes powered by multinational capital (Regan and Bohle, 2022 for Hungary; Ban, 2019; and Ban and Adascalitei, 2020 for Romania). In both, manufacturing looms large in gross domestic product (GDP). Yet the share of capital in GDP is far below advanced economies, real wage growth consistently falls behind productivity increases, and debt crises induce austerity periods and external conditionality. The 2009–2010 debt crisis in particular wreaked havoc with extensive parts of the household and corporate sectors in both countries, generating demand for the politics of anger (Scheiring, 2021; Fabry, 2020; Ban, 2016, 2019). The state of Hungary’s finance was a big part of the story. The disgruntlement of the domestic business class and of the salaried middle class was magnified by the exposed vulnerabilities of reliance on foreign financial capital (Miklos and Simons, 2021). A dependent financial sector triggered sudden stops and even reversals of capital flows after years of unleashing a major foreign currency lending boom (Bohle, 2014; Piroska et al., 2020). The main export markets broke down in 2009, a year in which it seems as if foreign investors would withdraw from the region and concentrate on their home-country business (Bernaciak and Šc´epanovic´, 2010). Domestic firms faced high interest rates, low approval rates for business plans by the banks, and a high share of foreign currency loans in the mortgage market enraged SMEs and households. This proved to be a massive opening in the opportunity structure for political entrepreneurs seeking an extensive editing of Hungary’s growth model and associated social bloc by kicking multinational financial capital active in the country (both banks and private pension funds) onto the backyard doorstep of the dominant social bloc (Sebok and Simons, 2021). There were, then, ample opportunities for populists to want to rock the growth model. Yet the growth model also posed constraints as well on the plasticity of the political space of populist entrepreneurs, with Hungarian (2010–today) and Romanian populist political projects (2016–2019) during the 2010s generating forms of economic nationalism that have been different in intensity, strategic planning, and political resilience: high in Hungary and low in Romania (Ban et al., 2021; Sebok and Simons, 2021). Overall, however, rather than an overhaul of the existing growth model, both populist projects aimed to strengthen the exportoriented core of the economy at the expense of (mostly) finance and domestically oriented services (telecom, retail, energy), while offering domestic capital and labour better tax and credit conditions within that model. The internal variations inside the growth model were important as well. While Hungary’s economy is a typical export economy with a small consumption base, Romania’s is more balanced between consumption and export drivers (although the latter have grown a lot since 2008) (Ban and Adascalitei, 2020). This put more pressure on Hungarian populists than on the Romanian ones to integrate critical factions of foreign capital into their social bloc.

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Growth model constraints also mattered in terms of social bloc ‘editing’ work. Overall, both FIDESZ and PSD tried to bolster the prevailing cluster of interests linking domestic and multinational manufacturing, the petty bourgeoisie and labour in the export sector under the banner of excluding some factions of capital (multinational finance capital and multinational non-financial services trapped into the local economy) and the ‘undeserving’ poor. As a result, multinational financial and non-financial service capital, finance professionals and associated services (consulting, accounting, legal services), high-skilled service workers in the repressed sectors and the racialized poor were largely ‘edited out’ of the dominant social bloc. In both countries, the populists did not target foreign capital in manufacturing, although the larger domestic consumption base in Romania meant less pressure to incorporate multinational manufacturing. Not only did the populists refrain from any adverse action against industrial multinational corporations (MNCs), they also lowered the corporate tax rate, as in Hungary or the employers’ social security payments, as in Romania (Ban, 2019). This should not be surprising. The available literature on change and stability under FDI-led growth models suggests that change is unlikely to be drastic and can only be forged in the corridors of ‘quiet’ politics. Since most exports originate in global value chains with foreign orchestrating firms, even the most nationalist government will not risk rolling back the space for this form of capital (Bohle and Regan, 2021). This has been shown to be the case in Hungary, where nationalist populism and transnational industrial investment reinforced each other (Scepanovic and Bohle, 2018; Bohle and Greskovits, 2019). In post-crisis Budapest and Bucharest, the MNCs’ lobby organizations maintained direct institutional channels to the corridors of legislative and executive power, where they demanded and obtained labour market deregulation, tax perks, state aid, and a great deal of regulatory laxity (Scheiring, 2020; Ban, 2016, 2019; Adăscăliței and Guga, 2017; Munteanu and Adascalitei, 2018; Bohle and Regan, 2018). In brief, given the failure of the ‘Eastern opening’ (Jacoby and Korkut, 2016) and, most importantly, the poor capacity of domestic capital to provide technological upgrading and export capabilities by inserting itself productively into global value chains, the benefits provided by Western-based industrial MNCs gave them structural power (Bohle and Regan, 2021). Although Romania is, along with Poland, the only Eastern and Central European country that has a substantial share of consumption in its growth model, its reliance for upgrading, exports, jobs and taxes on multinational capital is almost as strong as Hungary’s. Two-thirds of exports are carried out by multinational corporations, with most of the investment concentrated in car assembly and parts (Ban, 2019). At the high end of the complexity ladder, where high wages reliant on distinct local skills are paid, dependence on foreign capital is self-evident: after the mid-2000s, multinational investment in tech grew exponentially so that by 2016 Romanian tech accounted for 2.6-billion euros in exports (a threefold increase

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since 2012), its contribution to growth on a par with that of the construction sector (Guga and Spatari, 2021).² That said, the lesser dependence on MNC-generated exports in the growth model relative to Hungary meant that when manufacturing multinationals in Romania criticized government policies, they met a rhetorical backlash from PSD heavyweights in terms that would be unfathomable in Hungary. While multinational manufacturing was generally coddled by populists in both countries (and particularly in Hungary), multinational finance and other services ‘trapped’ in the domestic market were not. Indeed, the populists’ concerted effort was to reduce the financial dependency status of their financial systems by loosening the links between domestic credit allocation and the decisions of transnational finance while targeting foreign investors that serve the domestic market (retail, telecom) with special taxes and other restrictive regulations (Bohle, 2017; Sebok and Simons, 2021). Furthermore, by curtailing the freedom of financial market actors (whether domestic or international) these measures aimed to de-financialize what, by West European standards, were already weakly financialized economies in all but interbank money markets, foreign exchange markets, and treasury markets (Ban and Bohle, 2020). The next sections trace the linkages between populism, the growth regime, and social bloc dynamics.

Domestic business and the neo-protectionist social bloc: Hungary Since the mid-1990s, Hungary became the case study of FDI-led growth in EastCentral Europe, relying almost exclusively on foreign investment for technological upgrading, employment growth and export competitiveness. In 2008 foreign affiliates in Hungary accounted for about 80% of the exports (Organisation for Economic Co-operation and Development (OECD) Technical (TEC) Statistics),³ with its exports concentrated in electronics, transport equipment, and machinery (Bohle and Greskovits, 2012; Bohle and Regan, 2021). In line with the dependent market economy model, these firms did not rely strongly on the domestic financial sector to finance their business, using reinvested profits and parent company’ financing lines instead (Szanyi, 2017). For a while, even as it caused declining living standards for a large part of the population and led to the formation of a new ‘underclass’ (Fabry, 2020), this growth regime remained stable and the role of foreign capital in it was generally appreciated. ² ANIS (Asociat¸ia Patronala a Industriei de Software si Servicii), Software & IT Services in Romania—2016 Edition. ³ Trade by enterprise characteristics, http://www.oecd.org/sdd/its/trade-by-enterprisecharacteristics.htm (30 August, 2022).

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When FIDESZ came to power in 2010, they declared they would ‘edit’ the growth regime to give more space for domestic capital accumulation while not challenging multinational dominance in manufacturing. This policy turn seems to have had a strong material basis in the crisis of the domestic capital’s motivation to uphold the FDI-led growth regime wholesale, with scholars pointing out domestic resentment over MNCs enjoying the most disproportionate benefits of the growth regime (Scheiring and Szombati, 2020). The dominance of multinational capital was certainly a fact (made possible in part by FIDESZ’s own government between 1998 and 2002) (Bohle and Greskovits, 2012), but after the devastating effects of the 2008 crisis on domestic capital and households (who had no external safety nets to fall back onto), FDI dominance became a sitting duck for a FIDESZ party whose opposition years had been shaped intellectually by resurgent national-conservatism (Bozogany and Varga, 2018). As such, FIDESZ had strong incentives to craft a political-economic platform that would rebalance the interests of MNCs and those of domestic business (Naczyk, 2014). Business elites of all stripes reacted to this policy turn in the world of Hungarian conservatism rather positively (Scheiring and Szombati (2020). While international financial firms in Hungary were dogged by an international crisis, the country continued to be a major manufacturing hub for German capital in particular at a time when it tried hard to cut costs vis-à-vis Asian rivals. Most importantly, antagonizing this business faction would have been self-defeating. As Bohle (2010: 7) noted, ‘[f ]oreign direct investment contributed to re-industrialization, job creation, and growing international competitiveness, while the external financing of public and private debt provided the resources for the welfarist social contract’. As a result, the main thrust of the associated Hungarian policy regime was to alter the FDI-led dependent growth model to facilitate capital accumulation for the domestic bourgeoisie while consolidating transnational capital in the export oriented industrial sectors and reducing it in finance and ‘trapped’ services such as telecom and retail (Scheiring, 2020).

Business and the ‘glue’ of the dominant social bloc in Hungary From a sectoral perspective, the export sector in which MNCs dominate, has demanded and obtained wage repression in Hungary (Galgoczi, 2017), fearing no currency risk (the central bank credibly kept the currency stable after an initial devaluation) and mass exit for the labour force via large outmigration number (these never materialized for Hungary on the scale one sees in Romania and Latvia). Wage repression was important for the export sector as a key member of the social bloc because in effect the policy obtained the depreciation of the real exchange rate which in turn led to more external demand in a country where export demand dwarfed the depressing effects on aggregate demand that

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wage moderation induced. Moreover, state aid continued to flow to mostly German owned automotive firms (Scepanovic and Bohle, 2018). As such, FIDESZ was good for the export business (or what Sallai in this volume calls ‘good’ FDI sectors). But the core idea behind FIDESZ’ rewriting of its relationship to business was that no country has reached a developed state through a state of dependence on foreign capital and particularly on finance capital. By pointing to the case of East Asian industrialization, FIDESZ’s communication indicated that the state must enable the domestic business class to have a significant share in domestic capitalism in order for the national economy to break out of emerging market/dependent status (Sallai and Schneyder, 2018), be it at the cost of going illiberal. As Victor Orban himself put it: A trending topic in thinking is understanding systems that are not Western, not liberal, not liberal democracies, maybe not even democracies, and yet making nations successful. Today, the stars of international analyses are Singapore, China, India, Turkey, Russia. And I believe that our political community rightly anticipated this challenge. And if we think back on what we did in the last four years, and what we are going to do in the following four years, then it really can be interpreted from this angle. We are searching for (and we are doing our best to find, ways of parting with Western European dogmas, making ourselves independent from them) the form of organizing a community, that is capable of making us competitive in this great world-race.⁴

Key FIDESZ economic policy figures also pointed out that in a world of global value chains, domestic capital is not likely to be competitive by itself. Therefore, the state should support the interests of multinational industrialists (or ‘productive capital’ in the words of Viktor Orban) via measures that stay within the EU law (Scheiring, 2020). These measures were well-received. As Scheiring (2020) showed, support for authoritarianism increased the most for the upper class (from 6 to 23% between 2015 and 2018; 90% of German investors in Hungary would vote for FIDESZ). However, not all sectors got what they wanted. As Dorottya Sallai shows in this volume, business based in areas that were of high salience for the government (finance) and those that were ‘bad’ FDI sectors were net losers while good FDI sectors engaging in quiet politics plus large domestic firms in domestic politics were net winners. For the domestically oriented national bourgeoisie, wage repression was in theory detrimental because it meant less demand. But the theory (Baccaro and

⁴ Speech by the Hungarian prime minister at yearly summer school in Baile Tusnad or Tusnadfurdo, Romania https://budapestbeacon.com/full-text-of-viktor-orbans-speech-at-baile-tusnadtusnadfurdo-of-26-july-2014/.

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Pontusson, 2019) says that the preferences of domestically oriented capitals for wage increases can be weak if purchasing power losses are compensated for with easier credit. As we will see later on, this turned out to be one of the priorities of the FIDESZ government when it engaged in extensive de-financialziation and ‘Magyarization’ of ownership in Hungary (Ban and Bohle, 2020). That said, the wage repression policy was half successful, despite the government’s best efforts due to a sharp uptick in emigration numbers after 2014⁵ combined with plantbased activism in the automotive sector firms critical to the German supply chain,⁶ which drove wages up in the tradeable sectors after 2015.

Delivering to the core of the social bloc Hungary’s national-populist project generated a policy regime that delivered to the business core of the social bloc, thus helping entrench FIDESZ’ political hegemony. First, fiscal rectitude, wage repression, corporate tax cuts, and labour deregulation benefited the political alliance between domestic business and multinational industrial capital. Indeed, one of the most striking sources of variation between Hungary and Romania is that the former made sure that its cultivation of an ‘accumulative state’ (Scheiring, 2020) did not come at the expense of economic orthodoxy and particularly at the expense of being protected against the bond vigilantes due to decreasing government revenues and therefore higher deficits and debt (Johnson and Barnes, 2016). Yet, FIDESZ used the resulting space for maneuvering by adopting a flat 9% corporate tax in 2016 and, to boost the investable incomes of the investor class, it adopted a flat 16% personal income tax in 2011. To enforce wage moderation in the non-tradeable sectors dominated by domestic capital, the government cut social benefits (from 18.1% of the GDP in 2009 to 13.3% in 2018) and made taking unemployment benefits a very unattractive prospect (Fabry, 2020). The measure gave claimants the choice between a minimum wage job and a below minimum wage public job, a measure that helped both wage moderation by forcing claimants into the labour market (the employment rate increased in the double digits since 2010) and reduced the pressure on the public budget. The retirement age was increased and early retirement was eliminated. Unemployment benefits now cover only three months, the lowest duration in Europe; the standing tripartite body was disbanded and the opportunity to strike restricted. Not only did the government increase overtime limits, it also allowed companies to postpone payment for overtime for three years (Scheiring and Szombati, 2020; Lendvai-Bainton and Szelewa, 2021). ⁵ https://www.ksh.hu/docs/eng/xstadat/xstadat_annual/i_wnvn004.html. ⁶ https://www.ft.com/content/63d132ea-2561-11e9-8ce6-5db4543da632.

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Second, the domestic bourgeoisie benefited when the government nationalized several large companies in non-tradeable sectors such as banking services and energy in order to sell them to loyal domestic businesspeople (Mero and Piroska, 2016; Oellerich, 2021). FIDESZ politicians’ kin, friends, colleagues, acquaintances, and trustworthy business partners and the cadres of the ‘System of National Cooperation’ (NER in Hungarian) benefited most extensively from financial nationalism in particular, with commissions, targeted tax relief policies and cheap loans boosting their profits and future capital investments (Sebok and Simons, 2021). At the same time, as demonstrated elsewhere, it was not just them, but all domestic capital that benefited from the lower interest rates and the redenomination by the government of foreign exchange loans into national currency at a rate favorable to Hungarian mortgage borrowers (Ban and Bohle, 2021). Furthermore, rather than as a neo-developmentalist government doing openeconomy industrial policy to make these domestic firms go global, FIDESZ let these Magyarized firms control domestic market share and boost the wealth and investable capital of their owners (Piroska, 2021) while state-owned banks enabled media acquisitions that favoured the government (Sebok and Simons, 2021). Unlike the East Asian developmental regimes that Viktor Orban likes to claim as sources of inspiration, under Hungary’s current ‘accumulative state’ (Scheiring, 2020) ‘nationalized assets are re-privatized to players within the NER’s network, yet the national capitalists are obliged to funnel back a portion of their proceeds’ rather than experience the export performance conditionalities that successful developmental regimes have always imposed on national capitalists (Wade, 2016). In another contrast to neo-developmentalism, in Hungary the knowledge sector component and long-term planning associated with this model have been pushed into the background through stagnating education budgets, declining quality of pre-university education, falling tertiary education financing and enrolment, aggressive intervention into the operation of research institutes and universities. Overall, total research and development (R&D) spending in Hungary grew only marginally (with growth attributed mostly to large and presumably multinational firms from the private sector) and the country continues to be a modest innovator in the EU.⁷ Third, the government provided the domestic business class, the ‘bankable’ petite bourgeoisie and the bulk of the formally employed with additional fiscal and financial space. Ban and Bohle (2020) showed that while low lending to SMEs in the ECE region should be understood in the light of its poorer supporting legal and regulatory infrastructure across post-communist Europe, if we look across a few comparable cases from the region in 2010, Hungary stood out in terms of the high interest rate on SME loans as well as the share of SME in total business loans, ⁷ https://glosz.eu/en/research-development-in-hungary-data.

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making banks particularly vulnerable to financial nationalists. In 2010, FIDESZ decided to engage in a massive financial repression operation using a subordinated central bank and nationalizations to push down the interest rate (Johnson and Barnes 2016). For example, the newly re-politicized Hungarian central bank offered funds free of charge to commercial banks which granted low-interest loans to SMEs, a move that turned around the negative trend in lending to SMEs, contributed to new investment, and reduced regional inequalities in access to credit (Hungarian Central Bank 2017). Thus, the interest rate for SMEs fell by 72% in Hungary, 48% in Slovakia, 24% in the Czech Republic, and only 6.2% in Slovakia. By 2018, Hungarian SMEs had the lowest interest rate environment amongst the ECE members of OECD (Ban and Bohle, 2020). Furthermore, the Hungarian central bank used macroprudential measures not just to stabilize domestic finance but also to reassert state control over financial institutions so as to make them deliver credit at rates and in conditions that provided more opportunities for domestic capital (Piroska et al 2020). Fifth, FIDESZ uses EU and state money to boost capital accumulation for the country’s upper bourgeoisie. Political capitalist Lorinc Meszaros went in a few years from being a gas fitter to being the fifth wealthiest Hungarian compiled in five years thanks to state construction contracts, about 60% of which are funded by the EU. Another multimillionaire, Lajos Simicska, went through school, army service, and university with Orban and used business ventures to fund the rise of FIDESZ as a political party but his conflict with Orban in 2015 was followed by the drying up of lucrative state contracts. State-owned companies account for 26% of print advertising, 15% of online advertising, and 7% of TV advertising revenues. Another friendly multimillionaire received cheap loans from the state-owned Eximbank to finance the expansion of a government friendly TV station. Billion-euro contracts were awarded to Orban’s son-in-law and by one estimate four of Orban’s closest businessmen won 12% of all contracts and averaged 13 times the size of other contracts. According to Transparency International, meanwhile, Hungarian public contracts were overpriced, on average, by 25% compared with market prices. As Andras Lanczi, an academic ideologist of FIDESZ, told the Financial Times, ‘certainly, these are Hungarian oligarchs’ and ‘it is openly pursued as a policy, it is what [the government] wants’, he added. ‘A lthough [Orban] has never said that, he perhaps encourages or allows that certain Hungarian entrepreneurs get really rich, to form the top of the Hungarian middle class’.⁸ Finally, the package of institutional capabilities that could protect the populist project was in place: a central bank ready to step in and monetize debt against adverse market sentiment (Ban and Bohle, 2020) and a reliable revenue agency able to achieve West European levels of public revenue to GDP ratios. In contrast, ⁸ https://www.ft.com/content/ecf6fb4e-d900-11e7-a039-c64b1c09b482.

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as the next section shows, the Romanian populists did not have these institutional capabilities, thus exposing themselves to overwhelming economic pressures originating in their deteriorating revenue, deficit and bond market risk figures that eventually annihilated their attempt to edit the growth model.

Business and populism in Romania: Shadowing Hungarian populism Romanian economic populism echoed its Hungarian counterpart in terms of an attempt to improve the financing conditions of the domestic capital concentrated in the SMEs. Loosening up credit to the middle class and the domestic capital concentrated in the SME sector was seen as central for making the domestic bourgeoisie reap the benefits of neoliberal entrepreneurship. The same is true of attempts to redenominate foreign currency loans into domestic currency (Gabor and Kudrna, 2013). Like in the Hungarian case, the political economy narrative of the party during the leadership of Liviu Dragnea (2016–2019) was that the weakness of domestic capital had to do with outright politico-economic interventions of multinational capital and its local enablers (the opposition, the transnationalized NGOs, the central bank, the tax agency, the intelligence services connected with the conservative president), not with poor domestic business capabilities. From the beginning of the 2016 electoral campaign, the political narrative of the PSD framed multinational capital and its backing by the EU as a whole as a problem and promised that its privileges would be trimmed.⁹ Unlike in Hungary, though, the PSD’s discursive posture escalated into open conflict with all sectors of multinational capital although, in acknowledgement of the growth model pressures, the actual policy regime of the PSD measures did not hurt multinational manufacturing capital. This narrative acquired even more dramatic tones when EU criticism of the PSD attempts to relax anti-corruption safeguards led to the PSD cadre nominating foreign business amongst the usual suspects of nefarious ‘anti-Romanian’ actors. On more than one occasion, some of the PSD top brass accused MNCs of having sent their white-collar staff to the anti-government protests out of frustration with the latter’s minimum wage increases that eroded MNCs’ margins.¹⁰ ⁹ On the PSD’s Euroscepticism and its contradictions see Coman (2020). ¹⁰ The issue of whether the PSD was also authoritarian for trying to curb the powers of the anticorruption prosecutors is a heavily debated one in the literature (Mungiu-Pippidi, 2018; Gherghina et al., 2019; Mendelski, 2020; Dragoman, 2020; Lacatus and Sedelmeier, 2020), with some scholars going as far as seeing a form of anti-corruption populism going on in Romania (Mungiu-Pippidi, 2018; Dragoman, 2020) alongside legitimate concerns with the rule of law. Irrespectively, compared to the situation of Fidesz in Hungary, the PSD did not go as far, arguably due to a more competitive political scene and more checks and balances (a hostile president using the powers of a semi-presidential system, independent anti-corruption bodies that decimated the PSD leadership).

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Finally, the PSD went for a ‘big bang’ political marketing approach that combined denunciations of communism and progressivism (conflated with neoMarxism) with a range of supportive measures targeted at domestic business and workers. At the heart of this programme (and actual actions) was a clear attempt to enroll high-value added big business and SMEs into the PSD’s social bloc via a transformed development model whereby the poor funding of non-financial firms by the banks would be addressed by the establishment of a government fund for start-ups and a sovereign wealth fund based on the Polish model (Naczyk, 2021) that targeted areas with strong domestic capital: defense, energy, information technology (IT), and food processing. At first, domestic capital organizations expressed support for the government, with one (CNIPMMR) sending its head to join the PSD government as minister for SMEs.¹¹ To rebuild its credibility to business, the PSD promised and delivered a series of supply-side measures that benefited not just well-off professionals, but the entire business class: zero dividend tax for all firms, zero VAT for real estate transactions, maximum one tax audit per year, and the elimination of all social security taxes to be paid by employers. Also, like in Hungary, the fundamental labour market policy was labour-force activation through cutting unemployed benefits unless individuals accepted any job offered by employment offices.¹² Most supportive measures targeted the self-employed and small firms, two areas densely populated by the domestic bourgeoisie. Specifically, they adopted a 1% corporate income tax on microenterprises in parallel with raising the business rollover threshold for being considered an SME from 100,000 to 500,000 euros, VAT exemptions for firms cashing less than 300,000 euro, zero tax for self-employed cashing less than 24,000 euros a year and massive public funding for business start-ups. According to a recent estimate, the 1% tax on microenterprises cost 0.6% of GDP or 34% of the corporate income tax revenues.¹³ The incorporation of the petite bourgeoisie into the social bloc was clear: the SME’s White Book of 2019 indicated that out of the past ten years, national entrepreneurs had the most positive perception of the economic environment during 2017–2019.¹⁴ The large domestic bourgeoisie consolidated their regulatory rents. Capital taxes levied on the net worth or value of assets owned or transferred in the form of legacies or gifts are low in the EU (0.3% of GDP, on average) but were rendered barely visible in Romania (Ban and Rusu, 2019).

¹¹ https://www.zf.ro/profesii/bio-cine-este-florin-nicolae-jianu-propunerea-psd-pentruministerul-pentru-mediul-de-afaceri-el-a-mai-fost-ministru-pentru-imm-uri-16047272. ¹² https://www.economica.net/dragnea-ne-gandim-la-modificarea-legii-privind-ajutoarelesociale-multi-romani-care-pot-munci-prefera-sa-se-multumeasca-doar-cu-acestea_145637.html. ¹³ https://buciupetre2020.github.io/firmele/diferite-metode-de-impozitare.html. ¹⁴ http://cnipmmr.ro/wp-content/uploads/2019/07/Prezentare-Ovidiu-Nicolescu.pdf.

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Beyond these statutory pro-business interventions sat an equally consequential non-decision: a deliberate withdrawal from revenue collection reforms served off the shelf by the World Bank that could tax business and the wealthy at the levels of the region (Bulgaria collected an additional 2% of GDP as a result if this reform package). In effect, rather than pay the statutory 16%, under the PSD the average firm in Romania paid 4% thanks to this non-decision (Ban and Rusu, 2020). No doubt, price transfers within multinational wealth chains are real and undoubtedly massive in dependent market economies such as Hungary’s and Romania’s. Yet, at no point did the PSD governments produce evidence of its size, nor did they remove the holding structures that make price transfers particularly easy in Romania.¹⁵ Thus, despite having already compromised relations with multinational capital, the PSD did not walk the walk on taxing multinational capital adequately to right the balance with domestic capital. But despite forswearing larger revenues to lure domestic business, over time the PSD came to alienate it by overextending its social bloc to the large masses of working poor (via significant gross wage increases in several rounds) and the public sector employers (via double digit wage increases) in ways that led it to run a pro-cyclical fiscal policy that business disliked because it meant borrowing costs far above the regional average. Furthermore, while in theory domestic business wants wage increases to boost demand, this does not happen when the margins are razor thin, as is the case with Romanian domestic business, where 30% of firms post profits averaging 850 euros a year and 43% posted net loses.¹⁶ As a result of these income policies and the pressures put by continuing mass emigration (Europe’s largest), by 2019 Romania had the region’s highest average real wage increases. For first time since 1990, these reduced the gap between the labour and capital share in GDP (Guga, 2020) but alienated the domestic SME sector.¹⁷ Unlike in Hungary, the weak institutional capabilities of the Romanian state (and lack of a subordinated central bank) meant that the strategy to forge a social bloc compromise between large factions of domestic capital and associated investor class (via more demand, tax cuts and easier credit) and private and public sector labour (via wage increases and tax cuts) was doomed by the external pressures induced by the twin deficits problem in a peripheral country with a weak currency. This led to higher borrowing costs and business anxieties over the cost of

¹⁵ https://www.zf.ro/special/romania-tara-atractiva-investitori-punctul-vedere-taxelorimpozitelor-acestia-au-relatii-bune-autoritatile-impactul-schimbarilor-legislative-fiscale-businesstax-and-legal-conference-and-workshops-18,429,242?fbclid=IwAR1EB3b7gnQmIfM4SJ2dd_l_ 4Pov9IpL-IOSSmNRItcveq4sbv6ChCiMPyU. ¹⁶ https://buciupetre2020.github.io/firmele/profitabilitate.html. ¹⁷ https://stirileprotv.ro/stiri/alegeri-parlamentare/programul-de-guvernare-cu-care-psd-acastigat-alegerile-parlamentare-bugetarii-vor-primi-majorari-de-salarii-cu-20-anual.html.

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capital, leading them to withdraw their support and cast their lots with the liberal opposition (Ban and Bohle, 2020). Furthermore, the PSD’s capacity to deliver an ‘accumulative state’ like in Hungary was institutionally more difficult. Although fraud cases have plagued the absorption of EU funds in Romania, the centralized capacity of the government to use these funds to bolster a domestic bourgeoisie was extensively encumbered by the strong anti-corruption prosecutors and legislation forcing transparency by request. Thus, some of the largest construction companies that benefited from EU infrastructure funds had their owners thrown in jail and, with few exceptions, national infrastructure contracts were allotted to multinational companies. As a result, the kind of national infrastructure billionaires that emerged under Orban with the help of EU funds are not a phenomenon in the Romania of those years. The sense of alienation between the PSD and domestic business increased when it turned out that the government’s industrial policy talk had little traction in reality. A massive corporate survey ordered by the Romanian investor group PIAROM, in 2019 found that officials were not only reluctant to use procurement to support domestic firms but did not even have a good sense where domestically owned Romanian manufacturing capital was concentrated, despite the export success of firms in areas as complex as electric car systems or electric train locomotives. The failure of the PSD to tamper with the growth model and associated social bloc became manifest in a litmus test of its economic programme: the FIDESZ-inspired tax on financial sector’s assets. Like in Hungary, the discourse of legitimization for this policy was framed in terms of fighting the disloyalty of these firms to society via tax dodging schemes (that the government failed to expose or curtail using its formal institutional channels) enabling them to have much higher profits than in the ‘core’ countries where their headquarters were. But unlike in Hungary, the PSD had no plans to ‘Romanianize’ the banks, force through extensive forex debt conversion, or obtain the support of the central bank for defending the government in the bond markets in case the spreads went up (Ban and Bohle, 2021). Similarly, these steps were not as sweeping as in Hungary and were soon diluted (applied to 20 not 100% of assets). Critical in this episode is the fact that domestic capital marched in sync with multinational finance,¹⁸ with the domestic bourgeoisie seeing the levy as a form of fiscal desperation that augured future tax increases and reflected massive incompetence.¹⁹ After the PSD lost the government to a conservative political alliance in 2019, the sovereign wealth fund and the levy on the business rollover on banks, energy companies and telecom assets were also stripped down by the new government and ¹⁸ https://economie.hotnews.ro/stiri-finante_banci-22872962-patronatele-din-cadrulconfederatiei-concordia-resping-acuzatiile-tendentioase-ale-lui-liviu-dragnea.htm. ¹⁹ https://ziaristii.com/jihadul-fiscal-al-guvernului-dancila-omoara-capitalul-romanesc-pe-carepsd-si-alde-ziceau-ca-l-apara/.

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so was the royalty tax on offshore gas. Labour activation was relatively successful and when combined with wage increases it cut deep into poverty while reducing the yawning gap between the labour and the capital share in GDP (Adascalitei and Guga, 2018). To top it off, deprived of an institutional anchor in the form of peak-level collective bargaining, wage-led growth, the cornerstone of the government’s heterodox inflection of national neoliberalism was immediately stopped by the conservatives upon their return to office in full-on globalist-neoliberal mode in November 2019 only to be challenged from the hard populist right in the 2020 elections. Thus, in the 2020 elections, the far-right Alliance for the Unity of Romanians (AUR), a party few had heard of even during the campaign, got almost 9% of the national vote and entered into the Parliament. AUR had chipped away at the basis of the PSD social bloc, especially at the (devout) petit bourgeoisie, by appealing even more effectively to national, ethnic, and conservative norms in culture and protectionism in economics. In terms of its relations with business, however, things are straightforward: beyond a yet to be clarified appeal with factions of the petite bourgeoisie, AUR seems shunned by business. To date, the only evidence of explicit business support comes from a billionaire funder who co-owns a TV station. At the end of the day, less than 3% of eligible voters voted for AUR and this happened in their best-case scenario: the peak of a pandemic in which its key message was about lockdowns. It is unclear how AUR can survive the post-pandemic period, especially after people will have realized that they have no credible solutions to cobble together a powerful social bloc. Indeed, their economic agenda is eminently neoliberal (the usual talk of tax cuts for investors, deregulation and workfare is all over the programme), with a smattering of conservative family policies and vague mumbo-jumbo about making everyone live off the land. This is unlikely to inspire a mass following for an extended period of time. Nevertheless, the fact that the PSD did not reject an alliance with AUR and that in fact some of its leaders have made friendly noises about it suggests that the days of populist national-neoliberalism in the PSD are far from over.

Conclusion This chapter departed from curiosity about how the literature on business and populism travels to dependent market economies in East-Central Europe. While in the capitalist ‘core’ the key economic sectors are in domestic ownership, in semiperipheral/dependent economies domestic business has a much smaller share of key sectors. Here, economically nationalist populists may want to deglobalize banking or telecom but boost foreign-owned manufacturing capital. In such contexts, a business alliance between foreign and domestic capital factions may support a right-wing populist force rather than oppose it. By asking what explains

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the different forms and fortunes of populism in Hungary and Romania, the chapter makes four main contributions to the state of the art on business and populism. First, the cosy relations between populists and multinational industrial capital in Hungary challenge the claim that internationalized firms always mobilize against populists more than domestically oriented ones do. Indeed, the paper shows that there may be good business reasons to do the opposite of what the literature would lead one to expect. Second, both country cases reaffirm the potentially populist nature of the petite bourgeoisie, thus challenging the claim made more recently in the literature on populism according to which the interest of the SMEs is to be opposed to populism. It seems that in the context of FDI-led dependent market economies the opposite may be the case. That said, the case of Romania shows that under certain conditions the populists may lose the support of the SME sector. Third, the characteristics of the growth model powerfully constrain the options of populists. In both countries, the export orientation of their growth model prevented populist policy attacks against the foreign owned export sector (a clear restatement of the importance of structural power) while the nonessential character of foreign owned finance, retail or telecom in the growth model exposed this faction of business to populist attacks. However, the slightly less FDIdependent Romanian growth model enabled the populists to at least rhetorically challenge the role of multinational industrial capital. Another nuance on this topic is that since attacks against foreign financial institutions come with sovereign bond risk, the success of the attack hinges on having institutional capabilities such as a central bank ready to credibly monetize debt and a revenue agency with an enforceable commitment to adequate tax collection. Finally, the morphing of populism into Scheiring’s ‘accumulative state’ for the national bourgeoisie as a way to secure its support entails the removal of checks and balances that prevent the passing of rents from the state to the national bourgeoisie. For a number of contextual reasons, this removal was possible in Hungary, but not in Romania.

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9 India Populism, Personalism, and Economic Governance Andrew Wyatt

Introduction India’s size and remarkable social diversity tempts political entrepreneurs to deploy populist ideas and strategies as a means of assembling a majority. The idea of a unified people cuts across numerous cleavages that otherwise fragment the electorate. In practice it has been easier for regional politicians to make claims on behalf of their people and several states within India’s federal system are home to strong populist parties. Nevertheless, national politicians also attempt to present politics in simple terms and present themselves as champions of the ordinary people. Populist ideas and sentiments are significant because they have been used to justify the expansion of welfare spending, the dilution of liberal economic reforms, and the weakening of democratic norms. Indian capital responds cautiously to such populist politics. In some respects, India stands apart from other cases in this volume. The turns towards populist politics in national politics have been episodic and/or partial. India, until 2020, had not experienced an economic crisis since 1990–1991. Policy makers were able to shield India from the worst effects of the 2008 global financial crisis. This is not to say that India has been free of economic stress and tensions arising from rapid economic growth and intensified capitalist development. However, political elites have for the most part been able to manage and ameliorate these tensions (Chatterjee, 2008; Jenkins, 2020). Economic growth made significant increases in social spending possible. In other ways the Indian case confirms or illuminates the key concerns of this volume. Economic governance has responded to global imperatives and neoliberal ideas, however gradually and unevenly (Sinha, 2016). Many would prefer technocratic regulation of markets and competition (Mukherji, 2004). India’s 2014 election enabled significant changes in Indian politics bringing to power the rightist Bharatiya Janata Party (BJP) with a majority in the lower house of parliament after a long period of coalition politics and minority governments. The BJP Prime Minister Narendra Modi has undermined the close working between business,

Andrew Wyatt, India. In: Business and Populism. Edited by Magnus Feldmann and Glenn Morgan, Oxford University Press. © Andrew Wyatt (2023). DOI: 10.1093/oso/9780192894335.003.0009

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experts and state institutions that is termed ‘network governance’ in this volume. Indian politics has become markedly more illiberal since 2014. This chapter confirms that populism is a longstanding feature of Indian politics which predates the recent disruptions in European and North American politics. Populism, expressed in narratives which celebrate the importance of the ordinary people, erupts from time to time in regional politics. These narratives often become an accepted idiom of politics which informs day to day processes of governing. I argue that in this form populist politics and business co-exist constructively. However, the return to power of the BJP since 2014 has been more disruptive. I argue that this is largely because of Prime Minister Narendra Modi’s personalist way of governing. He has broken from collegial ways of governing and is resistant to expert advice. This has degraded the quality of economic governance and made it difficult for business to influence outcomes. This chapter begins by discussing reforms in India’s model of economic governance that reduced state controls and encouraged integration with the global economy. India’s experience with populist politics is summarized before the character of Indian business is discussed. The reforms of the 1990s encouraged Indian business to be more vocal in its interaction with the state. I then discuss the challenges faced by business following the centralization of power and personalization of government since 2014. I show how business has become more cautious since 2014, reverting to various forms of loyalty to the national government. In the final section of the chapter, I elaborate the less intrusive ways in which populists interact with business at the state level.

Economic governance and reform An important turning point for the Indian economy and business came with a balance of payments crisis that became apparent in 1990. This short-term crisis reflected failures of fiscal discipline in the previous decade and called into question India’s model of statist economic governance. The crisis was resolved relatively quickly during 1991, with financial support from the World Bank and the International Monetary Fund (IMF). India’s leading party, the centrist Congress Party, returned to office in 1991 after a period in opposition, and took the opportunity to move the Indian economy in a market-oriented direction. The reforms initiated in 1991 included removing licenses controlling industrial activity, currency devaluation, making foreign direct investment easier, and reducing investment in public sector enterprises. Privatization of these enterprises was promised, and the centre devolved more economic responsibilities to state governments (Mukherji, 2004). India’s ‘defensive and reclusive’ trading regime was reformed incrementally, with average tariffs falling from 87% to 7.2% between 1990 and 2014 (Sinha, 2016, 8–9).

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The post-1991 reforms were gradual and disappointed some neoliberal commentators. Among other things they still argue for reducing the fiscal deficit, cutting subsidies on food and agricultural inputs, moving decisively on privatization, and making land transactions easier. They also advocate for a more efficient legal system, and improvements in basic public services, including health and education (Aiyar, 2019). Freeing up labour markets and reducing regulations on manufacturers are also on the agenda of pro-business commentators. Following the crisis of 1990–1991 India experienced an extended period of economic growth, which may or may not have been the consequence of the turn towards the market. Rodrik and Subramanian (2005) take a sceptical view of the 1991 reforms as a driver of growth, instead tracing growth back to earlier policy decisions. Rather like the Philippines (Takagi, Chapter 10 in this volume), the need for India to continue to ‘reform’ is advocated regularly, usually by commentators outside of government (Mehra, 2019). One critic claimed in 2014 there was ‘a widespread conviction in the body politic that the national leadership has failed to steer the nation in a productive direction economically’ (Tellis, 2014: 2). Whether or not this was true, political leaders have tended to advance market-oriented reforms in underhand ways, often producing policy that is ad hoc or incomplete (Jenkins, 1999). The diversity and complexity of India’s private sector means that support for reform from business is qualified. Some enterprises gain a competitive advantage from state regulations and others fear competition that follows from external liberalization. Others would prefer transparent technocratic economic governance and see opportunities in global markets (Pedersen, 2000; Sinha, 2016). Politicians are sympathetic to the aspirations of business but also keep in view the needs of voters. Economic reform is approached with care, especially where it has implications for employment. Investments in physical infrastructure are balanced against other priorities. Since 2004, spending on welfare and interest in social provision by both national and state governments has intensified markedly (Manor, 2010; Ruparelia, 2013). As economic management changed after 1991 Indian business adjusted. Previously shielded from competition from overseas competitors, and sometimes from potential domestic challengers, businesses rationalized, and improved their products and procedures (Harriss, 2003). The end of licensing and technological change created opportunities for new businesses to form. Access to global markets and easier finance terms enabled firms like Infosys to expand its software business. Private firms gained from new opportunities in sectors like software, telecommunications, pharmaceuticals, and aviation. Some older business houses were able to revive their fortunes in liberalized markets (Damodaran, 2019). Enterprises were confident investing, with investment as a proportion of gross domestic product (GDP) reaching 35% in 2010 (Gandhi and Walton, 2012). India’s hierarchy of leading firms was fairly stable before 1991, but since then the composition of the leading business houses has changed significantly. Changes in the business sector

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have not been a simple story of reducing state controls and the release of ‘animal spirits’ (Damodaran, 2019: 121). The Indian state determines the profitability of business, especially those working in institutionally controlled markets, such as telecommunications and mineral extraction. Many of India’s largest firms are active in areas where they can access rents (Gandhi and Walton, 2012). However other firms are what Sinha terms ‘policy-seeking’ and often need the support of the state as they seek entry to global markets (2020: 26).

Populism in India India has a well-established tradition of populist politics that goes back to the 1960s when a number of regional parties and politicians contrasted the struggles of ordinary people with the alleged indifference of the national elite represented by the Congress Party. Prime Minister Indira Gandhi claimed this vocabulary for the Congress Party in the early 1970s, pledging to abolish poverty only to be challenged in 1974 by the anti-corruption movement inspired by Jayaprakash Narayan. India’s regional populists have had the most durable political careers, often governing in their home states as well having representation in the national legislature. The Congress Party has been weakened both by regional parties and the Hindu nationalist BJP. The two main national parties compete and cooperate with a wide variety of populist and non-populist regional parties (Wyatt, 2019). For the most part political parties in India do not compete with each other on economic matters preferring to emphasize identity issues (Murali, 2019) and profile their record on providing welfare, given a broad consensus among political parties in favour of gradualist economic reform. Recent national governments have displayed populist tendencies. For example, a Congress coalition was elected in 2004 promising to govern on behalf of ordinary people. This did not evolve into a populist project, but the rhetoric of the ‘common man’ was later picked up by anti-corruption activists who condemned Congress for betraying its principles. Narendra Modi, the Prime Minister since 2014, is said by some to be a populist (Jaffrelot and Tillin, 2017; Varshney, 2019). I favour an understanding of populism as ideology and thus my own view is that Modi is not a full-blown populist, but rather a religious nationalist who exploits populist tropes (Wyatt, 2023).¹ The ¹ Overall, I judge Modi’s resemblance to a populist leader to be superficial, and argue he is better understood as a religious nationalist. If populism is understood as strategy, he is not a maverick or an outsider (Barr, 2009). Neither are his appeals unmediated (Weyland, 2017). Modi’s regime is underwritten and promoted by the most institutionalized and organized political movement in India. It is possible for a nationalist party to degenerate into a populist party, by breaking down its organization and/or diluting its ideology. However, the BJP has not undergone such a transformation. If we understand populism in ideational terms (Mudde and Kaltwasser, 2017), Modi is a poor fit as a populist, given he does not advocate a thin-centred ideology or promote the general will of the people. Instead

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term ‘quasi-populist’ seems more apt. However, what matters for the purposes of this volume is that aspects of national politics since Modi became prime minister strongly resemble populist developments elsewhere. Democratic institutions have been put under pressure and chauvinism is cultivated by the governing BJP. In terms used elsewhere politics has become increasingly ‘noisy’ (Culpepper 2021; Feldmann and Morgan 2022), and notably confrontational and condemnatory. Opponents of Hindu nationalism are treated with contempt (or worse). Modi has centralized power and promotes his image continually. These personalistic characteristics have echoes of populist strategies pursued elsewhere. Personalization has decisively shaped interactions between business and the central government since 2014.

Business: Divergent interests and strategies India’s business sector is complex, and as Sinha expresses it, there are ‘multiple types of capital’ (2020, 25). There are variations according to size, region, links to global markets, and business strategy. Estimates vary, but the majority of output comes from a combination of the informal sector and the public sector, with the private corporate sector, which includes many smaller companies, thought to contribute less than a third of gross domestic product (Nagaraj, 2015, 43). To maintain clarity, this chapter focuses on larger businesses. Even though they account for a fraction of India’s economic activity, large businesses have the most potential to influence politics. Even though the contribution to economic activity of larger businesses is relatively small, these enterprises have significant power. The growing wealth of the business class is notable, with the number of dollar billionaires increasing from 46 in 2012 to 140 in 2021 (Gandhi and Walton, 2012; The Hindu, 2021). Business is an important source of political funding (Sinha and Wyatt, 2019). Some even claim that the business class has become India’s dominant class since 1991 (Chatterjee, 2008). This may be an over-statement, but large businesses are well placed to lobby on matters of general policy and equipped to engage with decisions made by national regulatory bodies. Large businesses are structurally important for the Indian state as they make important investment decisions (Murali, 2019). These enterprises are relatively easy to tax and are an important source of public revenue. Many of these firms are linked to the global economy, making them relevant in India’s foreign economic policy (Sinha, 2016). Some business leaders have celebrity status and are respected leaders of opinion. Other business leaders of placing the people at the ‘centre of politics’ (Rooduijn, 2014: 575), he remains faithful to a welldefined nationalist ideology. Modi began his political career with the Hindu nationalist organization, the RSS, and remains committed to their ideology (Palshikar, 2019).

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gain influence through media ownership and organizations that are sympathetic to the agenda of the private sector (Murali, 2019). The direct influence of business over the media is apparent nationally and at the regional level also, where media concentration can be very high. The Eenadu group developed a close relationship with the populist chief minister of Andhra Pradesh, Chandrababu Naidu, for example (Gundimeda, 2017). India’s largest conglomerate, Reliance Industries, owns Network 18, which runs a wide range of television channels, including a number purchased from Eenadu. Business strategy and organization conditions the orientation of enterprises towards political engagement. Firms may achieve profitability from innovative products and efficient organization and eschew lobbying activity. This approach resembles the ‘focused business elites’ of the Philippines who concentrate on their business activities (Takagi, Chapter 10 in this volume). With regards to Indian business, Naseemullah sees a divide in the governance of firms between those who follow a technical route to competitiveness and those who rely on personal networks. Those taking a technical approach have more formal structures of governance and operation. Political engagement to get access to rent-based profits can be irrelevant for these businesses, which would prefer transparent and effective economic governance. This contrasts with firms that draw on personal networks ‘through which business gets done and production is arranged’ (Naseemullah, 2016: 11). These firms gain a competitive advantage from the ability of their owners and managers to use networks to access resources and recruit labour. These networks also facilitate access to politicians with influence over regulatory matters. Transcending this distinction are a group of powerful enterprises that participate in ‘rent-thick’ activities including mining, petro-chemicals, and telecommunications (Gandhi and Walton, 2012; Sinha, 2020). Government decisions on licenses to extract minerals and the pricing of services sold to consumers determine the profitability of these privileged businesses (Gandhi and Walton, 2012; Rajshekhar, 2020). Access to credit from public sector banks on easy terms enabled troubled firms like Kingfisher Airlines to remain in business (Sinha, 2020). The implication of these varied business strategies is that businesses perceive politics and political engagement in different ways. As will be discussed in more detail, some firms see political engagement as an opportunity and invest in bespoke networking, which is opaque if not furtive. Political corruption can allow selective market entry and enhance profitability. Other firms see political actors as predatory and prefer to keep a low profile. In other words, there are many obstacles in the way of collective action by business (Sinha, 2010). This is reflected in the variety of apex organizations which include the Confederation of Indian Industry (CII), the Federation of Indian Chambers of Commerce and Industry (FICCI), and the Associated Chambers of Commerce and Industry of India (ASSOCHAM) (Pedersen, 2000), each of which lobbies for their own constituency (Sinha, 2005b).

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Business voice: Moving between loud and soft registers The post-1991 reforms gave business opportunities to expand (Damodaran, 2019). Relations between business and the state changed, with some suggesting business is able to assert itself and ‘increasingly sets India’s political agenda’. (Jaffrelot et al., 2019: 293) Business became more confident contributing to public debates. Business associations, such as the CII and FICCI became more active, lobbying for policy change (Pedersen, 2000; Baru, 2021). Business became more likely to exercise the ‘voice’ option on policy matters. The period of minority and coalition governments at the national level between 1989 and 2014 dispersed power (Manor, 2010), and reduced fears of coercive action by the state. The openness of the national government to lobbying was at times remarkable (Mehra, 2019). The collective positions taken by business in public does not rule out elements of ‘soft voice’, especially when enterprises are seeking their own interests. Neoliberal critics denounced the system of planned development for limiting economic freedoms before 1991 but individual business learnt how to lobby and use the regulations to their advantage. This quiet lobbying only intensified after 1991. Business would hire ‘contact men’ or ‘liaison officers’, often retired civil servants, to facilitate access and maintain a network of contacts (Baru, 2021, 78–9). Some of these quiet contacts involved corruption with contributions to party funds being required for the licenses and concessions needed by business to operate under the system of planning, often literally in the form of briefcases full of cash (Kochanek, 1987). The planning system has been largely dismantled but corruption has evolved as the state still controls access to certain markets and critical inputs including land (Chandra, 2015). The sums involved have increased as election campaigning has become more elaborate and expensive in massive parliamentary constituencies. The liaison work continues and includes growing numbers of parliamentarians. At least 28.4% of members of parliament (MPs) elected to the lower house in 2019 had a business background and/or current business interests (Sinha and Wyatt, 2019).

Narendra Modi, populism and personalist tendencies in national politics The Congress Party showed some interest in populist politics around the time of the 2004 general election. The BJP governing coalition chose to fight that election by claiming economic competence (GDP growth was on an upward trajectory, reaching an unprecedented 10.4% shortly before the election). The government took credit, using taxpayer funded advertisements to proclaim the slogan ‘India

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Shining’. The opposing Congress Party deduced that growth had not translated into personal experiences of prosperity and promised to govern on behalf of the ‘A am Aadmi’ or common man. The Congress coalition translated this rhetoric into heavier spending on welfare provision but otherwise did not fashion a populist strategy for governing. Economic policy making tended to be technocratic (Echeverri-Gent et al., 2023), even if political decision-making overruled caution at times (Mehra 2019, 94). The social policy of the Congress coalition was influenced by the National Advisory Council (NAC), which included social activists and civil society expertise and argued for a rights-based approach to development and welfare (Ruparelia, 2013). In other words, far from practicing plebiscitarian politics the Congress coalition government was open to rational and evidencebased policy making. An unintended consequence of this period of Congress rule was the formation in 2012 of an opposition party, the Aam Aadmi Party (AAP), whose populist anti-corruption rhetoric contributed to the defeat of the ruling coalition in 2014. The AAP failed to breakthrough into national politics, but it has become a successful regional party, governing the National Capital Territory of Delhi since 2015 (Wyatt, 2015). The 2014 election reset the terms of economic policy making in India. The Hindu nationalist BJP won a majority and dominated the coalition government that ruled from 2014 to 2019, and was re-elected in 2019. The BJP candidate for prime minister, Narendra Modi, presented himself as a pro-business and progrowth leader in the 2014 election campaign. His credibility was boosted by his long period as chief minister of the state of Gujarat, a state which even before Modi came to office, was responsive to the needs of investors (Bobbio, 2012; Sinha, 2005a). Many observers allowed themselves to believe that Modi would take up a reform agenda and act decisively to encourage investment and create new jobs. The outcome was rather different as policy making became erratic and growth began to slow in 2016–2017 and finally tipped into sharp recession following the onset of the COVID-19 pandemic (Echeverri-Gent et al., 2023). Decision making since 2014 has been highly personalized with the Prime Minister’s Office (PMO) shaping policy and controlling the work of the finance ministry (and other ministries too). Personalistic politics is a recurring feature of Indian politics, at both national and state levels of the political system. I take ‘personalistic politics’ to mean a government and/or party is dominated by the ambitions of its leader. Personalism is evident within a party as members put more emphasis on loyalty to party leaders than the organization itself (Margolis and Owen, 1985). Interpreting the career of Recep Tayyip Erdog˘an, Lancaster (2014) observes that personalist politics becomes evident in a party when: political recruitment is organized by party leaders, collective decision making dwindles, succession becomes a critical and uncertain issue, electoral appeals focus on the leader, and the party attracts less attention from the public. The organization tends to oligarchy as personal

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loyalty takes priority over policy and ideology. A cult of personality may well develop whereby the party leader is celebrated uncritically by supporters (Lancaster, 2014). In short, personality ‘overshadows institutions’ (Colburn and Cruz, 2012, in Lancaster, 2014, 1682). In possession of a governing majority Narendra Modi has centralized power and promoted his image relentlessly.² Narendra Modi campaigned for office in 2014 making claims for his competence and alleging that the incumbent prime minister, Manmohan Singh, failed to maintain his authority and allowed his administration to drift. Using Singh as a foil, Modi has very visibly taken control of government and built his own image. The resources of party and government are used to keep the prime minister in the news (Wyatt, 2021). Modi takes meticulous care with his personal appearance (Vittorini, 2022) and his public appearances are arranged to generate striking images that broadcasters will use (Sardesai, 2019). He uses every social media platform available and his own website to update supporters and voters on his work. Going further, he has his own app that voters and citizens are encouraged to download to their phones. Party matters have become much more centralized with Modi dominating election campaigning and the selection of candidates. BJP MPs are subject to strict rules on their conduct and long-established leaders were overlooked when the cabinet was formed in 2014, signalling change in the party elite. Personalist politics inevitably impact on relations between the state and business. The conduct of government is highly personal, including economic policy making. The PMO is the tool used to impose Modi’s will on the government. Cabinet government has been undermined by limiting collective decision making. Policies are designed within the PMO and given to functional departments to implement. The prime minister chooses senior officials in ministries with minimal consultation, which includes the appointment of bureaucrats within the finance ministry (Gupta, 2019). The prime minister often meets with officials directly, undercutting the authority of responsible ministers. A lack of trust is a common feature of personalist politics (Lancaster, 2014), and it pervades the culture of governing under Modi. Ministers and civil servants are discouraged from talking to the press. It is not always clear who within the PMO is making policy, or offering advice, as rules on government record keeping have been ignored (Mehra, 2019). Policy and project implementation is closely monitored by Modi, in a manner that has intimidated civil servants (Gupta, 2019). Expert economic advisers have become disillusioned as their advice is ignored (Echeverri-Gent et al., 2021). The ² There are many similarities between Erdog˘an and Modi, including control of political recruitment, centralised decision making, weakening of their own party, personal image building, and distrust of others. However, they have not followed identical paths. The BJP does not depend entirely on Modi for its survival, and the ideology of the Hindu nationalist movement remains important for Modi and his party. Gupta (2019,) shows how ideological commitment has conditioned recruitment to the PMO since 2014 and Jha (2017) surveys the state of the BJP as an organization.

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independence of institutions of economic governance, such as the Reserve Bank of India and the National Statistical Commission, has been undermined as Modi has extend his influence (Echeverri-Gent et al., 2021). The authority of the finance minister has been weakened as the PMO drives policy (Mehra, 2019). The personalization of politics during Narendra Modi’s time as prime minister has five consequences for business. Firstly, Modi’s competence as an economic leader is in question. Put bluntly, Modi seems to trust his judgement over that of experts and has made impulsive decisions that have been costly for business (Manor, 2020). The ‘demonetization’ that was intended to crack down on tax evasion and corruption is a case in point. The poorly planned withdrawal of high value bank notes in late 2016 resulted in demand contraction, unemployment, and disruption for business. The over-hasty implementation of a national Goods and Services Tax in 2017 was also damaging for business (EcheverriGent et al., 2021). Small business has found these policy changes especially challenging. India’s macroeconomic performance was deteriorating prior to the economic recession brought on by the COVID-19 pandemic (Echeverri-Gent et al., 2023). Some argue that hopes for reforms that would promote growth were misplaced in 2014, partly because Modi struggles to articulate a strategic vision (Mehra, 2019). At times policy seems driven by presentation, such as the ‘Make in India’ scheme to promote manufacturing ‘which grabbed headlines but without a coherent or well-thought plan to link manufacturing with trade, investment, and other policies’ (Echeverri-Gent et al., 2021: 404). During his first administration Modi’s ‘ideological and political compulsions created an inconsistent and rambling economic policy agenda’ (Echeverri-Gent et al., 2021: 404). A common complaint from business is ‘bewilderment at the incoherence of this government’s economic philosophy’ (Chandra, 2020: 15). A second consequence for business of Modi’s personalism is that many business leaders have reasons to fear the government. Modi’s leadership style discourages debate and dissent. He resents criticism and has a long memory (Sardesai, 2019). The anti-Muslim pogrom carried out Gujarat in 2002, while Modi was chief minister of that state, has much to do with this. The inaction, and in some cases complicity, of the state administration in the rioting was widely criticized and remains a negative aspect of Modi’s image. Modi felt that elements of the national media had covered the riots inappropriately and relations with the press remain tense (Sardesai, 2019). A number of business leaders raised concerns about the violence in 2002 and 2003 during meetings of the CII. Modi was reportedly angered by the interventions and the Director General of the CII was asked to apologize for the upset (Mukhopadhyay, 2013). The centralization of economic policymaking after 2014 foreshadowed a new equilibrium in business-state relations. Prior to 2014, and in the absence of a single party majority, business expected, and for the most part received, a sympathetic

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hearing from the national government. Under Modi’s leadership, the central government is much less receptive to entreaties from business and in day-to-day dealings can be overbearing. The government has set targets for tax officials to meet and vigorous enforcement has been met by protests about ‘tax terrorism’. One former board member of the leading software company Infosys complained ‘(t)alk to any entrepreneur, any high net worth individual and they will have some kind of friction with the tax department’ (Sinha, 2020: 24). Businesses fear arbitrary action in other areas where government regulation permits or enables commercial activities, and one industrialist spoke of ‘a general climate of fear’ (Manor, 2020: 15). In November 2019, Rahul Bajaj caused a stir when he stated that most business leaders were afraid to criticize the government (The Week, 2019). The revelation in July 2021 that the telephones of ‘scores of businesspersons’ were identified in the Pegasus list of potential targets of surveillance confirms the perceptions Bajaj articulated (Varadarajan, 2021). Business is expected to finance the BJP and the pressure described previously can only encourage generosity. The BJP has intensified its fundraising, seeking out contributions from business and spending heavily during election campaigns (Jha, 2017). Changes to the law, which came into effect in 2018, conceals business donations from public scrutiny (Vaishnav, 2019). Simply put, the party, but not the public, knows who has contributed to the BJP, which received almost all of the donations from the first sales of the new ‘electoral bonds’ (Sinha and Wyatt, 2019: 253). The new law seems to have deterred businesses from supporting opposition parties. The nervousness of business is encouraged by wider developments as politics in India has taken an illiberal turn since 2014 (Adeney, 2021). Constitutional changes, including the revoking of Jammu and Kashmir’s statehood and denying citizenship to Muslim refugees, have given Hindu majoritarianism institutional status. The BJP government has given succour to brutish elements within the Hindu nationalist movement. Official moves to promote vegetarianism and ban the slaughter of cows are indirect ways of discriminating against India’s Muslim minority. Nationalist vigilantes have been involved in violent attacks, and even killings, of individuals they claim are involved in selling beef. The leftist student body of Jawaharlal Nehru University have been subjected to rhetorical and physical assaults on the grounds that they are ‘anti-national’. Acts of violence and intimidation, of which only a few are mentioned previously, discourage critical commentary, and give business reasons to be reticent. A third challenge for business under the Modi premiership has been one of access. The personalization and centralization of power since 2014 has made communicating with government more difficult. The preceding coalition government was extraordinarily open to representations and had a very good sense of the priorities of business (even if it did not deliver everything business desired) (Mehra, 2019; Sardesai, 2019). This openness is reflected in Sinha’s term ‘porous state’ that sums up the variety of access points open to business and politicians with

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business interests (Sinha, 2019 57). The incoming Modi administration was quick to reduce the official presence of business in government. Business participation in economic policy committees was scaled back and appointments to meet senior officials can take months to arrange (Sardesai, 2019). The efficacy of interacting with other institutions of economic governance is far from clear as it depends if they are in or out of favour with the PMO. The inscrutability of the Modi administrations is such that ‘(e)ven large political financiers in 2014 have sometimes found it difficult to get their voices heard’ (Chandra, 2020: 15) The vexed question of crony capitalism is the fourth challenge linked to Modi’s personalist politics. A few firms appear to gain a competitive advantage from their proximity to the prime minister, while the remainder struggle for access. Deepening ties between business and political elites have been a major point of discussion since the mid-2000s. Some have drawn parallels with the ‘gilded age’ of US capitalism and raised concerns about the growth of crony capitalism (Crabtree, 2018; Walton, 2020). The Modi government claims to have turned away from crony capitalism, citing the use of digital mechanisms such as electronic auctions to allocate licenses (Bhattacharya and Thakurta, 2019). However, the claim to have ended crony capitalism lacks credibility. The general shortage of credit since 2014 gives an advantage to certain large business groups who find it easier to get loans from public sector banks than smaller firms (Chandra, 2020). A few business owners are still able to get access to the prime minister, including a number of associates with investments in Gujarat (Crabtree, 2018; Sardesai, 2019). Financial markets seem to believe that personal connections to the prime minister enhance profitability, and the personal wealth of those with access grew significantly between 2014 and 2018 (Walton, 2020). The bankruptcy code introduced in 2016 has allowed the assets of distressed companies to be sold on and debts written off (Echeverri-Gent et al., 2021). However, the sale of assets frequently works to the benefit of a small number of already large companies, who increase market share. In some cases, unprofitable subsidiaries of well-connected conglomerates have been kept out of the bankruptcy process by government intervention (Rajshekhar, 2020). A fifth challenge for business is the depth of Modi’s commitment to business in contrast to his other political priorities. In his second year in office, Modi began to have doubts about the electoral viability of giving too much support to business. His public interactions with business were scaled back and he devoted more interest to schemes that delivered benefits to voters, including subsidized cooking gas and income support payments to selected groups. Personalism was once again in evidence. Modi launched and advertised the schemes, and very often the naming of the projects made it clear they were the initiative of the prime minister. The quality of the schemes was highly uneven, and their scale contributed to an escalating fiscal deficit, doing little to help a difficult investment climate (Echeverri-Gent et al., 2021).

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Personalist politics, exit, voice, and loyalty Modi’s demonstration of strong leadership has encouraged business to reconsider its options for engaging in politics. Some entrepreneurs are reassessing the risk of investing in India, and a quiet exit of some capital is being carried out by second rank companies who see better opportunities overseas or are moving their capital into more mobile assets (Chandra, 2020). As noted previously, a few leaders have chosen to speak out loudly, but they are very much in the minority. Soft voice remains a popular and safe option (Feldmann and Morgan 2022; see also Chapter 1). Businesses continue to lobby, and the globally respected governor of the Reserve Bank of India, Raghuram Rajan was the subject of a whispering campaign which included business leaders unhappy with his attempts to crack down on loan defaulters. Rajan only served one term, from 2013 to 2016. Business lobbyists also felt bold enough to lobby for exemptions from the new GST in 2017 (Mehra, 2019). Political donations are another way of seeking influence in ways that are now impossible to track given the new electoral bonds. Opting for implicit loyalty is another cautious option (see Chapter 1). Mediumsized companies have long taken this approach, avoiding publicity and remaining wary of potentially predatory state-level politicians (Vijayabaskar and Wyatt, 2013). The reluctance of business leaders to be interviewed on record reflects a fear of coercive treatment (Chandra, 2020). Business leaders tend to avoid public involvement in election campaigns (Sinha and Wyatt, 2019). However, a few business leaders have opted for explicit loyalty. The otherwise taciturn Gautam Adani has backed Modi on numerous occasions (Crabtree, 2018). He contributed to the costs of Modi’s appearance at Madison Square Gardens in New York in September 2014 (Mint, 2014), and has joined the prime minister on various overseas trips. Anil Ambani described Modi as ‘king among kings’ at an investor summit in 2013 and has also followed Modi on several prime ministerial visits overseas (Singh, 2019). In September 2016 Mukesh Ambani, the chairman and managing director of Reliance industries, launched his 4G data network commenting ‘Modi’s vision for Digital India is a life changing moment’. The admiring sentiment was confirmed in front page newspaper advertisements picturing the prime minister (Scroll, 2016).

State-level populism and business India’s federal system, which includes 28 states and eight union territories, adds another layer to economic governance. The central government is responsible for the macroeconomic context, the most remunerative taxes, and important regulatory decisions. Yet, state governments can shape the investment climate in their state, enable access to land for large projects, provide infrastructure, create human

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capital, and run a regional industrial policy (Sinha, 2005a). Individual states have their own business cultures which state governments can reinforce (Bobbio, 2012; Upadhya, 2020; Zarhani, 2018). State chief ministers have done much to promote their image as economic managers of their regions (Rudolph and Rudolph, 2001). Numerous state governments are run by regional parties, including some with strong populist credentials. Currently the large states of Andhra Pradesh, Tamil Nadu, and West Bengal have populist governments. India’s richest state, Maharashtra, is run by a coalition led by a faction of the right populist Shiv Sena. The National Capital Territory of Delhi is governed by the anti-corruption Aam Aadmi Party. Business has good reasons to be wary of state level populists who have at times encroached on economic freedom, favoured consumption spending, and neglected infrastructure. Populist chief ministers can be capricious and overbearing. Populist politicians tend not to talk the language of business and can inhabit a different cultural milieu, devoting their time and attention to the needs of ordinary voters. Part of Mamata Banerjee’s political appeal is her frugality and ‘mild but definite aversion’ to the privileges available to upwardly mobile politicians (Bose, 2012). Populist ideology prompts various state level regimes to promote people-oriented policies (Subramanian, 1999). These have slowed India’s economic liberalization. Market interventions, including food subsidies and interference in land markets, are politically expedient. The commitment to people-centred politics has often been demonstrated through an interest in spending on welfare (Joshi and McGrath, 2015). The schemes are usually heavily personalized, emphasizing the generosity of the party leader, as has been the case with Mamata Banerjee who defeated the communist state government of West Bengal in 2011 and is keen to demonstrate her own connection to the ordinary people (Bhattacharya, 2021). While elitist commentators mock such ‘freebies’ and ‘dole’ politics, populist welfare regimes can promote human development, and move party competition away from chauvinism towards performance in office (Wyatt, 2013). While businesses might prefer state governments to spend more on physical infrastructure, deepening commitment to welfarism helps manage the social disruption that follows from rapid economic growth (Vijayabaskar, 2010). Investments in health and education, advocated by the populist political parties that have governed the state of Tamil Nadu since 1967, have improved the human capital of the state (Joshi and McGrath, 2015). Initially, the state appeared to be sacrificing economic development because of consumption spending, but it has nevertheless achieved impressive economic growth rates since the 1990s (Harriss and Wyatt, 2019), supporting an argument that populist politics can be a productive way of balancing the interests of capital and popular forces (Kalaiyarasan and Vijayabaskar, 2021). The state of Andhra Pradesh has followed a slightly different trajectory, with Chief Minister Chandrababu Naidu’s pursuit of ‘reform’

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bearing some resemblance to Alberto Fujimori’s idiosyncratic neoliberalism. Having served three terms in office Naidu was ousted in 2019 by another populist, Y. S. Jagan Mohan Reddy, who warmly embraces both business and (literally) the less privileged people of his state. Andhra Pradesh has combined populist politics with attracting inward investment since the mid-1990s (Zarhani, 2018). The personal dominance of populist chief ministers, who can exhibit ‘Bonapartist tendencies’ (Harriss and Wyatt, 2019: 236), may be very helpful for business. The concentration of power in the hands of a chief minister means they can act decisively to promote economic development. Some populist leaders have supported regional businesses seeking to expand into national markets, as has been the case in Andhra Pradesh (Baru, 2021). Sympathetic attitudes towards business may be influenced by the social profile of populist parties which include large numbers of legislators with business backgrounds (Sinha, 2019). Populist ideologies at the state level tend to celebrate regional culture and autonomy, directing ire at elites governing in Delhi. Economic issues, and relations between capital and labour, are of second-order importance. This leaves open the possibility of populist politicians reaching a quiet understanding with business, or in some cases making allies with regional capitalists who are also wary of Delhi (Gundimeda, 2017). The post-1991 reforms condition relations with business in the Indian states. Since the 1990s state chief ministers have been under pressure to attract inward investment, often competing with other states (Jenkins, 1999; Harriss and Wyatt, 2019), which discourages hostility towards business elites even if populist leaders were that way inclined. For the most part, Indian business has adapted to politically managed economics and been able to reach an accommodation with state-level populist regimes.

Conclusions The state-level of Indian politics has produced more thorough going populist politicians, who also have a role in economic management. Populist politics at the state level of Indian politics may not be the preferred option of business. Populist leaders have ‘cultural’ differences with established business houses (Harriss and Wyatt, 2019: 254), and they remain close to the largely rural electorates that re-elect them. Yet populist politicians tend not to target business elites, preferring to denigrate oppressive forces in Delhi. While performing ‘noisy politics’, regional populists have tended towards pragmatism. Effective welfare policies help their governments get re-elected. India’s regional populists offer a useful reminder, given concerns about right wing populists elsewhere, that populism can be a constructive form of politics. Attracting investment, which includes competing with other states, brings jobs, and adds prestige to the region. Business has found ways of working with state level populists, who can be effective economic managers.

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Relations between Modi and regional parties have been less fruitful. The centre has taken to interfering in state matters and has not developed the cooperative federalism promised in the 2014 manifesto of the BJP (Kailash, 2019). The biggest political challenge for Indian business currently is the personalist character of the BJP government. There are echoes of populist politics elsewhere, where leaders use populist appeals as a strategy for gaining power (Weyland, 2017). Such regimes, unrestrained by strong party institutions, can produce inconsistent policies driven by a leader’s changing appreciation of a situation. Modi resembles this type of populist leader given that he is difficult to predict, and his policy choices are erratic. He has failed to address properly the weakness of the banking sector. Despite claiming to be a decisive leader, Modi has not taken the action that might have improved the flow of credit. His inept handling of the COVID-19 pandemic has increased human suffering, contributed to macroeconomic instability, and created uncertainty for investors. Modi’s relationship with business is complicated. While he has been criticized by business leaders, he claims to be well-disposed to business. This is consistent with his party’s heritage, of strong links with traders and owners of small businesses. Modi is very close to selected business leaders, including several from his home state of Gujarat (Crabtree, 2018). Between 2002 and 2014 the state government of Gujarat continued the pro-business orientation that previous Congress administrations had established (Sinha, 2005a). In high-profile investment summits Modi feted large corporations from India and overseas (Bobbio, 2012). Yet, being ‘well-disposed to business’ translates only imperfectly into policy making and the everyday treatment of businesses by government. Modi’s record on economic policy making has been inconsistent and created obstacles for business to work around (Echeverri-Gent et al., 2023). The Modi government’s illiberalism is a latent threat to business. The weak rule of law and erosion of institutions has weakened the quality of public administration in areas that influence investment and growth. Modi’s centralization and inaccessibility undermines the network governance that can bring regularity to a complex economy (Sinha, 2020). The regimes’ resistance to scrutiny and criticism undermines possibilities for responsive policymaking. The personal dominance, and mixed economic record, of Modi is relevant to larger debates over relations between business and the state, in which a shift in power away from the state has been identified. It has been argued that the 1991 reforms enlarged the private sector and enhanced its political influence such that ‘(o)ver time the balance of power between the state and business has shifted in favor of business groups’ (Jaffrelot et al., 2019: 283). Business is said to shape outcomes indirectly (reflecting its structural power) and lobby on specific matters directly. Overall ‘the leading position of the private sector in the economy increasingly pressures India’s main political parties to pursue probusiness economic policies’ (Jaffrelot et al., 2019: 285). However, the evidence reviewed previously

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does not support the contention that the balance of power has shifted in favour of business. The Modi government has been able to introduce very damaging policies without retribution from business, with no evidence that the BJP is losing political funding. Modi’s personalist regime has sought dominance over other social forces including business. Electoral objectives have taken priority and probusiness initiatives have been pursued fitfully. Business has failed to respond collectively. So far, business has been unable or unwilling to resist Modi’s political aggrandizement. The rise of aggressive nationalism and personalist politics has mostly been met with ‘implicit loyalty’ and a more cautious approach to politics by business.

Acknowledgements I am very grateful to comments on the chapter from its very earliest stages made by anonymous readers and the editors. John Echeverri-Gent and Aseema Sinha both read the final draft and made many helpful suggestions. Any errors are mine.

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10 Technocracy and Populism in the Philippines Yusuke Takagi

Introduction Scholars often describe the rise of the Philippines’ President Rodrigo Duterte as another example of the global rise of populism. However, considering Duterte’s brutality towards his opponents, he is not so much a populist—although he is popular—as much as he is an authoritarian ruler whose leadership style is quite different from that of his predecessor Benigno Aquino III. While leading a brutal anti-drug campaign, Duterte has repeatedly attacked institutions and individuals promoting human rights and media freedom. Knowing the significance of economic growth sustained by foreign direct investment, however, Duterte has attacked his political enemies not in a systematic way and has not yet distorted the regulatory regime in general. In the growing economy benefiting from globalization, he has not attacked but rather embraced technocratic policy prescriptions. The Philippines and the other cases in this book have three major differences. First, immigration is not a major issue in the Philippines, which benefits from remittances from Filipino migrants worldwide. Globalization is still a saving grace for the Philippine economy. Second, the events triggered by the austerity programme imposed by international financial institutions and the rise of anti-austerity was not a new story arising after the Global Financial Crisis as in many other countries. Rather, it had emerged and developed in the 1990s. After democratization in 1986, a debate had arisen between those who asserted that the Philippines should repay the debts and those who opposed paying them because they were accumulated by the dictator, Ferdinand Marcos. Successive administrations decided to repay the debt and faced severe fiscal constraints, which arguably resulted in the rise of Joseph Estrada, a populist president during the late 1990s. After 2008, austerity did not arise as a major policy issue in the Philippines (Pempel and Tsunekawa, 2014). Third, Duterte’s economic policy management represents not a departure from, but rather a layering upon the existing institutions developed by previous administrations (Mahoney and Thelen, 2010). The

Yusuke Takagi, Technocracy and Populism in the Philippines. In: Business and Populism. Edited by Magnus Feldmann and Glenn Morgan, Oxford University Press. © Yusuke Takagi (2023). DOI: 10.1093/oso/9780192894335.003.0010

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Duterte administration has not interfered in the central bank’s independence and its inflation-targeting policy. In the case of government-business relations, Duterte aligned with capital rather than labour. Duterte, for instance, vetoed the bill to protect the rights of contract workers, which the labour groups supported, while almost all business associations opposed it (Tomacruz, 2019). When it comes to tax policy, Duterte supported tax reforms that were far more complex than familiar populist anti-austerity pleas. Although Duterte’s economic policy management might look like neoliberal consolidation, we argue that the reform coalition was based not on a restoration of neoliberalism nor its replacement by populism but on a transformation of economic managers’ mindsets, especially after the Estrada presidency. Estrada fits well with the portrait of populists, and he left a legacy in the form of policymakers’ mindsets. After Estrada’s rise and fall, economic managers no longer neglected the social implications of economic policy management; instead, they combined economic reforms with various social policies. As background to this transformation, we should appreciate the porous nature of the Philippine policymaking process, where various stakeholders outside of the government join, and neither political parties nor bureaucrats dominate the process (Abinales, 2005). The revolving doors of the government were open not only to the business sector but also to academia. Some business elites, for instance, supported social policy reform to enhance the human capital of the labour forces in the country (Takagi, 2017). The policymakers and advocates with an academic or business background have shown a nuanced understanding of the overall economy, the fiscal foundations of various government expenditures and the impact of international competition on their businesses. They have used this to carry out a series of reform policies which means that the Duterte administration cannot be solely characterized by the president’s rhetoric and the brutal drug war in which he has engaged but also by the technocratic efforts of socio-economic reform. Business groups have in the main supported the administration because of the reform efforts of both the democratic Aquino administration and the authoritarian Duterte administration both of which have built on the more overtly populist administrations in the 1990s. In the first section of this chapter, we briefly review the political developments after democratization, including the rise and fall of Estrada’s populism to put the rise of Duterte in its historical context. In the second section, we examine the rise of billionaire business people which show changes and continuities of the Philippine economy over the last three decades. In particular, the chapter identifies three types of relationships between government and business, arguing that one of these types—described as ‘the focused business elite’—has increased its presence while a second type—politically proactive business elites—have reduced in their presence. The third section traces the process of reform policymaking, which is not limited to the period of the Duterte administration, but instead involves

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the continuous development of policymaking by reform-oriented technocrats and supporters from the business sector. To conclude, we synthesize the findings and highlight the role of technocracy in bridging the potential gap between the ‘odd couple’ together.

The rise and fall of populism and coalition politics in the restored democracy In this section, we examine the rise and fall of populism by sketching the political development after democratization in 1986 with a special focus on the business sector. Rampant cronyism under the Marcos administration mobilized business elites to lead reform politics beyond the scope of their businesses (Hedman, 2006). In the midst of the economic crisis in the early 1980s, business elites began to call for reforms to economic policy management and illicit practices by cronies (Hau, 2017). They finally organized Makati Business Club (MBC), named after the central business district in Metro Manila, and provided financial and moral support to the anti-Marcos struggle (Thompson, 1996). Tellingly, no political parties succeeded in dominating the struggle, which resulted in the sort of coalition politics which was open to the influence of civil society organizations and business organizations. Just after democratization, policymakers engaged in a series of debates over economic policy, but they eventually reached a consensus towards liberalization, privatization, and decentralization (Raquiza, 2012). The business elites who supported the consensus became vocal within the administration and promoted their critical views against the Marcos administration’s interventionist policies, which had generated crony capitalism. Some individuals from the business elites joined the government e.g. as cabinet secretary and especially in the economic portfolio, promoting neoliberal economic reform in successive administrations (Tadem, 2005). The administrations led by Corazon Aquino (1986–1992) and Fidel Ramos (1992–1998) engaged in reform politics and prioritized dismantling governmentcontrolled enterprises and market monopolies. Meanwhile, the Marcos administration’s profligate public spending binge resulted in a serious fiscal crisis that prevented successive administrations from spending to mitigate the acute poverty in society (National Economic and Development Authority, 1986). The Philippines experienced the harsh effects of austerity politics from the late 1980s to the early 1990s under neoliberal economic reform leading to the rise of populism as a challenge to this situation. Joseph ‘Erap’ Estrada introduced the famous slogan ‘Erap para sa mahirap [Estrada for the poor]’ and won the presidency in 1998. The Estrada administration was populist in two ways. First, Estrada’s popularity is often associated

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with his career as a movie star rather than his career in public office, even though he served as a mayor for 17 years, a senator for six years, and the vice president for six years. He presented himself as an outsider who was close to the masses rather than as an establishment insider (Rocamora, 2009). Second, poor people rather than rich people indeed supported him. In the 1998 election, he won almost 50% of votes among the poorest and 40% of votes among the poor, who accounted for 88% of the total voters (Rocamora, 2009). Joel Rocamora, a leading activist and a keen political observer pointed out that Estrada’s rise reflected the failure of the left to connect its movements with the people whose support it should have relied on the most. President Estrada, however, did not appreciate well-designed antipoverty programmes and failed to mitigate poverty before his administration’s collapse, which was triggered by a popular uprising in 2001 (Rocamora, 2009). Because of a series of corruption scandals and a notoriously inefficient management style, most business elites were critical of the Estrada administration. In the midst of falling popularity, President Estrada suddenly declared an ‘allout war’ against the Muslim rebellion in Mindanao in April 2000, which fuelled criticism against the administration (Doronila, 2001). During the Mindanao campaign, the MBC disclosed its business outlook survey, which indicated a decline in business confidence because of the administration’s miserable handling of the Mindanao conflict, as well as its cronyism and corruption (Doronila, 2001). The MBC and three other business associations called for Estrada’s resignation after the exposure of another scandal involving the president (Doronila, 2001). Opposition groups composed of politicians, business associations, the Catholic Church, and civil society organizations convinced top military leaders to withdraw their support from President Estrada, resulting in his downfall and succession by Vice President Gloria Macapagal Arroyo in January 2001. Compared with Estrada, Duterte does not seem like a ‘pro-poor’ populist. During his campaign, he described himself as a ‘punisher’, and experts refer to his style as ‘penal populism’ (Curato, 2016; Ramos, 2020). Observers call his war on drugs a ‘war on the poor’ because it is not only abusive but also heavily biased against people living in urban slums and squatter areas (Ramos, 2020). Besides, the Duterte administration repeatedly attacked investigative journalists and one of the established TV stations in the country. A leading intellectual of the Philippines, Walden Bello, asserted that Duterte is a ‘fascist original’ (Bello, 2017). As Ramos pointed out, however, the Duterte administration does not neglect social policy (Ramos, 2020). The administration has enhanced social policy both in spending and making necessary laws, and its welfare spending is among the highest in the country’s history since its democratization (Ramos, 2020). Based on the research on the 2016 election and the description about the rise and fall of left-leaning figures in the administration early in Duterte’s presidency, Ramos argues that Duterte must exploit social policy reform to cultivate support from

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his base among the poor. It is striking to notice that whilst business abandoned its support for the Estrada administration, it is predominantly left-leaning figures who have resigned from the Duterte administration. This is another signal of the need to differentiate Duterte’s authoritarian populism from Estrada’s left-wing populism. Duterte is not an inward-looking populist considering his pro-business economic policy management. He neither categorically opposes globalization nor does he support ‘traditional values’ and the culture war rhetoric characteristic of male right wing populists. Instead, he embraced economic globalization representing a continuation of the previous pattern. Although observers point out similarities between President Duterte and US President Donald Trump, Duterte’s financial secretary highlighted their diverging stances on globalization in a public speech (Department of Finance, 2016). A week after the US elections in 2016, Secretary Carlos Dominguez asserted the ‘That (Brexit) vote represents, as does Mr. Trump’s victory, a backlash to globalization’, but he did not support the path of anti-globalization rhetoric. Instead, he suggested that the Philippine government implement a series of tax reforms to achieve inclusive growth. The Duterte administration’s economic team was composed of veterans of economic reform practice and advocacy. Finance Secretary Dominguez is a businessperson and former cabinet member of the Corazon Aquino administration. The first secretary of the Department of Budget Management was Benjamin Diokno (governor of the Central Bank since 2019), who is an economics professor at the University of the Philippines and served twice in the same department as undersecretary (1986–1991) and secretary (1998–2001). Besides these secretaries at the implementing agencies, the director-general of the planning agency, or the National Economic and Development Authority (NEDA), was Ernest Pernia, an economics professor at the University of the Philippines who once worked at the Asian Development Bank. They had all been active in making policy proposals before joining the Duterte administration. Diokno and Pernia, together with nine other professors, published a seminal report on the government’s fiscal crisis in 2004. In an article entitled ‘The Deepening Crisis: The Real Score on Deficits and the Public Debt’, they revealed serious concerns about the increasing debt accumulation, which rose to 78% of gross domestic product (GDP) in 2003, and they analysed the causes and provided a set of prescriptions (De Dios et al., 2004). Instead of simply accusing individual presidents of mismanagement, they scrutinized the existing structures of the tax system and pubic corporations’ finances and proposed several concrete remedies. First, they pointed out that the government did not increase its spending drastically under Presidents Estrada and Arroyo and noted that the government failed to improve its tax efforts; 17% in 1997 and 12.5% in 2003 (De Dios et al., 2004). Second, they examined the bonds issued by public corporations and decided that

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because the government financed payment for the bonds by borrowing money, it assumed off-budget liabilities or contingent liabilities. Based on their own analysis, they proposed a series of reform policies covering issues such as indexing excise taxes, increasing the value-added tax (VAT), and imposing a certain limit on the government’s off-budget liabilities (De Dios et al., 2004,). Subsequent administrations partially but continuously implemented tax reform measures following the scholars’ proposal. President Arroyo (2001–2010), who is a trained economist, increased taxes on tobacco and liquor, increased the tax rate and expanded the VAT tax base, and introduced a reward system in the Bureau of Internal Revenue to enhance its ability to collect tax properly. These reforms led to a decrease in the national government’s debt relative to GDP from 77% in 2004 to 57% in 2008 and an increase in tax revenues from 12.4% in 2004 to 14.1% in 2008 (Tanimura, 2012). Cesar Purisima, who worked at the country’s leading accounting firm and led the fiscal reforms under the Arroyo administration as the financial secretary, represents a continuity of personnel in fiscal reform across two successive administrations. After passing the reform bills in Congress, Purisima resigned in protest in July 2005 because of the exposure of alleged fraud by President Arroyo in the 2004 election (Tanimura, 2012). In the successive administration, President Benigno Aquino appointed Purisima as his financial secretary and had his economic team continue their financial reforms from 2010 to 2016. President Aquino stated he would not impose new taxes but sought to improve the capacity of the Bureau of Internal Revenue and reformed the existing laws (Reside and Burns, 2016) indexing tax rates on tobacco and liquor for the first time in 15 years to generate revenue for the health insurance system. Because of this series of tax reforms, policymakers not only escaped from the fiscal crisis but were able to introduce a set of social policies. The Arroyo administration introduced a conditional cash transfer programme to mitigate poverty, which the Aquino administration expanded to cover more households. The Aquino administration also expanded allocations to the health insurance system through the previously mentioned tax reform, which encouraged the poor to enrol in the Philippine Health Insurance Corporation (PhilHealth), increasing enrolment from 5.2 million in 2012 to 15.4 million in 2015 (Reside and Burns, 2016). In 2019, President Duterte signed the universal health care act into law to institutionalize affordable health care access by enhancing the existing social health insurance scheme (Ramos, 2020). While the presidents changed every six years following the constitution of 1987, the policymakers, in cooperation with academia and the reform-oriented business elite, continuously strove for economic as well as social reform, partly because the coalition politics allowed the policymakers and advocates to work for the government beyond the so-called partisan line.

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Changing government-business relations in the twenty-first century Not all business elites are active in policymaking. Three types of government– business relations are prominent in the Philippines. The first involves business elites who focus on their business activities and pay little attention to the government as long as it does not interfere with their activities; in this chapter, we refer to members of this group as ‘focused business elites’. Following the discussion by the editors, we can assume that the focused business elites adopt implicit loyalty toward populism (Feldmann and Morgan 2022; see also Chapter 1). In addition, we identify two types of proactive business elites which actively engage in politics, though they have opposing goals. So-called cronies cultivate relationships with politicians to seek various forms of rent for their parochial interests. They should be explicit loyalists to the populist leaders (Feldmann and Morgan 2022). By contrast, reform-oriented business elites advocate policy reforms to improve the business environment in general. They should be the loud voice against populism following the classification of the editors of the book (see Chapter 1; Feldmann and Morgan 2022). Who were these business elites? Decades after democratization, the list of business elites shows changes and continuity in the country’s economy. The following list of top business people in selected years reflects the changing nature of Philippine businesses, see Table 10.1.

Table 10.1 Top 10 richest people in the Philippines in 2020, 2010, and 2006. Ranking in 2020

Name

Estimated Asset

Major business

Ranking in 2010

Ranking in 2006

1 2 3 4

$13.9 B $5 B $4.3 B $4.1 B

diversified real estate Ports diversified

1 17 7 3

1 24 11 6

$3.6 B

diversified

4

3

6 7 8

Sy Siblings Manuel Villar Enrique Razon, Jr. Lance Gokongwei & Siblings Jaime Zobel de Ayala Andrew Tan Lucio Tan Ramon Ang

$2.3 B $2.2 B $2 B

diversified diversified Diversified

9 10

Tony Tan Caktiong Lucio and Susan Co

$1.9 B $1.7 B

food retail

5 2 Out of top 40 6 Out of top 40

8 2 Out of top 40 7 Out of top 40

5

Sources: Forbes (2020, 2010, 2006).

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A number of conclusions can be drawn from this list. First, the top ten richest people in 2020 were far richer than the top ten richest people were in 2006. All of the top ten were billionaires in 2020, whereas only three were billionaires in 2006. Second, cases of spectacular growth have occurred. Four of the ten richest people in 2020 were not present in 2006. Manuel Villar and Enrique Razon, for instance, have accumulated their wealth after 2006. Villar accumulated his wealth through his real estate and construction businesses, and Razon enjoyed considerable profits from his casino and hotel business in addition to his conventional port development businesses. Third, the share of focused business elites increased, whereas proactive business elites did not perform well in the ranking. Among the top ten richest people in 2006, the top three (i.e. the country’s only billionaires) represented three types of business elites. Henry Sy is an example of the focused business elites who skillfully avoid politicization and focus on their businesses. After Henry’s death, Sy’s sibling stayed at the top of the rankings in 2020. Meanwhile, Jaime Zobel de Ayala and Lucio Tan were fifth and seventh, respectively, in 2020, which reflects contrasting forms of the politicization of governmentbusiness relations. Tan was known for his close relations with presidents Marcos and Estrada (Doronila, 2001). The Ayala name is often associated with the memory of the anti-Marcos struggle. Jaime Zobel de Ayala was initially the vice-chair of the Ayala Corporation, and Enrique Zobel was the corporation’s chairman. They were often linked with various reform efforts on the part of the MBC. Enrique Zobel was a powerful manager who expanded the business and founded the MBC in 1981. Because of the Ayalas’ accumulated investments and de facto city planning in Makati City, the name of the MBC has always been connected with the Ayala Corporation (Batalla, 1999). The Ayala Corporation’s business, however, was separate from the MBC’s activities even in the early 1980s (Batalla, 2006). In 1983, Jaime Zobel de Ayala took over the corporation’s chairmanship. He survived the politico-economic turmoil thereafter, and his son, Jaime Augusto Zobel de Ayala, succeeded him in 1994. Jaime Augusto is still a member of the MBC but has not been as vocal as Ramon del Rosario, who publicly accused Duterte of disorganized talk at the MBC during the 2016 campaign (ABS-CBN News, 2017). Del Rosario was the seventeenth richest person in the country in 2006, but he fell out of Forbes’ top fifty list by 2020 (Forbes, 2006). This brief look at the list of billionaires in the country reveals the diversification of business activity in the midst of a growing economy in which a few business elites cannot dominate the entire landscape, though several examples of crony capitalism and political interference in business activities exist. Because of their involvement in politics, proactive business elites tend to be the targeted for criticism. Critics of the Duterte administration express concerns about the rise of business elites who maintain close relations with President Duterte. Dennis Uy is a businessperson who joined the millionaire club under the Duterte administration. With assets totalling $650 million, he is twenty-second on the list

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of the richest people in the Philippines (Forbes, 2020). In 2002, Uy started a gasoline and oil retail company, Phoenix Petroleum, in Davao City, where Duterte and his daughter dominated the mayorship for decades. In fewer than 20 years, Uy made his company the country’s third-largest gasoline retailer, especially after signing a contract with the rapidly growing budget airline Cebu Air, Inc. (De la Paz, 2017). Uy expanded his business into resorts and casinos, and then under the Duterte administration, moved into the more controversial telecommunication industry. Based on Duterte’s policy of promoting competition in the mobile phone services sector, which two major companies have dominated for decades, the government provided a license to the Dito Telecommunication Corporation, which Uy owns but China Telecom heavily supports with technology and finance. Although Uy has denied having business relations with President Duterte, he did not hide the fact that he donated to Duterte’s campaign in 2016 and often invited the president to the company’s events (De la Paz, 2017). Manuel Villar, the second richest person on the Forbes list in 2020, is not immune to criticism of his close relations with the government. Villar made his wealth in the real estate business while he was a former house speaker, senate president, and presidential candidate in 2010. His wife Cynthia was elected senator, and his son Mark serves as the secretary of public works and highways for the Duterte administration. Critical media have pointed out Mark for possible conflicts of interest because of his family business in real estate and the post of public works secretary (Jimenez, 2019). Contrasting cases of the politicization of business under the Duterte administration also exist, in which the administration has harassed some businesses. In March 2019, Metro Manila suffered a severe water crisis in which some parts of the city faced 24 hours without water because of insufficient rainfall and underdeveloped infrastructure (Manila Water, 2019). During the investigation, Manila Water, a private company owned by the Ayala Corporation, became a scapegoat. Manila Water provided water to the eastern part of Metro Manila and neighbouring areas in Rizal Province, whereas the Metropolitan Waterworks and Sewerage System was in charge of regulation. After a series of congressional hearings, lawmakers served Manila Water a 1.124-billion-peso ($21.5 million) penalty, though critics pointed out that the Metropolitan Waterworks and Sewerage System should have addressed Manila Water’s request to develop water supply facilities. One of the country’s leading economists, Raul Fabella, warned that the decision might be the ‘twilight of the rule of law’ unless a group of lawyers fixed the issues (Fabella, 2019). The Manila Water case was triggered by the water crisis, but the case of ABS-CBN, the largest television broadcasting company, was overtly political. In July 2020, Congress rejected ABS-CBN’s request to extend its franchise, which resulted in a shutdown of its service. Oscar Lopez, the thirty-second richest person in the Philippines, with $240 million in assets (Forbes, 2020), owned ABSCBN. The Lopezes were victims of martial law under President Marcos, who

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also shut down ABS-CBN. In 2016, ABS-CBN declined to broadcast Duterte’s campaign advertisements. President Duterte asserted that the Ayalas and the Lopezes were oligarchs, though there are other billionaires, as we have discussed (Reed, 2020). As of 2021, the rise of crony capitalism has not led to an economic crisis nor to a rise in anti-business and anti-establishment populism. In part, this is because government-business relations have become complex, and the interests of business elites have diversified. In a booming regional economy, most of the growing companies have expanded their business both inside and outside of the country. Business has become more heterogeneous and global, while cronyism has become less dominant over time. Furthermore, even if cronyism has reemerged as a problem, the administration’s general economic policy management is still supported by most economists as well as the other two components of the business elite identified—the business focused and the reform-oriented businesses.

Economic policymaking under the Duterte administration Unlike its colourful rhetoric and brutal anti-drug campaign, the Duterte administration represents continuity of policy reform carried out by the previous Aquino administration, especially in socio-economic policy management. In this section, we highlight the efforts for the economic managers who provide techonocratic solutions to the government. Duterte won the election in May 2016 partly because of the breakup of the Aquino coalition in which President Aquino officially endorsed Manuel Mar Roxas, his colleague in his cabinet, while the candidate Grace Poe continuously claimed until the very end of her campaign that she would be President Aquino’s genuine successor in terms of maintaining and developing his reforms. In the elections, Duterte won 39%, whereas Roxas and Poe won 23.4% and 21.4%, respectively (Rappler, 2016). Because most of the supporters of Roxas and Poe were also supporters of the Aquino administration, it is fair to conclude that Duterte won because of the breakup of the Aquino coalition. When Duterte appeared at the MBC forum in April 2016, he was criticized for his economic policy’s lack of substance (ABS-CBN News, 2017). He confessed that he was not an expert and would have the cabinet manage economic policy but described himself as a law-and-order candidate. Only after the campaign on 12 May did Carlos Dominguez, who would be appointed as the finance secretary, reveal Duterte’s eight-point economic agenda (CNN, Philippines, 2016). The eight points of Duterte’s economic agenda consisted of the following: 1. Continue and maintain the current macroeconomic policies. 2. Accelerate spending on infrastructure and maintain the target of setting aside 5% of the country’s GDP to infrastructure spending.

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3. Ensure the attractiveness of the Philippines to foreign investors and enhance competitiveness in doing business in the country. 4. Provide support services to small farmers to increase productivity and improve market access. 5. Address bottlenecks in the land administration and management system. 6. Strengthen the basic education system and provide scholarships for tertiary education that is relevant to private employers’ needs. 7. Improve the tax system by indexing tax collection to the inflation rate. 8. Expand and improve implementation of the conditional cash transfer programme. Source: the author’s summary based on CNN Philippines (2016). It is intriguing to note that the incoming administration’s agenda began with the words ‘continue and maintain’, especially because Duterte attacked the Aquino administration and asserted that he would bring change. Duterte’s agenda did not deny the legacy of the Aquino administration. Duterte did not neglect the rationality of economics. He was interested in the experience of Singapore when he was a mayor of Davao City (Parreño, 2019). Mayor Duterte asked the city council to prepare an economic plan to promote foreign direct investment. He knew the significance of economic development and appreciated the role of foreign direct investment, which he seemingly never forgot after he was elected president. The evolution of the economic policy agenda reflects not the departure from but the layering on Aquino’s economic policy reform. After the elections, Dominguez, in cooperation with the Philippine Chamber of Commerce and the Mindanao Business Council, organized Sulong Pilipinas [Move Forward, Philippines] and announced the ten-point agenda in Davao City in June 2016 (de Vera, 2016). No major differences exist between the eight-point agenda and the ten-point agenda. In fact, the ten-point agenda looks more liberal than the original eightpoint agenda. The incoming administration added the issue of constitutional amendment and the promotion of reproductive health. They added the constitutional amendment to the economic agenda because they wanted to relax constitutional restrictions on foreign investment and business ownership, which discouraged foreign investors. In a country in which more than 80% of the population is Catholic, reproductive health was a controversial agenda on which the Aquino administration spent many political assets (Danguilan, 2018). By declaring the ten-point agenda, the economic team stated its position on promoting an open economy and reproductive rights at the possible expense of support from protectionists and socially conservative voices. Not only the policy content but also the platform promoting the policy reflected the technocratic nature of the administration’s policymaking. According to its official website, ‘Sulong Pilipinas has been the platform for the government to consult stakeholders on socio-economic priorities’, and the group designed its platform

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‘based on a 21st-century town hall concept’ (Sulong Pilipinas, n.d.). Despite populist rhetoric on the home page, the Department of Finance manages the website and declares the following three major achievements on its home page: tax reform, ease of doing business, and a national ID system. These achievements do not seem to represent a populist or anti-establishment voice. Instead, they reflect the demands of technocrats and businesses rather than the people’s voice. The administration submitted the first part of its tax reform in September 2016, only three months after its inauguration (Department of Finance, 2017a). The Duterte administration prepared the bill in part because the idea was already there. Secretary Dominguez recruited Karl Chua from the World Bank as his undersecretary. Chua was a research assistant for the previously mentioned 2004 fiscal crisis report by the team of economists that had included Diokno, the budget secretary and later governor of the Central Bank under Duterte (de Dios et al., 2004). At the World Bank, Chua served as a country economist and joined a fiscal policy review team for the Philippines. The team published an important report on the fiscal management of the Philippines and argued that the government should spend more on physical and human capital to grow its economy and reduce poverty as fast as its neighbours in the region (World Bank, 2011). As a recommendation, the report’s authors proposed comprehensive tax reforms, including broadening the tax base of the VAT, rationalizing tax exemptions, and indexing excise taxes. The Duterte administration’s tax reform bill reduced the personal income tax, indexed the excise tax on petroleum, and expanded the tax base of the VAT. The tax reform has enjoyed supra-partisan support from former government officials as well as support from the private sectors. Fourteen former finance secretaries and undersecretaries, as well as five former director generals of the NEDA, supported the bill. In addition, business groups, including the MBC, supported the bill publicly because they believed it would improve the business environment (Department of Finance, 2017b). Jaime August Zobel de Ayala of the Ayala Corporation supported the bold step taken by Secretary Dominguez, who repeatedly claimed that tax reform was necessary to carry out the government’s initiative to invest in infrastructure (Department of Finance, 2017c). Interestingly, the ten megaprojects posted by Duterte’s supporters represent, again, not a change but an instance of building upon the efforts of the Aquino administration. According to the Vera File, a group of fact-checking journalists in the Philippines, seven of the ten megaprojects were begun by the Aquino administration and were continued by the Duterte administration (Vera File, 2018). Although the administration’s supporters attempted to highlight Duterte’s leadership, there was a continuity of the existing projects with those designed by the Aquino administration. As with tax reform, the advocacy for a better business environment extends beyond the term of a single presidency (Divinagracia, 2019). In 2006, the Arroyo administration established the Public-Private Sector Task Force on Philippine

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competitiveness and introduced the Anti-Red Tape Act in 2007. These seeds bloomed under the successive Aquino administration, which replaced the task force with a newly established National Competitive Council (NCC). A person from the MBC played a pivotal role in promoting the agenda of the ease of doing business. Guillermo Luz, the former executive director of the MBC, became a co-chairperson of the NCC in 2011 and worked to improve the business environment. He started by scrutinizing the results of the several international surveys on business environments worldwide, such as the World Economic Forum Global Competitiveness Index, Transparency International’s Corruption Perception Index, and the Ease of Doing Business Report by the International Finance Corp. of the World Bank Groups. Luz found the Philippines performed poorly in the international rankings (Luz, 2011). He believed the surveys were the benchmark against which the government should design and measure its reform programmes to improve the business environment. The NCC made progress in the International Finance Corp.’s report. The Philippines ranked 138th out of 189 countries in 2012 but ranked 108th in 2013 thanks to the various improvement projects designed by the NCC working groups (Luz, 2014a). Most reforms involved the process of registering and securing permission for private businesses’ various activities from the relevant government agencies, including the tax office, social and health insurance, and local governments. By mobilizing the relevant agencies through the economic cluster at the cabinet level, the NCC succeeded in shortening the necessary hours and days to process documents and increased the country’s international rankings with several international organizations. Moreover, the NCC began collecting data in local cities and municipalities to encourage local business development. Luz pointed out that two-thirds of business activities were concentrated in the capital and neighbouring regions and that those who consider local economic development tend to have the country’s geographical map in mind but forget the realities of economic performance. Against this backdrop, the NCC took the initiative to measure the performance of local cities and municipalities to appreciate various efforts at the local level (Luz, 2014b). The Duterte administration did not scrap their efforts but rather enhanced them. After the first Sulong Pilipinas programme was reported, Luz appreciated that the incoming administration included the ease of doing business in its tenpoint agenda for economic development (Luz, 2016). The NCC launched Project Repeal as a new initiative in 2016 and studied the practices of other countries such as South Korea, Vietnam, Cambodia, and Australia to reduce the bureaucratic red tape (Luz, 2014a). With Project Repeal, the NCC searched for outdated regulations overlooked by various government agencies and succeeded in repealing almost 6,000 such regulations across several agencies. The Project Repeal evolved into the Ease of Doing Business Act of 2018 under the Duterte administration (Luz, 2018).

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The Duterte administration preferred continuous development to a rupture in the fields of business environment improvement and industrial policy. Duterte appointed as secretary of the Department of Trade and Industry Ramon Lopez, who once worked at the same department and moved to the country’s largest food processing firm before the appointment. Upon assuming office, Lopez did not promote drastic reforms of the department but pursued the continuous development of its initiatives (Star, 2016). As a co-chair of the NCC, Lopez also pursued reforms in the field of doing business in the Philippines (National Competitiveness Council, 2016). The Aquino administration left an impressive record of addressing the ease of doing business, whilst the Duterte administration has spent time trying to improve the ranking. In 2019, the Philippines jumped to 95th in the ranking. President Duterte was apparently keen on this issue and requested that Congress work harder to improve the business environment (Tadalan and Atienza, 2020), see Figure 10.1. The economic managers of the Aquino and Duterte administrations made international recognition the benchmark of their performance. As Figure 10.2 shows, the Aquino administration increased the Philippines’ investment rating, and the Duterte administration maintained or improved its credit rating. The credit rating agencies appreciated the tax reforms and upgraded their ratings for the Philippines. They expected that the Duterte administration’s first tax reform package would increase household consumption and government infrastructure investment through the combination of the reduction of the personal

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Figure 10.2 Credit rating. Source: Countryeconomy.com. (accessed 3 October, 2020). https://countryeconomy.com/ratings/ philippines.

income tax and the increase of VAT’s tax base, as well as the excise tax on several products (Tubayan 2018). Finance Secretary Dominguez stated that the government chose ‘the path of fiscal prudence’ even in the midst of the Covid-19 pandemic, putting pressure on the administration to spend and borrow. The government appreciates the ‘credit rating at historic highs’ that has allowed it to prepare emergency loans to recover from the economic crisis triggered by the pandemic (Dominguez, 2020). In addition to macroeconomic management and business environment improvement, Duterte’s policymakers took over the previous administration’s industrial policy in cooperation with the private sector. In 2009, the automobile manufacturing companies organized the Philippine Automotive Competitiveness Council Incorporated (PACCI), which was independent of the existing Chamber of Automotive Manufacturers of the Philippines, Inc., including importers. In cooperation with the PACCI, President Aquino in May 2015, created the Comprehensive Automotive Resurgence Strategy programme (Fukunaga, 2016). Toyota, the largest automobile manufacturer in the Philippines, and Mitsubishi, the second-largest, declared production increases in 2015 and 2017, respectively (Fukunaga 2016; Mitsubishi, 2018). Rafaelita Aldaba, an economist at the Philippine Institute for Development Studies, tirelessly advocated for industrial policy in recent decades and played a pivotal role in promoting the Comprehensive Automotive Resurgence Strategy programme. She pointed out the limited ability of the service sector to create

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jobs and promoted industrial policies to enhance the manufacturing sector in her paper ‘Why a New Industrial Policy for the Philippines is Critical’ (Aldaba, 2013). One year after the paper’s publication, she was appointed an assistant secretary of the Department of Trade and Industry; then, in 2019, she was appointed an undersecretary under the Duterte administration (Department of Trade and Industry, 2019). Aldaba recorded that the Philippine government had attempted to make an industrial policy under Secretary Cesar Bautista of the Ramos administration (Aldaba 2014). The Ramos administration created an industrial developmental plan as late as June 1998, the last month of the administration, but the successive administrations of Estrada and Arroyo took no action on the plan. When Aldaba and her team worked with the private sector to create an industrial policy, Bautista wrote the following in the Philippine Daily Inquirer: Now, we have the luxury of talking about strategic directions since we have completed a generation’s work of fixing our external debts and public deficit problems … . The government officials in the Strategy Team will have to be ‘embedded’ in the private sector, but not in bed with it. (Bautista, 2012)

Some policymakers knew the necessity of industrial policy and collaborative relations with the private sector. They found the opportunity to ally with the private sector in the 2010s, after surviving the two crises in the 1980s and 1990s and stabilizing macroeconomic conditions in the 2000s. These advocates for industrial policy implemented an industrial policy for automobile manufacturing under the Aquino administration and consolidated it under the Duterte administration. Within the Duterte coalition, we can see the groups of reform-oriented policymakers with business or academic backgrounds. Finance Secretary Dominguez and Trade and Industry Secretary Lopez are examples of cabinet members with a business background. Economics Professor Diokno was appointed the budget secretary and then the governor of the central bank. The head of the NEDA, or the planning agency, was led by economists; after Pernia resigned, Chua took over. These policymakers combined economic policy with social policy to achieve inclusive growth.

Conclusion Despite populist rhetoric and the brutal drug war, President Duterte developed a technocratic policy package supported by the business sector. We have argued that the Philippine government has implemented technocratic economic policy reform under both the democratic and authoritarian administrations thanks to the unintended legacy of the populist administration in the 1990s.

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Although each president has a different governance style, policymakers in the successive administrations have addressed various common agendas. The rhythm of policymaking does not necessarily resonate with that of presidential politics. Policymakers might find collaborative leadership, face opposition, or work without much attention from the president, but they have not abandoned their proposals. After the rise and fall of the populist presidency in the 1990s, no administration has been free from the agenda of economic and social development. Beginning in the latter part of the Arroyo administration in the late 2000s, successive administrations sought macroeconomic stability through fiscal reform and carried out social policy reforms thanks to the fiscal reforms. The Duterte administration has not destroyed these social policy reforms but rather accelerated the reform, including industrial policy along with tax reform. In the decades since democratization, most business elites have come to appreciate macroeconomic stability and non-intervention by the government. While the cronies and reform-oriented business elites are visible and continuously attract much attention in media, the presence of focused business elites is increasing in the growing economy. As long as the government does not destroy the foundations of economic activities, Filipino business elites have no strong motivation to mobilize their resources to oppose the government but choose implicit loyalty. A Populist president’s cosy relationship with business elites looks indeed odd, but an administration run by technocrats must have a good relationship with the business elites. The popular president and the growing business elite depend on rational socio-economic management by the technocrats who appreciate the social effects of economic reform. The porous policymaking process is open to populist rhetoric, authoritarian political rule, and technocratic prescriptions.

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11 Populist ‘Order and Progress’ Authoritarianism and Loyal Business Elites in Brazil Heike Doering, Amon Barros, Marcus Gomes, and Caroline Rodrigues Silva

Introduction Latin America has a long history of populist movements (Mudde and Kaltwasser, 2013; Filc 2015). There are a number of factors which have contributed to populism’s power in the region. Latin America has been characterized by high levels of inequality and poverty. At the same time, wealthy elites have worked together with the military to maintain their power and privilege. Populist movements often focused on overcoming the uneven distribution of income and wealth. Latin American populism has therefore been predominantly inclusive: ‘allowing the political integration of excluded social groups’ (Filc, 2015: 265), focused on widening social benefits and, often, a strong role for the state. In particular, in recent decades left-wing leaders in Bolivia, Ecuador, and Venezuela aimed to address inequality and the power of wealthy elites and international MNCs by mobilizing the people against the elites. The 2018 Brazilian elections turned such a characterization on its head. Jair Bolsonaro, a known authoritarian, became president on an exclusionary populist strategy (see also Serrano Rodriguez, 2019), building on a different characterization of ‘the people’ and heavily emphasizing an economic liberalism agenda. How did he achieve this and what role has business played in this? A range of global and domestic explanations can be offered. In 2018, right-wing populism was on the rise globally (Kyle and Gultchin, 2018). Since the Brexit vote and the election of Donald Trump in 2016, right-wing populism had gained a foothold in the Anglo-Saxon world (Bristow and Robinson, 2018; Levitsky and Ziblatt, 2018). Politicians who combined a populist strategy and nationalist arguments enjoyed electoral gains in various countries in continental Europe (Eatwell and Goodwin, 2018, see also other chapters in this volume by Ibsen, Szanyi, Ban, and Vampa), as well as emerging economies such as India (Masood and Nisar, 2020, see also other chapters in this volume by Wyatt and Takagi). Domestically, Bolsonaro’s election took place while Brazil had barely emerged from the worst economic crisis in its history. Established political parties had been delegitimized in a long-lasting corruption probe, named Lava Jato (Hunter and Power, 2019). Heike Doering et al., Populist ‘Order and Progress’. In: Business and Populism. Edited by Magnus Feldmann and Glenn Morgan, Oxford University Press. © Heike Doering et al. (2023). DOI: 10.1093/oso/9780192894335.003.0011

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Lava Jato had established a ‘grammar of illiberalism’ using anti-political rhetoric and pursuing former president Luis Inacio Lula da Silva (De Sa´ e Silva, 2020). The final years of the Workers’ Party (hereafter Partido dos Trabalhadores (PT)) administration under Dilma were thus characterized by the breaking up of carefully negotiated alliances (Morgan et al., 2020). In addition to these contextual factors, political and economic commentators alike (Garcia, 2019; Webber, 2020; Hunter and Power, 2019) have analyzed Bolsonaro’s campaign strategy highlighting the focus on corruption and moralism, crime, and the use of social media. We, however, focus our attention on how business elites became part of Bolsonaro’s electoral coalition. Populists unsettle the ‘quiet’ coalitions between business and government and thus threaten the conditions under which business power is strongest (Culpepper, 2011) by their vocal (re)definition of the people and the elite. Business may find itself on the wrong side of the people-elite divide with its legitimacy questioned (Feldmann and Morgan, 2021). In a situation where populists present business strategies such as outsourcing, global value chains, foreign investment and free trade policies as particularly harmful to popular interests, business loyalty to populist governments may be in doubt. Instead, they might choose exit or voice strategies to respond to and oppose populism (Feldmann and Morgan, 2021). In the Brazilian case, corruption scandals had highlighted and criminalized ‘backroom politics’ between some of the nation’s leading corporations (e.g. Petrobras, Odebrecht) and politicians. The involvement of the Sao Paulo Federation of Industries (FIESP) in the noisy politics preceding Dilma’s impeachment by lending vocal and material support to right-wing street protests had also raised business elites’ visibility—and potentially discomfort. We analysed leading international and Brazilian news outlets’ coverage of the election campaign with a particular focus on Bolsonaro’s economic policies. This inevitably meant paying attention to Paulo Guedes, the Chicago educated financier, who would complement Bolsonaro’s authoritarian and statist politics with neoliberal economics. The alliance between the ex-military man and the ultra-liberal convinced business elites, especially financial markets, of Bolsonaro’s understanding of their needs as well as those of ‘the people’ (Evans, 2020). An ambiguous representation of power relations served to reassure business of the return of quiet politics in the economic arena alongside rather noisy politics in the socio-cultural arena (Barros and Wanderley, 2020; Schneider and Sandbeck, 2019). This included, on the one hand, promises of neoliberal policies, such as pension reform and tax reform, which would encourage business elites to accept, and even embrace, authoritarian cultural warriors. On the other hand, a renegotiation of business—state relations for some parts of the business elites, in particular agribusiness, were offered through emphasis on deregulation of indigenous land, the liberalization of gun laws and climate-change denial (Duque and Smith, 2019; Lapper 2021) as well as continuing the revolving door between business and government.

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The chapter is structured as follows: the first section discusses the importance of investigating the formation of loyalty between business and populists. In the following sections we describe our research design and present our analytical narrative of the coverage of Bolsonaro’s campaign. Three elements of Bolsonaro’s campaign are particularly used to instil loyalty with business: a conservative agenda; anti-PT and anti-corruption sentiment; and Paulo Guedes as a guarantor of a free market approach. Finally, we show how the resulting separation of economic and socio-cultural policy arenas promises conditions of quiet politics for business despite populists’ aim of raising the volume of politics for other constituencies.

Business loyalty and populism Populism is a broad research field with different definitions and approaches such as ideational, economic, structuralist, and political-strategic approaches (Hawkins and Kaltwasser, 2017; Mudde and Kaltwasser, 2018). Populism may be understood as a style or rhetorical form of political discourse (Norris, 2020; Norris and Inglehart, 2019), a thin-centered ideology (Mudde and Kaltwasser, 2017), a political strategy (Weyland, 2001; 2017) or a discursive order (Laclau, 2005; Mouffe, 2005). In this chapter, we explore populism as a political strategy (Weyland 2001, 2017), that because it is a thin-centered ideology allows actors to balance competing demands in their attempt to assemble electoral coalitions. Populism is particularly prevalent in societies or situations characterized by a crisis of representation (Barros and Wanderley, 2020) or by conflicts around the inclusion and exclusion of social groups (Filc, 2015). Therefore, identifying the people (the in-group) and the elite (the out-group) is the central concern of populist actors. Populists question the way in which institutions enact the ‘will of the people’. Instead, they are seen as governed by elites which neglect or, more pessimistically, obstruct responding to the needs of the people. The fact therefore that in Brazil business representatives, who may be considered as part of the elite, have been supportive of Bolsonaro’s populism requires explanation. In many countries, business has seen its legitimacy questioned by populists who have been able to construct business as a ‘special interest group which had benefited by its ability to bend politicians to its will against the people’ (Feldmann and Morgan, 2021: 124). At the same time, the political behaviour of businesspeople suggests that if economic policy remains in the main, neoliberal, then business elites in certain contexts do not mind endorsing political movements that weaken democracy (Barros and Wanderley, 2020) or evoke nationalist discourses which seem antithetical to internationalized business interests. In these cases, narrow economic self-interest frames the participation of capitalists in the public sphere, leading them to set aside threats to democracy

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(Masood and Nisar, 2020; Mollan and Geesin, 2019). By contrast, in countries, such as Germany, where the lessons of Nazism and business collaboration are an indelible part of the business context, business associations have opposed populist movements on the grounds of their anti-democratic discourse (Kinderman, Chapter 13, this volume). The relationship between business and populism is therefore complex. When business interests such as low taxation, free trade, out-of-sight relationships with and influence on government are challenged by populist actors, business loyalty may be hard to achieve as capital can be mobile, especially in highly internationalized sectors. Feldmann and Morgan (2021) examine the conditions under which business elites exercise their influence, i.e. use their voice, in the context of noisy politics. They identify three factors: incentives for exercising influence, the legitimacy of such interventions and the capacity to intervene in the first place. Complementing Feldmann and Morgan’s (2021) endeavour, we focus on the strategies populist candidates employ to develop and sustain business loyalty. We argue that considerations of incentives, legitimacy and capacity of voice for business are equally relevant for populist actors when trying to acquire power with the support of business. Loyalty, as we discuss it here, is ‘an active choice and a deliberate strategy to support or work with populists’ (Feldmann and Morgan, 2022: 355; see also Chapter 1). Business, as a social group, plays an important role in the formation of electoral coalitions (Morgan et al., 2020). This is not to say that business is a unified actor (Bortone, 2018; Feldmann and Morgan, 2022). Demands and interests vary between business sectors, and between large internationalized firms and small and medium sized businesses. In addition, fragmentation or change within business elites needs to be seen in the context of global and national developments such as the drive towards internationalization and financialization (Feldmann and Morgan, 2021).

The Brazilian context In Brazil, democracy has always been a hard fought for achievement with shallow roots (Mainwaring, Meneguello, and Power, 2000; Schwarcz and Starling, 2015; Skidmore, 1967). In particular, endemic inequality has been a challenge for democracy. Supporting authoritarianism is therefore not new for business elites determined to protect their interests against the rise of democratic reform movements. In Brazil, when businesspeople have had to choose between democracy or a freer market, most of them picked the latter and supported the 1964 military coup (Dreifuss, 1980; Barros and Taylor, 2020; Dreifuss, 1980). Through think tanks and close connections with the Catholic Church business elites actively supported a right-wing populist movement which ended with the military taking over (Barros and Wanderley, 2020). The left was marginalized (or killed) and economic

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reforms were introduced by a hard-line dictatorship (1964–1985) with an active developmentalist state (Skidmore, 1999). Since then, Brazilian businesspeople have stayed close to the state to obtain benefits (Bandeira-de-mello and Marcon, 2010; Claessens, Feijen, and Laeven, 2007), even when the left eventually won elections in 2002. During the PT administrations, business corporations were appeased and partially incorporated into the governing bloc through neo-developmentalist policies. These policies supported domestic Brazilian businesses and internationalization drawing approval from business elites (Morgan et al., 2020). Consequently, the PT’s approach to internationalization favoured some parts of Brazilian industry (large conglomerates in the primary sector, agribusiness and heavy industries, often formerly state-owned) while making others more vulnerable (e.g. consumer goods) (Andrade, 2020). Since 2014, changes in the economic environment contributed to a fracturing of the alliance between the left-leaning PT and big business (May and Noelke, 2018, Morgan et al., 2020; Andrade, 2020). The uneven effects of the end of the commodities boom led to a reshuffling of power within local elites. Fissures in the business elites exacerbated cracks in the PT-business coalition. State support for domestic companies now seemed like a distortion of the markets which only increased costs for the state. Financial elites who had benefited from developments under Lula as they brought a big part of the population into credit markets (Lavinas, 2017) gained in importance, a movement also observed in other places (Davis and Williams, 2017). For these groups, continued deregulation and reduction of state expenditure was seen as necessary for economic recovery. Agribusiness, in particular, had an interest in deregulation of land use and reduction in environmental legislation which previously had protected indigenous communities (Capelari, Araújo, Calmon, and Borinelli, 2020; Önis and Kutlay, 2020). Employing traditional ‘quiet’ political strategies, businesspeople had been supporting an ecosystem of right-wing think tanks and other organizations promoting ultraliberal free-market ideas (Rocha, 2018) and a developmentalist approach to Brazil’s natural resources (Capelari et al., 2020). By 2018, events in other countries had demonstrated that business interests and far-right populist movements could develop into a productive partnership (see also Önis and Kutlay, 2020 on Russia and Turkey, Masood and Nisar, 2020 on India). Jair Bolsonaro’s election and his government needs to be seen in this context.

Research design By 2016, business elites and their dealings with government had become salient in Brazilian politics. On the one hand, business representatives had been involved in noisy protests against Dilma. On the other hand, the investigation into corruption under Dilma shone a light on the backroom dealings between politicians and

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business. Strategies of business engaging with politics did not seem to be quiet anymore. At the same time, politics was mediatized. Previous research has discussed the role of newspapers in the transition from the last PT administration under Dilma to the elections of Bolsonaro (Araújo and Prior, 2021). As a result, we want to analyse how business elites, which are nominally less interested in the dramatization of politics and more in the opportunities for their own rent-seeking and profit opportunities were addressed through traditional media outlets. To examine the framing of potential benefits of a Bolsonaro presidency for business we constructed a data set from four major news sources: Folha de São Paulo, Valor Econômico, The Economist and The Financial Times. The first two are considered dominant news sources in Brazil. Folha has the highest circulation and Valor is leading in the business and economics niche. The latter two have a prominent standing within the Western news media landscape. Our data is drawn from news outlets specifically geared towards a particular audience (educated, middle-class, with interests in business or economics). The data thus focuses on ‘business-based explanations of crises’ (Feldmann and Morgan, 2022). Our search resulted in 1188 articles from these four news sources, 1,138 from Brazilian media and 50 in English. We focused our sampling on stories of relevance to business audiences, such as economic policies, Bolsonaro’s economic principles or relationships with business. Given the centrality of Paulo Guedes to garnering business loyalty, we narrowed our search terms to include Paulo Guedes in the title or subtitle of the article. This resulted in a dataset comprising 550 articles. Lastly, we chose full articles in English and Brazilian articles which focused on Paulo Guedes’ actions, speeches or his role in Bolsonaro’s election campaign, resulting in 220 articles. All the articles were entered into qualitative data analysis software packages. We developed the coding frame through iterative rounds of coding. An initial sample of 50 articles including both English and Portuguese media was coded by two of the authors. The resulting codes were compared, and a coding frame was agreed. In the first instance, the data has given us an insight into different representations of perceived business interests. In the second instance, it allows us to highlight the specific relationship between economic and political spheres of action. We will draw out how, in particular, the representation of Paulo Guedes contributes to the construction of an exclusionary but unifying ideological framework which promises just enough in terms of incentives, legitimacy and capacity to some factions of business to pledge loyalty to a little-known ex-military-man turned populist.

Bolsonaro’s exclusionary populism: The conservative agenda The central discursive challenge for populist projects is the construction of the in-group and the out-group in moments of heightened distributional conflicts.

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Bolsonaro’s campaign followed two years of a move towards neoliberalism under Temer following 14 years of a strongly inclusive and developmentalist project, at least in rhetoric if not always in practice (Andrade, 2020), under the PT administration. By 2018, Brazil found itself in an economic nightmare, ‘the worst recession in its history’ (Economist, 2018). In the elections of 2018, therefore, representation of the cause and consequence of Brazil’s economic, social, and political crises was crucial for the construction of the ‘people’ and the ‘elite’. Conservative values were at the centre of Bolsonaro’s manifesto. For the middle and upper middle classes, the crises of the 2010s manifested itself in loss of income and status, and a growth of dependence on credit (Garcia, 2019; Morgan et al., 2020; Webber, 2020). During the Dilma administrations, they saw their ‘elite way of life’ threatened by the relative ascension of a more prosperous and confident urban working class buttressed by Lula’s measures supporting wages and social benefits. This group was increasingly engaging in middle-class styles of personal consumption and accessing spaces that had previously been exclusively middle class such as private education or public universities (Garcia, 2019). By 2018, the threat of losing status following economic decline, rising taxes and the experience of weak public services made a political strategy based on maximizing middle class support and excluding the urban working class, and the urban and rural poor, such as Bolsonaro’s, very attractive to this constituency. This agenda became visible in the efforts to discredit progressive policies closely associated with the PT which benefited social groups such as black Brazilians, indigenous and traditional communities, the poor working classes, women, the lesbian, gay, bisexual, transgender, and queer (LGBTQ +) community. In the right’s account, state finances were argued to have been mismanaged in the PT’s drive to serve ‘undeserving’ minorities (e.g. racial, gender, and sexual minorities) at the expense of the ‘people’. The result was a redefinition of ‘the people’ away from the working classes and socially disadvantaged groups most closely associated with the Workers’ Party. Such a discourse resonated strongly with the conservative voters who rejected identity and redistributive policies (Rennó, 2020) and who could, in turn, see themselves as part of the disadvantaged, ‘left behind’ rather than the elite. The right-wing anti-PT forces reintroduced the concept of ‘order’. Brazilian conservatives had frequently evoked in the past ‘order’ to justify repression of social democratic forces in the name of national identity. Thus, using national symbols became key in Bolsonaro’s campaign. The answer to economic crisis was not redistribution but a return to a hegemonic national identity with a specific partnering of authoritarianism and liberalism: Mr Guedes, …, describes his partnership with Mr Bolsonaro by referring to the words ‘Order and Progress’, which are written on the Brazilian flag. In Mr Guedes’ telling, Mr Bolsonaro represents ‘order’ and the financier ‘progress’. (Financial Times, 31 December, 2018)

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The middle- and upper-middle classes, and business elites were thus constituted in Bolsonaro’s populism as ‘the people’, representing order and progress and national identity. Bolsonaro’s challenges were predominantly geared not against business but towards those ‘undeserving minorities’ threatening order and national identity.

Paulo Guedes as guarantor of free-market policies The key step to overcoming potential misgivings of business towards Bolsonaro who regularly admitted a lack of knowledge of economic matters was the introduction of a figure who would demonstrate such expertise into his campaign team. Before the election, Guedes was described as a ‘trump card’ or ‘seal of quality’ clearly cementing Bolsonaro’s changed view on economic matters, from a state interventionist to a converted liberal: ‘Underwriting Mr Bolsonaro’s marketfriendly stance is his economic adviser, University of Chicago-trained investor Paulo Guedes’ (Financial Times, 18 October, 2018). The announcement of Guedes as future Finance Minister did not address the ‘people’. Economic advisers tend to ‘use a language that is incomprehensible to the common voter, but they are seen as key to understanding the plans for the next government in terms of the economy by businesspeople and the financial markets’ (Folha, 09 September 2018, our emphasis).¹ Paulo Guedes, in this context, needed to be the opposite of Jair Bolsonaro. While the former is framed as an expert, the latter deals with the desires of ‘the people’. Our data demonstrates a consensus that economic reforms were necessary, focusing on the pension system, the tax system and public expenditure. Bolsonaro, following his economic advisor, criticized the high levels of state intervention which choked the labour markets giving ‘rights to everything but no jobs’ and which made it difficult to be an entrepreneur in Brazil. The economy had to be ‘unlocked’ (Folha, 11 November, 18) via suitable reforms. For the Bolsonaro campaign, these reforms needed to be market friendly. Guedes thus became a central figure in the rise of Bolsonaro. A recurring theme in the representation of Paulo Guedes is his trajectory from university education as economist to leading investor and financier in one of Brazil’s investment funds. One of the most frequently repeated descriptions is that of the University of Chicago trained PhD. The emphasis in these descriptions is not on Guedes as a particularly gifted economist but rather on the reputation of his alma mater. The University of Chicago is invariably described as ‘the symbol of liberalism’ (Folha, 25 February 2018), ‘bastion of free-market ideas’ (Economist, 20 September, 2018) or the ‘cradle of liberal thinking’ (Folha, 21 July, 2018). The university is also mentioned in connection with the ‘Chicago boys’ under Pinochet which have ¹ All translations from the Portuguese were completed by the authors.

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been credited with Chile’s economic transformation during the 1970s but also with contested results (Folha, 09 October, 2018). This connection with Chile’s neoliberal miracle is strengthened through the reference to Guedes’ years in Pinochet’s Chile. Guedes drew on his experience to normalize the coexistence of liberal and authoritarian ideas in one candidacy which could otherwise be considered incongruent. According to him, ‘The Chicago boys saved Chile, fixed Chile, fixed the mess’ (Financial Times, 02 November, 2018). Guedes’ expertise and experience allowed him to make authoritative judgements about the current state of Brazil: ‘The measures have to reflect the diagnosis. I saw Brazil stagnate, degenerate in terms of corrupting a democratic regime. So, my diagnosis is the following: public expenditure, public expenditure, public expenditure, tax reform, tax reform, tax reform’ (Folha, 02 July 2018, our emphasis). He singled out the state sector as corrupt: Have you seen anybody from [private Brazilian bank] Bradesco corrupt someone from [private bank] Itaú? Anyone from [the private newspaper] Jornal do Brasil corrupt anyone from Folha? The private sector does not corrupt the private sector, when they do, they go to jail. (Folha, 25 February, 2018)

Paulo Guedes suggested that it was the state interventionist approaches of social democracy which had led to a dysfunctional economy and corruption. In contrast, Guedes argued, a liberal economic approach aligned with Bolsonaro’s conservative and exclusionary agenda would return Brazil to prosperity. The relationship between the economy and politics was presented in ambiguous terms. On the one hand, newspapers regularly reported Bolsonaro delegating any economic questions to his ‘one-stop-shop’ (posto Ipiranga),² Paulo Guedes, whilst Guedes insisted on Bolsonaro as the political leader. The prospect of a super-ministry giving Paulo Guedes far-reaching powers seemed to offer the manifestation of a liberal approach to the economy free of political intervention. In this way, Bolsonaro’s administration would solve the problem diagnosed by the right of there being too much state presence in the economy. Bolsonaro did not have strong credentials to garner business elites’ support around him; his previous record was one of supporting state intervention and he lacked any neoliberal credentials. By subcontracting this area to Guedes, whose expertise and experience were reassuring to business, this left Bolsonaro free to pursue his brand of culture wars and right-wing populism. Business elites could feel reassured that their interests mattered and that established, quiet, ways of working, e.g. the revolving door from industry into strategic posts, would not be disrupted—even whilst Bolsonaro ² The name ‘Posto Ipiranga’ refers to an advertising campaign for the Ipiranga chain which focused on the multi-functionality of their convenience stores.

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disrupted the political sphere with his outspoken comments and insults on climate change, deforestation, and left-wing politics.

Anti-petismo and anti-corruption sentiment The link between economic failure and corruption as a result of the strong role of the state was important in the election campaign. Bolsonaro gained support from the business elites not only because of his association with liberalism but also as, seemingly, the lesser evil for business elites: ‘“I don’t see any sympathy in the market for Bolsonaro. What exists is a greater evil versus a lesser evil”, says a bank executive’ (Valor, 25 May 2018). In comparison to what was considered the corrupt and over-blown state machinery of the PT intent on directing business, Bolsonaro’s hands-off approach seemed promising to business despite his broader authoritarian inclinations. In his speeches, Guedes emphasized the need for the liberalization of the economy signalling to international capital that Brazil is open for business. The answer to the problem of Brazilian industry is tax reform and ‘competitive integration into the international economy’ (Folha, 30 October 2018) and to focus on competitiveness. Guedes tapped into an increasingly dominant, ‘aggressive form of neoliberalism’ ideology which rejected industrial policy (Saad-Filho and Boffo, 2021: 304), one of the pillars on which the PT’s cross-class alliance had been built and which much of the Brazilian business elite had been happy to cooperate until, under Dilma, the threat of increased taxes for the rich and for corporations began to break this link (Morgan et al., 2020). For Guedes, Brazilian industry needed to be open to competition and the opportunities the market brings, even if that necessitated, as Guedes stated, that ‘The government will save Brazilian industry, despite Brazilian industrialists’ (Economist, 1 November, 2018). Guedes’ criticism of Brazilian industrialists is, above all, a criticism of state support for industry and the corruption which this led to. PT neo-developmentalist policies characterized by an interventionist approach stoked anti-petismo sentiment that emerged from the corruption scandals: The Ministry of Industry and Commerce has turned into the trenches of the First World War. They [the industrialists] are there with barbed wire, mud and holes, sometimes defending protectionism, subsidies, sectoral exemptions which harm the Brazilian industry. (Folha, 30 October, 2018)

Guedes promised to oust traditional industrialists from their positions and align the government with what international financial markets expected by removing state support for protectionism and monopolies. This signalled that sectors that

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once were associated with PT developmentalist policies (as former national champions) needed to change and adapt to the more neoliberal economic environment. Industrial business elites had little choice but to support these changes; We have 99% convergence with the plans of the future government’, said Fernando Pimentel, president of the Brazilian Association of the Textile and Clothing Industry (Abit) (….) According to Pimentel, the only divergence between industry and Paulo Guedes is in the pace and the way the next government intends to make some decisions. (Valor, 26 November, 2018).

Guedes labelled the developmentalist policies as the ‘nationalisation of debt’: According to Guedes, the operation of public credit for private groups close to power is ‘perverse’ for society and is capable of generating public indebtedness in a ‘snowball’. ‘When debt is nationalised, there is less left over for the rest of Brazil, and the interest rates are absurd. It is this type of distortion that [his new Ministry] will try to eliminate. That is the president’s philosophy. … We are going to do things the right way, without cheating’, he said. (Valor, 7 January. 2019)

Ultimately, Guedes’ pro-market message was not necessarily recognized as a pro-business agenda by everyone, as it criticized those businesses which had benefitted from the PT period (Doctor 2019). The image of PT governments favouring certain business elites was widespread in both domestic and international media and was labelled the ‘BNDES black box’—BNDES referring to the state development bank which had been substantially funded by the government and distributed those funds to favoured businesses (sometimes on the basis of technocratic evaluations and sometimes as a result of corruption): Under different governments controlled by the PT, …, BNDES grew bigger than the World Bank and became the main provider of long- term finance in Latin America’s largest economy. Mr Bolsonaro has pledged to open up the ‘black box’ of BNDES, implying his government will investigate if there were signs of corruption. … The proportion of BNDES loans that a group received also often corresponded with the size of its political donations, studies have shown. (Financial Times, 12 November, 2018, our emphasis)

The achievement of the right-wing campaign was to turn the perception of both widespread corruption and economic crisis into the fault of the PT and offer instead a blend of neoliberal free market thinking and authoritarian populism as a viable unifying sentiment. For the far-right coalition anti-petismo required the

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separation of politics from economic decisions. The latter remained the realm of technocrats and experts who would not be open to corruption schemes. At the same time, the focus on liberalism serves two functions—reassuring business of the primacy of the market but also reassuring the ‘people’ that corrupt relationships between government and business, i.e. such relationships as uncovered in lava jato, would be a thing of the past. The media’s representation of Dilma Rousseff ’s impeachment contributed to anti-petismo (Saad-Filho and Morais, 2020; Bentes, 2018; Alves, 2016), portraying both the left (The Worker Party’s candidate Haddad) and the right (Bolsonaro) as potential threats to democracy. It is important, however, to consider that the media is also part of the business elites and not an independent observer. It played a central role in ‘normalising’ Bolsonaro by emphasizing the ultimate strength of democracy (Araújo and Prior, 2021). The media’s self-interest in the maintenance of neoliberalism thus shaped their representations and ‘despite the leader’s authoritarian bias, the newspapers have backed off their threats in hopes of changing economic policy’ (Araújo and Prior, 2021: 241).

A marriage of convenience? The relationship between the economy and politics The relationship between Bolsonaro and Guedes is central to the formation of business loyalty. Commentators regularly questioned the ‘marriage’ between Bolsonaro and Guedes. The potential conflicts between Bolsonaro’s authoritarianism and Guedes’ liberalism were a recurring theme during the election campaign. Guedes was seen as a defender of the minimal state; by contrast, Bolsonaro’s history as parliamentarian was evidence of his statist leanings (Folha, 24 October, 2018). One central contradiction was the attitude towards privatization. For Guedes, privatization was a key reform of the state: ‘When you privatise, you reform the state’ (Folha, 09 November, 2018). He did not consider any of the great nationalized industries as ‘untouchable’, including Petrobras. By contrast, Bolsonaro questioned selling off ‘strategic’ state-owned enterprises such as electricity giants as, he argues, there are ‘no countries in the world without state-owned enterprises’ (Folha, 6 October, 2018). This tension was a result of Bolsonaro’s challenge to balance ‘the nationalist preferences of his military backers with the privatization and privatization message sold to markets’ (Doctor, 2019). Bolsonaro’s authoritarianism was seen as a risk, one, however, that business elites were willing to take: ‘If presidential candidate Jair Bolsonaro manages to leverage his candidacy and reach the Palacio do Planalto, the market will “light a candle and pray” that Guedes will indeed be able to conduct the economy, according to the resource manager of a traditional independent asset’ (Valor, 25 May, 2018). These tensions were resolved by clearly separating the economic and

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political sphere on the campaign trail. Guedes was introduced as the ‘Posto Ipiranga’ who has the answer to all economic questions. Guedes therefore stood in for Bolsonaro’s lack of expertise, and decisions on the economy were to be ‘outsourced’ to Guedes. He was openly portrayed as an independent pole of power, handed a ‘blank cheque’ (Folha, 5 December, 2018) to pursue his plans of reform. Thus, such framing emphasized the separation between Guedes representing the economic realm with expertise necessary to garner business elites’ loyalty and Bolsonaro representing ‘the people’ in the political realm. The contradictions between Guedes and Bolsonaro created a divide between the economy and politics as if they were separable spheres. This separation is a performance that allows for a fantasy, a momentary suspension of disbelief, in which Bolsonaro does not interfere in the economy and Guedes does not interfere in politics. This marriage can only work because Guedes’ strain of economic liberalism does not need political liberalism.

Discussion and conclusion Our analysis of Bolsonaro’s populist project to instil loyalty as an active choice by business complements Feldmann and Morgan’s (2022) discussion of the factors in business voice under conditions of noisy politics. We identify the specific form legitimacy, incentives and capacity take in this context. The campaign’s focus on ‘anti-petismo’ as unifying ideology, in both economic and social policy, constructs business as part of ‘the people’. Bolsonaro’s effort to mobilize a distinct vision of the people is based on (i) a characterization of the PT leadership (and to a lesser and more muted degree some associated capitalists that benefitted from BNDES) as ‘the corrupt elite’ and (ii) the identification of poorer classes as beneficiaries of this PT control of the state. The neoliberal economic agenda enables Bolsonaro to reach out for business support and create a coalition that can win the election given the implosion of the PT and the failure of other centrist parties. The result is an exclusionary form of populism which has a predominantly socio-cultural character (cf. Mudde and Kaltwasser, 2013) more in keeping with forms of populism traditionally associated with Europe and North America. Paulo Guedes played a central role in providing business with the incentives for supporting Bolsonaro as a guarantor of economic liberalism. Promises of taxation reform, deregulation and austerity sat well with business interests. Finally, this populist project relies on an ambiguous relationship between the economic and political sphere, in both rhetoric and practice, to avoid a re-politicization of neoliberalism and to reinstate the primacy of the market as a central element of economic policy. In this sense, business elites are reassured of the availability of traditional, quiet paths of influence under Bolsonaro. In line with previous literature (Andrade, 2020), we highlight the central role of ambiguity as a strategy for populism. Populism itself is an ambiguous term (Araújo and Prior, 2021) and can

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be characterized by attempts to represent ‘interests “from below” while advancing a political project that protected and nurtured interests “from above”’ (Andrade, 2020: 1470). Our narrative of Bolsonaro’s campaign strategy highlights how the specific form of populism pursued by him courts business and their interests. The central objective for the authoritarian agents is to create a construction of the ‘people’ and the ‘elite’ which supports their agenda (Mudde and Kaltwasser, 2017). In the data we have examined previously, this effort is focused on ‘anti-corruptionism’ and ‘antipetismo’. Anti-petismo positions the PT and those who have benefited from the PT governments as a corrupt political class and a (communist) threat to Brazil’s national identity (Garcia, 2019). The exclusionary type of populism advanced by Bolsonaro seemed to find favour with those groups whose fortunes had suffered as a result of the economic crisis, e.g. the middle-classes and upper-working-class. They interpreted their loss as a result of the inclusive and redistributive policies under Lula. Bolsonaro’s campaign, in contrast, promised to protect the markets from demands by labour (Britton-Purdy et al., 2020; Evans, 2020), and continue to disassemble the Brazilian welfare-state. In this way, Bolsonaro’s ‘culture war’ is similar to populist strategies discussed in the US context which increasingly focus on identity issues in the context of growing inequality (Hacker and Pierson, 2020). At the same time, exclusionary populism in Brazil operates differently from its European or Anglo-American counterparts (Mudde and Kaltwasser, 2013; Filc, 2015). The far-right in Europe and the US usually base their claim against immigrants, in a reproduction of colonialism (Filc, 2015). Bolsonaristas’ claim excludes minorities and people identified as members of the political left but returns legitimacy to the business elite. The solution to a system characterized by a corrupt political class and an industrial rentier class is the introduction of liberal reforms by political outsiders. Once their status as outsiders is established, the discursive work focuses on the relationship between Bolsonaro and Guedes, and politics and the economy. Overall, the data shows two dominant strategies: Guedes is either portrayed as an autonomous actor, the super-minister, or as a subordinated instrument of Bolsonaro whose main role is to gain credibility with businesspeople to deliver a Bolsonaro victory. In his role of broker with business, Guedes, with his Chicago PhD and wealth attained through investment, then becomes a signifier of the elite, in particular the financial elite. The importance of finance to Bolsonaro’s campaign is also demonstrated in the creation of a super-ministry under the leadership of Guedes. This is an attempt to establish a specifically (neo)liberal ‘command post’ (Zald and Lounsbury, 2010) to restructure the power relations within government and, at the same time, to rebalance the access to power for different social groups. The integration of the ministry of labour under Guedes’ auspices, for instance, clearly signals the subordination of workers’ demands to the interests of the ‘markets’. Similarly, ‘Secretariats for De-bureaucratization, De-nationalization

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and Disinvestment’ were set up (Garcia, 2019). The reorientation of the ministry thus represents an elite in flux (Zald and Lounsbury, 2010) and also provides clear incentives for business to support Bolsonaro. This reorientation results in a clear separation between politics and economics and therefore creates the space for quiet politics in business relevant areas alongside noisy socio-cultural politics. Figures from the finance industry were appointed by Guedes into influential posts such as the Central bank and areas such as the economy, banking, and trade. The ultimate effect of populism is the (discursive) disconnection between policy and politics (Barros and Wanderley, 2020). In Bolsonaro’s project, this is particularly visible in the separation between economic policy and popular politics. The distinction between policy and politics is not a new one. It has been discussed in the context of the US and European nations who sometimes make ‘policy without politics’ (Schmidt, 2006). In these contexts, policy is seen as an outcome of the efforts of technocrats. Bickerton and Accetti (2015) highlighted a divide between mass politics without policymaking on one side and elitist policymaking outside politics on the other. We argue that this fits well with neoliberal intentions of insulating economics from politics (Slobodian, 2018) and the attempt to guarantee the capacity for quiet intervention so favoured by business elites (Culpepper, 2011). Economics becomes the reserve of experts and technocrats. The Brazilian case then demonstrates another example in which populism and technocracy can be complementary rather than contradictory (cf. Bickerton and Accetti, 2015). Since the election, Bolsonaro’s administration has so far illustrated the ‘unstable outcome of the operation of the institutions of the state within the bounds of neoliberalism’ (Saad-Filho and Boffo, 2021: 302) but with mixed results for both Guedes and business elites. Guedes had liberal credentials but no actual track record of political efficacy. There was nothing ambiguous about his views. What remains ambiguous is the ability to implement these reforms in the context of a potentially divided and contradictory government. Commentators agree that until the Covid-19 pandemic, there were successes such as some privatizations and the passing of the civil service pension reform (2019) which is aimed to save the state $260 bn over the next ten years (Marcello and Paraguassu, 2019). Since then, however, Guedes’ power and his ability to push through a liberal agenda have waned, the government has been characterized by a string of resignations and the reliance on the military to provide stability (Doctor, 2019). Similarly, a number of corruption scandals involving Bolsonaro’s family have dented his anti-corruption image. Prior to the Covid-19 pandemic, business remained implicitly loyal. This worked particularly for the agribusiness sector which could continue traditional strategies of lobbying and network with parliamentarians via the bancada ruralista, the ‘rural bench’, in Congress. Only when Bolsonaro declared that he would follow the US move of their embassy in Israel to Jerusalem, did agribusiness

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interests use their soft voice to stop an action which would have threatened their lucrative Middle-Eastern export markets (Doctor, 2019). Increasingly, however, business can no longer avoid the noisier policy arenas. Devastating forest fires in both the Amazon and the Cerrado in 2020 and heightened international interest in climate change in general and the state of the Amazon in particular, have required more explicit loyalty from agribusiness interests or louder voices from other business interests. In 2020, Aprosoja, the soy farmers’ association, mounted a campaign to end the Amazon Soy Moratorium (Jolly and Ambrose, 2019), which could be seen as explicitly supportive of Bolsonaro’s wider efforts at deregulation in the Amazon. At the same time, big names in agribusiness (e.g. JBS, Cargill) have joined the Concertation for the Amazon siding with Bolsonaro’s international critics. More recently, the handling of the Covid-19 pandemic has also led to business elites loudly opposing Bolsonaro’s rhetoric in which the economy needed to be prioritized over individual lives and in which public health measures inevitably damaged economic growth (Hatzikidi, 2020). In March 2021, an open letter signed by hundreds of business leaders, including representatives of the financial sector, openly criticized the government’s performance during the Covid-19 crisis. Ambiguity in power relations between the economy and politics can therefore be effective during the rise to power, while the right assembled support from business elites. Using this strategy is in keeping with our understanding of populism which ‘makes all the more ambiguous who controls politics, who expresses their will, who drives the political project, who has agency, who holds power, who benefits and who loses’ (Andrade, 2020: 1475). The marriage of authoritarianism with liberalism provides the solution for Brazilian economic and political turmoil while at the same time depending on creating an arena of quiet politics for business and the acceptance of noisy politics in other arenas. Once the right has successfully taken over the control of institutions, ambiguity in rhetoric might no longer be able to obscure contradictions in practice and prove problematic for business loyalty as the increasing noise levels in the business arena demonstrate. Here, however, Webber (2020) suggests that the right is not held back by an incoherent ideology. Instead, the right is ‘happily flaunting its programmatic incoherence and rejection of the rationalist demand that politics have a logic, crafting its discourse to appeal in incommensurate ways to contradictory audiences’ (Toscano 2019, cited in Webber 2020: 20). While the Chicagoan inspired stream of economics embraced by Guedes follows the notion that the economy should be shielded from democratic politics (Slobodian, 2018), protecting the markets from ‘an excess of democracy’ (Streeck, 2011, p. 7), they have not been protected from an excess of authoritarianism. This, in turn, raises the viability of both loud proclamations of loyalty and criticism from business. This case also illustrates the turn towards ‘authoritarian neoliberalism’ (Bruff, 2014; Saad-Filho and Boffo, 2020). Saad-Filho and Boffo (2021: 301) argue that, despite many declarations of the death of neoliberalism following

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the Global Financial Crisis, there is now increased consensus that neoliberalism is alive and well and does not simply favour markets over the state but facilitates public policies which ‘promote an agenda of financialization, of accumulation and the corresponding restructuring of social relations’. Business loyalty therefore inevitably needs to be seen as an active choice and deliberate strategy sought by populist actors.

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PART 3

TH EM ATIC A N A LY SE S

12 Right-wing Populism vs. Climate Capitalism Climate Change Governance Under Scrutiny Marcus Gomes and Steffen Bo¨hm

Introduction In this chapter, we critically investigate the threat of right-wing populism to rapid climate change action and governance and highlight its role in undermining the global co-operation necessary to tackle the carbon lock-in of the global economic system. Over the past decade, prominent populist leaders such as Donald Trump in the US and Jair Bolsonaro in Brazil have changed the landscape for climate change governance. Trump’s environmental legacy remains pertinent despite his defeat in the 2020 election and President Biden’s re-entry into the Paris Agreement (following Trump’s withdrawal four years earlier). Optimism from these recent political realignments is largely countered by the profound and long-lasting impact of Trump’s presidency, marked by its fundamental undermining of science, experts, media, and government (Bomberg, 2021). Bolsonaro, who was in power in Brazil at the time of writing, followed in Trump’s footsteps by adopting regressive environmental policies and reinforcing doubt in science and experts. Beyond these examples, there are many other right-wing leaders in power around the world many of whom express climate change denialism and scepticism (see in Europe, Schaller and Carius, 2019). Right-wing populism is therefore by no means something of the past and its implications for climate change action are still unfolding. Tackling climate change requires an urgent need to rethink the traditional reliance on carbon emissions in societies and economies, looking instead towards decarbonized alternatives. Yet, the process of how to achieve this radical reorganization remains a central dispute within climate change governance (CCG). One might expect that right-wing populists, with their often-expressed denial of climate science, are in diametrical opposition to seemingly more progressive political leaders who publicly support decisive action on climate change, such as President Biden in the US and President Macron in France. However, both groups

Marcus Gomes and Steffen Bo¨hm, Right-wing Populism vs. Climate Capitalism. In: Business and Populism. Edited by Magnus Feldmann and Glenn Morgan, Oxford University Press. © Marcus Gomes and Steffen Bo¨hm (2023). DOI: 10.1093/oso/9780192894335.003.0012

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are ideologically tied to market approaches and hence avoid systematic changes to capitalism as a way of (re)organizing nature, societies, and economies. As such, leaders, including Biden and Macron, represent ‘climate capitalism’, consolidating a neoliberal CCG. Central to climate capitalism is the belief that emissions growth can be decoupled from economic growth. Consequently, decarbonization is understood as an incremental rather than a transformational process. This tends to result in the creation of new markets (i.e. carbon markets) and financial products (e.g. environmental, social and governance (ESG) investment funds) as ways of resolving the climate crisis that support minimal regulation and interference and retain the free market approach. Right-wing populism (i.e. Trump and his allies) and climate capitalism (i.e. Biden and his allies), while seemingly opposed to each other, are two sides of the same coin, representing the hegemonic struggles over the future of capitalism by its powerful business elites. While right-wing populists focus on climate denial and the negative impact of environmental regulation on the those ‘left behind’, supporters of climate capitalism consolidate neoliberal CCG as the only politically viable option to tackle the climate emergency. The chapter unfolds as follows. In the next section, we discuss the consolidation of neoliberal CCG and how it is intertwined with climate capitalism. This is followed by showing how climate denial was funded by extractives business elites, creating fertile ground for right-wing populists to draw ideas and discourses against climate change. The subsequent section examines how right-wing populism is updating climate denial for its own benefits. The final section concludes with how right-wing populism further promotes climate change marketization and keeping the capitalist way of organizing nature unchanged.

The rise of climate capitalism The world’s political elites have discussed climate change at the highest levels for the better part of 30 years. The approach which has emerged has been in line with neoliberal governance approaches that were spearheaded by influential players, mainly the US and the UK, since the mid to late 1970s, and have since spread across the globe (Bailey, 2007; Ciplet and Roberts, 2017). In particular, the dominant approach has centered around managing the carbon market. This response has included establishing property rights for carbon emissions and allowing carbon permits and credits to be traded globally (Bailey, 2007). A number of Emissions Trading Schemes (ETS) were set up across the world, most prominently the EUETS, which came into force in 2005. Carbon has now become a major commodity, being traded on stock exchanges across the world. This financialization of climate change is creating new carbon elites, benefitting from the world’s need to urgently curb global greenhouse gas (GHG) emissions (Bond and Dorsey, 2010; Okereke, 2018). It is this commodification and financialization of the climate emergency

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that is at the core of what we label neoliberal CCG, which has become hegemonic over the past two decades. New business elites have therefore framed climate change both as a threat and as a business opportunity. A key element of for identifying the business opportunities arising from climate capitalism is how energy is produced and generated. Within climate capitalism, energy transition is widely embraced, and industrial-scale renewable energy projects are proliferating around the world, creating new business opportunities (Dunlap, 2018; Newell, 2021). While industrial-scale renewable energy is positioned as a solution to ever-increasing energy consumption, the fossil fuel industry has started to invest in renewable energy projects, although in smaller proportion when compared to what they have invested in the extraction of oil and gas (Newell, 2021). BP, for example, has recently announced major investments into renewables, without fully letting go of its main oil and gas business (Bousso, 2021). Moves within the financial markets to fund ‘green projects’ have increased supported by limited government and international agency funding. Similarly, a wide range of sectors are now engaged in transforming how energy is sourced and used as part of the climate crisis mitigation measures. Competition between companies and competition between countries to establish the sorts of institutional conditions for innovation and experimentation that can make and develop new products and processes for dealing with aspects of the climate crisis goes alongside efforts to develop and sustain an international consensus on key targets. Climate capitalism and discourses about the New Green Deal attempt to marry together business opportunities with a recognition of the climate crisis though a range of authors have argued that these transitions to renewable energy and new products and processes do not necessarily change underlying dynamics of exploitation, injustice, and inequality, which mark neoliberal capitalism and its CCG variant (Dunlap, 2018; Newell, 2021). Emissions trading and its financialization (e.g. derivatives, swaps, insurances, among others) have created new markets in which new companies, traditional banking institutions, and consultancy firms have become key actors. Similarly, climate capitalism is based on voluntary regulation, which not only dismisses the power of states to regulate but increases companies’ influence over governance regimes (Newell and Paterson, 2010). Therefore, climate capitalism constitutes a form of continuity for business and for neoliberal economic regimes.

Climate denial and the role of business interests Alongside the development of climate capitalism and its network of corporations, agencies and governments, there has been a strong counter-movement, primarily led by companies and investors directly threatened by efforts to curb fossil fuel emissions but drawing in at various times many other large business interests,

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particularly in the US. Climate change denial¹ has existed since at least the late 1980s (Greenpeace, 2013). It has adopted a strategy around spreading uncertainty and doubt (Dunlap and McCright, 2012) and it is strongly associated with US conservative think tanks funded mainly by extractive business elites in the fossil fuel sector. Although the climate denial machine first took hold in the US, creating a conservative echo chamber that became an integral part of North American politics and is strongly associated with the Republican Party, it has since diffused around the world (Boussalis and Coan, 2016; Hornsey, Harris, and Fielding, 2018; MacKay and Munro, 2012; Washington and Cook, 2011; Begley, 2007; Greenpeace, 2013, Mayer, 2010; Brulle, 2014). Extractive industries’ business elites have funded conservative think tanks and lobby organizations, which produce information, discourses, and narratives that generate doubt and uncertainties regarding climate science and the consequences of climate change. This climate denial material is distributed via mainstream and conservative media, becoming amplified by the conservative ‘echo chamber’ (i.e. media, social media, and politicians). In turn, these materials have been used in conservative politicians’ rhetoric and positions regarding climate change governance. It is clear that many fossil fuel companies knew from early on the connection between their activities and the emerging climate crisis but sought to undermine and discredit such notions. An investigation from Inside Climate News (Banerjee, Song, and Hasemyer, 2015), revealed that Exxon, one of the biggest US-based oil and gas companies in the world, was aware of the growing consensus that climate change was related to the burning of fossil fuels as well as its consequences to global average temperature as early as the late 1970s. A further investigation revealed that The American Petroleum Institute (API) created a task force to ‘monitor and share climate research between 1979 and 1983, indicating that the oil industry, not just Exxon alone was aware of its possible impact on the world’s climate far earlier than previously known’ (Banerjee, 2015). Despite this knowledge, oil companies took decades to publicly recognize the climate problem (Levy and Kolk, 2001). Their corporate response was to adopt a similar strategy to the tobacco industry of creating uncertainty and doubt (Dunlap and McCright, 2012; Keane, 2020). Consequently, ‘since the late 1980s, this well-coordinated, well-funded campaign

¹ Although many climate deniers label themselves as ‘sceptics’ (Washington and Cook, 2011), we will adopt the term ‘denial’, instead of ‘scepticism’. Scientific scepticism is an important way in which science advances and framing climate denial as a form of scientific scepticism corroborates with one of the denial forms, which is to question the scientific consensus around climate change. Thus, framing ‘climate scepticism’ instead of ‘climate denial’ while the scientific community achieved a consensus that we are experiencing anthropogenic climate change (Cook et al., 2018) is to strengthen the denial discourse. We recognize that expert knowledge is at the heart of the right-wing populism’s revolt against the elites and it is no different in the climate change camp (Huber, 2020), which is the focus of attention of this chapter; nonetheless, it is crucial to give the proper label, as keeping the term ‘climate scepticism’ is to keep implying that climate change is a theory, not a fact.

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by contrarian scientists, free-market think tanks, and industry has created a paralyzing fog of doubt around climate change’ (Begley, 2007) that has been shaping policies and public opinion towards opposition to governmental regulations to climate change (Dunlap and McCright, 2012). As evidence of anthropogenic climate change got stronger in the late 1980s, increasing its scientific consensus, the extractive industries elites’ response also became more muscular (Keane, 2020). In 1989, the lobby organization GCC was founded to represent the interests of fossil fuel producers and main users. It focused on creating misinformation regarding evidence of climate change and challenging the Intergovernmental Panel on Climate Change (IPCC) that had been created in the previous year. Similarly, the Information Council for the Environment (ICE) was formed in 1991 to represent the electricity companies, leading campaigns to reposition global warming as a theory, not as fact. In the early 1990s, the campaign against the IPCC went beyond the extractive businesses elites (fossil fuels, steel, mining, forest industries) and included business elites with a core business dependent on GHG emissions, such as the manufacturing sector, including the automobile industry, attempting to challenge climate change policies and regulation (Levy and Kolk, 2001; Dunlap and McCright, 2012; Greenpeace, 2013; Keane, 2020; Begley, 2007; Banerjee, 2015; Levy, 2010). As Dunlap and McCright (2012: 148) argue, ‘in the early 1990s it appeared that much of corporate America was lining up against climate science and policymaking, with the IPCC being the crucial target’. Besides the IPCC, the denial machine chose as their main target the Kyoto Protocol and its mandatory emissions control mechanism, developing a strong and noisy campaign against it (Dunlap and McCright, 2012; Levy, 2009). According to a Greenpeace report, these groups coordinated a strategy to promote ‘a complete scientific critique of the IPCC research and its conclusions and to enable decision-makers to raise ‘such serious questions about the Kyoto treaty’s scientific underpinnings that American policymakers not only will refuse to endorse it, they will seek to prevent progress towards implementation’ (Greenpeace, 2013: 16). Moreover, the report, drawing from leaked documents, shows that the campaign would be victorious when ‘[t]hose promoting the Kyoto treaty on the basis of extant science appear to be out of touch with reality’ (Greenpeace, 2013: 16). The extractive businesses elites’ campaign was successful. The Clinton administration dropped plans to ratify the Kyoto Protocol; one of the first acts of the subsequent Bush administration was to withdraw the US from the Kyoto Accords (McCright and Dunlap, 2003; Levy, 2009; Greenpeace, 2013). Just prior to this, the GCC was dismantled in 2001, as some fossil fuels corporations—mostly those headquartered in Europe, such as Shell and BP—left this industry alliance due to pressure from their stakeholders that saw the aggressive and noisy position against climate change and its policies as a threat to their businesses’ legitimacy (Levy and Kolk, 2001; Dunlap and McCright, 2012). However, this did not mean

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that the extractive businesses elites’ coalition against the Kyoto Protocol failed, nor that they stopped funding the climate denial machine. On the contrary, their campaign achieved its objective of avoiding the implementation of regulation on carbon emissions. Its result was the consolidation of the climate denial discourses, particularly in the US. Although this denial machine did not halt the Kyoto Protocol, the extractive businesses elites kept funding climate denial and conservative think tanks in diverse ways during the Obama administration in the 2010s (Greenpeace, 2013; Boussalis and Coan, 2016; Dunlap and McCright, 2012; Mayer, 2010; Brulle, 2014: Nature, 2010: Nerlich, 2010) even as other businesses were coming to welcome the opportunities arising from climate capitalism. Central to this continued commitment to climate change denialism was the rise of populism and the ability of right wing think tanks funded by the extractive industries to define climate change action as against the interests of ‘the people’ and in the interests of ‘the elite’. In particular they argued that environmental policies, advocated by what they consider to be an international ‘elite’, were responsible for many of the negative socio-economic consequences experienced by the people and places that are ‘left behind’ when mines are closed, fracking (with its job creation possibilities) is constrained, oil pipelines across certain areas banned, and changing land use of forests and other areas result in turning them over to intensive agriculture. Mudde’s ideational approach to populism is relevant to how climate change becomes part of populist discourse. He defines populism as: ‘a thin-centered ideology that considers society to be ultimately separated into two homogenous and antagonistic camps, “the pure people” versus “the corrupt elite”, which argues that politics should be an expression of the volenté générale (general will) of the people’ (Mudde and Kaltwasser, 2017: 6). The thin-centered ideology of populism allows it to be associated with other sets of ideas which can be turned into elite versus people terms. Right-wing populist discourses operationalize ‘the people’ as those ‘left behind’, who are premised as suffering from the consequences of environmental policies that hold back extractive industries expansion (e.g. the coal industry in the Appalachian Mountains and agri-business in the Amazon rainforest). It is those that are ‘left behind’ who are threatened by jobs cuts and curtailed development, while the ‘corrupt elite’ pushes for international agreements that force environmental regulation and threaten national sovereignty. As Lockwood (2018) argues, right-wing populism is embedded within (i) anti-elitism values that challenge the scientific knowledge about climate change and the role of scientists and environmentalists, and (ii) nationalistic and sovereign values that challenge the global co-operation that is associated with the climate change agenda. As such, they combine to critique climate capitalism and neoliberal CCG. Further developing Lockwood’s (2018) argument, we demonstrate how two antagonistic groups (‘the people’ vs. ‘the elite’) offer right-wing populism the opportunity to combine climate denial with its own rhetoric, creating a threat to addressing climate change.

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Right-wing populism, climate change and ‘the people’ As discussed, the denial machine, financed by the extractive industries elites, has its roots in the conservative movement in the US and provides a discursive pool from which right-wing populism uses and adapts the climate denial discourses to fit its own agenda. Following an ideational approach to populism (Mudde, 2017), we examine how climate denial arguments provide ideas and discourses that create two camps: ‘the people’ vs. ‘the elites’. Here, CCG is positioned as a threat to the free market, economic growth, and national sovereignty (Forchtner, Kroneder, and Wetzel, 2018). Hence, the short circuit links freedom of the people and defence of the country with an opposition to climate change interventions and regulation. Lockwood (2018) argues that there are two main explanations for the success of this short circuit. First, right-wing populists claim that low-skilled manufacturing jobs were lost due to environmental regulations, appealing to those affected by globalization. This reinforces claims that many working-class people got ‘left behind’ by the elites’ drive towards globalization. Second, the ideological approach points to the conservative and nationalist values that link to the ‘thin ideology’ of populism (Mudde and Kaltwasser, 2017). Hence, two strands combine: on the one hand, nationalist values perceive CCG as a threat to national sovereignty; on the other hand, anti-elitism frames CCG as a cosmopolitan elite agenda, driven by scientists, environmentalists, and political elites (Lockwood, 2018). Similarly, Huber (2020) examines populist attitudes and climate denial, concluding that the inherent characteristics of climate change being abstract and technical make it easier for populists to frame CCG as an elite-driven project that is removed from ‘the people’ and their everyday lives. Successfully entering the terrain of hitherto left politics, a major right-wing critique of CCG is the economic consequences of climate regulation, framing environmental regulations as responsible for job losses and lower wages that affect those ‘left behind’ the most. This discursive short circuit between labour politics and climate change has not only been successful in the US, but also in Brazil and many European countries. As Schaller and Carius (2019) have shown, many right-wing parties across Europe claim that economic and social justice are the key issues to frame climate action as an elite matter. This purported detrimental economic impact is aligned to international agreements, considered to be developed by, and for, ‘the elites’. For example, then President Donald Trump demonstrated such associations in his (in)famous speech on 1 June, 2017, when he announced that the US would pull out of the Paris Agreement due to its ‘harsh economic restrictions’ and negative impact on American workers: The Paris Climate Accord is simply the latest example of Washington entering into an agreement that disadvantages the United States to the exclusive benefit of other countries, leaving American workers—who I love—and taxpayers to absorb

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the cost in terms of lost jobs, lower wages, shuttered factories, and vastly diminished economic production. Thus, as of today, the United States will cease all implementation of the non-binding Paris Accord and the draconian financial and economic burdens the agreement imposes on our country. … Compliance with the terms of the Paris Accord and the onerous energy restrictions it has placed on the United States could cost America as much as 2.7 million lost jobs by 2025 according to the National Economic Research Associates. This includes 440,000 fewer manufacturing jobs—not what we need—believe me, this is not what we need—including automobile jobs, and the further decimation of vital American industries on which countless communities rely. (Trump, 2017)

In this short extract, we can see how Trump creates a link between CCG and the economic impacts on those ‘left behind’ as well as the national sovereignty of the US. It operationalizes ‘the people’ that had their jobs destroyed by environmental regulations imposed by an international agreement developed by ‘elites’. Similarly, far-right Brazilian President Jair Bolsonaro stated that Brazil would not host the Conference of Parties (COP) 25 (2019), referring to CCG as nothing more than ‘trade wars’: ‘I want to know, whether there is any resolution for Europe to be reforested? Is there any decision? Or are they just bothering Brazil? It’s just trade wars, I don’t know how the people can’t see that it’s trade wars’ (Amorim, 2019). This is in line with the Brazilian government’s view that environmental regulations are holding back Brazil’s economic development, as its economy is highly dependent on cattle and soy products exports, which are strongly linked to Amazon deforestation. In May 2020, during the Covid-19 pandemic, former Brazilian Environment Minister Ricardo Salles, in a recorded cabinet meeting later released by the Brazilian Federal Supreme Court, saw an opportunity to dismantle environmental regulations, claiming that ‘We need to make an effort while we are in this calm moment in terms of press coverage, because they are only talking about Covid-19, and push through and change all the rules and simplify norms’ (Spring, 2020). After the release, he explained his position by stating: ‘The tangle of irrational laws hinders investments, the generation of jobs and, therefore, sustainable development in Brazil’. While right-wing populist efforts to connect climate regulation with the loss of jobs and declining standards of living for ‘the people’ is a common thread in its discourse, the national sovereignty dimension is also key. For example, in Bolsonaro’s opening statement to the 2019 UN General Assembly, he stated: ‘We all know that all countries have problems. Yet, the sensationalist attacks that we have suffered coming from a large part of the international media due to the fire outbreaks in the Amazonian region have aroused our patriotic sentiment. It is a fallacy to say that the Amazon is the heritage of humankind, and a misconception, as confirmed

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by scientists, to say that our Amazonian forests are the lungs of the world. Using these fallacies, certain countries, instead of helping, embarked on the media’s lies and behaved in a disrespectful manner and with a colonialist spirit. They even called into question that which we hold as the most sacred value: our own sovereignty’ (Bolsonaro, 2019, p. 4). Again, a hitherto left discourse of colonialist critique is mobilized here to appeal to the people of Brazil and their sovereign instincts. In a similar speech at the 2020 UN General Assembly, Bolsonaro stated that the global interest in the Amazon is not due to its importance in the climate crisis but due to its resources and riches that other countries are trying to access, thus threatening Brazil’s sovereignty: ‘Our agribusiness remains vibrant and thriving and, above all, it has and respects the best environmental legislation on the planet. Even so, we are victims of a most brutal disinformation campaign about the Amazon and the Brazilian wetlands. The Brazilian Amazon is known to be immensely rich. That explains the support given by international institutions to this disinformation campaign anchored on shady interests coupled with exploitative and unpatriotic Brazilian associations with the purpose of undermining the Government and Brazil itself ’ (Bolsonaro, 2020). The nationalist rhetoric supports anti-environmental regulation, based on an underlying premise that ‘international environmental elites’ are imposing regulations that impact the development and prosperity of ‘the people’, restricting Brazil’s ability to capitalize on its natural assets to support its economic revival. Bolsonaro’s government has also championed access for industries into the Amazon, claiming that such moves are pivotal and calling for a relaxation of environmental regulations to achieve economic growth (Simões, 2019). These stances underpin the Bolsonaro government’s active attempts to dismantle environmental regulation and weaken environmental agencies through limiting agencies’ budgets, disputing the merits of their work, and questioning the overreliance on research by scientists and experts. Again, Trump’s environmental governance followed a remarkably similar approach, publicly embedding climate change in international politics: ‘China loved Obama’s climate change speech yesterday. They laughed! It hastens their takeover of us as the leading world economy’ (Trump cited in Matthews, 2017). Sovereignty can also be expressed as foreign intervention that has a negative impact on communities ‘left behind’, epitomized in Trump’s 2017 speech: As President, I have one obligation, and that obligation is to the American people. The Paris Accord would undermine our economy, hamstring our workers, weaken our sovereignty, impose unacceptable legal risks, and put us at a permanent disadvantage to the other countries of the world. It is time to exit the Paris Accord—and time to pursue a new deal that protects the environment, our companies, our citizens, and our country. It is time to put Youngstown, Ohio, Detroit,

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Michigan, and Pittsburgh, Pennsylvania—along with many, many other locations within our great country—before Paris, France. It is time to make America great again. (Trump, 2017)

The sovereignty argument also reinforces right-wing populism’s ideological stance that ‘green/Marxists’, ‘globalists’, or ‘cultural Marxists’ are part of a plot against Western countries to promote China’s economic growth (Forchtner, Kroneder, and Wetzel, 2018; Hornsey, Harris, and Fielding, 2018). Similarly, Brazil’s former Minister of Foreign Affairs, Ernesto Araújo, once said: ‘This dogma has been used to justify increasing the regulatory power of states over the economy and the power of international institutions on nation-states and their populations, as well as to stifle economic growth in democratic capitalist countries and to promote the growth of China’ (Araújo cited in Watts, 2018). Hence, we can see how right-wing populism enables a new wave of climate denial, supplementing blatant attacks on climate science with criticisms rooted in the CCG’s purported threat to national sovereignty and economy. Climate change is used by the right-wing movement as a political vehicle to win over voters that have traditionally voted for left and labour-oriented parties, appealing to those ‘left behind’ to consider the negative economic impact of CCG and the apparent loss of national sovereignty. Climate change has certainly been a heated political issue in many countries, and right-wing populism has done its best to use it as a polarizing issue. Yet, we argue that the differences between Trump and Biden, between right-wing populism and neoliberal CCG, are over-stated. Instead, there is a deep-seated neoliberal kernel at the heart of both approaches.

Neoliberalism and populism in climate change debates We have argued that the connection between extractive business elites, the conservative movement and climate denial is a fertile ground on which right-wing populism’s rallies against CCG thrive. Right-wing populists take pride in their nationalistic and free market values, framing CCG as a threat to national sovereignty and economic growth as well as to ‘the people’, particularly those ‘left behind’ by globalization. Right-wing populists hence create a front of opposition against any form of climate change legislation and regulation. Ever since climate change was put on the top of governments’ agendas more than 30 years ago, extractive business elites and their political allies have been eager to delay, disrupt and dismantle any concrete climate action. They have not just used denialism and obfuscation; they have also sought to direct any climate action down a route that could be beneficial for neoliberal economies. When the world came together to agree the Kyoto Protocol in 1997, for example, the US surprised everyone by introducing

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carbon markets as the prime approach to dealing with climate change mitigation. This allowed, so they argued, much needed ‘flexibility’ for highly industrialized countries, whose economies would be disadvantaged by too stringent climate policies (Bo¨hm and Dabhi, 2009). The US delegation made the inclusion of carbon trading a condition for them signing the Protocol—with the world following suit—only then to never ratify this international agreement for the reasons we discussed above. While the non-ratification of Kyoto was a clear winner for the US’ right-wing populist movement and its extractive business elites’ sponsors, Kyoto’s inclusion of carbon market principles at its core spearheaded a frenzy of business models and financial instruments geared towards the trading of so-called carbon permits or credits, allowing states and companies of the Global North to offset their emissions by investing in ‘sustainable development’ projects in the Global South. Although first a US idea, which was very much disliked by the Europeans in Kyoto (Hepburn, 2007), carbon trading, including offsetting, became the hegemonic approach adopted by the EU, which started its flagship Emissions Trading System (ETS) in 2005. Instead of governments using their legislative and taxraising powers to mandate and incentivize carbon-intensive industries to decarbonize, carbon was turned into a commodity that can be traded internationally. The idea is that globally it does not matter where carbon reductions are achieved, as the climate and the greenhouse effect does not know national borders. Instead of accepting stringent mitigation targets, Northern companies could now trade themselves out of the climate misery. Over the course of only a few years, thousands of carbon offsetting projects were instigated, with countries like Brazil, China, and India taking the lion’s share of northern money for investing in tree plantations, biogas generation and other projects which today we would call ‘net-zero’ initiatives (Bryant et al., 2015). Although some academic research suggests that ETSs, such as the EU-ETS, have directly led to reduced carbon emissions (Bayer and Aklin, 2020), most commentators agree that carbon markets have been nothing more than a delaying tactic, allowing countries and companies of the Global North to continue—more or less—business-as-usual (Bo¨hm and Sullivan, 2021; Spash, 2010; Krause, 2020; Stoddard et al., 2021). While carbon market instruments—just like the annual COP climate change gatherings around the world—give the appearance of tackling climate change, the fundamentals of climate change and the ever-increasing greenhouse gas emissions have not changed. While right-wing populists have done their best to translate their climate denial into actual obstructions of climate science and politics, neoliberal CCG approaches have not fundamentally altered business-as-usual relying on markets to bring about change, either through carbon trading or through efforts to establish new energy sources and carbon-free production and processes. At the corporate

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level, something similar has happened. While many corporations have been recognizing climate change publicly and the importance of controlling GHG emissions (Levy, 2019; McCright and Dunlap, 2003; Dunlap and McCright, 2012; Levy and Kolk, 2001), this has often not translated into real low-carbon corporate strategies or it has led to a dependency on using dubious carbon offsetting mechanisms (Bo¨hm et al., 2015). In other words, there has been plenty of greenwashing (Wright and Nyberg, 2015). The recent flurry of ‘net-zero’ announcements by BP, Shell and many other companies are a case in point. While designed to appease policymakers and the wider public, there are rarely any concrete strategies and management plans in place for reaching these ‘net-zero’ ambitions, which are mostly set in the distant future (Dyke et al., 2021). Both the right-wing populists and neoliberal CCG approaches, rely on the assumption that the free market can deal with the climate crisis the way it presents itself globally. While right-wing populists deny climate change is happening at all, neoliberal CCG—meaning carbon market—protagonists have put all their hopes in market mechanisms that have, so far, produced little or no climate mitigation progress. Both approaches aim at avoiding governmental regulation, serving extractive business elites that are eager to keep business-as-usual in place for as long as possible, given that it produces handsome profits and dividends for investors. Right-wing populists and climate capitalism advocates are two sides of the same market-driven coin. While right-wing populists focus on climate denial and the negative impact of environmental regulation on the ‘left behind’, the supporters of the carbon market approach consolidate their position as the only politically viable option to tackle the climate emergency (Ferns and Amaeshi 2019a, b). This double movement further entrenches market-based approaches and enables extractive and financial businesses elites to continue to thrive while not pushing forward the fundamental, systemic changes that decarbonization requires.

Conclusion Right-wing populism creates a number of implications for climate change governance. First, right-wing populism and its nationalist views put forward a critique of globalization and cosmopolitan principles needed to tackle climate change globally, thus challenging international collaborations. Brazil, for example, was previously recognized for its multilateralism and promotion of international environmental agendas, particularly by bridging gaps between developed and developing countries. Since Bolsonaro took office in 2019, Brazil has been holding back the progress of CCG (Financial Times, 2019). Bolsonaro’s right-wing populism has not only opened up the Amazon for further ‘development’, threating the ecological integrity of that ecosystem, which is so important for the global

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climate (Coe et al., 2013), he has also actively obstructed global climate change negotiations (Goodell, 2021). Second, the fact that Trump was not re-elected for a second term in office does not mean that a market approach to climate change is off the table, nor that right-wing populism will stop influencing policies in the climate arena. Biden’s election opens a new historic moment for the ongoing struggle between rightwing populism and CCG, one that is still unfolding. Governance processes are about regulating social action and bringing cohesion to a given social order, being the outcome of constant negotiation of multiple actors influencing one another (Bartley, 2015; Ezzamel and Reed, 2008; Gomes and Merchan, 2017). Thus, any governance processes involve criticism, conflicts, coalitions, struggles, and accommodations (Levy and Egan, 2003), and it is no different in the climate change arena. Right-wing populism has been playing an important part in this arena for many years, if not decades, reconfiguring the formation of alliances and collaborations that would not be possible otherwise. Biden’s government is likely to align with the EU on pushing carbon markets forward, increasing pressure on China to deliver its promises on curbing GHG emissions (Mallet and Keohane, 2020). Yet, Biden will also have to find a way to win over ex-Trump-voters at home. We do not claim that all right-wing populist leaders share the same discourse on climate change; it is likely to vary according to national political dynamics and business elites’ support. However, a recent Adelphi report (Schaller and Carius, 2019) has shown how right-wing populist parties are gaining momentum in Europe and pose risks to European climate policy. The authors analysed the 21 strongest right-wing populist parties and mapped their views on climate change. Unsurprisingly, seven are denialists, eleven are cautious/disengaged (i.e. no position or do not attribute it a high priority) and only three support the scientific consensus on climate change. The report shows that, although there are some nuances, most discourses against climate change and energy policies are supported ‘in economic or social justice grievances and climate action is perceived as an elitist issue’ (Schaller and Carius, 2019, p. 37). Hence, although variety exists, it seems that there is some homogeneity within right-wing discourse that corroborates the analysis in this chapter. Having said that, there are no certainties and linear pathways. It is not a given that right-wing populism will increase its reach of climate denial discourse around the world. In the 2021 national elections in Germany, for example, climate change was the number one political priority for voters, given that the country experienced one of its worst flooding disasters, which most experts attributed to climate change, only a few months before the election (Crowcroft et al., 2021). As a result, green and centre-left parties did much better than right-wing parties, including the climate sceptic party, Alternative for Germany (AfD).

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As the US re-joins the Paris Agreement, carbon markets will be pushed further, contributing to their institutionalization as the solution to the climate crisis. While the denial machine and right-wing populism benefit the extractive businesses elites, the marketization of climate change favours financial elites. Carbon markets commodify carbon emissions that now are transformed into assets as well as targets for speculation within financial markets. Therefore, the financialization of GHG emission markets is evidence of a new phase of capitalist development. Promoting carbon markets is a way to keep business-as-usual for as long as possible without instigating fundamental changes to the socio-economic system (Bo¨hm, Misoczky, and Moog, 2012; Wright and Nyberg, 2015). While right-wing populism focuses on climate denial discourses, posing CCG as a threat to national sovereignty and the economy, the marketization of climate change is in denial of the need for deep transformations within capitalism. Consequently, this double movement enables the extractive and financial businesses elites to thrive, posing a continued and real danger to the climate crisis.

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13 Business Associations and Right-wing Populism Daniel Kinderman

Introduction The rise of right-wing populism is one of the most consequential political developments in recent years. In the aftermath of the Trump presidency and the Brexit referendum, liberal democracy remains fragile, battered, and under siege.¹ Political risks, previously restricted to multinationals operating in developing countries, have arrived in the innermost core of global capitalism. The most forceful new challengers to the global rules-based market order have come from right-wing populists, rather than from the left. Brexit has been characterized as heralding ‘not just Britain’s exit from the EU but the decline and maybe fall of the twentieth century ideal of a liberal, globalized world’ (Peters, 2018: 323). Trump and Brexit ‘are likely to turn out to be “events” in Sewell’s (1996) stringent sense: profoundly and enduringly consequential happenings that transform structures’ (Brubaker, 2017: 368). The rise of right-wing populism has transformed the relationship between business and politics in capitalist democracies: it starkly ‘challenge[s] the assumptions of neoliberalism and globalization on which the recent governance of the international market order has been based’ (Gamble 2018: 113), without challenging capitalism per se. One observer recalls the day after the Brexit referendum: .

… the sense of the business world—normally so articulate and composed – being all at sea, unable to find the words, exhausted by the politics and unable to work out its next steps. This feeling was to last for months … I had never seen business leaders respond with such emotion. Business is supposed to be a rational act … It is governed by making cool-headed judgments and carrying then out with care and diligence. None of these behaviours were on display in the early days and

¹ I am grateful to Magnus Feldmann and Glenn Morgan for very helpful comments and suggestions on an earlier version of this chapter. In addition, this chapter has benefitted from the research and discussions associated with the Norface Network POPBACK project grant number 462-19-080 2021-2023. Daniel Kinderman, Business Associations and Right-wing Populism. In: Business and Populism. Edited by Magnus Feldmann and Glenn Morgan, Oxford University Press. © Daniel Kinderman (2023). DOI: 10.1093/oso/9780192894335.003.0013

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weeks after the referendum. For some, there was a sense of panic; for most, I witnessed an initial numbness, and from a few there was real anger (Anderson 2019: 71–72)

The president and director-general of the UK’s most powerful business organization, the Confederation of British Industry, were summoned to 10 Downing Street, where Prime Minister Theresa May’s top advisors and closest confidants screamed at them and gave them a ‘full-frontal verbal dressing down’. The president of the CBI recalls: ‘I had never been spoken to by that in my forty years in business. There was no respect’ (Anderson, 2019: 97). Another top-level business representative stated: ‘I don’t think the relationship between business and politics has been this low since the mid-1970s’ (Anderson, 2019: 116). While Brexit is an extraordinary case of a ‘deep freeze’ between business and politics, it is just the tip of the iceberg as right-wing populists have become a formidable force in many countries across the world. As Piketty notes, the ‘electoral right’ is ‘equally divided between a pro-market centre-right and a more radical nativist and nationalist right, which sees identitarian retreat and antiimmigrant social nativism as the proper response to the challenges of a global economic system run amok’ (Piketty, 2020: 774). The rise of the populist right has significant implications for business associations, politically potent organizations that represent a significant concentration of firms, capital, employees, and GDP in their respective societies. Business associations are the aggregation, and the political representation of what Piketty (2020) calls the ‘merchant right’. Business associations have historically had close relations with centre-right parties (Gidron and Ziblatt, 2019). But as support for the populist right has grown, business associations in a growing number of countries have been forced to engage with them. Despite this fact, relatively little is known about the relationship between right-wing populists and business associations. This chapter aims to fill this gap by theorizing business association responses to right-wing populism and answering the following questions. What are divergent and convergent interests between business associations on one side, and the populist right on the other side? Is it more expedient for business associations to cooperate and collaborate with or oppose and resist right-wing populists? Why do some business associations mobilize, engage in collective action, and take a public stand against the populist right, while others do not? How does the populist right’s rise affect the internal cohesion of business associations? I argue that right-wing populists present a difficult challenge for business associations by supporting protectionism and railing against globalization and unrestricted market access, by restricting immigration and the trans-national flow of labour, and by conducting politics in the name of ‘the people’ against elites, including cosmopolitan and internationally mobile business elites. These policies are problematic for a substantial number of businesses, particularly in open,

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export-oriented economies, which is why my default expectation is that business associations will oppose and denounce right-wing populists. This is what we observe in case studies of Germany, Switzerland, and France on the following pages. However, the interests of business associations and right-wing populists do overlap in important ways. Business associations may cooperate with or even support right-wing populists if they run the government or have a business-friendly policy orientation. More generally, some aspects of right-wing populist parties’ platforms appeal to small business owners, craftspeople, and shopkeepers, which comprise a significant share of many business associations. Precisely because some of their policy positions are attractive to business, while others are problematic, the rise of right-wing populism can lead to growing tensions, divisions, and disunity in business associations and in the right bloc more generally. As Traxler points out, ‘The special dilemma of employer organizations is that they have to organize the most powerful interest group in society’, a group which ‘rationally follows their self-interest more consistently than any other interest group’ (Traxler, 2008: 226). Paradoxically, right-wing populists may present a more difficult challenge for business associations than the left. Challenges from the left lead businesses to close ranks and engage in collective action to defend their common class interests, which provides business associations with good prospects for success. Right-wing populists, on the other hand, appeal to some business interests while opposing others, which weakens business unity and increases tensions and divisions within business associations. Feldmann and Morgan (2022) extend Albert O. Hirschman’s ‘exit, voice, and loyalty’ framework to identify five strategies businesses can deploy in response to right-wing populists: exit, implicit loyalty, explicit loyalty, soft voice, and loud voice (see also Chapter 1). They apply their framework to the case of Brexit and find that ‘soft voice’ is the predominant business response, whereas very strong public positions—what Feldmann and Morgan call ‘loud voice’—are quite rare. Since most business associations are territorially bound and immobile, the strategy of exit is not available to them; but business associations make ample use of soft and loud voice and implicit and explicit loyalty. ‘Quiet politics’ (Culpepper, 2010) and the distinction between ‘lobbying insiders’ and ‘lobbying outsiders’ (Du¨r and Mateo, 2016) are also useful for conceptualizing the relationship between business associations and populism. Business associations tend to rely on an inside lobbying strategy that is particularly effective under conditions of ‘low political salience’ (Culpepper, 2010), as they tend to have good access to and significant influence on bureaucrats and executive institutions (Du¨r and Mateo, 2016). By contrast, lobbying outsiders ‘are influential when they manage to increase the public salience of an issue … Mobilizing the public is most feasible on issues that arouse emotions and for which groups can present an easy solution’ (Du¨r and Mateo, 2016: 182).

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Right-wing populism changes the dynamics of politics by politicizing issues such as immigration, trade, economic integration that were previously integral to the neo-liberal consensus. By raising the volume of politics and making it increasingly ‘noisy’ (Culpepper, 2021), right-wing populists weaken and may render ineffective strategies of quiet politics and inside lobbying that have been the strength and main modus operandi of business associations over the past decades. This raises the question: can business associations find any strategies that are promising or effective against right-wing populists? A comprehensive exploration of this question lies beyond the scope of this chapter, but Swiss business associations seem to have found a winning strategy in the Brexit-Trump era. This chapter is organized as follows. I begin by discussing the rationales for business association support and business association opposition to right-wing populists. The bulk of the chapter surveys business association responses to rightwing populists in Germany, France, and especially Switzerland. These sections are followed by a conclusion that summarizes the argument and lays out questions for future research.

Rationales for business association support of right-wing populists While there are significant tensions between business associations and right-wing populists, the interests of these two groups overlap in at least four ways. In this section I discuss their common interest in defending capitalism; their ideology of producerism; the importance of small business support for the populist right; and the pull of political power. Business associations and right-wing populists have the same underlying class interests. Here, a distinction must be made between left-wing and right-wing populists as the ‘enemies of the people’ differ in each case: ‘Populists who emphasize the identity cleavage target foreigners or minorities, and this produces right-wing populism. Those who emphasize the income cleavage target the wealthy and large corporations, producing left wing populism’ (Rodrik, 2018: 24). Given the choice between left-wing and right-wing populist parties, business associations will generally prefer the latter to the former. The reason for this is that most radical right-wing populist parties ‘have an essentially right-wing economic orientation’ (Otjes, 2018: 14). Furthermore, ‘defence of the [capitalist] system is always the principal objective of the bourgeoisie’ (Davidson 2015: 148), and there are fewer doubts that right-wing populist parties will deliver this than left-wing populist parties. Some ideologies held by right-wing populist movements are also attractive for businesspeople and business associations. Producerism refers to the idea that:

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the ‘producers’ of the nation’s wealth should enjoy the economic fruits of their own labours. Individuals and groups driven by work are seen as superior, both economically and culturally … producers contribute to economic prosperity, but they also embody virtue and morality, as opposed to ‘parasites’ at the top and bottom of society. (Ivaldi and Mazzoleni, 2019: 6–7)

Businesspeople and their representatives do not generally have a problem with the idea that ‘a “true” community of hardworking producers … a coalition of productive and deserving people … the backbone of economic prosperity’, the ‘makers’ and not the ‘takers’, are morally deserving and should be at the centre of economic life (Ivaldi and Mazzoleni, 2019: 7). Indeed, business associations have often used similar rhetoric against the state when it comes to the issue of taxation: businesspeople are the ones that produce wealth and create jobs, and who are threatened by excessive taxation. Another component of the producerist ethos is an attack on the undeserving poor—those that choose not to work are less deserving than those who do. Business associations have often demanded policy changes along these lines, for example by attacking unemployment insurance and advocating for a reduction in social benefits, welfare state austerity, and badly paid jobs as being preferable to none at all (Kinderman, 2017). Regarding the relationship between producerism and the financial sector, while left-wing populists are often highly critical of financial power and view it as a ‘parasite of the true economy’, in the right-wing versions, ‘especially those influenced by neoliberal ideas [such as the Trumpist version], financial power is not a threat’. On the contrary: in countries such as Switzerland with a strong financial sector, finance is seen ‘as a crucial pillar of the economic prosperity of the country’ (Oscar Mazzoleni, interview, 18 March, 2021). The main right-wing populist party in Switzerland, the Swiss People’s Party (SVP), sought to defend Swiss bank secrecy even after mainstream parties had distanced themselves from this practice. Although the SVP primarily focuses on small business, the party is strongly supportive of the Swiss financial sector and prioritizes the Swiss national interest over supranational rules and institutions. By contrast, the French National Rally/Rassemblement National is much more critical of financial markets and institutions, either national or supranational (Oscar Mazzoleni, interview, March 18, 2021). A substantial literature documents small business support for right-wing populists. According to Kitschelt and McGann (1995), ‘petit bourgeois’ groups such as craftspeople, shopkeepers, and farmers are a key constituency of support for radical right parties in Western Europe. Right wing populists ‘attract an electorate threatened by the modernization process of advanced capitalism’, which for parties such as the SVP and the Austrian Freedom Party (FPÖ) includes a substantial

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share of small business owners (McGann and Kitschelt, 2005: 149). In Switzerland (in particular), but also in Austria, Belgium, and France, the petite bourgeoisie provides above-average support for the populist right (Oesch, 2008). Business associations aggregate, represent, and shape the interests of their member companies. While the most dynamic sectors of business are unlikely to support the strong nationalist and sovereigntist approach of right-wing populists, businesses in import-competing industries, or relying primarily on domestic demand, or very small and backward firms which are unable to withstand international competition, may think that their interests are well-served by right-wing populists, to the extent that they are protectionists.² For all these reasons, a significant number of small companies in business associations may support right-wing populists. There is an additional powerful rationale for business associations to support the populist right: where right-wing populists offer the prospect for a right-wing coalition to assume political power, business associations may support and engage in negotiations with right-wing populists on these pragmatic grounds even if they disagree with some of their policy proposals. This scenario seems to apply to the Confederation of Austrian Industry IV and the right-wing populist Freedom Party of Austria (FPÖ). The Confederation of Swedish Enterprise Svenskt Na¨ringsliv seem to be increasingly curious about the Sweden Democrats and open to engaging with them, but outright support is still relatively rare.³ And where right-wing populists have a stranglehold on political power, as Viktor Orba´n has in Hungary, they may cozy up to the right-wing populist government to benefit from favorable legislation, patronage, and public contracts (Scheiring, 2020). Finally, it should be noted that the specific relationship between business associations and right-wing populists will to a substantial degree depend on the specific economic and social policy orientation of the right-wing populists (see Norris, 2019 for a useful survey). The more market-liberal, neo-liberal, or businessfriendly their policy orientation, the more attractive they will be for business associations. I nevertheless expect business associations to oppose and resist at least some aspects of right-wing populists’ policy agenda.

Rationales for business association opposition and resistance to right-wing populism Despite some areas of overlap and agreement, the programmatic and ideological agenda of right-wing populists and the organizational and economic interests of business associations diverge in fundamental ways. Right-wing populists rail ² I am grateful to Lucio Baccaro for this insight and formulation. ³ I am grateful to Magnus Feldmann for this insight and formulation.

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against immigration, free trade, globalization, and the EU, which are crucial for trade-dependent firms (Curran and Eckhardt, 2022; Curran and Eckhardt, 2020). Right-wing populists tend to be strongly nativist in orientation—they uphold an ‘exclusionist and ethno-nationalist conception of the people’ (Ivaldi and Mazzoleni, 2019, p. 8), which implies that businesses should only hire native workers and that others should be excluded, deported, and so on. Right-wing populists’ opposition to the free movement of labour is problematic for firms which face a labour shortage. Right-wing populists’ criticism of international business and of multinational firms puts them in conflict with these companies, which are a powerful constituency in most business associations. Along these lines, Curran and Eckhardt hypothesize that ‘In contexts where protectionist trade policy proposals are economy wide, or remain rhetorical, most TDFs [trade dependent firms] will lobby collectively through their formal trade associations’ (2020: 13). Material and organizational interests motivate business association opposition to right-wing populists, but values and culture (Norris and Inglehart, 2019) matter too. David Goodhart (2017)’s distinction between two tribes—‘somewheres’ and ‘anywheres’—sheds light on these fault lines, which present a difficult challenge for business associations. According to Goodhart, people who see the world from anywhere ideology (and supported ‘remain’ in the Brexit referendum) are highly educated cosmopolitan professionals. They comprise approximately onequarter of the population and favour progressive individualism and the status quo of double liberalism: both economic and social liberalism. ‘Somewheres’ (who supported ‘Leave’ in the Brexit referendum) by contrast, are a larger group—they comprise approximately one-half of the population according to Goodhart. They tend to be older, less highly educated, more socially conservative and communitarian. Somewheres tend to view the world through their ascribed identity—stemming from where they live and who they are—versus the achieved identity of cosmopolitan elites. Business elites—particularly large firms and the most dynamic segments of business—are anywheres, they are ‘strongly attached to the existing economic system and to globalization’ (Piketty, 2020: 773). Almost by definition, right-wing populists represent somewheres—workers, but also craftspeople and small business owners who are members in business associations. Right-wing populists do not just represent somewheres, they actively portray cosmopolitan business elites as unpatriotic traitors who deliberately undermine the interests of somewheres. Business associations will tend to oppose this populist rhetoric because it exacerbates the tensions and divisions within their membership and puts them in a difficult rhetorical position.⁴ Right-wing populists’ ‘economic populism’ is also problematic for many business associations. According to Ivaldi and Mazzoleni, ‘economic populism’ refers to ⁴ I am grateful to Christopher Way for this insight.

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the idea that the economic well-being of the ‘people’ is ignored or betrayed by the ‘elite’ and that it should be re-established, notably by means of restoring the nation’s economic sovereignty. This idea forms the basis of a common mobilization frame that identifies a problematic economic condition—the decline of the people’s well-being—and makes attributions regarding who is to blame—the elites. (Ivaldi and Mazzoleni, 2019: 5).

While not all businesses oppose economic sovereignty, business associations will oppose a movement and a worldview that attacks their organization as well as some of their member companies. This points toward the most basic and fundamental point of tension between right-wing populism and business associations— the former’s embrace of populism, an ‘appeal to “the people” and a denunciation of “the elite”’ (Mudde and Kaltwasser, 2017: 5). Business associations will be wary of parties and movements that portray them, their expertise, and their advice as part of the undeserving or parasitic elite/establishment that stands opposed to the needs and interests or the ‘real’, deserving people. To clarify, populism is not necessarily problematic from a business association point of view provided that the enemies of the people are synonymous with the enemies of business, but this neo-liberal or market populism must be conceptually and empirically distinguished from right-wing populism with its nationalist, nativist, and sovereigntist orientation. Furthermore, many business associations will be wary of right-wing populist appeals to craftspeople, shopkeepers, and small business, since this can foment divisions within business associations and undermine their ability to speak effectively with a unified voice. Finally, as I noted in the previous section, the specific relationship between business associations and right-wing populists will depend to a substantial degree on the latter’s economic and social policy orientation (Norris, 2019). The more right-wing populist parties oppose economic and social liberalism and support restrictions on market activity, the more they attack business elites, the greater the hostility of business associations. The next section surveys business association responses to right-wing populism in Germany.

German business associations’ outspoken opposition to right-wing populism German business associations have been loud, vocal, and outspoken critics of right-wing populism, especially the right-wing populist Alternative for Germany/Alternative fu¨r Deutschland (AfD) party, which rose to prominence at the regional level before becoming the largest opposition party in the 2017 Bundestag elections.

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Already in March 2016, the President of the Confederation of German Employers’ Associations (BDA) Ingo Kramer warned: ‘Our country lives from openness and international connections. Right-wing populism and nationalistic politics would harm our country, our businesses and our workers’. Kramer was convinced that further successes of the AfD would seriously damage German exports: ‘our reputation in the world would suffer’, as would investments in Germany (Focus, 2016). Well before the AfD was elected to the Bundestag, managing director of the Federation of German Industries (BDI) Markus Kerber stated that the AfD’s programme ‘goes full frontal against what has made this country successful economically. We will face tough fights and tough struggles to make those guys disappear’ (Kerber, 2016). That same year, several companies in south eastern Germany came together to advocate against xenophobic, racist, and nativist tendencies through political and educational work, and to promote and support the integration of immigrants and refugees into the labour market in Saxony. Following the shocks of Brexit and Trump, in early 2017, two German business associations launched dedicated campaigns to shift public opinion and mobilize employees and voters to oppose the AfD and support the EU, liberal democracy, and the global market order. My prior research (Kinderman, 2020) describes these campaigns and seeks to explain why some German business associations mobilized against rightwing populism while others did not.⁵ Not surprisingly, I find that economic self-interest is a powerful driver of German business association mobilization. Two German business associations representing medium-sized exportoriented manufacturers—firms that are especially vulnerable to the collapse of the European and global free market order—mobilized (the Verband Deutscher Maschinen- und Anlagenbau and the Wirtschaftsverband Industrieller Unternehmen Baden e.V ), and the Business Association for a Liberal, OpenMinded and Cosmopolitan Saxony was founded by companies in Saxony that feared that that right-wing populist agitation with Pegida marches and so on, would make it harder for them to sell their products and recruit skilled workers. However, the interviews I conducted suggest that values, more specifically collective memories of the Nazi past also motivate German business association engagement against the populist right. In general, it is reasonable to assume that business associations are motivated primarily by the material interests of their member companies, but liberal democratic values and identity can also matter. Given their motivation by both business interests and liberal democratic values, German business associations are outspoken critics of right-wing populism.

⁵ To avoid any misunderstanding: I am aware of no German business associations that have publicly expressed support for right-wing populism in recent years; but that does not mean that all German business associations have prioritized denouncing right-wing populism to the same extent.

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While the overall picture is quite clear and the tensions and dilemmas facing German business associations are not very apparent, there is variation among German business associations: while some denounce right-wing populism with a loud voice and others use a soft voice, associations representing small businesses in the crafts and trades sector may remain silent and avoid the issue altogether due to the support for right-wing populism among their members. Next, we turn to the important case of Switzerland.

From James Schwarzenbach to Christoph Blocher and the Swiss People’s Party: Right-wing populism in Switzerland While interest in the populist right has skyrocketed in recent years, right-wing populism has shaped world politics for a long time. The case of Switzerland is important for at least three reasons. First, right-wing populists have been a powerful force in Swiss politics for the past half a century—longer than anywhere else in post-war Western Europe. Second, Switzerland’s direct democracy and frequent referenda make it easy to put votes to the people over trade relations and economic policy issues. This provides right-wing populists with greater opportunities to influence the agenda and challenge business associations than is the case in other liberal democracies. Third and as a result, Swiss business organizations have considerably more experience confronting the populist right than business organizations in other countries. This section provides a brief overview of the two leading right-wing populists in Switzerland over the past 50 years—James Schwarzenbach and Christoph Blocher—as well as the Swiss People’s Party. James Schwarzenbach is known chiefly for his Überfremdung initiatives, which aimed to dramatically limit and reduce the number of foreigners and foreign workers in Switzerland. Indeed, Schwarzenbach is by now widely recognized as a pioneer of right-wing populism in Europe (Buomberger, 2004; Drews, 2005). Schwarzenbach has been characterized as a xenophobe, racist, and anti-Semite; he was most certainly a populist who pleaded for economic sovereignty. He attacked Swiss business associations and large Swiss firms for their unpatriotic focus on profits and their over-reliance on foreign workers, who he claimed were incapable of doing the same quality work as the Swiss (Drews, 2005). Schwarzenbach’s most famous referendum took place in 1970 against the overforeignization of Switzerland. In the campaigning prior to the vote, Schwarzenbach cultivated the image of a lone fighter, an underdog who was fighting against a cartel composed of business, the political establishment, and unions—like David vs. Goliath. The campaign against the Überfremdungsinitiative was dominated by Swiss business organizations and businesses; some of them threatened to cut their employees’ bonuses if the referendum were to pass (Buomberger, 2004, p. 156, 158). It is possible that these actions by business were counterproductive,

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but Schwarzenbach’s referendum in 1970 failed nevertheless, with 46% of the votes cast in favour, and 54% against. Two decades later, the tables turned. In 1992, a referendum took place over Switzerland joining the European Economic Area (EEA). Virtually all business associations and unions supported Switzerland joining the EEA (Somm, 2009: 290); Christoph Blocher, who was president of the Swiss People’s Party (SVP) at the time, opposed it. ‘In the campaign against the EEA, Blocher played an extraordinary, indeed a historic role’ by giving ~200 presentations against the EEA throughout Switzerland from the summer until the 6 December referendum (Somm, 2009: 276, 297). The result was 50.3% of votes against, 49.7% of votes in favour: the referendum failed. This shock was not altogether different from the Brexit and Trump earthquakes in 2016. Somm describes this outcome as ‘the bitterest defeat that Switzerland’s political and economic elites had ever experienced’, and claims that Blocher achieved this ‘decisive breakthrough’ ‘almost alone’ (Somm, 2009: 300, 504). This event propelled Blocher’s ‘comet-like career and his ascendency to a nationally known politician’, and launched a conservative revolution in Swiss politics (Somm, 2009: 47). Blocher’s right-wing nationalist opposition to the EU, to immigrants, asylum seekers, and the establishment catapulted the SVP from weakness and obscurity at the end of the 1980s to the largest party in Switzerland’s national council, a position it has maintained since 1999. Blocher’s politics centres on economic market liberalism, socio-political conservatism and neutrality in foreign policy (Hennecke, 2003). In the following sections, I discuss some implications of right-wing populism’s rise for Swiss business associations as and well as some of the strategies and campaigns Swiss business associations have used in recent referenda.

The impact of right-wing populism on Swiss business unity and cohesion Switzerland is a small, open, export-orientated economy, which has consistently been ranked at the top of global competitiveness rankings. Considering the desire of important sectors of Swiss business for unimpeded access to EU product and labour markets, right-wing populists’ stance against immigrants, close trade relations, and political integration with the EU has presented a formidable challenge for Swiss business associations. This challenge has been compounded by right-wing populists’ business-friendly orientation, which threatens the unity and internal cohesion of business associations. While he became involved in politics in the 1970s, Blocher achieved success as a businessman by taking over the management and ownership of EMS Chemicals. Within a few years, the company became very profitable and Blocher became very

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wealthy, a billionaire. Blocher often contradicted the official statements of Swiss business associations, but no one would accuse Blocher, a plutocrat who defends money and wealth and is ‘one of the most business friendly federal councilmen that Switzerland ever had’ (Somm, 2009: 462), of being anti-business. Blocher is indisputably a populist: in addition to independence and patriotism and policies regarding foreigners, Blocher focused on the ‘fight for a lean state’ (Somm, 2009: 399), a topic with significant appeal for many businesspeople and business associations. Indeed, there is substantial agreement that Swiss business was not united in support of joining the EEA; some Swiss businesses supported Blocher, which contributed to the failure of the referendum (Pletscher, interview, 16 November, 2020; Somm, 2009). The rise of right-wing populism has exacerbated tensions within the right bloc and business associations in Switzerland. The referendum over the EEA in 1992 exposed a ‘conflict between export-oriented firms and the domestic economy … In the referendum over the EEA the export industry was suddenly left alone’, observes Somm (2009: 294, 295), who claims that ‘The clash over the EEA split the bourgeoisie in a similar way to the Kulturkampf [culture war or culture struggle] of the nineteenth century. The SVP was a de facto bourgeois opposition’ (Somm, 2009: 396). In the political sphere, ‘The clash between export industry and domestically oriented firms’ damaged the Free Democratic Party. ‘Owners of small businesses, farmers, people in the crafts and trades distanced themselves from the FDP and from the Christian Democrats. This process began with the referendum over the EEA, and it benefitted the SVP’ (Somm, 2009: 294). Somm claims that during the 1990s, as soon as business realized that isolation in Europe also had advantages and that it did not need to join the EU or the EEA for its interests to be served, business swung around to support Blocher (Somm, 2009). Economic journalist and chief editor of the Swiss Sonntagszeitung newspaper Arthur Rutishauser states that there is substantial business support for Christoph Blocher and his daughter Magdalena Martullo-Blocher, ‘otherwise we would have been in the EU a long time ago’ (interview, 11 October, 2020). The Swiss national business federation Economiesuisse represents the interests of merchants and industry, approximately 100,000 companies with 2 million employees across Switzerland,⁶ whereas the SVP represents farmers, craftsman, and the self-employed (Michael Wiesner, interview, 19 October, 2020).⁷

⁶ https://www.economiesuisse.ch/en/organization (accessed 7 December, 2020). ⁷ It is important to stress that there are areas of economic policy agreement between the SVP and Economiesuisse, for example in the areas of taxes and business regulation. ‘Irreconcilable differences between the SVP and Economiesuisse exist in the areas of European politics (and regarding economic openness more generally) and agricultural policy. This tension also manifests itself in the area of trade agreements’ (Michael Wiesner, Interview, 19 October, 2020).

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Swiss business association strategies against right-wing populism This section discusses the strategies the leading Swiss business association Economiesiusse has used to promote its interests on immigration and traderelated issues against the SVP in recent years. As we will see, after suffering a series of defeats, Economiesuisse has learned strategies to defeat right-wing populists in trade and immigration related referenda. The table below provides an overview of referenda over Swiss relations with the European Economic Community/EU as well as their outcomes over the past 50 years, see Table 13.1. Swiss business associations’ defeat in the 1992 EEA referendum did not lead to a change in strategy. Thomas Pletscher was in the Vorort, one of Switzerland’s major business organizations, at the time of the referendum. In his memory ‘there was Table 13.1 Swiss EEC/EU-related Referenda and their Outcomes. Year

Topic

Outcome

Win for Business or Populism?

1970

Referendum against over foreignization Free trade agreement with the EC Join European Economic Area Bilateral Agreements with EU Referendum on EU Membership Association with Schengen and Dublin Extending the free movement of persons to new EU countries Tough new asylum laws Extension of free movement of people to Bulgaria and Romania Referendum against the construction of minarets Swiss immigration initiative Ecopop call for drastic immigration cut Enforcement initiative for the deportation of foreign criminals Federal Constitution should rank higher than international law EU gun laws and Schengen area membership Plan to end free movement with the EU

Rejected

Business

Approved Rejected Approved Rejected Approved

Business Populism Business Populism Business

Approved

Business

Approved Approved

Populism Business

Approved

Populism

Approved Rejected

Populism Business

Rejected

Business

Rejected

Business

Approved

Business

Rejected

Business

1972 1992 2000 2001 2005 2005 2006 2009 2009 2014 2014 2016 2018 2019 2020

Source: author as well as Scholten, 2014: 400.

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not a particular about-face’ after the failure of the 1992 referendum over joining the EEA (interview, 16 November, 2020). Between 2001 and 2014, the SVP won four more high-stakes referenda. How did they manage to do this? Blocher and the SVP have railed against their country’s ‘false elite’ and managers who have enriched themselves while running their companies into the ground (Blocher, 2002). But the most frequently portrayed outside group is migrants/immigrants. As Scarvaglieri explains, the imagery of the SVP focuses on fears and dangers. ‘The portrayal of dangers should trigger fears and lead to a psychological process that influences action and is hard to steer rationally’ (Scarvaglieri, 2018: 341). The imagery of the SVP has been highly successful: even though at most 30% of the Swiss population consistently vote for the SVP, ‘the SVP has been very successful in referenda, in which all the other parties, interest groups, and the media were supporting the other side’ (Scarvaglieri, 2018: 339). During the past decades, the SVP ‘has been able to dominate the visual presentation of migration policy topics’, which helps to explain its political successes in this area (Scarvaglieri, 2018: 351). After Economiesuisse’s defeat in the February 2014 mass immigration initiative, they rethought their strategy—along the lines suggested by Curran and Eckhardt (2022, 2020). As Economiesuisse’s Michael Wiesner explains, the four most important lessons were: 1. Complex issues such as the value of bilateral relations with the EU are difficult to convey to voters within two or three months. This requires long-term campaigning. 2. It is counterproductive to copy the SVP’s populist campaign style and work with tough threat scenarios. We need another narrative that arouses positive emotions to convince people. 3. Modern campaigns are not a one-way communication. We have to offer people opportunities to get personally involved. 4. Economic arguments are not enough to win in European politics referenda. To accomplish this, we must involve the relevant actors from the fields of politics, science, education, culture, and civil society (interview, 26 October, 2020). Concerning long-term campaigning, following the mass immigration initiative referendum, many different groups and organizations wanted to campaign against isolationist politics. ‘But alone, they hardly had the strength to really make a difference—there was a lack of common thrust and, above all, coordination’ (Wiesner, interview, 26 October, 2020). In the Ecopop referendum which took place in November 2014, Economiesuisse assumed the role of coordinator. After the vote, Economiesuisse decided that

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it would be more efficient to set up an alliance that could be used for several different referenda. As a result, the stark + vernetzt [strong + networked] alliance was established in spring 2015. Economiesuisse sought to coordinate various community, stakeholder, and civil society groups who would be willing to work towards a constructive relationship with the EU and who could be activated in upcoming referenda. Since early 2017, stark + vernetzt network meetings have taken place every six months, and they ‘are very well attended’ (Wiesner, interview, 26 October, 2020). Concerning campaigning style: Since 2014 we have distanced ourselves from the SVP’s campaign style in European and migration policy votes. Instead, we rely on colourful campaigns that can be adapted for different senders and target groups. The basic story is not a glaring warning, but a positive narrative. That is why in the most recent campaign we showed Switzerland as a balloon basket, which has soared high with the bilateral trade agreements. We put values in the foreground. (Wiesner, interview, 26 October, 2020)

In sum, Populist initiatives are successful in Switzerland when they address a diffuse discontentment in the population with a supposedly simple solution and no broadly based alliance opposes it … Such initiatives must not be countered with a purely rational-economic argument. It is crucial that a counter-campaign addresses many target groups in the most varied of social milieus, with the appropriate senders in each case. A single campaign run directly by Economiesuisse cannot achieve this. This requires the broadest possible alliance and many different counter-campaigns … This is the only way to generate pressure to reject populist politics. (Wiesner, interview, 26 October, 2020)

This evidence supports Curran and Eckhardt’s claim that ‘In contexts where antitrade rhetoric is rising, TDFs will increase their engagement with civil society and grass-roots organizations with a view to supporting actions in their common interest’ (Curran and Eckhardt, 2020: 625). Economiesuisse’s defeat in the Swiss immigration initiative was a critical juncture that led to learning: Economiesuisse re-thought its strategy and come up with a successful campaign template and the strong + networked coalition which it has been able to use to win all trade and EU-related referenda since 2014. These campaigns show that business associations can mobilize and defeat right-wing populists despite noisy politics. It is even more remarkable that these successes were achieved in the Trump-Brexit era—a time in which right-wing populist rancour has been steeply ascendant in other countries. It is important to note, however

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that these referendum campaigns and of Swiss business associations against rightwing populists were costly and resource intensive. Economiesuisse won, but their victories did not come cheap. Before concluding this section, I want to contrast the success of Swiss business associations with the failure of British business associations to stop Brexit. Feldmann and Morgan (2021) find that the fragmentation of British business elites weakened their ability to act cohesively and effectively against Brexit. This is surely correct, but it is unclear why the Confederation of British Industry (CBI), where 80% of surveyed member companies reportedly wanted to stay in the EU and only 5% wanted to leave, did not try to play a more active role. As Michael Wiesner explains,

In the context of the Brexit vote, there was a somewhat more intensive exchange with the CBI, with whom we shared our experiences. However, the English colleagues lacked the necessary instruments for effective campaign management, especially experienced campaigners with networks at regional level. British business also evidently failed to forge a broad alliance and to package its economic and rational concerns in emotional messages that could have counteracted the aggressive anti-EU propaganda. (Interview, 13 November, 2020)

Given the close result of the Brexit referendum, the question arises as to whether a well-run, colourful, emotional, broad-based, participatory campaign along Economiesuisse lines could have swayed public opinion enough for Remain to win. If that is true, the CBI’s decision to remain on the side-lines is one of the most fateful decisions British business leaders have made in recent decades.

France: MEDEF’s struggle to come to terms with the Rassemblement National (RN) Since the right-wing populist Front National (FN)’s breakthrough in French politics two decades ago, France’s largest business association Mouvement des entreprises de France (MEDEF)—with approximately 750,000 member companies—has struggled to confront and come to terms with them. Founded by Jean-Marie Le Pen in 1972, his daughter Marine Le Pen took over the leadership in 2011. In 2018, she changed its name to Rassemblement national or national rally. When Jean-Marie Le Pen made it to the run-off of France’s presidential election in 2002, MEDEF president Ernest-Antoine Seillière denounced Le Pen and the FN and stated:

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his economic and social programme ‘would have disastrous effects for our country’… If Mr Le Pen was allowed to carry out his programme, ‘it would provoke deep economic regression, a strong rise in unemployment, an unprecedented financial crisis, high inflation, and explosive social tensions’. Mr Seilli criticised Mr Le Pen's intention to withdraw from the EU and to base access to employment on ‘national preference’—discrimination against immigrants. (Marlowe 2002: 10)

In addition to warning of the potential economic costs of FN rule, Seillière referred to ‘the high values of entrepreneurs in France’ which were threatened, namely ‘respect for the human person, freedom, responsibility, equal opportunities, nondiscrimination, tolerance, democracy’ (Offerlé, 2013: 66). Despite Jean-Marie Le Pen’s neo-liberal economic program, MEDEF leaders have consistently condemned him and his party. Laurence Parisot, who headed MEDEF from 2005 until 2013, even published a book (Parisot and Lapresle, 2011) to discredit the new FN leader Marine Le Pen. In it, she challenged Le Pen’s proposal to leave the Euro and the EU, as well as her attacks on immigrants and her plans for nationalization. Under Marine Le Pen’s leadership, the RN has shifted its economic policies to the left, opposing large corporations of the French Cotation Assistée en Continu as well as recent legislation such as the 2016 Labour Law which aimed to increase flexibility in the job market (Gilles Ivaldi, interview, June 1, 2018). In 2015, MEDEF chief Pierre Gattaz warned voters not to back Le Pen’s irresponsible policies, which would not kickstart economic growth (Business World, 2015). A change did occur in the presidential race in early 2017, when for the first time, Gattaz invited Marine Le Pen to present her economic program to MEDEF and its members. The FN was eager to capitalize on this invitation to present itself as a party that ‘is the friend of all companies, from the small shopkeeper to the French giant of the CAC 40’ (de Boni, 2017). However, Gattaz was unimpressed: ‘the measures proposed by the FN will give cold sweats to business leaders’ (Bellan, 2017). This pattern of denunciation on one hand, and engagement on the other has continued in recent years. As an example of the former, in the run-up to the 2019 European Parliament elections, Bernard Spitz, who directs MEDEF’s international and European divisions, published a book to defend the EU against the RN’s populist lies (Spitz, 2019). On the other hand, MEDEF has been increasingly willing to engage with the RN, for example by inviting its leading figures to its events. In 2019, MEDEF president Geoffroy Roux de Bézieux invited Marion Maréchal, granddaughter of Jean-Marie Le Pen and niece of Marine Le Pen, to its summer school to participate in a roundtable about populism. Following significant political backlash, Maréchal was disinvited. It is not easy for business associations to navigate the politically charged terrain of right-wing populist politics.

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Support for right-wing populism and the RN is negligible among dynamic trade-dependent firms, but substantial among small businesses and microenterprises represented by the small-business confederation CGPME. Although MEDEF represents large internationalized French companies, a majority of MEDEF member companies are SMEs, and some of them have sympathies for the RN. During the past decade, the RN has made an explicit effort to court small businesses, and a growing number of small businesspeople have publicly expressed support for the RN. This poses a difficult challenge for MEDEF and other French business associations, and with Le Pen making it into the second and final round of France’s 2022 presidential elections, there are no signs that it will disappear anytime soon.

Conclusion As right-wing populists grow in strength and influence, business associations across the world are forced to engage with them. Right-wing populists pose a serious challenge for business associations: their support for protectionism and welfare chauvinism and their opposition to globalization and immigration threaten the interests of the most dynamic sectors of business, while their attacks on business elites, expertise and liberal cosmopolitan values directly threatens the organizational and cultural interests of business association elites. The right-wing populist agenda is problematic for important segments of businesses; particularly in open, export-oriented economies, they will prefer mainstream establishment parties if given a choice. Despite important tensions and differences, business associations and right-wing populists support the ideology of producerism and share a common interest in defending capitalism. Right-wing populist parties and movements have substantial small business support, which can foment divisions within business associations and weaken their ability to engage in collective action and speak with a unified voice. Case studies of France, Germany, and Switzerland show that business associations in these countries have taken a variety of positions against right-wing populists in recent years, from loud voice and forceful opposition in Germany to a more accommodative stance in France. To understand MEDEF’s engagement with the RN/FN and its weaker anti-populist consensus in comparison with the leading German business associations, we must focus on the overall support for right-wing populist politics, which is higher for the RN/FN in France than it is for the AfD in Germany. Overall societal support for right-wing populist politics is also reflected, to varying degrees, within business associations, and this makes a loud and forceful condemnation of right-wing populism more difficult for French than it is for German business associations.

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Swiss business associations have been confronted with right-wing populistinitiated referenda for half a century, and the Swiss People’s Party is a powerful and assertive force in Swiss politics. Following several high-profile right-wing populist victories in referenda between 1992 and 2014, the Swiss business association Economiesuisse has figured out a winning campaign strategy in the Brexit-Trump era. Business associations in other countries would do well to follow or at least learn from their best-practice example. At first glance, the cases of Switzerland and Germany are similar, as business associations in both countries have voiced loud opposition against rightwing populists. However, a closer examination reveals some differences: Swiss business associations invest more resources in their campaigns against rightwing populists than their German counterparts, which reflects the more serious threat right-wing populists pose for Swiss business (see also Curran and Eckhardt, 2022). In referenda over business regulation and business taxation, Swiss business associations have taken the same side as right-wing populists. By contrast, I am not aware that any major German business associations have publicly supported right-wing populists in recent years. Material interests powerfully motivate firms and business associations, but political norms, values and ‘ideal interests’ matter too, and as of yet, support for the AfD remains off limits for establishment actors such as business associations in contemporary Germany. This chapter barely scratches the surface of this vast topic; there are many questions for future research. How do business associations engage with rightwing populists that have captured political power? Opposition to right-wing populists is more difficult if right-wing populists control the government than it is if they are in opposition—the stance taken by the government ‘is decisive’ (Paster 2018: 5). In this scenario, it is expedient for business associations to exercise some degree of loyalty. The cases of Orba´n’s Hungary and Poland under the Prawo i Sprawiedliwos´´c (PiS) could be instructive here. The case of the US under Trump could expose to what extent business association support can be bought with business tax cuts and deregulation. Regarding the internal dynamics of business associations, to what extent do individual firms delegate strategies of voice to their business associations, so that individual firms can minimize the risk of reputational damage, loss of sales, market share, and so on? How autonomous are business associations, and to what extent are their preferences and strategies against right-wing populists shaped by large dominant firms within the association membership (Barnett, 2013)? Right-wing populists’ political fortunes will wax and wane, but they will continue to pose a serious challenge for business associations for the foreseeable future.

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14 Populists in Power—the Impact on Interest Representation and Firm-level Nonmarket Strategies¹ Dorottya Sallai

Introduction This thematic chapter explores how collective representation structures and firmlevel nonmarket strategies are affected by institutional pressures in a context where exclusionary populists are in power. Similar to how business lobbying varies across different varieties of capitalism (Sallai, 2013), the structure of the political economy shapes the ability of the business sector to exercise its power. Populist politics facilitates the questioning of the legitimacy of the business voice, especially when it can be contrasted with the ‘will of the people’ (Feldmann and Morgan, 2021) and hence in countries where exclusionary populists gain power, interest representation through traditional channels may become challenging not only for collective interests but also for domestic and multinational firms (see Chapter 1). Yet, recent research has shown that despite the market uncertainty that populist incumbency initially generates, the negative impact on the business climate ‘vanishes’ after around two years in office, as businesses adjust their portfolio of investments according to the differentiated risks (de Sousa et al., 2020). Some argue that dealing with populists in power is not ‘less appealing and rewarding for firms’ interests than influencing conventional parties in government’ (Sousa et al., 2020: 15). Hence business responded to the rise of populism by ‘learning to fight’ (Culpepper, 2021: 136) and instead of opting to leave the country where populist leaders consolidate their power, businesses show pragmatism and seem to adapt to the new institutional reality. What changes is the climate in which firms operate—as consolidated populism has a long-term impact on a ‘country’s institutional structure by altering the ‘rules of the game’ (Devinney and Hartwell, 2020: 36)—and the methods firms have to use to remain successful in market and nonmarket contexts. ¹ This study was supported in part by the Norface Network POPBACK project grant, number 462-19-080 2021-2023. Dorottya Sallai, Populists in Power—the Impact on Interest Representation and Firm-level Nonmarket Strategies. In: Business and Populism. Edited by Magnus Feldmann and Glenn Morgan, Oxford University Press. © Dorottya Sallai (2023). DOI: 10.1093/oso/9780192894335.003.0014

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Still, we know very little about what happens to structures of interest representation when populists gain power and how the changes in the political context affect firm-level nonmarket strategies. This chapter will address this gap in the literature through a case study of Hungary under the Orba´n regime in the period of 2010–2021. The chapter is structured as follows. First, I look at the theoretical debate around business power in political science and firm-level nonmarket strategies in management and international business. Then I detail the methods of this study and present the empirical findings. In the last section I discuss the emerging findings and conclude.

Theoretical background While management scholars focus on the role of political capabilities and the different nonmarket strategies that firms rely on in an international context, political science scholars investigate how the influence of business or business power changes under the populist conditions of ‘noisy politics’ and ‘quiet politics’ (for a detailed account, see Chapter 1). When populist leaders gain power, they often ‘personify’ the will of the people, and the relationship between the leader and the followers becomes mediated by a perceived personal connection—through the media, social media, and direct democracy, notably referenda (Weyland, 2017)—rather than intermediary organizations. As such, populism does not rely on organized interest representation, since, once in power, the populist leader has a direct bond with their followers and can easily ‘bypass any organizational intermediation’ (Weyland, 2017: 59). In this sense, populism is ‘averse to special weight’ (Weyland, 2017: 59) such as business power or the economic clout of organized business interest groups, as populist leaders will try to affirm and demonstrate their independence from ‘elite groupings’ and often even ‘bypass organized civil society’ (Weyland, 2017: 59). Hence, we can assume that when populist leaders enter government, they will aim to reorganize structures of interest representation and social dialogue and create a new context for state-firm relations.

Nonmarket strategies in volatile institutional contexts In today’s networked economy, firm performance and managerial success increasingly depend on the nonmarket environment, which presents several risks as well as opportunities for business leaders. Managers implement nonmarket strategies when they communicate with the government or their local member of parliament (MP), interact with the media, engage in regulatory consultations,

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participate in coalitions and associations, serve on advisory committees, negotiate with interest groups, or consult with supranational bodies. The nonmarket environment encompasses all interactions with the ‘public, stakeholders, government, the media, and public institutions’ (Baron 1995: 47). When firms engage in nonmarket strategies, they manage their relationships through corporate political activities (CPA) and corporate social responsibility (CSR) (Mellahi et al., 2016). While strategic CSR refers to corporate actions that appear to advance some social good that allows a firm to enhance organizational performance, CPA concerns activities to manage relations with political institutions and/or influence political actors in ways favourable to the firm (Hillman et al., 2004). In this chapter, I only discuss nonmarket strategies in the CPA field. In this section, I will explore how nonmarket strategies are affected by the rise of populism from the perspective of management and international business theories. While expertise, membership in elite networks, and the unified voice of business associations generally gave business licence to affect public policy outcomes, the rejection of expertise in populist regimes decreases the value of traditional resources for political influence (Culpepper, 2021). This is not a surprise since the systemic changes in the institutional environment under populist leadership inevitably lead to changes in the country’s governance system. While in a rulebased governance structure economic exchanges are based on formal rules, laws, and government regulations, in a relationship-based one economic transactions are privately ordered through informal relationships and norms of reciprocity (Judge, 2012; Chen and Deakin, 2015). As national economies globalize, they increasingly evolve into rules-based governance systems (Judge, 2012), but this trend might be disrupted by populism. When populist leaders gain power, the institutional environment may shift back from a rule-governed form towards a more relationship-based style of governance. While in rule-based systems CPA involves mostly professionalized, transactional, issue-driven activities based on transparent exchanges, in relationship-based systems CPA is dominated by informal personal contacts between politicians, public officials, and managers, which inevitably triggers a change in the value of the different political resources and capabilities that companies use in their corporate nonmarket strategies (Schnyder and Sallai, 2020). Previous research has shown that democratic backsliding and the shift towards authoritarian capitalism can also trigger a change in the nature of political risk. During the phases of ‘institutional backsliding’ state intervention becomes arbitrary and hence creates situations of ‘discontinuous risk’ (Sallai and Schnyder, 2021). One way for firms to manage high political risk is to become legitimate in the eyes of the government or in the case of multinationals in the eyes of the host government. Multinational firms become legitimate in a country if their activities are in line with the values of the country they are operating in, such as the government’s economic, political and social goals (Bodewyn and Brewer, 1994;

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Henisz and Zelner, 2005). Governments may be tempted to alter policies and introduce legislation to their political advantage and to the detriment of some foreign firms (Stevens et al., 2016) or different industries. This is especially prevalent in countries where populist leaders are close to power and economic protectionism and anti-trade rhetoric can win elections, as in the case of the 2016 presidential elections in the US or the Brexit vote in the UK (Curran and Eckhardt, 2021). The legitimacy of foreign firms from the perspective of host governments, will depend on their contributions to national goals such as employment or technological investment (Stevens et al., 2016). When there is a congruence between the government’s goals and the activities of the foreign business the legitimacy of the subsidiary increases in the eyes of the government (Kostova and Zaheer, 1999). However, if they are not serving the government’s purposes, they can easily become targets of hostile legislative changes (Sallai and Schnyder, 2015). Political interference in multinational enterprises (MNEs)’ operations may also trigger a negative impact on the government’s own goals, such as economic growth generated as a result of inward foreign direct investment (FDI) (Luo, 2001). This is why industrial policies aimed at capital investment that contribute to national growth are rarely if ever discussed within the domain of noisy electoral politics (Bohle and Regan, 2021). On the other hand, the political risk perceived by MNEs depends on whether their business objectives are consistent with the government’s long-term agendas (Stevens et al., 2016). Consequently, companies, whose activities are aligned with the government’s long-term goals may perceive a lower degree of political risk compared to those whose activities are not aligned (Henisz and Zelner, 2005). Subsidiaries can gain legitimacy by making government officials view their presence as necessary for the government’s objectives. Creating new workplaces, hiring local workers to reduce unemployment, or investing in local infrastructure could be ways in which a subsidiary supports the government’s long-term goals. Governments evaluate the degree to which foreign subsidiaries’ presence and actions are legitimate or not based on these actions (Marquis and Qian, 2014) and the judgements about companies’ legitimacy could have serious consequences for a subsidiary’s survival in the host country context (Bitektine, 2011). If a government views a firm or a certain group of firms as legitimate, it could signal its support by providing resources, favourable policies, or tax incentives to these selected firms (Oliver and Holzinger, 2008), whereas if it views a firm as illegitimate it could introduce unexpected policy changes, new regulations, or taxes that may create disruption in the firm’s sector or industry. Besides their market decisions, a firm’s political behaviour can also be a source of legitimacy. First, when faced with high political risk, firms either exit (Hirschman, 1970) or do not even enter the host market (Meyer et al., 2009). However, if they decide to enter or stay, they have to manage their relationships with the government.

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In order to manage their external environments, firms engage with social and political stakeholders through ‘buffering’ or ‘bridging’ strategies. Buffering refers to situations when firms try to protect themselves from the external environment by buffering the organization against the threat or negative impact of political ties in highly volatile emerging market contexts, for instance, where the power of politicians is not sufficiently constrained by legal frameworks and firms may be harmed by the ‘grabbing hand’ of the state (Dieleman and Boddewyn, 2012: 74). Through buffering firms may rearrange their organizational structure to ‘segregate, isolate, hide and cut off political ties and eliminate pressures’ (Dieleman and Boddewyn 2012: 74). On the other hand, firms engage in bridging strategies when instead of shielding from the external environment, they try to adapt to the expectations by meeting or even exceeding regulatory requirements in their external environment (Meznar and Nigh, 1995). Bridging refers to different activities around connecting an organization to other ones through joint ventures, mergers, bargaining, contracts, and government connections. Thus, companies that rely on political actors to remain competitive, try to ‘couple’ their ties with them through bridging activities (Dieleman and Boddewyn, 2012). Besides manipulating their external relations and political ties with the political environment firms may also engage in bargaining behaviour to influence their nonmarket environment. In a conflictual context both the government and firms try to appropriate rents or gains from each other. Conflictual bargaining posits that governments will try to make gains from firms, whereas firms will try to mitigate these governmental gains or try to make gains at the expense of governments (Stevens et al., 2016). In contrast, the partnership type of bargaining behaviour is a more positive view of business-government interactions as it is more likely to generate legitimacy. Partnering conveys a positive message and viewed almost like an approval of what international firms are doing (Boddewyn and Brewer, 1994). Political partnership between the government and firms prevails if both parties perceive the situation as a positive-sum game. Consequently, firms must negotiate and maintain a stable and legitimate position in their nonmarket environment in order to survive and prosper in a positive-sum game and also to secure competitive advantages against other actors in the market (Boddewyn and Brewer, 1994). Some studies claim that when operating in high-risk contexts, international firms will choose and deploy a non-engaged approach to CPA, whereby they exercise loyalty to the host market by staying, but not engaging actively in political strategies (De Villa et al., 2018). In contrast to the engaged approach to CPA, according to which firms manage their nonmarket activities through information, financial incentive, and constituency building strategies (Hillman and Hitt, 1999), the nonengaged approach refers to a situation when firms actively adapt to their environment through different actions but do not aim to influence the political environment. The four nonengaged strategies are: low visibility, where

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firms operate ‘under the radar’; rapid compliance, which refers to actions to obey the rules; reconfiguration, when MNEs rearrange their organizational structure; and anticipation, where firms monitor public policy and analyse interest groups to anticipate responses (De Villa et al., 2018). However, we do not know what happens if firms decide to stay in a high-risk context and also decide to engage in CPA, especially when exclusionary populists are in power. Do they adapt their nonmarket strategies using the tools of conflictual or partnership-type political bargaining? Do they decide to actively engage with political ties through bridging and buffering techniques? If they decide to engage do firms engage in CPA through quiet or noisy politics? And if populism fragments collective business interests in the arena of noisy politics will businesses and collective interest organizations move into the space of quiet politics? In order to answer these questions, we need to make a link between the political science debate around business power and lobbying and the management literature on nonmarket strategies and CPA. When firms face populism in power—even if this power is consolidated and firms get used to the risk and decide to stay on the market—their capacity to act cohesively and through collective action in noisy politics decreases (see Chapter 1, this volume). For some individual firms this shift and the associated national economic policy objectives of populist governance may open up lobbying opportunities within the space of quiet politics (Bohle and Regan, 2021). Long-term, consolidated populism in power is likely to lead to substantial changes in the nonmarket environment. Consequently, besides looking at how collective interests are impacted when populists are in power, we also need to explore how individual businesses achieve their political goals and how they compete with each other in the quest for access to political decision-making. We need to explore in more detail what happens within the space of quiet politics and more specifically what nonmarket strategies businesses use when populists are in power. Now we turn our attention to how interest representation and firm-level corporate nonmarket strategies are affected when exclusionary populists gain power. The next sections explore this question in the context of Hungary.

The case The case study focuses on Hungary as a high-risk political context in the period 2010–2021. Hungary is one of the most suitable cases for studying the impact of consolidated populism in power, not only because Viktor Orba´n’s Conservative Party Fidesz has been in power since it acquired a two-thirds majority in parliament in 2010, but also because it provides a rich laboratory to explore how state-firm relations changed during the transition from a relatively stable democracy before 2010 to an ‘authoritarian capitalist’ system by 2020 (Sallai and Schnyder, 2021).

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The chapter is based on empirical research on state-firm relations in Hungary since 2010. The findings draw on an interview-based qualitative research design combined with research on the political context using secondary data. The data used in this chapter includes 59 semi-structured interviews out of which 45 were with business leaders working at MNE subsidiaries and domestic firms and a further 14 with experts on this case. Hungary was selected as a revelatory case, because it is arguably one of the best cases to study how a consolidated populist regime affects state-firm relations and companies’ nonmarket strategies in a member state of the EU.

Changes in social dialogue After coming to power in 2010, the Orba´n cabinet started to ‘disorganize’ civil society. Despite the populist rhetoric of representing the interest of ‘the people’, the three consecutive cabinets of Fidesz-KDNP (2010–2014, 2014–1018, and 2018– till today) drastically changed the pre-2010 corporatist structures and weakened collective bargaining. In May 2011 the government announced its plans to restructure the entire system of social dialogue. Prime Minister Viktor Orba´n argued that by giving a two-thirds majority to the government, the ‘people’ had delegated all its representational authority to the government. In his speech he said ‘we not only represent voters in general, we represent employees and employers as well, they all voted for us’ (Bedna´rik, 2010). Before the institutional changes, the Interest Representation Council (IRC) discussed all major social issues, such as labour market issues, the minimum wage and recommended wage increases, tax reforms, and vocational training policies. Even though the Labour Code prescribed the IRC to negotiate with the government on all issues that concern labour, tax, and budgetary policies, in its first year in office the Orba´n government passed all important legal changes without consulting with social partners (Bedna´rik, 2010). After the abolition of the tripartite National Interest Reconciliation Forum in 2010, a two-tier social dialogue model was introduced by the Orba´n government. It consists of an official body, the National Economic and Social Council (NESC), and an informal council, the Permanent Consultation Forum (PCF). The NESC includes representatives from many different areas of society, but it operates without any government presence. The PCF is based on a civil law contract, to which only selected organizations belong (Árenda´s and Hungler, 2020). The ‘toothless’ NESC includes trade unions and employers, representatives of business chambers, civil society, and scientific institutions, well as Hungary’s historical churches, academics, and representatives of the arts (Szabó, 2013: 210). In contrast to its predecessor, NESC does not have a tripartite structure as it does not include government representatives and only has an advisory and not a consultative function

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(Szabó, 2013). The government explained the changes with the inefficiency of the old system. In contrast to the IRC, the new body has no decision-making rights, only the option to draft proposals, which could be entirely ignored by the government. In effect, in the new system the government can unilaterally decide on wage and employment-related regulations without any consultation (Komiljovics, 2011). One of the respondents reflected on these changes in the following way: ‘There is no formal, written, enforced forms of interest reconciliation today.’² As social partners were excluded from the legislative process, unions competed with each other to get access to decision-makers and make their voice heard directly through informal channels: … we realised that we do not have enough tools now, there are no formal forums but we still have to negotiate…So we had to sit down informally with the government, with Viktor Orba´n and managed to agree on some changes.³

Despite its initial aims of providing a forum to monitor socio-economic developments in Hungary, NESC had ‘few achievements’ since its foundation. Between 2010 and 2017 the council discussed overall only 36 proposals but has not reached any agreements’ (Árenda´s and Hungler, 2020: 55). The government does not consult the NESC about ‘substantial topics’ such as the minimum wage as discussion about this as well as taxes and social contributions takes place at the Permanent Consultation Forum (PCF), and the NESC is only informed about the outcomes of these negotiations once they have been completed (Árenda´s and Hungler, 2020). The PCF was set up as a channel between the government and the invited trade union federations and employers’ associations. However, it does not operate as a ‘tripartite’ institution, since it is based on civil law and hence lacks the legal basis to operate as an official consultation forum (Árenda´s and Hungler, 2020: 57). Like the NESC, this forum’s membership is also ‘by invitation only’, with membership offered only to certain selected trade unions and employer organizations, and some argue that the government uses the forum as a ‘facade to pretend there is social dialogue and to give the impression of maintaining a democratically functioning tripartite system’ (Árenda´s and Hungler, 2020: 57). As this discussion shows, ten years of populist governance dismantled the previously transparent, formal, and organized corporatist structures and created a powerless, partly informal, and ‘by invitation-only’ system of collective bargaining. These changes had an impact not only on how business dialogue is managed in Hungary but also on state-firm relations in general. The next section explores the government’s dialogue with business. ² Director at multinational subsidiary interviewed by the author 06.09.2011. ³ Respondent at Trade Union interviewed by author 23.01.2012.

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Business interests and firm legitimacy within the pressures of the FDI-led growth model In contrast to the first few years of the Orba´n era when the business-government relationship was rather conflictual and communication between the government and business groups broke down, these relations were partially rebuilt as business groups and individual businesses adapted to the regime. After a period of transition business learned to cope with the more informal and more particularistic form of state-firm relations and started to engage in collective mobilization through business associations, especially on policy issues that require expertise and are of low political salience. Some business associations find the representation of sectoral interests more challenging under populism than before. As the government opened up selectively to individual businesses that support its growth-led economic agenda, putting pressure on the government on behalf of a given sector or lobbying against a disadvantageous sectoral legislation became more difficult as business interests were fragmented. Nevertheless, large domestic companies and MNEs continue to engage with industry associations and chambers of commerce although these activities remain mostly symbolic in low salience policy areas, as lobbying on important issues is shifting to a new form of quiet politics, where informal, firmlevel lobbying becomes the norm. In contrast, smaller firms that are not connected to the governing regime and would rely mostly on collective mobilization through business associations and chambers of commerce, may be disadvantaged as populist governance is consolidated and business power through collective interest representation is marginalized. The political shift towards exclusionary populism and authoritarianism has a direct impact on interest representation and business voice, leading to the gradual decline of corporatism, the marginalization of social dialogue and a shift towards particularistic state-firm relations in which direct, individual lobbying for businesses becomes unavoidable. In this new context it becomes crucial whether a firm is viewed as legitimate or not by the regime. While Hungary was a front-runner in attracting FDI during the 1990s, since 2010 the government has engaged in aggressive political rhetoric against foreign capital and adopted unfavourable policies such as high taxes in many SMNEdominated industries (Sass and Kalotay, 2012: 1). This state-level change of attitude towards FDI had a direct impact on multinational subsidiaries’ political legitimacy in Hungary, and also on the level of political risk in different sectors. The political rhetoric has started to distinguish between ‘good’ and ‘bad’ FDI (Sass, 2017). ‘Bad’ FDI—mostly referring to service-related firms operating in banking, telecoms, retail or energy—was increasingly viewed as aiming to replace domestic producers or service providers and repatriating profits—therefore not being beneficial for the country’s economy. Whereas FDI that resulted in creating new jobs,

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contributing to the country’s export-led growth, while allowing domestic companies to get engaged in global value chains as suppliers, became increasingly viewed by the Orba´n government as ‘good’ FDI (Sass, 2017). Research shows that since 2010, the three consecutive Orba´n governments consistently supported export-oriented industries or ‘good’ FDI, such as car manufacturing, electronics production and shared service centres (Sass, 2017) and provided them with generous incentives. Incentives included smaller corporate tax rates, low labour costs, and other subsidies, in some cases worth up to 50% of investment (Byrne, 2016). Szanyi’s Chapter 7 in this volume details how ‘friendly’ multinational businesses have been supported by important changes in labour market regulations—infamously referred to as the ‘slave laws’—as these increased the ability of employers to unilaterally set conditions of employment contracts, including the ones in collective bargaining (see Chapter 7). At the same time, the Orba´n governments have taken a hostile view on ‘bad’ FDI (Sass, 2017; Sass and Kalotay, 2012) by introducing special taxes and other regulatory measures, such as nationalizations, and targeted sectoral regulations in service-related sectors, leading to strong reorganizations of property in favour of the new oligarchic national capital (Gagyi and Gerocs, 2019). According to the Financial Times, the contrasting experiences of foreign manufacturers compared with investors in service industries ‘points to Hungary’s drive to position itself as a low-cost manufacturing and logistics base in Germany’s economic hinterland’ (Byrne, 2016: 1). Although it has promoted anti-foreign rhetoric, the Orba´n government seems to be partial in its anti-FDI stance and does not seek to fundamentally alter the country’s ‘export-led growth model’ that depends on FDI (Bohle, 2018). Consequently, in the current political climate, gaining legitimacy vis-à-vis the governing elite is crucial for both domestic and multinational firms. As one of the respondents from a multinational subsidiary claimed: ‘The relationship can be very positive as long as the companies represent the priorities of the state. If a company can bring investment into the country … if businesses bring more employment, or more Hungarian ownership …’.⁴ This type of ‘selective economic nationalism’ has helped the government to build strong relationships with multinational firms in manufacturing, while also forging new alliances with the domestic business sector by sponsoring a new oligarchy (Bohle and Regan, 2021), and creating domestic businesses that are more dependent on the government (Sallai and Schnyder, 2021; Scheiring, 2020). As a result of the FDI-led growth model and the parallel dismantling of the corporatist interest intermediation structures state-firm relationships shifted from a rule-based to a more relationship-based system, where firms must find new ways to create legitimacy. As bargains take place behind closed doors between state-business elites, public officials are less likely to deal with national business ⁴ Respondent at multinational subsidiary interviewed by the author 09.08.2015.

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associations and more likely to negotiate with executives within the global supply chains of multinational corporations, especially firms in ‘good’ FDI sectors (Bohle and Regan, 2021). However, we do not know much about how firms manage their nonmarket strategies in this informal space and what kinds of tools they use in their corporate political activities in this new era of ‘quiet politics’.

Quiet and informal politics through partnership-type bargaining The previous discussion shows that populism in power leads to changes in statefirm relations as the nonmarket environment becomes less formal and more high-risk, especially for those who operate in ‘bad’ FDI sectors. While earlier studies have suggested that individual firms from ‘good’ FDI sectors can engage well with the governing elite in the era of quiet politics (Regan and Bohle, 2021), interviews for this study suggest that interest groups, large domestic firms as well as multinationals in ‘bad’ FDI sectors also adapted to this new type of quiet politics in recent years. However, a distinction needs to be made between ‘quiet politics’ as discussed in the literature and the new type of quiet politics that is emerging in Hungary’s authoritarian capitalism. While the term ‘quiet politics’ traditionally refers to lobbying that takes place behind closed doors through formal interest representation activities (see Chapter 1), in Hungary quiet politics is more strongly related to the authoritarian nature of the political system and includes both formal and informal corporate political activities. Therefore, this chapter differentiates between formal and informal quiet politics. Table 14.1 shows how bargaining and business power has changed in the different phases of populism in Hungary, from the early years of coming into power to the mature consolidated system after the Orba´n regime won the elections the third time. What is interesting is that there seems to be a transition in how organizations managed their bargaining with the state as the populist system consolidated around them, shifting from a more conflictual style of bargaining when Orba´n came into power, especially in the first two to three years, to engaged partnershipstyle bargaining by 2021. Similarly, even though business power weakened in the early years for both collective interest groups and individual firms, after a few years of reconfiguration business learned how to play the new game, and both collective organisations and most individual firms adapted their nonmarket strategies to engage at least in some ways in a new form of quiet politics. The area of quiet politics has also broadened with a larger space being dedicated to informal bargaining and a smaller space sustained for traditional formal quiet politics that is open to selected interest groups (depending on whether they support the government’s industrial agenda). The findings also suggest that firms need to extend their traditional nonmarket strategies and CPA methods in Hungary with practices that open the door

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Table 14.1 Type of bargaining and business power in the different phases of populism. Phase of populism

Type of bargaining

Business power

Coming into power 2010–2014 Conflictual type of bargaining for both individual firms and collective interests

Weakening of collective interests, weakening of individual firm power

Consolidation 2014–2018

Mature consolidated system 2018–2021

Shift towards less conflict and more partnership for both individual firms and collective interests. Organisations learn new ways of engaging Reconfiguration of power structures

Partnership type bargaining for both individual firms and collective interests

Some collective power for informally selected collective interest representation bodies in low salience issues—formal quiet politics No or very limited power for collective interest groups in high salience issues—noisy politics Limited power for individual firms in informal quiet politics from ‘bad’ FDI sectors Strong power for individual firms in informal quiet politics from ‘good’ FDI sectors Strong power for large domestic firms in informal quiet politics that belong to the circle of oligarchs or have close ties to the governing elite

directly to decision-makers, increase their legitimacy vis-a-vis the government and substantiate their ‘loyalty’ towards the government’s strategic objectives or the governing elite in general. Although there are other types of political strategies (see the detailed discussion of lobbying capabilities in Hungary in Schnyder and Sallai, 2020 and of subsidiaries’ lobbying strategies in Sallai, 2020), this discussion focuses only on a few CPA techniques that this study identified in the era of quiet politics. Some of them can be classified as bridging strategies as they help to make links with the political environment, while others are buffering strategies that help companies protect themselves or their interests against state appropriation. Bridging strategies include strategic partnership agreements (SPAs), lobbying through well-connected domestic PA consultancies, direct lobbying through the

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firm’s chief executive officer (CEO), or in the case of MNEs, the CEO of the subsidiary/parent company, or lobbying through ambassadors.

Strategic Partnership Agreements In 2012 the government introduced the so-called ‘Strategic Partnership Agreements’ (SPA), which are signed by the government and individual firms. By 2020 the government had signed agreements with 86 companies (Németh, 2020), including multinational and domestic firms from a wide range of sectors. Transparency International in Hungary described SPAs as ‘specific policy measures in a business environment where in addition to traditional market risks there are also tangible and unpredictable political risks’ (Bartha, 2014). The aim of these contracts is to increase investment in Hungary and to provide new jobs (Bartha, 2014). However, it is not clear how firms are selected for these partnerships—which organizations can conclude an agreement with the government and on what basis (Bartha, 2014). Such contracts contain a short description of the firm, its background in Hungary, its contributions to the economy, and they list the areas of collaboration which include in most cases engagement in capacity building, innovation, creation of employment opportunities, vocational training, a commitment to relying on Hungarian suppliers, and to engaging in joint projects with the state, although these projects are not detailed in most contracts. The agreements are negotiated through informal channels, and no information about the process is available. Interviews suggest that the agreements are based on individual deals with companies about collaboration or future investment opportunities. Some argue that the agreements only pave the way for access to decision-making and information—especially for firms in service-related sectors-, while others claim that there may be some link between the partnerships and government support for foreign direct investment: When we made the strategic agreement, we went to them and said that we have a common interest, to attract EU funds, finding this common ground was essential.⁵ The strategic cooperation agreement is like an interest ticket. If you do not have one of those, then you are looked at suspiciously by anyone in the public sector …. Having one does not really buy you much, it does not confer any advantage, but not having one is sort of a question.⁶ We demonstrate [through the SPA] that it is good to work with us, we have common goals …. We try to make projects that have a win-win impact.⁷ ⁵ Respondent at multinational subsidiary interviewed by the author 15.08.2016. ⁶ Respondent at multinational subsidiary interviewed by the author 15.08.2016. ⁷ Respondent at multinational subsidiary interviewed by the author 15.07.2016.

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These partnership agreements do not guarantee any advantages, the only advantage maybe is to get access to decision-making easier.⁸

Although views differ on the advantages, the majority of respondents agreed that the SPAs have some benefits at least in showing loyalty and partnership to the government. Some argued that in recent years so many companies have signed partnership agreements that their value has already diminished, but it still seems to be considered as an important tool in both domestic and multinational firms’ corporate political strategy. Firms also use more traditional but still quiet CPA methods to build partnerships and legitimacy with the governing elite. Interviewees highlighted the use of external PA consultancies that have strong political ties with the government to get access to high level government officials; direct lobbying with high-level decisionmakers through the firm’s CEO or the CEO of the mother company in the case of multinationals; as well as direct engagement through the home country’s ambassadors. ‘They [PA consultancy] help to organize meetings with a state secretary or a deputy and also to get background information or forecast reports. They are the door openers …’.⁹ ‘Some ambassadors are very powerful. … ambassadors are a good way [of lobbying] ….’¹⁰ Beyond the previously mentioned bridging strategies, firms also use buffering strategies that are designed to protect them from the external environment if it becomes too threatening. These include contracts with government-related suppliers, paying tax relief to selected sports clubs, or restructuring.

Contracting government-related suppliers Interviews suggest that some companies build legitimacy through a partnership technique that focuses on contracting suppliers that are ‘recommended’ by the government through intermediaries in their supply chains. Although the commitment towards the use of Hungarian suppliers in general is also mentioned in the Strategic Partnership Agreements, respondents referred to the more specific informal requirement to use firms that are linked through their ownership to a very narrow group of the governing elite. Doing business through government-related suppliers or oligarchs and their firms shows ‘commitment’ to the regime. As one of the respondents from a multinational subsidiary highlighted: ‘The other issue where the state is dominant is the appearance of the state-preferred suppliers in ⁸ Respondent at multinational subsidiary interviewed by the author 09.08.2015. ⁹ Respondent at multinational subsidiary interviewed by author 16.08.2016. ¹⁰ Respondent at multinational subsidiary interviewed by author 16.08.2016.

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the system. Companies try to work together with these suppliers based on their [the company’s] own values or against those.’¹¹ Even though the use of government-related suppliers might be prevalent only in some sectors, this political strategy may help firms to engage in partnershiptype bargaining, since the use of suppliers reflects their commitment to the regime and gives them legitimacy to contact decision-makers directly, when public policy issues arise.

Tax incentives to support government-related sports clubs The corporate income tax relief is a tax incentive under the law on corporate income tax (TAO). The tax allowance was introduced in 2011 mainly to provide support for team sports such as ice hockey, handball, basketball, football, waterpolo, and volleyball. By supporting sports clubs, companies can reduce their corporate income tax payments if they pay the clubs from their pre-tax profits rather than their net taxed profits (Ligeti et al., 2019). Transparency International claims that the fact that donors are not published encourages companies to ‘give way to political considerations when making TAO payment decisions’ as ‘they are better off giving their TAO to sports teams with good political connections’ (2019:15). By providing their TAO payments to sports teams with close political connections, firms show their ‘loyalty’ to the political regime. Hence, it is not a surprise that according to data published by investigatory journalists, the prime minister’s favourite sport football team received 40% of all TAO funds by 2020 (Bita and Pető, 2021). Furthermore, by 2021, out of all the funding for football, the Youth Training in Felcsút Foundation—founded by Prime Minister Viktor Orba´n and chaired by Lőrinc Mésza´ros, the prime minister’s childhood friend and one of the richest oligarchs since 2010—received TAO funds of some 35 billion forints (Zolta´n, 2021). The watchdog Atlatszo.hu reported that between 2011–2016 most of the funding for football originated from domestic firms, state-owned enterprises, and multinational companies (Erdélyi, 2018). The largest domestic contributions were made by Fidesz-related oligarchs and companies that have been large beneficiaries of public procurement tenders and state-owned businesses such as MOL and its subsidiaries (Erdélyi, 2018), while a smaller number of multinational firms from a variety of sectors also contributed. TAO payments may be considered as a buffering strategy since contributions to the most politically relevant club is perceived as an expectation from the government’s side. If the list included a more diverse group of organizations or causes, firms might feel that they have a choice, whereas in the current system paying the ¹¹ Respondent at multinational subsidiary interviewed by the author 15.08.2016.

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right organizations feels more like giving in to ‘blackmail’ rather than voluntary philanthropy according to some respondents. The third buffering strategy found in this study may be called ‘restructuring’. This method resonates with De Villa et al.’s ‘reconfiguration’ strategy (2018) or Dieleman and Boddewyn’s ‘buffering’ strategy (2012) according to which firms initiate second-order changes within their organizational structure to maintain competitiveness (De Villa et al., 2018) or to circumvent the regime’s influence (Dieleman and Doddewyn, 2012) on their activities. In Hungary restructuring helps firms in less legitimate ‘bad-FDI’ industries or industries under severe government intervention to modify, split up or rearrange the ownership of their subsidiary in order to ‘save’ the other parts of the firm. Companies that follow this approach divide or plan to divide their operations into different business units, creating smaller sub-subsidiaries in fields where government appropriation is considered most likely. Some subsidiaries have concrete contingency plans for ‘restructuring’. Some respondents claimed that due to their large investment in Hungary they ruled out the ‘exit’ option. Some of these companies introduced a restructuring plan that they plan to implement in case the government initiates drastic interventions in their sector. This is called functional separation in my business, utility companies have done this for a while. … This kind of structure could be something that could make it easier for us to adapt if the environment became really nasty. We have not decided to do that, it is one of the things we look at from time to time.¹²

This discussion shows that firms use various non-traditional CPA methods to address consolidated populism within the context of authoritarian capitalism. Table 14.2 illustrates whether the different engagement methods are used by firms to buffer or to bridge the impact of the external environment and whether they may include a direct or indirect monetary ‘contribution’ as an expression of loyalty to the populist regime or whether they are symbolic in nature, see Table 14.2. While different MNE subsidiaries may use any of these CPA methods, domestic firms were found to rely mostly on direct lobbying through CEOs, SPAs, and TAO payments. The table shows that firms mostly use the bridging strategies of CPA to develop a relationship based on partnership-style bargaining and only resort to buffering strategies when they feel threatened or forced to do so by the authoritarian regime. However, both buffering and bridging strategies may include methods that come with a direct or indirect monetary contribution. In this sense restructuring as defined here is an exception since it does not include monetary contributions, although it may be very costly for firms. Findings also show some variation between the strategies of firms in different sectors. Those in ¹² Respondent at multinational subsidiary interviewed by the author 16.08.2015.

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Table 14.2 Quiet CPA activities in relation to buffering and bridging strategies and monetary contributions. Quiet politics through CPA activities

Strategic Partnership Agreements Contracting governmentpreferred suppliers Paying tax relief (TAO) to government-favoured sports Use of PA consultancies with good government ties Restructuring Direct lobbying through CEO or subsidiary/HQ CEO at MNEs Ambassadors

Buffering Bridging May include monstrategy strategy etary contribution through links to the governing elite x

Symbolic does not include monetary contribution directly to the governing elite x

x

x

x

x

x

x

x

x x

x

x

x

service-related ‘bad’ FDI sectors that have lower legitimacy from the government’s perspective, perceive greater political risk and were found to engage more actively and rely on a wider range of bridging and buffering techniques than firms in ‘good’ FDI sectors, see Table 14.3. This discussion has shown that during the consolidated phase of populism— when earlier and more transparent formal channels of interest representation were weakened and lobbying shifted into the space of informal governance—both domestic and multinational firms adapted to the new nonmarket requirements and learned how to engage in lobbying with the government. These findings do not imply that firms adopting these strategies support the political regime—although some do—or that all firms benefit from the regime’s industrial strategy. Many are clearly disadvantaged by it, but our discussion shows that firms from different sectors and different ownership backgrounds have acknowledged the consolidation of the exclusionary populist regime and found new ways to adapt their nonmarket strategies to this context. Whether this adaptation also leads to lobbying success and the achievement of political goals is a different question that future research needs to address.

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Table 14.3 Legitimacy and quiet CPA engagement of firms in ‘bad’ and ‘good’ FDI sectors. Firms from ‘bad’ FDI sectors

Firms from ‘good’ FDI sectors

Low legitimacy Less power in quiet politics More perceived political risk More diverse engagement in quiet CPA

High legitimacy More power in quiet politics Less perceived political risk Less diverse engagement in quiet CPA

Discussion and conclusion The progression of exclusionary populism from the early stages to a consolidated and mature authoritarian capitalist regime may have a long-term impact on a country’s interest representation structures and firms’ nonmarket strategies. The case study of Hungary has shown that businesses adapt to these changes by adjusting their strategies from a conflictual style of bargaining when populists gain power to a quiet but engaged strategy once the regime consolidates its power. While collective interest groups adapt and maintain dialogue with the state by narrowing their negotiating strategies to lower salience issues within of the sphere of formal quiet politics, individual firms also engage in informal quiet politics. They adopt various corporate political strategies to buffer the impact of the threatening external environment, to gain legitimacy in the eyes of the government and to build a partnership with the governing elite by engaging in bridging strategies. These findings support the claims of earlier studies that firms must negotiate and maintain a legitimate position in their nonmarket environment to survive and prosper in a positive-sum game (Boddewyn and Brewer, 1994). Extending the findings of earlier studies (De Villa et al., 2018), I found that when MNEs perceive high host country political risk, especially in the context of authoritarian capitalism, they engage with public policy through a variety of bridging and buffering CPA strategies using both formal and informal quiet politics. Moreover, this study found that firms in different sectors adapt to populism differently, depending on their perceived legitimacy. Extending the argument of Bohle and Regan (2021) that firms in legitimate or ‘good’ FDI sectors increasingly engage in quiet politics, this chapter argues that firms in sectors with lower legitimacy (‘bad’ FDI) engage even more with quiet CPA to offset negative perceptions and to signal loyalty to the state than the firms supported by the state as part of its FDI-led growth model. By contrast, those in legitimate, good-FDI sectors get better access to engage in direct lobbying and have less of a need to engage in bridging and buffering strategies.

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The findings of this study cannot be generalized, because Hungary’s weak institutional context may have contributed to its authoritarian shift, and exclusionary populism in this country may have a more extreme impact on business lobbying than in other countries where populists are in power. Nevertheless, the case illustrates the long-term impact of populism on interest representation and firms’ nonmarket behaviour. Future research could build on these findings and investigate how successful businesses are in achieving their goals in this type of environment, and also assess any variation in lobbying success across different types of firms. The spread of economic and financial nationalism coupled with the rise of populism in many countries presents firms with similar challenges all over the world. The political risk of populism is particularly imminent since the outbreak of the Covid-19 pandemic. As the Economist reported, ‘autocrats and would-be autocrats see opportunity in disaster’ and will ‘grab power at the expense of the people they govern’ (Economist, 2020: 8). Since 2020, many governments in democratic and less democratic countries have started to grab power by enacting emergency legislation. Some ruling parties may ‘abuse the pandemic as a pretext to further centralize power, potentially leading to increased oppression of political opponents, media and civil society’ (Maerz et al., 2020: 910). Governments introduced ongoing emergency measures without any official time limit in twenty-two countries around the world—including democracies and autocracies (Maerz et al., 2020). In light of these developments, businesses face increasingly disruptive and uncertain political and market conditions. Future work could analyse similarities between firm strategies in Hungary and other countries where populist leaders are in power. Nevertheless, as this chapter has shown, interest groups and business are generally agile and adapt to populists in government by adjusting their nonmarket strategies to the new challenges. How the adaptation of business lobbying to exclusionary populist governance affects society at large is a question that future research should address.

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15 Populism and Trade Louise Curran and Jappe Eckhardt

Introduction International trade has long been a controversial political issue. In the second half of the 20th century, as trade liberalization spread through multilateral and bilateral agreements, most of the criticisms which emerged were from the political left. A key mobilizing event in this context was the ‘Battle of Seattle’ in 1999, where demonstrators disrupted the World Trade Organization (WTO) summit. It was described by Barlow and Clarke (2002: 20) as ‘… a culmination of worldwide activity on the part of citizens deeply concerned about global corporate interests that are violating the rules of nature and taking precedence over democratic freedoms’. This movement brought together environmental and social campaigners including trade unions, churches and developmental non-governmental organizations (NGOs). It was mainly the result of strong resistance to the perceived desire to leverage multilateral negotiations to impose policy liberalization across a range of new issues, including investment and competition, and thus increase the bargaining power of multinational enterprises (MNEs). Although dubbed ‘anti-globalization’, this movement is not against international cooperation, as underlined in the motto of their key platform—the World Social Forum—‘Another world is possible’ (WSF, 2001). In this movement against globalization, the problem is not international exchange, as much as the neo-liberal terms under which it is currently conducted. Firmly anchored on the left of the political spectrum, this movement has not disappeared. However it has been joined, and to some extent been overtaken by, anti-globalization forces emanating from the political right (Horner et al., 2018). The populist right questions openness and international exchange in a far more fundamental way than the World Social Forum, promoting a zero-sum world view and exploiting what Lamp (2019) terms ‘the jobs-as-property metaphor’. Analysing the rhetoric of the former Trump administration, he notes: ‘The conception of jobs as akin to physical objects suggests a straightforward way to remedy the situation: one simply has to “take the jobs back” from the winners of globalization, namely, the foreign workers who now have the jobs previously held by US workers’ (Lamp (2019): 7).

Louise Curran and Jappe Eckhardt, Populism and Trade. In: Business and Populism. Edited by Magnus Feldmann and Glenn Morgan, Oxford University Press. © Louise Curran and Jappe Eckhardt (2023). DOI: 10.1093/oso/9780192894335.003.0015

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As highlighted elsewhere in this book, these movements create new challenges for business, as their objectives—protecting national industries, ‘taking jobs back’, reducing or even eliminating immigration—call into question the very basis of international business itself. In promoting a zero-sum view of the world economy, they also seek to ultimately force companies to choose between their countries of operation. The combination of long running criticisms from the left and new political movements (and governments) on the right, has once more made trade policy a controversial and highly salient topic for public debate in many developed countries (Van Assche and Gangnes, 2019; Rodrik, 2018). Although the right wing globalization backlash has attracted a lot of attention from political scientists and economists (see e.g. Colantone and Stanig, 2018; Horner et al., 2018; Rodrik, 2018), these issues have not yet been widely addressed by international business scholars (Butzbach et al. 2020; Curran and Eckhardt, 2020; Curran and Eckhardt, 2022; Kinderman, 2020).

Approach In this chapter, we seek to contribute to greater understanding of business responses to right wing populism by exploring the impact of the trade policy shifts fostered by such populist movements on business and the latter’s response. In doing so, we seek to inform the wider debates about companies’ corporate political activity (CPA) (Hillman and Hitt, 1999) and especially how (and whether) they mobilize collectively and individually to influence governments on trade policy issues. In other words, to use the langue of the typology of business responses developed by Feldmann and Morgan (2022) (see also Chapter 1), our focus is on whether business adopted a strategy of ‘voice’—i.e. engaging in CPA in an attempt to change the populist trade policies in question—and, if so, whether their observed strategies can be classified as outright resistance to the populist agenda (‘loud voice’), or as a more constructive form of engagement to influence/modify the populist policies in question (‘soft voice’) [Feldmann and Morgan, 2022]. In addition, we explore whether voice is exercised primarily by trade associations and/or by individual firms. Several recent contributions note an increasing tendency for trade dependent companies to lobby alone on trade issues (e.g. Madeira, 2016), as well as a tendency to mobilize transnationally (Curran and Eckhardt, 2018) and in cooperation with NGOs (Walker and Rea, 2014), in addition to more traditional cooperation with trade unions (Brook, 2005). In this chapter, we seek to contribute to better understanding of CPA on trade in the age of populism, focusing in particular on their collective actions. We recognize that certain firms and sectors have much to gain from trade protection—especially those that compete with imports and stand to benefit if

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they are restricted and/or trade costs are increased. As Kinderman has noted in Germany, business responses to populism vary, depending on how it impacts on their different interests (Kinderman, 2020). Our focus throughout this chapter will be on trade dependent firms (TDFs), i.e. those companies which rely on an open global trading system for inputs and/or markets. They are particularly vulnerable to the kind of roll-back of trade openness which populist politicians propose. We would, therefore, expect them to be active in lobbying against protectionism (Curran and Eckhardt, 2020). In the first part of this chapter, we will highlight how changes in trade policy at various levels risk changing the ‘rules of the game’. This could force major adjustments in the way MNEs organize the global value chains (GVCs) which underpin their global operations. The fact is that trade liberalization has been a key factor enabling the expansion of GVCs, while the rules of world trade have been instrumental in fashioning their geography (Curran, Nadvi and Campling, 2019) and business has historically been very active lobbying for favourable policy outcomes (Curran and Eckhardt, 2018). Increased protectionism will therefore inevitably force firms to reassess their GVCs and possibly lead to a strategy of ‘exit’ [Feldmann and Morgan, 2022]. In the first part of the chapter, we highlight some of the key business impacts of rising protectionism, including the threats posed to GVC integration. We will focus on the US and Europe, although the basic questions of how such policy changes affect business operations are similar across other national contexts. In the second part, we study the political response (or ‘voice’ strategies) of TDFs to the developments highlighted in Section 1, focusing on the responses of European business elites to this emerging context. EU businesses have been directly affected by several unilateral shifts, especially the US Section 232 tariffs on steel and aluminium (and EU retaliation against US exports) and Brexit. Although Europe has not been directly affected by other populist policy shifts, like the US-China trade war, or the renegotiation of the North American Free Trade Agreement (NAFTA), it is indirectly affected, for example by US pressure to reduce engagement with Chinese firms in certain sectors, notably 5G (Gonzalez and Veron, 2019), as well as by the negotiation of agreements which increasingly undermine international trade norms and thus the multi-lateral trading system. The threat to WTO inherent in such behaviour should concern trade-dependent EU business. In undertaking our analysis, we draw on 23 semi-structured interviews taken over the period from the Brexit vote (mid-2016) to mid-2020, in person in Brussels or by phone (see the list in Table 15.1 in Annex). The objective of these interviews was to assess the actual strategic responses of European business elites to different aspects of the rise of protectionism (specifically Brexit, US tariffs, and the threat to WTO) and the perceived motivations behind their actions. For reasons of feasibility and accessibility, as well as coverage, we focused our interviews on trade associations. These organizations have a very good overview of the

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activities of the business elite, as well as being important actors in their own right. Interviews were undertaken with the key ‘peak’ associations—BusinessEurope, amfori, Amcham—as well as trade associations representing industrial sectors which cover over 80% of the EU’s trade (pharmaceuticals, engineering and machinery, chemicals, automobiles, textiles, and iron and steel). We also spoke to several European Commission trade policy makers to access their perception of the mobilization of the EU business elite on these topics.

Exploring the impact of key populist trade policy shifts In this section we will briefly highlight the business impacts of some key policy shifts which emanated from right wing populists during the period of study. In the EU context, the key threats came, on the one hand from the impending Brexit process and on the other from the actions of the Trump administration, both because they directly targeted EU exporters of certain products and because of their undermining of the WTO, as well as the global trade policy norms encapsulated in its agreements. The key EU trade policy shift linked to right wing populism during our period of study was Brexit. The British vote to leave the EU had enormous implications for both parties (Matthes and Busch, 2016) and one of the policy areas most affected was trade policy (Hestermeyer and Ortino, 2016). Although the EU and the UK formalized Brexit on the 1st of January 2021, by reaching agreement on a trade deal, many aspects of the future relationship with the EU remain unresolved and a no-deal Brexit, which would have meant new tariffs instigated in both directions, remained a real possibility throughout the period of our study. Business on both sides could have faced tariffs, including up to 25% in fish and considerably higher in agriculture, where the tariff equivalent of duties on EU beef imports are up to 80%. The effect on trade of a no-deal outcome would have been immediate and major, although some sectors would be more heavily affected than others (Gasiorek, Serwicka, and Smith, 2019). In addition, Brexit changed the UK’s relations with the rest of the world. For 40 years, the UK had essentially no independent trade policy. While, of course, the UK had its national positions within the EU Council of Ministers, trade policy making in the EU was undertaken by qualified majority and the resulting consensus became the UK’s effective policy. Although ‘taking back control’ of trade policy was a key mantra of the pro-Brexit side, the UK’s 2017 White Paper on Brexit remained vague on trade relations with third countries, focusing on securing continuity (HMSO, 2017). Many of the hard ‘Brexiteers’, however, had a very clear vision of post Brexit Britain’s future trade relations, with a marked preference for deeper relations with the ‘Anglosphere’ and former Commonwealth (Cleverly and Hewish, 2017). The recent announcement that the UK is applying for

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Comprehensive and Progressive Trans- Pacific Partnership (CPTPP) membership and will undertake an ‘Indo-Pacific tilt’ should be seen in this light (HMSO, 2021). Whatever the nature of post-Brexit UK trade relations, European businesses understood they would face new challenges. At best, Brexit would lead to new procedures and, at worst, substantial new tariffs, increased competition on the UK market from non-EU sources and disruption of previously highly integrated cross channel supply chains. On the other side of the Atlantic, another set of populist policies affecting European business over the period emanated from the Trump administration. Its first major protectionist policy initiative to impact on the EU was the imposition of new tariffs on steel and aluminium, leveraging Section 232—a little used regulation designed to protect against imports that threaten national security (Department of Commerce, 2007). The head of Eurofer, the EU’s steel trade association called it ‘naked protectionism’, lamenting in particular, that the EU had been targeted along with a range of other suppliers: ‘the US’ administration seems not to believe that being close, political, economic and geo-strategic partners is sufficient grounds to prevent the EU from being hit’ (Eurofer, 2018). The EU (like other targeted trade partners) reacted by imposing retaliatory tariffs on several emblematic US exports, including whiskey and motorbikes, while the US threatened further action against EU car imports (Gonzalez and Veron, 2019). This expanded the sectors affected by the rising protectionist context well beyond steel and aluminium. These US policy shifts posed threats to the WTO for several reasons. Although member states can take exceptional trade policy measures when ‘necessary’ to protect their national security, this ‘exception’ has generally been used with care and very rarely against allies (Curran, Eckhardt and Lee, 2021). The US recourse to this exception was therefore unusual and highly controversial. In addition, the US used the leverage from these tariffs to negotiate a series of bilateral agreements with targeted states, where the tariffs were removed in exchange for concessions, especially quantitative limits on exports (CRS, 2020). These quotas are contrary to WTO principles and there are serious concerns about the legality (under both domestic and international law) of exceptions for certain trading partners (CRS, 2020). The questionable use by the US of both the security ‘exception’ and quantitative export restraints, to protect their domestic metal industry came in a context where several other WTO members had caused controversy by citing security concerns to impose new trade restrictions, including in the context of Covid-19. Observers expressed concern that this ‘creep’ of security ‘exceptions’ into trade policy undermined the legitimacy of the WTO at a time when, as discussed below, the lack of US multilateral engagement was already threatening the system (Curran et al., 2021). Populist concerns about trade in the Trump administration also led to major policy shifts in the US’s bilateral relations with key partners. Firstly, in relation to

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trade with its closest neighbours in North America and secondly in relation to its increasingly conflictual relations with China. Although these bilateral conflicts did not directly target the EU, they had direct effects on the international trading system and were therefore of concern to EU businesses (Gonzalez and Veron, 2019). In particular, the results of bilateral negotiations between the US and its trade partners further undermined existing trade norms and indicated a disturbing return to government managed trade. Although the new Biden administration has indicated a far more positive approach to multilateral engagement, it inherits a series of agreements and tariffs which may be difficult to roll back (McBride, 2021). NAFTA was renegotiated in 2018 and became the US, Canada, Mexico Agreement (USCMA). One of the key changes, much touted by the administration, was the revision of the rules of origin (RoO) in the auto sector, which the US administration claimed would: ‘Transform supply chains to use more United States content …’ (USTR, 2018). The new rules, which defined whether vehicles qualify as ‘originating’ in North America for the purposes of USCMA are 48 pages long. For cars, they specified a local content requirement (which starts at 66% for the first year, going up to 75% by 2023). Although this is standard practice in the RoOs of FTAs, the levels imposed are uncommonly high. Furthermore, they also stipulated how they should be achieved—including through a minimum local steel and aluminium content of 70%. By definition, these rules reduced trade opportunities for non-members of USCMA, including the EU (Gonzalez and Vernon, 2019). The most unusual requirement of the new RoO was that a given percentage of the car’s value—30%, increasing to 40% by 2023—should be assured by workers whose wages are above a fixed minimum hourly rate of $16/hr. (USCMA, Chapter 4, Appendix p. 26). In inserting this provision, the USCMA, in effect, stipulated to the North American car industry, not only where they should produce the value in their cars (already the case in NAFTA, although the content requirement was lower—60%) and where the steel should come from, but how much they should pay the workers which produce them and what stages of the value chain to prioritize in the US. As pointed out in an analysis of the proposals, this represents an unprecedented use of RoO to define how a given value chain should operate and where value adding activities should take place (Johnson, 2018). There are serious questions about whether these and other provisions of the USCMA are compatible with WTO law (EPRS, 2018). From the EU point of view, although these RoO obviously don’t apply to EU exports, they do apply to automobiles produced in the US by European companies. The EU auto industry is concerned, both about the practicalities of applying the rules and about the fact that conforming with them will be more difficult for EU investors than it is for the domestic US car industry (author interview, July 2019). Beyond USCMA, the other trading relationship which raised widespread concerns over the period of study was that between the US and China. The Trump

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administration targeted China directly, both in the previously mentioned Section 232 Steel and Aluminium tariffs and through a much broader Section 301 investigation. The latter saw tariffs placed on almost all Chinese exports in retaliation for supposed breaches of IPR protection and forced technology transfers. Unsurprisingly, China retaliated. This ‘trade war’ between the US and China had major impacts on business, with studies forecasting negative impacts on trade and economic growth in both the US and China (Bellora and Fontagné, 2019). The trade war was paused in 2019 after the two actors agreed a deal. It is probably fair to say that the agreement involves some of this century’s most interventionist trade measures. Specifically, it obliges China to buy at least $200 bn of specific US manufactured and agricultural goods, energy and services. during 2020 (USTR, 2020). The agreement stipulates how much trade over the baseline must be assured across the different categories of goods (agriculture, services, and so on). Elsewhere in the text the US committeds to ensuring that there were adequate supplies of these products available for export. This represented an intervention in the market which is rare outside centrally planned economies. As Chowdhry and Felbermayr (2020) observe, it amounted to a return to ‘managed trade’, where governments, not markets, decide how much goods are traded and with whom. It is also, almost certainly, WTO incompatible, as it is difficult to imagine how China could meet these targets without discriminating between American products and those of other sources (Jean, 2020). Indeed, China struggled to fulfil their commitments, raising further questions about how the Biden administration deal with the fallout from the agreement (Bown, 2021). Thus, over our period of study, the emerging context between the world’s two most important trading nations was one of increasingly ‘unfree’ trade, characterized by high tariff structures and managed trade which were contrary to both parties’ WTO commitments. However, these commitments themselves were also increasingly threatened by another shift in trade policy emerging from Trump’s populist politics—the existential threat to the WTO posed by the refusal to nominate new members to the WTOs highest instance—the Appellate Body (AB). With the AB no longer functioning, the WTO’s Dispute Settlement Body (DSB) could no longer hear appeals. This effectively meant that if a member state was unhappy with a negative WTO judgment, they could avoid implementing it by appealing to a non-existent AB (Bown and Keynes, 2020). The threat which a weakened, or non-existent WTO posed to the European business elite was quite generic and, in many ways, more difficult to conceptualize than the other trade policy shifts discussed previously, especially as the WTO continued to operate. Thus, the inability of its DSB to effectively adjudicate disputes and the weakening of the WTO which resulted from this, was a less visible threat to business than the US-China trade war, or Brexit. Indeed, our findings discussed later confirm this perception. However, the weakening of the WTO undermined

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the legal constraints which membership places on governments. With no functioning DSB, there was, of course, a risk that WTO members would apply trade-related regulations as they saw fit. This undermined the certainty in trade policy which the global trading system had provided to companies. As such, it reduced the potential avenues for companies to challenge regulations which they consider to be inconsistent with a state’s international commitments, a possibility increasingly mobilized by business in recent years, often in innovative ways (Curran and Eckhardt, 2018).

The response of European business elites to rising trade protectionism In this section we will explore the responses of European business to these threats. We focus in particular on the three major trade policy shifts related to rising populism discussed previously—Brexit, growing US protectionism (especially its unilateral action on iron and steel) and the threat to the WTO from the many WTO incompatible agreements the US instigated, as well as the absence of an AB. Overall, our findings indicate that, in spite of the fact that we focused our interviews in particular on trade dependent sectors, where concern could be expected to be high (Curran and Eckhardt, 2020), the involvement of individual businesses in the debate was rather limited. We highlight some insights from our interviewees as to why this might be the case.

Brexit On Brexit, the business elite was rather low profile during the referendum debate, leaving the economic arguments to politicians (Feldmann and Morgan, 2021). However, trade associations were active and became increasingly so after the vote. BusinessEurope issued many press releases on the subject, particularly over the period end of 2018-beginning of 2019, as the first deadline loomed. They also collaborated with 12 sectoral trade associations on a joint statement warning of the consequences of a no-deal Brexit (CEFIC et al, 2019). ACEA (autos) was also very active and issued many press releases underlining the integration of the auto sector in Europe and how negative the impacts of Brexit would be. In several of these they cooperated with the European Association of Automotive Suppliers (CLEPA) and UK domestic associations, thus the whole supply chain of the automotive industry warned of the risks together (e.g. ACEA et al., 2019). Similar efforts were made in the healthcare sector, where the peak association—EFPIA—allied with a range of sub-sectoral associations to highlight the threats (EPFIA et al., 2017). All the trade associations interviewed were actively working with their UK equivalents to lobby their respective authorities to avoid major disruption (e.g.

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CEFIC and CIA, 2019; EFPIA et al., 2017). In a sense such transnational collaboration was entirely natural, as UK associations were members of these EU associations and indeed were likely to remain so after Brexit. Another notable feature of business activity on Brexit was ad-hoc co-operation with the labour movement. There were several joint business-trade union warnings about a no-deal outcome (BusinessEurope, 2018a; CBI and TUC, 2019). The head of the British Trade Union Congress (TUC) has noted that the threat of Brexit led to joint actions with business on several key aspects of the debate. She reported ‘We’ve had long conversations about Brexit… We’ve been able to find some common areas’ (BBC, 2019). Beyond concerns about job protection, we noted collaboration with NGOs on very specific threats related to Brexit: shortages of medicines in the UK and the environmental risks of the UK exiting the EU’s Registration, Evaluation, Authorization and Restriction of Chemicals (REACH) chemicals management system. On the former issue, a coalition of trade associations and patient NGOs worked throughout the process to present a common front to governments (EFPIA et al., 2017). European Federation of Pharmaceutical Industries and Associations (EFPIA) underlined that, although patients often had different interest to the industry, on this issue they had clear common ground and worked together (author interview, January 2020). On REACH, EU and UK industry worked with the European Environmental Bureau, an umbrella body of 150 Environmental NGOs. They noted their common interests in an open letter: ‘Remaining within REACH will help to maintain high standards of protection of citizens and their environment and ensure continuity and consistency for companies’. (CEFIC et al., 2018). However, even on Brexit, which was a very imminent threat, individual companies were slow to mobilize. BusinessEurope issued a report in 2017 highlighting the negative impacts of a ‘hard’ Brexit on 11 companies, however they were anonymized, reflecting concerns about reputational effects (BusinessEurope, 2017). Euratex noted a lack of feedback from their members on concerns: ‘What we are trying to gauge is market signals … [these] are not reaching us for the moment’ (author interview, December 2017). By mid-2018 several large EU companies, including Airbus and BMW had started to take a public stand against a ‘hard Brexit’ (BBC, 2018), while the Japanese car manufacturer, Nissan, magnified its rhetoric as the prospect of a no-deal mounted (Halliday, 2019). Individual companies did, therefore, intervene in the debate. However, as one of our interviewees highlighted, most of the companies who talked out against Brexit such as BMW, Airbus and Nissan, are headquartered outside of the UK. They felt that UK companies, particularly those that were customer-facing, were concerned that taking a strong anti-Brexit stance would have a negative effect on their reputations: ‘These kind of retail people, or supermarkets, they felt that if they were too vocal, this could tarnish their brand name with, you know, the 50% of people

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who favoured leaving’ (author interview, June 2020). In this context, trade associations provided a buffer for their members, publicly mobilizing on their behalf, while enabling companies to operate more ‘under the radar’.

Threat from US protectionism In relation to the threat from US protectionism, it took time for EU industry to react to the shift towards more populist politics. Despite inflammatory rhetoric from the Trump administration, in interviews at the end of 2017, although BusinessEurope reported their members were very concerned, the sectoral trade associations interviewed did not note major impacts on their membership. As Orgalime noted: ‘I think in the US they’ve been discussing various options, but we don’t see anything in practice yet that goes against our interests …’ (author interview, December 2017). By mid-2018, the situation had rapidly evolved and there was clear exasperation amongst the trade associations about the volatility in EU-US negotiations: ‘We are always hoping that something will be enough for the US and every time we are disappointed’ (author interview, June, 2018). The emergence of US tariffs on EU metals and the EU’s retaliatory response, which had differential effects across industries, complicated the context for generic EU advocacy groups. As explored below, these new tariffs led to an increase in company and sectoral mobilization, partly because of these heterogeneous effects. With the advent of tariffs and counter-tariffs, larger business groupings struggled to find a coherent approach to the sudden and spectacular shift from protectionist rhetoric to action. The fact that the US tariffs impacted heterogeneously across industries meant that some were more conciliatory than others. As BusinessEurope commented: ‘I don’t know if you could define us as united’ (author interview, June 2018). This is unsurprising and reflects Kinderman’s (2020) findings that German business responses to populism varied across sectors and level of internationalization. BusinessEurope represents TDFs in both affected and non-affected sectors, i.e. the import-competing steel sector, steel users and sectors much less concerned about retaliation. Despite these internal discussions, however, they reported consistently arguing against the US tariffs. As the Trump administration hesitated about exempting the EU, the association issued five press releases between March and June 2018 calling for restraint. When tariffs were imposed, their Director General conceded that ‘… the EU should have a proportionate reaction to effectively defend its rights in a WTO conform [sic] way’. (BusinessEurope, 2018b). Individual mobilization of EU companies against the rise in US protectionism was still not very evident. On the other side of the Atlantic, Harley Davidson’s announcement that it was moving US production overseas to avoid the EU’s retaliatory tariffs, was a rare example of a company taking a strong stance in reaction

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to the emerging trade tensions (Stewart, 2018). Overall, our findings indicate that even in these cases of direct protectionist threats, it was still trade associations, rather than individual firms, that led lobbying efforts, although sectoral associations were much more publicly active than generic associations like Amcham or BusinessEurope. In addition, associations tended to focus on the aspect of protectionism which had the most direct effect on their business—in this case, EU retaliation—rather than the action which caused the EU reaction—illegal US tariffs. Several associations indicated that this was related to (quite realistic) perceptions that EU industry is more effective in lobbying its own institutions than foreign authorities. A former senior EU embassy official perceived more action in Washington by US firms dependent on EU imports than by EU firms themselves, although the impact on the administration was limited (author interview, June 2020). Several interviewees considered that transnational action by EU companies in the US wouldn’t have achieved much. Eurofer remarked: ‘What’s the point? We do not go for these games’ (author interview, November 2019). Overall, several informants indicated that EU corporate action in the US was ‘under the radar’, partly because of the difficulty in engaging with the US administration and the fear of a backlash if they talked out publicly.

Threat to the WTO On the threat to WTO, the failure of the US to engage in the WTO and, latterly, the perception that they were actively seeking to undermine it, was a key concern in our interviews. The European Commission officials and the trade associations interviewed considered the Trump administration a potentially existential threat to the WTO (author interviews, November 2017; June 2018). BusinessEurope was concerned that the US was ‘paralyzing the WTO’ through failure to appoint judges and a general lack of engagement (author interview, November 2017), while Orgalime commented: ‘… we need a functioning system and that is why it’s…unfortunate that the US keeps blocking the nominations …’ (author interview, November 2017). In terms of public statements, since 2017, BusinessEurope stressed the importance of the WTO in reports and press releases and supported reform. Amfori, Amcham, and Orgalime also publicly underlined their fears about the WTO in press releases. For example, in 2017, amfori made a joint statement with 14 other associations representing retailers and other TDFs from Asia and North America calling for progress in WTO and the preservation of the DSB (Amfori et al., 2017). In 2019, the trade associations representing automobiles, chemicals, textiles, technology, and iron and steel industries all cooperated to publish a report on EU industrial policy, where the need to defend the WTO was mentioned frequently

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(Industry4Europe, 2019). Finally, in mid-2019 CEFIC’s trade director wrote a blogpost warning of rising protectionism and the threat to the WTO (Van Sloten, 2019). Although trade associations have been active in the WTO debate, the engagement of individual companies on this issue was very limited. A comment by the US Chamber of Commerce (Amcham) was typical. They noted that, although their organization was very concerned about the threat to WTO, concepts like the AB and WTO incompatible trade agreements were of limited interest to their members: ‘It’s difficult to get companies to wake up’ (author interview, December 2018). One former Commission official summed up why this might be the case: ‘It’s too far away and too abstract’ (author interview, June 2020). Their perceived distance from the issue clearly undermined the mobilization of EU TDFs, although several interviewees (e.g. Euratex, Orgalime, amfori) also noted that the small size of many of their members meant that they had very limited capacity to undertake impactful political activity.

Explaining low levels of engagement of the European business elite in the political debate Overall, there was a perceived lack of mobilization by individual TDFs in relation to the different protectionist threats which we explored in our interviews. The European ‘business elite’—beyond the very specific eco-system of trade associations—was relatively inactive, leading to frustration amongst our interviewees. Questioned about this rather surprising lack of explicit engagement by individual TDFs, a European Commission analyst felt that there was a certain amount of complacency in the business community: ‘Up to now people didn’t think it was plausible to have a roll back [of trade openness]’ (author interview, November 2017). This view was shared by a representative of a trade association in a more recent interview: ‘… business managers have become so used to ongoing liberalization that they stopped worrying about trade’ (author interview, November 2019). BusinessEurope also felt that companies, especially smaller firms, did not have a strategy to address the problem: ‘There’s a bit of … a mix of complacency and/or they don’t know how to do it’ (author interview, December 2017). Several interviewees also linked firms’ lack of engagement to the very negative way in which trade had been framed in Europe, especially during the intense debate on the potential trade agreement with the US—the Transatlantic Trade and Investment Partnership—(TTIP)—(Bauer, 2016), which several described as ‘toxic’. They believed that this toxicity had spilled over into debate on trade more generally, reducing the willingness of companies to talk openly: ‘They may be scared of the reputational damage from supporting free trade’ (author interview, November 2017). Concern about talking out in contexts where trade has been

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negatively framed was found to have reduced industry involvement in the TTIP debate (Bauer, 2016). To some extent trade associations acknowledged that they act as a buffer for individual companies when issues like trade become salient and controversial. BusinessEurope echoed several informants in indicating that it was the role of trade associations to speak out when individual companies felt they couldn’t: ‘That’s what we’re there for …’ (author interview, June 2018). The nature of the threat from protectionist populism was also considered to be too generic to encourage individual companies and the business elite to mobilize. Several interviewees felt that, although the US shift towards populist trade policy was concerning, companies would be loath to mobilize unless a major policy change had a discriminatory impact on EU business (i.e. did not affect non-EU companies in the same way). The threat to the world trading system was not seen as a mobilizing event. It was simply too abstract to interest most companies. This confirms the point made by Madeira (2016) that the tendency of companies to focus on their short-term direct interests, undermines their willingness to support global public goods (in this case, open trade). The perception of interviewees was that company mobilization would only happen if they felt threatened by a specific discriminatory measure. Indeed, Brexit was the populist threat where we found the strongest evidence of company involvement and the widest mobilization. This was perceived as a clear and present danger to EU business.

Conclusions In this chapter we have highlighted some of the key risks which populist movements pose to European TDFs and provided some initial indications of their responses over the period 2016–20. We note that Brexit posed major risks to existing business models, including the re-imposition of tariffs on trade with the UK, which could result in the restructuring of many supply chains. The Trump administration’s populist anti-trade policies directly targeted EU steel and aluminium exports, resulting in EU retaliation against US products. In addition, a series of negotiations with their trade partners resulted in agreements which flout international trade law, including managed trade, highly restrictive RoO and import quotas. In addition, the administration refused to nominate judges to the WTO’s AB, such that the institution has been fragilized, both indirectly, by non-respect for its rules, and directly by the blockage of its system of legal redress. In this context we would have expected EU businesses who rely on open trade to lobby against these shifts and mobilize stakeholders in support of their CPA. We provide some indications of their strategic responses drawing on interviews conducted over the period. Several key findings emerge. Firstly, most of the lobbying efforts against trade protectionism were undertaken by trade associations, rather than individual companies. Although some European (and Japanese) companies

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have warned in ever stronger terms of the risks of a no-deal Brexit, trade associations tended to be the main actors mobilized politically on a regular basis. It was also they who mobilized most strongly against the threat from US protectionism, although they tended to focus more on the European response. They reported that they (and to a lesser extent their members) were active in the US, although they were careful not to be too high profile (operating ‘under the radar’), in order to avoid antagonizing the administration. On the threat to WTO, there was a lot of concern and several associations were active issuing press releases and calls for progress, including in coalition with similar actors in other global regions. However, there was frustration that individual companies were not active enough and a perception that they didn’t fully realize the long-term threat to the legal certainty underpinning their trading relationships. In terms of the typology of business responses developed in the Introduction (Chapter 1), our study shows that ‘voice’ strategies were mainly exercised by trade associations. Some of these trade associations engaged in ‘loud voice’ strategies in response to populist trade policies, in that they actively voiced concerns about the populist trade agenda and tried to influence decision making though lobbying and other forms of interest mobilization. Yet, other associations chose softer voice strategies, in particular in the US context, in order to avoid antagonizing the Trump administration. Individual firms, in contrast, generally refrained from engaging in voice strategies and, in some ways, this could be interpreted as an act of ‘implicit loyalty’—i.e. taking the passive stance of keeping one’s head down when confronted with populist polices [Feldmann and Morgan, 2022; see also Chapter 1]. We questioned our interviewees on the reasons behind the relatively limited mobilization of individual companies. Several highlighted that TDFs were not concerned about the risk to the global trading system. This was partly because, outside of the more protected agricultural sector, EU TDFs had never experienced high levels of protectionism and took the global trading system for granted. There was thus a common perception that there was quite a lot of complacency, while even those that understood the threat were concerned about speaking out. In the US this was due to the perception that the administration would not listen to EU business and, in Europe, because of the ‘toxic’ atmosphere around trade nurtured by the TTIP debate, which created a lot of bad will on trade without achieving positive results for business. This outcome may have further discouraged company mobilization. In addition, several commented that many firms in their sector are small, with little or no government relations capacity. In this context, trade associations saw it as their role to act as a buffer and speak out where their members were unable or unwilling to do so, although they were concerned that the absence of company mobilization undermined their message. Finally, another issue which we explored was the extent to which the pro-trade business elite was active in constituency building with civil society groups, to help

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increase the legitimacy of their messages (Hillman and Hitt, 1999; Walker and Rea, 2014). We found several examples of such coalitions in the Brexit debate, where common interests with unions (on jobs) and NGOs (on access to medicines and environmental protection) resulted in active cooperation. In relation to more generic threats, such cross-stakeholder mobilization was not evident. Overall, we found greater business engagement and a more varied and dynamic set of mobilization strategies in the Brexit debate than on those aspects of protectionism which emerged from the US administration. In a sense this is quite natural, as, firstly, Brexit was a very clear and present danger that affected most EU TDFs, whereas the threat from the Trump administration was, either concentrated in a few industries (iron and steel, cars …) or generic and indirect (WTO, trade war, quotas …). Secondly, there was concern about the potential effectiveness of any such actions. There was a common perception that there was little point in EU companies seeking to influence the US administration, who, if they listened to business at all, listened to US firms. Thus, the EU business elite, worked indirectly in the US, through their American partners. In terms of the limitations of our research, firstly, given that (with the exception of Brexit) the debates that we explore had not been resolved at the time of writing, we cannot draw many conclusions from our work about the effectiveness of the strategies which we identify and their actual impacts on policy. In as much as the end result of the Brexit process was a deal, it could be concluded that the concerted and coordinated campaign by the EU and UK business elite was successful, even in the absence of wide-scale public mobilization of individual companies. After all former UK Prime Minister Johnson had appeared to completely disregard the concerns of business initially (BBC, 2018). However, the deal is far from ideal for many firms, especially in the services sector. Thus, any policy ‘wins’ are relative. Secondly, in this chapter we seek to draw conclusions about corporate activity through interviews with business associations and their targets (policy makers). We sought to engage with individual companies in our research, primarily through contacting enterprises recommended by their associations. However, they were not willing to be interviewed, either for lack of time, or because they felt that protectionism wasn’t a concern. We therefore focused this initial work on trade associations, whose perceptions on the mobilization of the business elite turned out to be quite coherent. Clearly future research which focuses on the actions of individual TDFs would be very useful to increasing our understanding of their strategies and the reasons behind their relatively low-key engagement in the debate on rising trade protectionism. In addition, there is a need for research covering the response of business elites to populism in a wider range of contexts. We focus our work here on activity in the EU. Further work addressing the responses of corporate actors and its impact across geographic space would be very useful to informing our understanding of variations in CPA across different institutional contexts, industrial sectors and

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company level trade exposure. As populist trade policies are likely to evolve over the coming years, it seems vital to better understand the strategic responses of business elites to these developments, as well as their relative effectiveness, as they seek to give voice to their concerns.

Annex Table 15.1 Interviews undertaken for this project. Organization

Date (s)

Trade Associations Amfori (formerly the Foreign Trade Association (FTA))—representing key EU importers Euratex (textile and clothing sectors) BusinessEurope—key generic business association Amcham (American business in Europe) ACEA (Automobiles) Orgalime (Mechanical, electronic, and electrical engineering industries) CEFIC (Chemical industry) Eurofer (Steel industry) EFPIA (Pharmaceuticals) Policy makers/think tanks European Commission (DG Trade) European Commission (DG Trade) European Commission (President’s Cabinet) European Commission (External Action Service) European Centre for International Political Economy (ECIPE)

19/12/16; 8/11/17; 12/12/18; 5/11/19 19/12/16; 12/12/17; 22/12/17 (In French) 8/11/17; 12/12/17; 29/06/18; 15/11/19 12/12/18 and 15/11/19 15/7/19 30/11/17 13/11/19 20/11/19 13/01/20 8/11/17 8/11/17 15/11/19 11/06/20 13/11/17

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16 The Populism of Transnational Plutocrats Brooke Harrington

Latifundia perdidere Italiam —Pliny, Natural History (1950 [77])

In the beginning were the landowners: the agrarian absentee landlords of the late Roman Empire, for whom a holding of at least 600 acres meant a guaranteed seat in the Senate. Those latifundisti pioneered a mode of accumulating commercial wealth and political power simultaneously, then leveraged that power to create institutions that would advance their interests. Their successors have been known by many names—Barons, Junkers, and Boyars among others—but their political orientation and modus operandi remained remarkably consistent over 2,000 years. The strategy, unknown to the ancient Greeks and even to the early Roman Republic, was to accumulate as large a tract of land as possible and manage it to generate maximum revenue; their for-profit mode of farming required armies of slaves and landless peasants as exploited labour. This was the model from which the colonial plantations and haciendas later arose, facilitating fusions of commercial and political power in imperial outposts around the world. The synergy between the two forms of capital was reproduced by institutions throughout society, so that the military, legislature and schools inter alia advanced the interests of elites at the expense of many others. Ironically, the resulting concentrations of wealth and political power produced unsustainable levels of inequity, destabilizing the Empire and leading to its decline. Hence, Pliny’s conclusion that the system of accumulation that produced those elites (the latifundia mode of building wealth and power) destroyed the system of governance that gave rise to it. Similar observations were made centuries later by Pareto (1902); Mosca (1939); Mills (1956) concerning the dangers that commercial-political elites presented to various forms of democratic governance. In fact, what Pliny wrote of Rome was echoed in Pareto’s remarks on the fate of twentieth-century republics: that those who accumulated wealth and power under that system of governance would ultimately be its undoing. That is, Pareto (1916/1935) argued that democracy inevitably favors the rise of individuals who are both politically skilled

Brooke Harrington, The Populism of Transnational Plutocrats. In: Business and Populism. Edited by Magnus Feldmann and Glenn Morgan, Oxford University Press. © Brooke Harrington (2023). DOI: 10.1093/oso/9780192894335.003.0016

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and endowed with capital, including social connections and economic wealth— still often derived from land ownership (Christophers, 2018; Estes, 2021). This commercial-political elite form a plutocracy that eventually ‘kills the goose that lays the golden egg’ (Pareto, 1901/1968: 62). Occasionally, other types of elites come to the fore for limited time periods—such as the military elites who sometimes deposed corrupt plutocrats (Pareto, 1921/1984)—or in specific contexts, such as the experts who might be necessary to lead certain organizations (Michels, 1915/1962; Weber, 1922/1978). But both history and theory indicate that power eventually returns to the hands of plutocrats (Higley, 2010). Thus, the consistent theme across the millennia of political analysis is of the inextricability of commerce and politics, as embodied in the elites who rule democratic states. Recently, a trans-Atlantic plutocratic coalition brought into being almost simultaneously in the UK and the US leadership and policies that exemplify the destruction of democracy by elites who prospered under it. Both Brexit and the presidency of Donald Trump presented themselves under the rubric of populism: a contested concept whose proponents across the political spectrum claim to represent the true ‘will of the people’, and who offer to redeem the broken promises of democratic governance (Abts and Rummens, 2007). While claiming to return political control and voice to the masses, the victors in those 2016 votes ended up serving the narrow interests of the wealthiest business owners in the UK and the US (Harrington, 2019). This merged commercial and political elite represent the modern instantiation of the rentier-Senators of ancient Rome, and have similar destructive effects on institutions of governance. A key difference is that the modern businessman-politicians—from Berlusconi in Italy, to Trump in the US, and Farage in the UK—may accelerate democratic decay through their control of mass media, from legacy outlets to social media platforms. Indeed, these avatars of ‘plutocratic populism’ appear to fear democracy despite the power and wealth they derived from it (Hacker and Pierson, 2019). One result has been the emergence of a contemporary ‘spectacle’ of governance: the ‘managed democracy’, where government retains only the appearance of democratic practice rather than its substance; elections are held, but the information and voice available to voters are tightly controlled, and outcomes are pre-ordained. This form of democratic rule took on a distinctively commercial character with the global rise of financialization (Harrington, 2017; Krippner, 2011) in the 1970s; that period witnessed the expansion of ‘business-managed democracy’ in the US and Europe, in which corporate and political elites have merged to such a degree that the state serves business interests, often contrary to the wishes of the governed (Beder, 2010; Useem, 1984). Under these conditions, a weakened public sector provides a Potemkin façade of legitimacy, while stylized competition among political parties offers temporary distraction from the systemic parasitism of elites on national resources, from legislative power to national parks to tax funds (Hacker

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and Pierson, 2019; Wolin, 2008). Still the spectacle served its purpose of garnering voters’ attention, ramping up electoral participation even as politicians did less for constituents (Crouch, 2006); this was particularly noteworthy during the austerity period following the global financial crisis, when the divergence between performance and policy change was particularly stark (Mair 2013). The failure of political spectacle to deliver meaningful improvements to the lives of voters has sometimes led them to be ‘tempted by nationalist solutions, ethnic divisions, and the politics of hatred’ (Piketty 2015: viii). Rather than challenging dominance of the commercial-political elite, such protest movements have often deflected energy and scrutiny away from them, facilitating the rise of right-wing populism—particularly the kind that leverages jingoistic national sentiment and distrust of foreigners to forge a coalition between elites and a large segment of voters who do not share their class interests. Surprisingly, there is a dearth of scholarly literature on the commercial-political elite and their role in right-wing populist movements (Kinderman, 2021). This chapter is intended to address that gap in knowledge.

Commercial-political elites and populism Though there is ‘no accepted typology of elites’ (Higley, 2010: 162), and no causal models linking them to regularities in politics, there is a consistent pattern of historical entanglement between political and economic power. Thus, the central premise of this chapter is that populism is linked not to wealthy business leaders as a distinct social group, but to the hybridized configuration I have termed the commercial-political elite. This is not to deny the existence of separate streams of elite affiliation and activity: it is possible for business elites to stay out of politics, and for politicians to remain detached from commercial activity and wealth. Noteworthy examples of the latter include several left-wing populist leaders in Latin America—such as those led by Cha´vez in Venezuela and Morales in Bolivia—who spearheaded movements animated by explicitly anti-capitalist sentiment derived from the legacy of resistance to European and North American colonization (Mudde and Kaltwasser, 2013). However, such a cleavage among commercial and political elites is increasingly rare in a financialized world in which the private and public sectors are often merged at the institutional level. This merger occurs both formally—such as through interlocking directorates or hybrid organizations that devolve management of public funds to private firms (Useem, 1984; Bendick, 1984)—and informally, through elite clubs like the Bohemian Grove (Domhoff, 1974; Vaughan, 2006) and the ‘global party circuit’, where heads of state socialize with captains of industry (Mears, 2020). Notably, such elite social gatherings skew strongly to

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the right wing of politics (Wehr, 1994). In practice, the social events also centre on quasi-ceremonial displays of resource extraction, plenty and waste, such as elites burning elaborate effigies or spraying one another with expensive bottles of champagne—all reminiscent of the practices of the latifundisti who enacted their combination of commercial and political power through extravagant private entertainments (Platts, 2011). The commercial-political elite is therefore quite ancient in its origins, and even in some of its expressions of cohesion and power. Another regularity in the activity of the commercial-political elite has been its capacity to ‘lay low’ for long periods, then mobilize right-wing populist movements around specific issues perceived as acute threats or opportunities. Over the past century, those threats and opportunities have most often taken the form of laws concerning taxation, regulation or other forms of democratic constraint on the accumulation of wealth and power (Harrington, 2016). In America, for example, the creation of a permanent income tax in 1913 catalyzed a series of popular protest movements that have surged back to public prominence every 15 to 20 years, most recently with the Tea Party; in classic populist style, these protests were funded and mobilized by elites but enacted at the grassroots by individuals from the middle classes (Martin, 2013). This resurgent right-wing populism in the US found its avatar in the presidency of Donald Trump, the self-described wealthy businessman who famously bragged in his first political debate that he hadn’t paid income taxes in years and that made him ‘smart’ (Blake, 2016). While right-wing populist movements sometimes resist classification in traditional political terms, in part because of the cross-class alliances they build, a common feature is their defiant rejection of governance efforts to organize mutual obligations and collective goods. Right-wing populists may make use of democratic tools such as the referendum, and of democratic language such as ‘the will of the people’, but only as a means to disable the deliberative and pluralist processes characteristic of functioning democracies. In this way, right-wing populism distorts democratic institutions to serve the private interests of a commercial-political elite. This distortion was particularly clear in the case of Brexit, where an advisory vote was reframed as a binding mandate on the UK government. As later became clear, that reframing was led by a group of transnational business people bent on reducing the regulatory ‘burdens’ of EU membership, such as the occupational health and safety laws that limited their profits from commercial activity (Smismans, 2017). In this sense, the populisms represented by Brexit and Trump set themselves against a common enemy: the uses of democracy to constrain commercialpolitical elites through taxation and regulation. But the confluence of the two runs much deeper, including sharing key personnel like Nigel Farage—former leader of the Brexit party, who repeatedly stumped for Trump in both his presidential runs—and political strategist Steven Bannon, who masterminded the social media data-mining operations that proved crucial to victory on both sides of

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the Atlantic (Mayer, 2018). Bannon’s mission in both cases was not just to put Trump in the White House or to detach the UK from the EU; rather, his stated goal was the ‘deconstruction of the administrative state’, meaning the systems of democratic governance and regulation that, however weakly, still vex many commercial-political elites by curbing the accumulation of unlimited wealth and power (Rucker and Costa, 2017). Perhaps most importantly, the Trump campaign and Brexit shared a funding source: an offshore ‘war chest’ of US$60 million, donated by American hedge fund manager Robert Mercer (Cadwalladr, 2017). Mercer’s motivations are noteworthy in relation to the goals of populist movements to use democratic means to subvert democratic governance: for many years, he was simply an elite businessman, with no documented involvement in or contributions to politics; it was only after the US tax authorities held him accountable for tax evasion and imposed a fine of US$6.8 billion that Mercer began donating to political causes (Sheffield, 2017). Similar motivations have been alleged among other members of the commercial-political elite, including Arron Banks, who became the primary financial backer of the Leave.EU campaign after financial regulators in another EU territory imposed new costs on his UK-based insurance companies (Fletcher, 2016).

A global noblesse, without the oblige The multiple intersections of two populist movements on different continents a few months apart illustrate an important and truly novel aspect of the contemporary commercial-political elite: their transnationality. Unlike their ancient counterparts, these elites are not confined by territorial borders, even when their own political power is nominally tied to those boundaries. This was the underappreciated significance of the many heads of state and cabinet level ministers who appeared in the rogue’s gallery of clients exposed by the Panama Papers and Paradise Papers leaks from offshore financial centres: they held positions of authority linked to particular nations, but their resources and allegiances were and remain global. In this light, it’s no wonder that Trump described his presidency in strangely un-American terms as ‘Brexit plus plus plus’ (Calamur, 2016). In this respect, he exemplified the view of the contemporary commercial-political elite that their power, wealth, and interests are as multi-national as the corporations many of them own. As the offshore wealth managers I studied put it, these commercial-political elites are ultimately ‘above nationality and laws’ and have ‘a lot more in common with each other than with the people of their own countries’ (Harrington, 2016: 245, 82). This gives their version of populism a strange quality of transnational coordination, even as it invokes themes of nationalism and local control. We see this in some unexpected regularities, such as the recent refusal of many populist

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leaders—including Trump in the US, Vladimir Putin in Russia, and Brazil’s Jair Bolsonaro—to wear masks during the deadliest pandemic in a century. In fact, many elites who have appeared in the news recently for refusing to abide by public health rules are familiar figures from the offshore financial scandals of recent years, or from the Brexit campaign. High-profile examples include Dominic Cummings, a key figure in Brexit and later senior advisor to UK Prime Minister Boris Johnson, who breached the lockdown ‘rules he helped to write’ (Dodd, 2020). The common denominator across these disparate events is the insistence of the individuals involved on complete impunity, both normative and legal (Harrington, 2020a). In Cummings’ case, his expectation that pandemic restrictions would not apply to him may stem from earlier experiences of going unpunished after violating UK electoral laws and committing contempt of parliament (BBC, 2019). Similarly, Putin and Trump may have been emboldened to flout public health rules following the lack of any meaningful sanctions resulting from their exposure in the Panama Papers. Despite the public availability of terabytes of data documenting questionably legal activity by thousands of individuals worldwide, prosecutions have been exceedingly rare. While some of the offshore clients exposed in the press were embarrassed, and a few paid fines, only a handful ever faced legal consequences, resulting in a grand total of five criminal convictions worldwide thus far (Tokar, 2020; Alecci, 2018). The open defiance of social obligation, law and legitimacy has become a contagion in its own right, spreading far beyond the clientele of offshore firms, crossing party lines and national borders. Such brazen refusal to abide by laws and social norms still has the power to shock onshore, where the price of social and political prominence has until recently included the obligation to simulate respect for ideals such as the common good and equality before the law. But decades of failure to sanction and deter elite scofflaws has empowered them, creating an elite insurgency that has realized many of its ambitions through the vehicle of populism.

Mobility, weaponized A distinguishing feature of the commercial-political elite is their ability to use the power of the state for private ends—such as personal enrichment via tax funds, or using the legal system to protect their property rights—while remaining largely unconstrained by the limits states place on everyone else. This peculiar ‘heads I win, tails you lose’ relationship to state power stems from two parallel developments which began about 50 years ago: the financialization of the global economy (Krippner, 2011; Harrington, 2017), and the growth of the offshore system following de-colonization (Ogle, 2017). Both gave rise to legal and financial innovations facilitating the nearly frictionless movement of elites and their capital around the world. Borders that are closed to others are open to them: the commercialization

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of state sovereignty (Palan, 2002) has put everything up for sale, including citizenship and the legislative process, particularly in economically depressed former colonies. This has given rise to new industries and professions to support the escape of commercial-political elites and their assets from any laws they might find inconvenient: particularly notable is the rise of a network of firms selling passports to the ultra-wealthy (Abrahamian, 2015) and the emergence of the profession of wealth management to create bespoke legal regimes offshore, protecting elite clients’ assets without constraining them (Harrington, 2016, 2012). The ability of commercial-political elites to move easily across boundaries that are generally closed to the rest of us is crucial to understanding the novelty of contemporary right-wing populism—and why it is so difficult to impose rules or accountability on its leaders. This weaponized mobility first became apparent decades ago in the tight linkage between mass media and right-wing populism. The ability to project images and messages into millions of homes around the world became a potent weapon in the hands of business elites like Rupert Murdoch, who used that power to become a populist king-maker in the US and UK. Soon afterwards, the merger of business and political elites at the top of rightwing populist movements became complete in the person of Silvio Berlusconi, who owned six of his country’s seven television networks; a few years later, fame as a reality television entertainer allowed Donald Trump to realize his ambitions of becoming the US president, after decades of dead-end efforts (Nussbaum, 2017). This launched a fascinating line of social scientific research on the role of ‘celebrity politics’ (Street, 2019) and ‘mediatisation’ in the making of populist leaders (Moffitt and Tormey, 2013; Moffitt, 2016). While the phenomenon can be traced back at least to the presidency of John F. Kennedy, the power of mass media to provide instant international visibility through the cross-national mobility of political imagery and messaging has ramped up significantly in recent decades, and has been amplified by the rise of social media platforms (Giglioli and Baldini, 2019). This facilitated what Trump’s political advisory team termed his ‘hostile takeover’ of the main right-wing party in the US (Baker, 2020). Trump used the power of his celebrity like a welding torch to merge fringe elements of the American commercial elite with the country’s right-wing political elite, often over the protests of the latter (Cohen et al., 2016). Among the results was the bizarre spectacle of figures like Patrick Byrne (former chief executive officer (CEO) of online home furnishings retailer Overstock.com) and Mike Lindell (CEO of a bedding firm, known colloquially as ‘the MyPillow guy’) becoming fixtures at the White House as advisors to and spokesmen for the president, often promoting the idea that Trump should remain in office against the will of American voters (Davidson, 2021). As one media studies scholar recently observed, Trump—formerly an infomercial salesman, like Lindell—invented a ‘Home Shopping governance’ model that ‘repeatedly

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scandalized observers’ but nonetheless succeeded in garnering votes through its entertainment value (Hediger, 2020: 343). This transgressive, hostile approach to breaching boundaries—whether they take the form of social norms, or the separation of politics from entertainment, or the limits created by national laws—is the essential core of the right-wing populist ethos. It is embodied and enacted by leaders, but is also central to the value proposition held out to voters: support us, and enjoy some of our flamboyant impunity. The trickle-down privileges enjoyed by voters who support these leaders often takes the form of permission to commit acts of aggression against outgroups, such as immigrants, religious or sexual minorities, and members of the press. Thus, Donald Trump’s offer to pay the legal fees of supporters who assaulted protesters and reporters at his political rallies (Finnegan and Bierman, 2016), his encouragement of police to be physically rough on suspects (Berman, 2017), and his insistence on describing the neo-Nazis whose rally resulted in the death of a protester as ‘very fine people’ (Gray, 2017). This is not unique to Trump: worldwide, populist leaders authorize violence by their supporters and promise them protection from legal and normative sanctions; this has been observed in disparate times and places ranging from Mussolini’s Italy (Ebner, 2011), to the vigilantism of the ‘Bakassi Boys’ in 1990s Nigeria (Smith, 2004), to the contemporary Philippines under Duterte, and Brazil under Bolsonaro (Putzel, 2020). That Duterte, Bolsonaro, Johnson and Trump remained popular despite their mishandling of their national responses to the public health and economic crises stemming from the Covid-19 pandemic (Phillips, 2020; Sreeharsha, 2020) is a testament to the enduring appeal of the strongman-as-showman trope—in which entertainment and shock value covers for incompetence—as well as the aspirational impunity they offer their supporters. The ‘perks’ that voters enjoy because of their alignment with the commercial-political elite are almost entirely based on status elevation rather than economic gain; surprisingly, that is often sufficient, not just for working—and middle-class constituents, but also for the affluent. For those voters, ‘their politics are quite literally luxury politics: not government of, by and for the people, but governance of status elevation for the already safe and secure who can afford to impulse-buy cruelty to others’ (Hediger, 2020: 352). By enacting ritualized devaluation, dehumanization and even violence against social outgroups, followers of right-wing populists gain what W. E. B. DuBois (1935) once called a ‘psychological wage’, or ‘compensation’ for losses in other areas of their lives. While DuBois’ theory was developed to explain the failure of poor whites in nineteenth-century America to align themselves with newly-freed slaves in their common aspect as exploited workers, it could equally well be applied to the appeals modern right-wing populists make to voters: we won’t solve any of your material problems, but at least we’ll reassure you that you’re better than those people. This

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model of status compensation helps explain what is otherwise puzzling: the tolerance of right-wing populist supporters for the corruption, incompetence, and lawlessness of the commercial-political elite. This method of securing popular support for right-wing elites was memorably summed up by former US President Lyndon Johnson: ‘If you can convince the lowest white man he’s better than the best colored man, he won’t notice you’re picking his pocket. Hell, give him somebody to look down on, and he’ll empty his pockets for you’ (Moyers, 1988). More recently, this very strategy has been attributed to UK investment-banker-turnedMP Jacob Rees-Mogg: a leading figure in the Brexit movement whose vast fortune derives in part from his offshore holdings, which were partially exposed in the Paradise Papers (Garside et al., 2017). Rees-Mogg has perfected the British version of the ‘psychological wage’, by exemplifying an aristocratic version of right-wing populism that draws heavily on nostalgia for Empire, and offering supporters ‘that bleak imperial compensation for the Victorian poor, a sense of racial superiority’ (Meek, 2019).

What do they want? Given the already immense privileges enjoyed by people like Rees-Mogg, Trump, and other members of the commercial-political elite, observers might ask: what more could they want? Why do they exert so much effort to sell the rest of us on ideas of unearned superiority over outgroups, or to impose their imagery through mass media? The American essayist and novelist Joan Didion understood the agenda of these elites surprisingly well for one who did not belong among them. ‘The secret point of money and power’, she wrote, ‘is neither the things that money can buy nor power for power’s sake … but absolute personal freedom, mobility, privacy’ (Didion, 1968: 67). This is the literary expression of a political philosophy shared by many of the ultra-rich worldwide: libertarian anarchy (Cowen, 1992). This radically antigovernment stance advocates for the privatization of everything, including most of what we now consider public goods; it envisions a world in which fire departments or access to clean air and water are all for sale, rather than being available to all. For those who can pay, the result is the best of everything—thanks to market competition—and ‘freedom from democratic restraint’ in the form of exemption from taxes, regulations or the other mechanisms through which societies construct and maintain themselves (Monbiot, 2012). Offshore is a product of this politics of lawlessness-for-sale, creating ‘a world without rules’ for those who wish to ‘take the benefits from society without paying for them’ (Shaxson, 2011: 10). Elites around the world participate in this exit from collective institutions, as the rogues’ gallery of individuals implicated in the Panama Papers and Paradise Papers leaks—from entertainers like Jackie Chan, to sports stars like Lionel Messi, to heads of state like

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Icelandic Prime Minister Sigmundur Gunnlaugsson—exemplified (Harrington, 2016) A key item on the agenda of contemporary commercial-political elites is to engineer the decline and dismantling of social institutions—both legal and normative—that they find inconvenient or costly, coupled with limits on the entitlements and rights of everyone else. The goal is more than profit-seeking through destruction, as in ‘disaster capitalism’ (Klein, 2007); an additional and equally important objective is control over the terms by which elites can be constrained or held accountable for anything. This approach to political economy has been termed ‘totalitarian capitalism’ (Monbiot, 2012) or ‘sadopopulism’ (Snyder, 2018): both are associated with the extreme right wing of populist movements. Offshore has been vital in realizing this agenda, creating a juridical space in which elites— directly, as government officials, or indirectly, through representatives such as wealth managers and lobbyists—can wield the instrument of state sovereignty with surgical precision, enhancing their own power and wealth via the highly selective release of constraints on themselves. The purpose of offshore is not just tax avoidance—although that gets all the headlines—but rather law avoidance, in the most general sense. It creates radical freedom for commercial-political elites, while incapacitating others as political subjects. For those outside the ranks of the elite, this seems like a huge and dangerous step backward, into quasi-feudal conditions, for everyone. To understand why the commercial-political elite might see things otherwise, it is helpful to recall that they do not rely on most of the public institutions on which the rest of us build our lives. They don’t educate their children in the public schools, their lives don’t depend on national health care programmes, and they don’t require a state pension in order to retire. If all of those institutions disappeared tomorrow, the elite would be fine. In fact, they would be better off, because they could keep for themselves the relatively small share of their wealth they now pay to support those institutions through taxation. And if the nation becomes a crumbling ruin, with Third World levels of health and education outcomes, or roads and bridges falling to pieces, then what of it? Commercial-political elites can shield themselves from these ill effects almost indefinitely. In the short term, they can adapt to local anarchy as the ultra-rich of Brazil and Mexico have done, by travelling a few blocks to work or shuttling their children to school via helicopter, high above the crime-ridden streets (Phillips, 2008). In case of disaster, they can retreat to luxury underground bunkers, or even to outer space (Osnos, 2017; Marikar, 2018). The ultimate display of power by the commercial-political elite is now to escape not only the laws of the state, but the laws of gravity. For now, content to slip the surly bonds of society, they place the burdens of taxes and legal accountability on the shoulders of the rest of us (Harrington, 2020b).

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Conclusion This chapter explores the historical context and implications of the asymmetrical merger of commercial and political elites in right-wing populism. There is no left-wing equivalent of these fused interest groups; only the right-wing, with its ideological touchstones of low taxation, light regulation and opposition to trade unions, aligns well with commerce and rent-seeking. While this merger has given rise to some of the most consequential figures in politics over the past century, it is not new: in fact, its origins and even some of its key practices, go back to the ancient world. And now, as then, the commercial-political elite threatens the very systems of governance that enriched and empowered them in the first place. This is not to discount the genuinely novel transformations represented by the contemporary commercial-political elite, most notably their transnationality. Whereas the latifundisti and their heirs, such as the Junckers, drew both their wealth and political clout from land ownership, their twenty-first century counterparts derive their power primarily from financial securities and intellectual property rights—assets that are ultra-mobile, like their owners. While some of these individuals have used their fortunes to buy vast tracts of land (Estes, 2021), such purchases are primarily for investment; the owners are rentiers, not residents. That makes the new commercial-political elite less likely than their ancestors to care about what happens to any particular place or nation; no matter where they were born or reside, there’s always another country ready to welcome them with open arms, allowing them to acquire new passports in much the same way that oil tankers adopt flags of convenience (Ogle, 2017). In relation to this volume, this chapter’s intended contribution to the scholarly conversation is twofold. First, it underscores the significance of the ‘liberation’ of elites from the Westphalian system: that is, their ability to exploit state power to their advantage while remaining personally unconstrained by it. Secondly, the chapter links the rise of the new commercial-political elites who define and often lead contemporary right-wing populist movements to the growth of financialization and the offshore system. Those two phenomena—transnational mobility and offshore—have facilitated the development of nearly frictionless movement of elite individuals and their wealth across borders that are otherwise all but impenetrable to others, particularly the poor and refugees. In relation to elite theory, the claims in this chapter depart from classical models that posit a distinct ‘political class’ (e.g. Mosca, 1939); they also diverge from theories that assert elite domination takes place either through brute force or skilled persuasion (Pareto, 1916/1935). My own study of elites showed that simultaneous and synergistic domination of the political and commercial spheres offshore required only immense quantities of money (Harrington, 2016). For the right sum, the power of nominally democratic sovereign states could be acquired by wealthy

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businessmen without a shot being fired and without any effort at persuasion (e.g. Bullough, 2015. In this respect, the chapter extends the late twentieth century American tradition in elite theory, which highlighted the increasingly close bonds between commercial and political elites (Mills, 1956, Domhoff, 1967). That stream of research pointed to the growing capacity of those two groups to converge around shared interests and to undertake collective action, even across national boundaries (Useem, 1984). My findings constitute an update on those trends after decades of financialization and globalization, which I argue have resulted in an asymmetrical merger of commercial and political elites at the uppermost levels; while much of this merger has taken place offshore, the shared interests of this elite are most commonly expressed onshore through right-wing populist movements. A key insight my empirical findings can bring to the study of right-wing populist movements is that they represent the arrival onshore of an ethos that has been the distinguishing feature and primary appeal of the offshore world for decades: elite impunity. Offshore is not just a place to escape tax bills, but a laboratory for law avoidance, where obligations to one’s country can be shed without consequence. In recent years, failure to sanction well-to-do scofflaws in high-profile cases such as the Panama Papers and Paradise Papers may well have contributed to their expectation that they could continue selectively flouting the rules of society as well, keeping the parts that protected their property while removing inconvenient obligations. The subsequent global health crisis provoked by Covid-19 has exposed how these offshore practices have been brought onshore and propagated—much like a virus—among the privileged.

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PART 4

CONCLUSION

17 Populism, Risk and Business Present and Future Prospects Magnus Feldmann and Glenn Morgan

Introduction In this chapter, we provide conclusions regarding the relationship between business and right-wing populism drawing on the detailed analyses of the cases and issue areas in the chapters of this book. In the first section, we frame this in terms of business risk; at what point does populism start to impinge on business and business models in ways which place previous ways of doing things at serious risk? In the second section, we discuss this in terms of our modification of Hirschman’s ‘exit, voice and loyalty’ framework (see Chapter 1); depending on the nature and level of risk that populism brings to existing business models, how does business respond? In the third section, we discuss whether populism is a passing phenomenon that is unlikely to survive crises, like the COVID-19 pandemic and the associated economic crisis. Similarly, do Donald Trump’s failed re-election bid in 2020 and the unexpectedly weak results of both right-wing and left-wing populists in the German election of 2021 suggest that populism is in decline? Or has populism already led to substantial changes to the previously dominant neo-liberal framework of economic policymaking, requiring business to make fundamental changes to the ways it organizes and the ways in which it relates to government and policy?

Populism as business risk In this section, we seek to identify different forms of business risk that populism creates. Firstly, we consider the nature of populism itself. The basic definition of populism used in this book is built around the centrality of the distinction between the elites and the people, where populists claim to speak for a ‘virtuous people’ which has been betrayed and exploited by a ‘corrupt elite’. However, we have also emphasized that that the nature of this claim rests mainly on a form of performative politics, one in which the distinction between people and elites is enacted and embodied by populist leaders through an emphasis on their own authenticity Magnus Feldmann and Glenn Morgan, Populism, Risk and Business. In: Business and Populism. Edited by Magnus Feldmann and Glenn Morgan, Oxford University Press. © Magnus Feldmann and Glenn Morgan (2023). DOI: 10.1093/oso/9780192894335.003.0017

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as representatives of the ‘people’ (Moffitt, 2016, 2020). This authenticity is performed by the populist leader through the use of particular forms of demotic and vernacular language, through adhering to a certain set of symbols that can claim this authenticity (in the US, guns and the bible, America First; in the UK, beer, cigarettes, and Brexit), through attempts to polarize electorates by emphasizing crises of moral values, through identifying and vilifying ‘the enemies of the people’ inside and outside the national context and through condemning the failures and corruption of past politicians and governments. Importantly, populists and especially populist leaders claim the mantle of majoritarian democracy, as demonstrated by victories in general elections and referenda or gaining a high proportion of votes when traditional parties are losing support. Tolerance for minority rights protected by law in the tradition of liberalism is limited where such rights can be constructed as clashing with the ‘will of the people’. Associated with this, populist leaders claim the right to speak and act against non-elected intermediary institutions such as the judiciary, the civil service, and independent central banks that can thwart the ‘voice of the people’. For example, in his influential speech in Băile Tus¸nad in 2014, Prime Minister Orba´n stated that the ‘Hungarian nation is not a simple sum of individuals, but a community that needs to be organized, strengthened and developed, and in this sense, the new state that we are building is an illiberal state, a non-liberal state’. The central role of the populist leader as performing authentically as the ‘voice of the people’ is reinforced by a willingness to respond quickly and dramatically to issues as they emerge or are created by the populists themselves, a process facilitated by social media and twenty-four-hour news coverage. For populist leaders, speaking their mind is performative, demonstrating to their supporters that they are acting. Where presidential powers enable the proclamation of policy decrees, then performance can be extended beyond the speech act to policymaking. If populist leaders can achieve an instant effect (e.g. the closure of borders; the imposition of tariffs) they can reinforce the link between their rhetoric, their action-orientation and their supporters. The slow development of policies passing through the various institutions of government and emerging for implementation months or years down the line can be labelled as dysfunctional, and populist leaders can take measures to short-circuit this process by using their decree power and undermining the ability of legislatures and the judiciary to question the use of such powers. In countries where the populists enjoy parliamentary majorities, such as Hungary and Poland, however, the legislative process can be highly significant in helping to lock in key populist initiatives by enshrining them in law. For business, therefore, government policy becomes less predictable under populist governments. Mechanisms of network governance which characterized much of the politics of the 1990s and 2000s and which aimed to mobilize multiple stakeholders and experts in the formation of policy and legislation had

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given business significant power to influence outcomes (Feldmann and Morgan, 2022; Stoker, 2019). Dominant populist leaders have broken up this model of governance and, by securing power to themselves and their circle, have created instability in the political environment. In doing so, they create new risks for business as planning becomes less straightforward given the uncertainties and instabilities introduced by this form of rule, particularly where the counterweights that could supply stability, such as the civil service, parliamentary procedures, and the judiciary, are themselves undermined by populist policies. Brexit and the Trump presidency with its imposition of tariffs and migration controls are obvious examples of the sort of uncertainty which has a negative effect on business investments (Dixit and Pindyck, 1994). The second form of risk arises from the changes to the nature of party politics, particularly the decline of mainstream parties espousing a shared commitment to neo-liberal economic policy and the rise of populist parties on the left and the right. In his seminal article that has shaped subsequent debates Mudde (2004) characterizes populism as a ‘thin-centred ideology’ emphasizing that it can take both left- and right-wing forms. As discussed in our Introduction, the risks that left-wing populism poses to business vary in form and content. Such risks may resemble more traditional socialist challenges, but historically, this is a battle which business has been fighting in various forms since the late nineteenth century. Therefore, whilst we acknowledge that left-wing populism and its relationship to business needs further study, particularly now that it has gained strength in the US and Europe as well as remaining powerful and significant in Latin America (Prentoulis, 2021, Tamames, 2020), this volume has focused on what we take to be a new set of risks for business in the post-1945 era, which emerges from right-wing parties that have increasingly used populist language to target business as part of a corrupt elite. This represents a break with the traditional identification of business with right-wing parties over this period, though as Mudde (2019) has pointed out, Far Right parties with populist agendas did emerge in Europe from the wreckage of fascism in the post-war period after 1945. Whilst most of them focused on issues of race and immigration, some also linked that to nationalist economic policies supporting local small businesses and home-based agriculture and attacking multinationals and emerging globalization (such as Poujadism and Jean Marie Le Pen’s Front National in France or Mogens Glistrup’s Progress Party’s crusade against taxes, the public sector, and the welfare state in Denmark). Mainstream Conservative right-wing parties distinguished themselves from these far-right parties, supporting business and working to ensure that trade unions and left-wing parties were initially accommodated within the post-war settlement through forms of corporatist organization. Later, from the 1980s, as right-wing parties became more attuned to neoliberal capitalism, with its emphasis on market deregulation, privatization and globalization, they developed new relations with business based on forms of network governance described earlier, a

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process and set of policies to which social democratic parties also accommodated themselves as part of ‘Third Way’ politics espoused by politicians such as Clinton, Blair, Schro¨der, in the 1990s and 2000s. However, by the 2010s, as our cases show, this alliance between business and right-wing parties was under strain due to changes in political systems signalling disillusionment with mainstream parties as they struggled to deal with the impact of the global financial crisis and the subsequent decade of austerity. In some contexts, previously mainstream parties were increasingly being taken over by populists that sought electoral support by attacking the role of business as part of the elite that had exploited and misled ‘the people’. In other contexts, particularly where new parties were able to emerge more easily due to rules on proportional representation (Bale and Rovira Kaltwasser, 2021; De Vries and Hobolt, 2021), right-wing populists were gaining votes and seats in the legislature partly by criticizing the actions of business with a particular focus on the globalization of production, the increase in economic migration and the failure to protect jobs and wages in the local economy for the local population. The second set of risks which emerged, therefore, was the distancing of right-wing parties from unquestioning support of business, as reflected in a loss of business influence over policy. The third set of risks arose from the actual policies which emerged where populist parties were in power or sufficiently influential to set the agenda for parties in power. Most notably, these risks arose from the way in which right-wing populists espoused economic policies which were at odds with the previous decades of neoliberalism, notably challenging expanded globalization and trade, minimal state intervention, and an independent, inflation-oriented monetary policy managed by an independent central bank. As the chapters in our book and our earlier discussion of the instability and ephemeral nature of populist leaders’ policymaking shows, whilst there was often a common language amongst populists in different countries, there were very few consistently formulated economic policies. Two aspects emerge as important in this respect. The first is that there remained a commitment to capitalism and markets by right-wing populist governments. In some this was made explicit as part of their appeal to the electorate, e.g. the role of Guedes as a quintessential representative of Chicago-style economics in Bolsonaro’s election campaign and subsequent government; Carlos Dominguez, Duterte’s Secretary of Finance has played a similar role in the Philippines (see Chapter 11 by Doering et al. and Chapter 10 by Takagi). In other contexts, such as the US and the UK, certain arms of state and the politicians who led them pursued a more consistently neoliberal perspective, surviving so long as they did not overtly undermine or delegitimate the populist leader (see Chapter 3 by Baltz on the US). Therefore, in many of the cases described, we see this contradiction between on the one hand, the right-wing populist leader attacking business, globalization and unregulated markets in favour of more state intervention and control and on the other hand, a continued commitment to neoliberal economic policy. Some

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authors (see Chapter 16 by Harrington; cf. also Hacker and Pierson, 2020) see this as a deliberate policy—to win votes by proclaiming to be on the side of the those who have lost jobs due to globalization, whilst in power doing nothing substantial to remedy this, because to do so would require increasing taxes to the detriment of the populist leaders and their closest supporters. In this view, the leader is strategically taking on the mantle of populism without any real commitment other than to gaining power and maximizing their own advantages when in power. Weyland, for example, argues that ‘populism rests on pure, opportunistic personalism … [it] tries to maximize the leader’s chances of coming to power. Personalistic leaders therefore use ideas, slogans and campaign pledges instrumentally, and flexibly shift with changing circumstances. Lacking firm ideological commitments, they seek to mobilize as much mass support as possible. It is this pure, opportunistic personalism that gives rise to populism’ (Weyland 2017: 63). The result, however, is uncertainty and instability for business, and policies may be directly contrary to their interests on one day but highly supportive of them the next depending on where the initiatives are coming from (see Chapter 9 by Wyatt on India). The second aspect of such policy risk relates to the way in which the attention of populist leaders moves from economic issues to cultural ones. The distinction between the elites and the people is performed through expressions of authenticity designed to affront ‘polite society’ and to appeal to those who feel outside and neglected by the establishment. Articulating this in images, language and symbols involves evoking certain cultural phenomena around national and local identity, including ethnicity, religion, and values and historical constructions of the past in which ‘the people’ addressed and interpellated by the populist leader become central to the society’s self-definition. Therefore, right-wing populism, however much it is driven by economic sources, is always at the same time ‘cultural’. The question is therefore not whether populism is cultural or economic but how are the two mixed together in particular contexts (see also Noury and Roland, 2020). Rightwing populism easily attaches itself to exclusionary forms of nationalism which can be turned outward and inward, as well as take an economic and/or cultural form. Outwardly the notion of the authentic people can be used to draw a line between those on the inside (‘the real people’) and those whose ascribed characteristics, mainly ethnic or racialized, but also religious, differentiate them from the ‘people’. When these outsiders appear inside the country through the route of migration, then they can be targeted as a cause of disruption and decline in the unity of ‘the people’ as well as connecting to economic issues such as a loss of job opportunities for the ‘real people’ or low wages for the local population caused by competition from immigrants (as described in the chapters in this book on Denmark, Italy, and the UK). However, such language can also be turned inward, where there is little public focus on migration issues (e.g. Brazil) or where there is substantial emigration and therefore a broadly sympathetic view of these processes (the Philippines and India). In these contexts, the enemies of the people are not

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identified in relation to processes of immigration, but to groups that are already present in the local population. These groups are to be excluded from the people, on grounds of ethnicity, racialized identities, religious beliefs, sexual behaviours and identities, moral values (particularly around sex and gender, family structure and abortion), political beliefs, and complicity with or dependence on the ‘elite’, e.g. in the Brazilian case, where those dependent on Lula’s Bolsa Familia conditional cash transfer were treated by Bolsonaro as part of the ‘enemy within’ due to their reliance on these funds in return for their support for Lula and later Dilma. As the cases in the book show, there is therefore no either/or choice between economic and cultural versions of right-wing populism. Over time and depending on different contexts, leaders may place more emphasis on one than the other or they may eclectically mix them to maximize support. In Hungary and Poland there have been attempts to provoke anti-immigrant feeling in part by emphasizing historic conflicts and portraying, for example, the defeat of the Ottoman Empire at the Battle of Vienna of 1683 as a ‘defeat of Islamists’ or by evoking particularly the Austro-Hungarian Empire or the Polish-Lithuanian Commonwealth as the bulwark protecting ‘Christendom’ and Europe from invasion. Nationalist appeals have also been used to undermine foreign ownership of some sectors of the Hungarian economy and return them to Hungarian ownership, often with favourable treatment of members of Orba´n’s circle whilst at the same time supporting other areas of foreign direct investment (FDI), notably those associated with manufacturing for global supply chains, and crucial for Hungary’s economy (see Chapters 7, 8 and 14 by Szanyi, Ban, and Sallai). Cultural populism, however, lends itself very strongly to the styles of populist mobilization in that it often requires no more than a provocative statement or a Tweet or Facebook post to create a controversy by needling opponents into reactions which then ramp up an issue for a short period. This process may be exacerbated either by the hidden algorithms of platforms keen to maximize ‘eyeballs’ on a page or by the use of targeting techniques specifically designed by agencies specializing in using social media for political purposes. As such activity is rarely more than exchanging insults, new topics can be generated as soon as others grow stale allowing for an endless cycle of tweets, anger, polarization and potential violence. Nevertheless the result for business is an environment that is difficult to predict and plan for because of the constant swirl of pronouncements and actions across a whole range of issues (trade, protectionism, monetary policy, state intervention, immigration, taxation, intellectual property rights, international trade agreements, the rule of law) with little consistency or coherence in terms of core ideas or modes of implementation beyond personalism and the appointment of supporters of the leader to key positions. In conclusion, therefore, from the point of view of business, there are certain populist economic policies that pose great risk. In some cases, these may be allencompassing in their potential effect, e.g. Brexit; in other cases, they may be more sectoral or even firm-focused as in the threats Trump and Orba´n made against

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certain groups and firms. On the other hand, alongside these threats are policies supportive of business, making it difficult for business to assess the aggregate degree of risk and how best to respond to these threats. Cultural threats are just as complex. At one level, business may feel that it is at no risk from cultural populism particularly where it is directed towards minority groups defined in cultural rather than economic terms. However, in many cases such cultural threats can be linked with issues that do concern business. Attacks on immigration based on cultural grounds have economic implications and, as the chapter by Ibsen on Denmark shows (see Chapter 5), employers may well feel the need to intervene if such initiatives undermine their access to the labour supply they require. More difficult Table 17.1 Risks to business from right-wing populism: Scale and scope. Risks arising from

Manifestations

Impact on business

Populism as a style of politics

• Politics as performance • Expressing the will of the people and attacking obstructions • Speaking and acting with authenticity and spontaneity • Close circle of dependents as advisers

• Loss of influence and close contact • Unpredictability • Possible label as part of the elite or ‘enemies of the people’

Changes in electoral politics and party ideologies due to rise of populism

• Decline of mainstream parties • Decline of network governance • Rise of populist parties protesting against status quo • Business as an target of attack by right-wing populists

• Loss of business influence • Decline in legitimacy of business as adviser to governments

Policy risks arising from actions of populist governments

• Economic policies at odds with neoliberalism ◦ Protectionism ◦ State intervention ◦ Pressure on independent central bank • Mitigated by commitment to capitalism, markets and low taxation • Evoking culture wars, shifting attention from economic issues but impacting on the economy, e.g. migration

• Difficulty for business in responding due to loss of legitimacy following austerity and rise of populism • Difficulty for business of balancing pro-business aspects of policy with populist attacks on business • Difficulty for business in deciding whether to protect ‘liberal values’ against populism’s majoritarian authoritarianism

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for business is the way in which cultural issues as provoked and magnified by populist leaders can lead to disorder and instability on the street in the form of violent protests and riots as happened in the final days of the Trump presidency. Similarly, through pursuing culture wars on their liberal opponents by evoking ‘woke’ ideas as a destructive force undermining national identity, populist leaders undermine trust in established institutions such as the judiciary, the idea of a free press and free speech, the role of universities and expertise, and the commitment to international organizations, treaties, and international rule of law. Truth becomes a matter of perspective (whose truth?), not an objective category sustained by norms of evidence, expertise and open debate. Populists also threaten those businesses which have increasingly allied themselves with these liberal ‘woke’ ideas as a result of the MeToo and BlackLivesMatter movements (on Woke Capitalism and its contradictions, see Rhodes, 2021). In doing so, they generate uncertainty for business and create risk that business might find itself vilified by such leaders for either knowingly or unknowingly taking a stance that offends the populists, (see Table 17.1).

Risks and responses Following our analysis of the different sorts of risks generated by right-wing populists in power, we can deepen our understanding of business responses and their choice of exit, voice or loyalty as described in our extension of Hirschman’s framework in the introductory chapter. In this concluding chapter, drawing on the cases in the book, we re-examine this issue, paying particular attention to how populist politics evolves over time and what this means for how business develops and adjusts its own responses. For example, when populist leaders come to power, they often explicitly aim to destroy their enemies (not just other politicians and parties but also civil society organizations and businesses which are not supportive of them) and replace them with friends and supporters held together through the exchange of personal and financial favours (see Chapter 14 by Sallai on the reconfiguration of social dialogue in Hungary). The point at which populists look to have embedded themselves in power for the longer term (not least because they have changed the institutions of democracy to make this a likely outcome) is therefore also likely to coincide with a transmutation in the nature of business responses as they are likely to be increasingly dependent on the favour of the populist leader and have less ability to operate independently of political power, due to e.g. partial state ownership, dependence on state licensing, state regulation, and state financial benefits favouring the supporters of the populist leader. In relation to decisions to leave a country, multinational companies may voluntarily exit if they perceive the policies pursued by the populists as fundamentally threatening their business model but over time, negotiations and

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compromises may modify this decision. The most obvious example of this is the response of Japanese car manufacturing multinationals in the UK in the post-Brexit environment, exiting to the EU because they can no longer manage a smooth supply chain across the EU or access in a frictionless way the EU market. It therefore makes more sense for them to gradually wind down their assets in the UK even if these assets are considerable. Given the scale of existing assets, these companies have had time to seek to ‘game’ the system, i.e. to pressurize the UK government in various ways to make concessions which allow them to stay in the UK. Although such negotiations have been going on, the eventual outcome seems to be a significant, but not total, shift of investment and activity from the UK to the EU. Similar dynamics have occurred amongst financial companies but as described elsewhere, given the nature of financial assets, partial or temporary exit can be relatively speedy and subject to modification, e.g. as agreements on the financial sector become more detailed under the Trade and Cooperation Agreement between the EU and the UK (see Chapter 4 by Feldmann and Morgan). As has been noted already, however, exit can be involuntary, particularly as populist governments become more powerful and their objectives for staying in power long term more clearly aligned. In Orba´n’s Hungary, overseas banks and owners of utilities found themselves squeezed out by regulations deliberately introduced to undermine their business models. As the chapters in this book illustrate, this went along with supporting and strengthening links between the Orba´n government and the subsidiaries of overseas multinationals in strategically important sectors, such as car manufacturing. Orba´n’s expulsion of FDI in certain sectors thereby opened these sectors up for ownership by Hungarian capital, and in particular, supporters of the Orba´n government itself. It therefore served an important function in creating a group of capitalists subservient to and dependent on Orba´n who could now become part of his social bloc facilitating further embedding of his populist model (Szelényi, 2016). In relation to issues of voice, we find that loud voice is most likely to be used as populist parties are rising in popularity but before they are in government. The most important examples of loud voice which this volume identifies is in Kinderman’s discussion of employers’ associations in Germany and Switzerland (see Chapter 13). In Germany, right-wing populism has acquired growing importance electorally and ideologically (as a fiercely nationalistic and anti-immigrant force). It has not had a presence in national governments nor has it come close to controlling any local governments, despite some notable successes in regional elections. However, German employers’ associations have launched campaigns to discredit and undermine the Alternative for Germany (AfD), not least in light of the historical legacy of Nazism. Because the AfD is not in government, it has little power to intervene actively against the campaigns of the employers’ associations though it can claim them as further evidence of the ‘establishment’ against the people. In Switzerland, where populist parties have been stronger for longer

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and the mechanism of referendum exists in the federal constitution, there have been a number of efforts to restrict immigration and reduce foreign influence more generally in the country. Kinderman shows that business associations learnt over time how to organize their campaigns against populist policy measures in a more systematic way under conditions of noisy politics. They have been successful over recent referenda in defeating populist supported initiatives which might have damaged their ability to recruit from overseas or to engage in global financial transactions. On the other hand, the limits of loud voice were shown in the Brexit campaign. High-profile interventions by the large business associations, economists as a profession and EU-supporting politicians from the UK and elsewhere, highlighting the merits of EU membership provided fodder for Brexit campaigners to articulate a ‘people versus the elite’ discourse labelling EU support as based on an elite-sponsored Project Fear. Backed by Brexit supporting newspapers and social media campaigns, businesses and others increasingly found themselves ‘named and shamed’ if they spoke up loud against Brexit. Businesses perceived loud voice as counter-productive, and many UK businesses remained neutral in the debate (see Feldmann and Morgan, 2021; see also Chapter 4 and Chapter 15 on various business responses to Brexit). Loud voice is therefore a risky strategy, particularly where populist leaders such as Trump, Orba´n, and Modi are willing not just to attack their critics in crude and unexpected ways but where they are also willing to use state power against business, e.g. revoking licences, cutting firms off government supplier lists, and overtly favouring firms that keep quiet and/or offer support. The more populist power is embedded, the less likely that business will use loud voice to attack the populists. In most cases loud voice is rare and adopted by a small number of financially independent and politically active businessmen, such as the billionaires, like Warren Buffett or Mark Cuban, who attacked Trump. In the neo-liberal era, as we have discussed, soft voice was very often business’s favoured tool of influencing government. Being present in policy discussions inside the state to bring their expertise to bear on policy questions that were kept out of the public domain allowed business to be highly influential. As we have described, however, populism dismisses such processes as the establishment ‘looking after itself ’; it is part of the reason why in the populist view, government has drifted away from representing the interests of the people and instead just become an arena in which business and politicians swap favours, cultivate connections, and make money. Populism and its claim to speak for the people and to rule on behalf of the people is therefore not likely to delegate law-making and decisionmaking to these networks of civil servants, experts, and business. These networks can be purposely dismantled or left to wither on the vine through disuse. As Sallai discusses (see Chapter 14), they are likely to be replaced by a form of ‘court society’ where the key priority for business seeking influence is to be close to the populist leader, supporting them financially and reputationally, though whether

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any rewards might come from this given the arbitrary and uncertain nature of the populist leader’s attention span is uncertain. Ideally from the point of view of the president and the members of the court, this court society should lack transparency most of the time and be concealed to protect the favours between the populist leaders and their supporters from public scrutiny and accusations of corruption. Whistle-blowers are dramatically ejected from the court for their betrayal and heaped with obloquy by the populist leaders and their supporters to undermine the claims they may make about how decisions are made inside the ‘court’, who is influencing them and how. Businesses may self-censor and continue to make careful use of traditional mechanisms of soft voice (see Chapter 6 on Italy), though where the media remains relatively open, such criticisms may still emerge into the public arena. As a result, populist leaders may seek to control the media to such an extent that even soft voice criticisms are not heard, e.g. as in Hungary and to a lesser degree, Poland. Elsewhere populists can engage in undermining soft voice criticism by resorting to tropes such as ‘enemies of the people’ or by restricting access to key meetings where business has been critical. In the main, businesses continue to try to use soft voice in relation to policy risk but their ability to be heard is limited particularly as populist power is consolidated over time not just in the institutions of the state but also in civil society with attacks on independent media, universities, and open debate. In relation to loyalty, businesses can be more or less explicit in how they express loyalty. Explicit loyalty can involve public declarations of support particularly where the populist leader is being strongly criticized elsewhere. It can also be manifested by providing funds for populist parties, their supporting think tanks, and advertising, and marketing professions. This funding is also often to enable the populist leader to enjoy the accoutrements of wealth which they may not be able to afford on the basis of a public salary (as in the case of Boris Johnson’s record of receiving gifts from the wealthy in order to fund his lifestyle) but which seem necessary to maintain the sense of power and prestige that is essential to the leader’s appeal to the electorate. Where the loyalty emerges early, i.e. before the populist has gained power and when they are struggling for funds, visibility, recognition, and votes, then loyalty may have paybacks later if the populists gain power. Late adopters of loyalty may find themselves in a more precarious situation, not necessarily trusted and therefore not drawn so closely into the ‘court’ or so likely to receive favours. Like exit, loyalty may reflect an element of coercion, especially if populists are entrenched in power. Yet loyalty may also be implicit and uneventful, as many businesses prefer to avoid getting involved and choose to keep their heads down and not challenge the populists, often regardless of their attitudes towards them. One of the most important lessons which our cases bring out is that business has agency in these processes. It has a choice in terms of seeking to mitigate the

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risks caused by populists as they rise in influence by gaining seats and eventually becoming the government or at least part of a ruling alliance. Clearly those choices are constrained and come with economic and political costs. Those costs are likely to be much lower when populists are not yet in government. It becomes potentially more costly for business to engage in opposition once populists control key levers of power. But when populists are not yet in power, why should business protest about risks arising from populism in its attack on intermediary institutions, in its claims to speak on behalf of the ‘people’ and therefore its efforts to undermine the rule of law and free speech as well as its willingness to stigmatize and scapegoat minorities, including immigrants and asylum seekers from the global South. The cases here show that it is only in exceptional circumstances such as the German historical legacy of Nazism that business is likely to make a pre-emptive effort to stall the progress of populist parties. Indeed, it is more likely that certain businesses will support populists in their early stages because of the benefits which they foresee from their policies, e.g. on lower taxes, deregulation, climate change, or labour migration. Once populists come to power, however, their impact on business becomes much clearer, as we have described earlier, but by this time it is more difficult for business to oppose them even if they want to. The cases in this book, however, reveal that businesses rarely mount highprofile challenges in response to right-wing populism. Their main concern remains sustaining their own business model; if this can be done by being quiet and loyal to populists and thereby minimizing the risks which are generated, then most of the time, business will do this; our cases also show that right-wing populists generally have no problem with capitalism per se or even with versions of neoliberalism that seek to reduce individual and corporate taxes, minimize state regulation, maximize market forces, cut back on the welfare state, privatizing many of its functions, and reinforcing anti-trade union legislation. Not surprisingly, therefore, most businesses remain passive in their response to the rise of rightwing populism no matter what social and economic risks are being generated, hoping that they can live with the uncertainty and potential conflict whilst benefitting from the more business-friendly elements of populism. Only when their interests are directly threatened may they start to resort to more activist tactics even though by then it may well be too late.

Populism into the future? So what is to stop right-wing populist governments becoming more deeply embedded and powerful in shaping a new environment for business? What role might business play in weakening the advance of right-wing populism? There remain electoral barriers in many countries to populists becoming the government or a part of it or a supporting party in the legislature. These partly relate to the electoral

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system, how seats are distributed and how governments are chosen. Even when populists have been successful, they have often struggled to win outright majorities. Trump did not win a majority of the votes in 2016 (and fewer votes than his opponent Hilary Clinton), but he won a clear majority in the electoral college. Although he won almost 12 million more votes in 2020 than four years earlier, he lost the electoral college as clearly as he had won it in 2016. Similarly, the Law and Justice party was lucky to win a majority in the Polish parliament in 2015, partly thanks to the fact that the left coalition narrowly failed to clear the 8% threshold for electoral blocs (Markowski, 2016). In the context of closely fought elections, campaign donations to mainstream parties can still be influential though funding for populists as they get into or close to government can match this, as in the case of Trump. Clearly populists are also increasingly adept at reshaping and removing some of these electoral barriers to their victory once they are in office, by ruthlessly gerrymandering seats, suppressing votes for potential opponents, removing rights of access to broadcasting and news media from the opposition, getting rid of independent oversight of electoral processes, changing rules about terms of office to enable populist leaders to stay in office longer. Similarly, by directing state benefits to their supporters in particular areas and regions and excluding others from this process, they reinforce their support amongst key parts of the electorate, a move which can be rhetorically reinforced by continually making reference to ‘the people’, to ‘my people’ to ‘our shared identity and history’. Elections and electoral institutions are therefore a necessary part of the advance or defeat of populist parties. However, what factors shape the ability of right-wing populists to achieve electoral support or to lose it? We can suggest three answers to this—firstly, the economy, secondly, the ability of political parties and leaders to develop supportive social blocs and thirdly contingent events such as the COVID-19 pandemic or the climate crisis which are unpredictable in their timing and development but potentially significant in their impact on the economy and society.

Economic management and populists The first is ‘the economy, stupid’! Can populists run the economy in a reasonably steady way and maintain economic growth, or will the sheer incoherence of their policies including the combination of high government spending, low taxes and low interest rates that have characterized many populist regimes in the past lead to economic crisis and as a result a loss of electoral support? So far the evidence suggests that populist governments can be associated with good economic performance, at least in the short run, but it also seems likely that a less favourable international environment, e.g. with higher interest rates reflecting higher inflation in many countries, could test such governments more harshly (Born et al.,

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2021; Feldmann and Popa, 2022). The crucial political dilemma is the balance between, on the one hand, supporting the kind of infrastructure and social spending which populists have promised to rectify the inequalities which have fuelled their electoral rise and, on the other hand, maintaining a commitment to low taxes and a limit to overall public spending. This tension may be manageable when there is economic growth due to increasing world demand, low interest rates and the support of the central bank, but when these conditions are threatened or the economy turns down, tensions may increase. The COVID-19 pandemic and its impact on economic activity, supply chains, and household income and consumption has created such crisis conditions. Governments have had to increase spending to support people out of work due to lockdown and the slow and hesitant reopening that has occurred. They have also had to carry the burden of extra health spending. In the short term, this has required substantial increases of direct and indirect taxes as a temporary measure to support businesses and employees as well as the use of central bank powers to prop up the balance sheets of companies (Tooze, 2021). How is this to be financed in the long term, particularly if it is accompanied by populist promises to restore infrastructure and level up regions that have missed out on the fruits of previous economic growth? Does central bank lending lead to increased inflation and with what consequence? Does government debt need to be paid back in the short term necessitating further austerity or cuts in parts of the state budget and rising personal and corporate taxation? If so, how can electoral support amongst the working and lower middle class be sustained? Can right-wing populists manage these contradictory demands whilst maintaining their electoral support? In the UK, this tension and its potential impact on an economy already destabilized and weakened by Brexit led to fissures in the Conservative Party barely two years after they gained a famous electoral victory on the pledge to ‘Get Brexit Done’ and to instigate a ‘levelling up’ agenda. Poll ratings for Johnson and his party dropped dramatically in late 2021 as these debates grew sharper with members of parliament (MPs) from former Labour seats (the socalled Red Wall) particularly concerned not to drop commitments to levelling up, contributing to the eventual resignation of Johnson in 2022. In the US, the Republicans have criticized Biden’s efforts to use state spending to stimulate and renew the US economy, linking this to various forms of critique of COVID-19 policy and vaccination efforts based on ideas of individual freedom. There are therefore multiple economic tensions that are likely to affect the perception of right-wing populists and their competence in running the economy that may lead to change in some countries.

Maintaining legitimacy and electoral support for right-wing populism Secondly and related to this, will the sheer venality, corruption and generally outrageous lying, concealment and threat to free speech, the rule of law and the role

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of science and expertise that typically characterizes right-wing populists in power eventually undermine their support? In the US, this seems to have had little impact on support for Trump amongst Republican voters which remains strong even after the riot at the Capitol on January 6, 2021 and the continued promulgation by Trump and his supporters of the idea of the ‘Great Steal’ in terms of the 2020 Presidential election. Many core Trump supporters appear to accept bizarre conspiracy theories such as Q-Anon and massive electoral fraud with relatively little evidence demonstrating the degree to which trust in the political system has been undermined over the last decades. Also, as Kahl and Wright state, ‘in numerous countries across the globe, illiberal leaders sought to capitalize on the pandemic to strengthen their authority, target opponents, erode civil liberties and manipulate elections’ (Kahl and Wright, 2021: 254). This reflected the urge that populations felt during the pandemic for the state to revert to its traditional role of protecting the people (Gerbaudo, 2021), leading to strong support initially for government action over COVID-19. To take some of the cases referenced by Kahl and Wright, in the Philippines, Duterte was given new powers by the Congress to undertake unilateral actions in response to the pandemic. In India, Modi used emergency powers to marginalize opposition, particularly focusing on Muslims and accusing them of being ‘super spreaders’. Orba´n was granted new powers to suspend existing laws and rule by decree. These kinds of challenges can be exploited in other ways by populist leaders, as the Covid-pandemic contributed to the agenda of closing borders, blaming foreigners for spreading the virus (this is also why Trump liked to refer to it as the ‘Chinese virus’, a strategy which was widely seen to have stoked anti-Asian racism) and strengthening nationalist sentiment in relation to vaccines and other issues (Bieber 2022; Singh 2022). Right-wing populists outside government can also freely participate in protest activity against measures that are unpopular with parts of the population, such as lockdowns, compulsory mask wearing or restrictions on hospitality, but populists in office generally vacillate, with Trump challenging health advice on many issues, whilst ultimately still introducing some restrictions and vaccine initiatives, but such issues can also generate controversy and division within populist movements. There is some evidence that this initial support which was used by populists in government to strengthen their position has been weakening because it has often gone alongside confused advice as described previously in the case of Trump, together with relative inaction concerning behavioural measures to restrict the transmission of the disease itself. This reflects the lack of trust in science and expertise that permeates right-wing populism. In the UK, polling support for the Johnson government was weakened by a range of sleaze allegations arising in late 2021, also linked to a failure of the government to take decisions at the right time and to follow its own COVID-19 rules whilst at the same time ensuring that its supporters won massive contracts to supply services needed in fighting the pandemic (Calvert and Arbuthnot, 2021). After a long period where Johnson seemed

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relatively invulnerable to this critique, polls in early 2022 showed that he and his party were losing support. However, unlike Trump, Johnson exists in a context less driven by conspiracy theories and scientific scepticism and he therefore sought to retain legitimacy in the pandemic crisis by surrounding himself with scientific advice, even if it was used intermittently and at times ignored. Similarly, Johnson, after many years as a climate sceptic, found it advantageous to his vision of Global Britain to take advantage of the fact that the latest UN Conference of the Parties (COP) 26 round on climate change was to take place in the UK in 2021 and to attempt to place himself and the UK at the centre of this effort even whilst many of his party were looking to slow down policies designed to achieve significant carbon cuts over the next decades. This leads into the question of whether populist movements destroy themselves as these inherent tensions, e.g. between economic liberals and economic nationalists, between climate sceptics and climate change advocates, between overt racists and more moderate voices on ‘the immigration problem’ emerge. This can be particularly intense where questions of succession become pressing. For example, the split in the Finns Party in 2017 was partly prompted by the end of Timo Soini’s long tenure as leader of the party, which led to a sharper confrontation between the moderate and radical wings of the party at the party conference of 2017. When the Finns Party’s coalition partners in government also declared that they were not willing to collaborate with the party after the radical wing’s candidate Jussi Halla-aho had been elected party leader, the party split into two, with the moderate splinter group, the Blue Reform Party, retaining the cabinet positions and the core Finns Party moving into opposition. In this case support for the Blue Reform party quickly fizzled out, whereas this split did not ultimately weaken popular support for the Finns Party, but such divisions could pose a serious threat to populist movements.

Contingent events and the response of right-wing populism Complicating these issues is the effect of ‘events, dear boy’ as the UK Prime Minister Macmillan famously expressed in an interview about the difficulties of being in politics (Pilkington, 1998). Events which may be predictable but uncertain in their timing and in the scale of their consequences could test the competence of governments and the solidity of their electoral support. Events often reveal longstanding weaknesses in the political system and state capacity even if they arrive with seemingly little warning. In the short-term, the most important event cutting across the rise of populism in recent years has been the COVID-19 pandemic. As various studies have discussed, at this stage there is insufficient evidence to draw a rigorous comparison between the effectiveness of different countries’ approaches to the pandemic, and in particular to assess whether the dominance of a right-wing

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populist government has led to more cases, hospitalizations and deaths than in countries run by mainstream parties (see e.g. Spiegelhalter and Masters, 2021). Nevertheless, some of the most striking examples of failures to understand the nature of the pandemic and to respond to it using scientific research and advice do appear to have occurred in countries run by right-wing populists. Most obviously, in the US, Trump continually undermined the scientists with his suggestions about cures and treatment as well as deflecting all responsibility for dealing with the everyday practicalities of the pandemic to the states and to the Fed. Even after he had supported funding a massive effort to create vaccines, he continued to sow confusion by supporting the growing anti-vaxxer movement in the US. He also ignored advice against mass gatherings and the use of masks to prevent infections as he launched his campaign for a second term. As has been previously stated, however, this seemed to have little effect on his electoral support. In Brazil, Bolsonaro similarly sought to belittle the disease and the efforts being made to change behaviours to reduce infections even as Brazil’s death rates grew. The Brazilian government was also slow to buy vaccines (despite its scientists being closely involved with developing the Astra Zeneca vaccine) and slow to roll out the vaccination process. Originally in mid-2020 Brazil had contracted to buy vaccines from China and Russia but under pressure to support Trump’s anti-China policy, Bolsonaro reneged on this commitment. However, by early 2021 when other countries were starting to roll out the vaccine programme, Brazil urgently had to find sources, returning to the Chinese vaccine and also securing supplies of Astra Zeneca as well as the Russian Sputnik vaccine (Kahl and Wright, 2021). However, these were not the only examples of countries struggling to develop vaccination purchasing and implementation plans. For some months in late 2020 and early 2021, the EU was slow in developing an appropriate plan reflecting some problems with its complex process of decision-making (Kahl and Wright, 2021, ch. 12: see also Tooze, 2021, ch. 12). In summary, therefore, the effects of the viability and effectiveness of populist government in the face of the pandemic seem to vary, as some have strengthened their position whilst others have experienced weakening support. More long-term and cumulative in terms of its impact on politics is the issue of climate change though here again immediate events have been important. Extreme weather and associated wildfires, floods, the melting of ice caps and glaciers, the destruction of animal habitats, and the loss of associated species have grown in scale and scope over the last decade. Right-wing populists have mainly been climate sceptics. This partly reflects the fact that business support for these movements has mostly come from the extractive sector, particularly oil interests determined to slow down the switch away from fossil fuels. Mainstream parties have moved closer to fully accepting scientific evidence about the reality of destructive climate change. More businesses in other sectors have begun to appreciate the new opportunities in terms of renewable energy infrastructure from

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solar panels, wind farms, nuclear power and the development of electric vehicles, smart homes,and other infrastructural changes necessary to reach Net Zero, and the central role of government support in establishing these sectors. Over the last decade, climate scepticism amongst conservative mainstream parties has therefore declined. Instead, it has moved to right-wing populist parties where a broader dismissal of experts and expertise in favour of the political musings of the populist leaders provides a cover for the self-interest of climate change deniers and to reinforce exclusionary populist agendas (Milman, 2021). Even within these groups, however, there has been some change, and the emphasis has started to shift from the question of ‘is there climate change induced by human activity’ to ‘how to mitigate climate change’, in the process becoming an argument about timescales and processes (see Chapter 12 by Gomes and Bohm). For example, Modi in India agreed at COP 26 to provide a timetable for reducing the reliance on coal, and most other populist governments went along with the broad conclusions of COP whilst dragging their heels on timescales and targets. This reflects a widening acceptance amongst the electorate given the natural catastrophe events that have occurred over the last decade in all parts of the world that action needs to be taken. Therefore, populists in most countries (though not the US, where climate denial remains strong) have learnt to play down climate denial and instead speak the language of mitigation and timescales. The key question is whether right-wing populist governments can ride out these storms and use them to their advantage—and, if so, how—by deepening exclusionary tactics and divisions within society or by converging on mainstream positions, as many expected them to do once faced with the realities of governing. This was also the expectation of some of their coalition partners in countries where they participated in coalition governments, like Norway, Finland, and Estonia and where the other parties felt that including the populists in coalition governments would be essential to attenuating their agendas and cutting them down to size, as they would have to start taking responsibility for inevitable and not always popular decisions and not just boost their vote shares by shouting from the sidelines. Both strategies come with risks for populists. Doubling down on exclusionary tactics could potentially lead to a backlash, especially if such policies come to be seen as erratic or incompetent, whereas gravitating towards mainstream positions may eliminate the raison d’être for populist parties in the first place and cause them to lose their core voters. Or will traditional Conservative and Social Democratic parties or newer Green parties find a more effective way of responding and succeed in strengthening key aspects of liberal democracy whilst renewing the commitment and involvement of the electorate into seeking new solutions for a new set of crises? If so, then populists may recede to the margins of contemporary politics. Finally in terms of this book, what role will business play in these future scenarios? As Mizruchi (2013; see also Mizuchi and Gălan, Chapter 2 in this volume) identified, under neoliberalism businesses abdicated their more comprehensive

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role in shaping the future direction of society some time ago, preferring in the main to use their power to extract further profits by persuading governments to construct more markets and more systems of rule that allow for employer influence. As a result, they have offered little positive vision for the future other than continued technological innovation, employment restructuring, and consumption. What will business do now if crises, partly driven by populism, deepen in their intensity— will they remain on the sidelines? Tooze (2021), for example, points out that by the 2020 presidential election, US big business was extremely concerned about the damage a second Trump term could do. He argues that the appeals which US business were making to Trump in late 2020 about the pandemic and other aspects of the increasing unstable environment in the US were not heeded and this ‘only served to highlight the gulf that separated them from the incumbent in the White House, his supporters in the electorate and the Trumpian wing of the Republican party’ (Tooze, 2021: 229). The impact of the Capitol riots only increased this gulf. In the light of this, will US business self-interestedly support conservative and right-wing populists or will they take on the challenge of building in conjunction with labour and civil society groups a new form of sustainable capitalism? These are choices that business would prefer to avoid making but abdicating such responsibility makes it easier for right-wing populists to set the agenda and gain power, deepening chaos and instability as described in the chapters in this book. Understanding more carefully the risks of the populist rise is therefore an urgent task for academic researchers, businesses, and policy makers. The comparative perspective developed in this book is a first step towards a clearer understanding of these challenges.

References Bale, T. and Rovira Kaltwasser, C.(eds.) (2021) Riding the Populist Wave: Europe’s Mainstream Right. Cambridge: Cambridge University Press. Bieber, F. (2022) Global nationalism in times of the COVID-19 pandemic. Nationalities Papers, 50(1): 13–25. Born, B., Mu¨ller, G., Schularick, M., and Sedla´cˇek, P. (2021) The macroeconomic impact of Trump. Policy Studies, 42(5-6): 580–591. Calvert, J. and Arbuthnot, G. (2021) Failures of State: The Inside Story of Britain’s Battle with Coronavirus London: Mudlark. Dixit, R. K. and Pindyck, R. S. (1994) Investment under Uncertainty Princeton, NJ: Princeton University Press. De Vries, C. and Hobolt, S.B. (2020) Political Entrepreneurs: The Rise of Challenger Parties in Europe Princeton, NJ: Princeton University Press. Feldmann, M. and Morgan, G. (2021) Brexit and British business elites: Business power and noisy politics. Politics and Society, 49(1): 107–131. Feldmann, M. and Morgan, G. (2022) Business elites and populism: Understanding business responses. New Political Economy. 27(2): 347–359.

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Feldmann, M. and Popa, M. (2022), Populism and economic policy: Lessons from Central and Eastern Europe. Post-Communist Economies, 34(2): 219–245. doi:10.1017/nps.2021.36. Gerbaudo, P. (2021) The Great Recoil: Politics after Populism and the Pandemic London: Verso. Hacker, J.S. and Pierson, P. (2020) Let them Eat Tweets: How the Right Rules in an Age of Extreme Inequality London: Liveright. Kahl, C. and Wright, T. (2021) Aftershocks: Pandemic Politics and the End of the Old International Order London: St. Martin’s Press. Markowski (2016) The Polish parliamentary election of 2015: A free and fair election that results in unfair political consequences. West European Politics 39(6): 1311–1322. Milman, O. (2021) Climate denial is waning on the right. What’s replacing it might be just as scary. The Guardian, 21 November. Mizruchi, M. (2013) The Fracturing of the American Corporate Elite. Cambridge: Harvard University Press. Moffitt, B. (2016) The Global Rise of Populism. Stanford: Stanford University Press. Moffitt, B. (2020) Populism. Cambridge: Polity Press. Mudde, C. (2004) The populist zeitgeist. Government and Opposition, 39(4): 541–563. Mudde, C. (2019) The Far Right Today. Cambridge: Polity Press. Noury, A. and Roland, G. (2020) Identity politics and populism in Europe. Annual Review of Political Science, 23: 421–439. Pilkington, C. (1998) Issues in British Politics. Basingstoke: Palgrave Macmillan. Prentoulis, M. (2021) Left Populism in Europe. London: Pluto Press. Rhodes, C. (2021) Woke Capitalism. Bristol: Bristol University Press. Singh, P. (2022) How exclusionary nationalism has made the world socially sicker from COVID-19. Nationalities Papers, 50(1): 104–117. Spiegelhalter, D. and Masters, A. (2021) Covid by Numbers: Making Sense of the Pandemic with Data. London: Pelican Books. Stoker, G. (2019) Can the governance paradigm survive the rise of populism? Policy & Politics, 47(1): 3–18. Szelényi, I. (2016) Weber’s theory of domination and post-communist capitalisms. Theory and Society, 45: 1–24. Tamames, J. (2020) For the People: Left Populism in Spain and the US. London: Lawrence and Wishart. Tooze, A. (2021) Shutdown: How COVID Shook the World’s Economy. London: Allen Lane. Weyland, K. (2017) Populism: A strategic-political approach. In Rovira Kaltwasser, C., Taggart, P., Ochoa Espejo, P. and Ostiguy, P. (eds.) (2017) The Oxford Handbook of Populism. Oxford: Oxford University Press, pp. 48–72.

Index A Aam Aadmi Party (AAP) 188, 201 Accumulative State in Hungary 180, 284 agribusiness 227, 237–8, 253 Alliance for the Unity of Romanians (AUR) 175 Alternative fu¨r Deutschland (Alternative for Germany) 26, 257, 270–1, 280–1, 283, 353 amfori, Trade with Purpose, Brussels 310, 317–18, 322 Aquino, Corazon, administration 207, 211–13, 215, 217 Arroyo, Gloria Macapagal, administration 207, 213, 218, 221 Austria 22, 99, 133, 268, 283 authoritarian capitalism 180, 284, 287, 290, 300, 302, 306 B Berlusconi, Silvio 9, 118, 120, 121, 122, 327 Berman, Sheri 7–9, 11, 31, 333, 338 Bharatiya Janata Party (BJP) 181–2, 184, 187, 189, 191, 196–8 Biden, Joe 74, 246, 254, 257, 325 Bolsonaro, Jair 9, 15, 17, 19–20, 25, 28–9, 53, 223, 224, 228–38, 239, 240, 242, 245, 252–3, 256, 258–9, 260, 333, 361 Bolsonaro’s campaign 225, 229, 236 Bolsonaro’s populism 225, 230 Brazilian Development Bank (BNDES) 233, 235 Brexit 17–18, 24, 27, 55–6, 79–80, 82–97, 263–5, 282–3, 309–11, 313–15, 319, 321, 323–5, 329–31, 338–41, 346–7, 354 Brexit and British business elites 32, 57, 96, 240, 282, 304, 324, 363 Brexit Negotiations 80, 88, 323 Brexit Party 82, 93, 329 Brexit referendum 15, 79, 82, 90, 95, 263, 269, 278 Brexiteers 84–6, 92–3, 310 Buffett, Warren 56, 354 Bulgaria 138–9, 141, 173, 177, 179, 275 business associations 26–7, 89, 91, 99–101, 105–6, 108–14, 130, 133, 187, 203, 205, 225, 264–74, 276–82, 284, 287, 293, 321 Danish 100–1, 110, 113–14

German 270–2, 280 Swiss 266, 272, 273–5, 278, 281 C Canovan, Margaret 5, 14, 32, 40, 57 carbon markets 246, 255–6, 258–9, 262 central bank, independent 8, 13, 22, 346, 348 Cha´vez, Hugo 9 chemicals 310, 315, 317 China 17, 46–7, 68–70, 72–5, 77, 167, 253–5, 257, 305–6, 312–13, 325 climate 245, 255, 257, 260–1, 285 climate crisis 247, 253, 256, 258–9, 357 climate denial 246–8, 250–1, 254–6, 257–8, 260, 362, 364 climate change governance (CCG) 245, 248, 251–2, 254, 256–8 collective bargaining 100, 110, 115, 151, 162, 175, 291, 292, 294, 306 Committee on Foreign Investment in the United States (CFIUS) 71–2, 75 Confederation of British Industry (CBI) 83–7, 90, 96, 264, 278, 315 Confederation of Indian Industry (CII) 186–7, 190 Conference of Parties on Climate, United Nations (COP) 252, 360, 362 Confindustria 121, 128–31, 133–6 Conservative Party, British 80, 82–4, 87, 358 corporate political activity (CPA) 287, 289–90, 295, 300, 305, 308, 319, 321, 324 corporate social responsibility (CSR) 13, 287, 305 corruption 138–9, 141, 143, 144, 152, 155, 187, 190, 197, 224, 227, 231–3, 355, 358 Covid-19 pandemic 119, 130, 188, 190, 196, 216, 237–8, 240, 357–8, 360, 363 crony capitalism 65, 157, 192, 205, 209, 211 Culpepper, Pepper 24, 26, 32, 55, 57, 94, 96, 237, 239, 265–6, 282, 285, 287 D Danish Employers 99, 106, 116 Danish People’s Party (DPP) 22, 26, 98–9, 101–16 democracy, illiberal 30, 147, 157

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deregulation 25, 48, 175, 224, 227, 235, 238, 281, 356 derivatives 91, 93, 247 Draghi, Mario 131–2 Draghi governments 135 Duterte, Rodrigo 20–1, 25, 202–3, 205–6, 209–13, 215, 217, 219, 221, 333, 359 Duterte administration 203, 205–6, 209–11, 213–15, 217–18

financial services 25, 80, 84, 86, 91, 93, 153 Finns Party 22, 360 Five-star Movement 133–4 Foreign Direct Investment (FDI) 15–16, 71–5, 91, 139, 212, 288, 293–4, 297, 302, 306, 350, 353 Forza Italia 118, 120 Freedom Party of Austria (FPÖ) 267–8 Front National (FN) 102, 278–9

E economic nationalism 59–62, 64–6, 69, 73–6, 153, 163, 179 militarist variant of economic nationalism 73–4 economic patriotism 75, 145, 147–8, 155–7, 179–80 Economiesuisse 274–8 elites economic 43, 114, 123, 156, 273 extractive businesses 249–50, 251, 258 financial 41, 227, 236, 258 Emissions Trading Schemes (ETSs) 246, 255 Estonia 22, 177, 362 Estrada, Joseph 203–6, 209, 217, 221 European Central Bank (ECB) 92, 131–2 European Commission 317–18, 322 European Court of Justice (ECJ) 83–4 European Economic Area (EEA) 83, 273–4, 276 European elections 82, 93, 114, 129, 134, 279 European Federation of Pharmaceutical Industries and Associations (EFPIA) 314–15, 322, 324 European Free Trade Association (EFTA) 83 Eurozone 91, 121, 123, 241 Exit 23–5, 27–33, 60, 82, 84, 86, 88–91, 93–6, 98, 105, 115, 224, 253, 265, 288, 300, 305, 309, 334, 345, 352–3, 355 Exit, partial 24–5, 89–90, 93, 95 Exit, temporary 353 ExxonMobil 248, 258

G Germany 20, 22, 26, 55, 257, 259–60, 265–6, 270–1, 280–1, 283, 353 German business mobilization 57, 179, 283, 325, 339 German business responses to populism 33, 316 global production networks (GPNs) 139, 324 global value chains (GVCs) 164, 167, 224, 294, 309, 323–5 governance network governance 13, 16, 18, 182, 196, 346–7 populist governance 290, 292–3 government populist governments 18, 20, 23, 27, 28, 29–30, 126–7, 132, 148, 153, 268, 348, 351, 353, 356–7, 361–2 Greenpeace 248–50, 260 growth regimes 158, 163, 165–6 Guedes, Paulo 17, 21, 224–5, 229–38, 348 Gurgaon 197–200

F Farage, Nigel 82, 327 Federation of Indian Chambers of Commerce and Industry (FICCI) 186–7 Federation of Industries (FIESP, Sao Paulo, Brazil)) 224 FIDESZ 145, 149–50, 160–2, 164, 166–71, 290 financialization 159, 226, 239–40, 246–7, 258, 327, 331, 336–7, 339 financial markets 16, 25, 91, 129, 192, 224, 230, 247, 258, 267 financial sector 92–5, 99, 159, 238, 267, 353

H Hacker, Jacob 18–19, 33, 236, 240, 327, 339, 349, 364 Henisz, Witold 288, 305 Hillman, Amy 287, 289, 305, 308, 321, 324 Hirschman, A. O. 5, 23, 25, 27, 33, 60, 89, 96, 98, 115, 288 Hopkin, Jonathan 8, 33, 118, 120, 135 Hungary 4, 20–2, 138–49, 152–7, 159–60, 162–74, 176–80, 284, 286, 290–7, 300, 302–6, 352, 355 FDI-led development model in Hungary 180 governments 16, 140, 146–7, 150–1, 154–5 I illiberalism 160, 180 immigrants 18–19, 41, 44–5, 52, 56, 59, 64, 108–9, 115, 119, 271, 273, 279 immigration 6–7, 44, 46, 125, 130, 132, 266, 269, 275, 280, 347, 350–1, 354

INDE X India 10, 12, 15, 20, 181–8, 190–201, 223, 227, 255, 259, 349, 359, 362 business 182–3, 186, 195–6 National Congress Party 184, 187–8, 198 politics 181–2, 188, 195, 200 interest groups 101, 120, 130, 132–3, 265, 276, 282, 287, 290, 295, 303 interest rates 22, 121, 170, 233, 357 interest representation 285–6, 288–306 Interest Representation Council, Hungary (IRC) 291–2 Intergovernmental Panel on Climate Change (IPCC) 249, 260 Ireland 31, 177, 304 Italy 10, 22, 118–36, 327, 349, 355 J Johnson, Boris 16, 18, 23–4, 27, 28, 33, 76, 79, 87, 168, 170, 178, 358–60, 359 K Kitschelt, Herbert 122, 267–8, 283 L labour labour markets 89, 108–9, 136, 151, 168, 183, 230, 271, 273 labour migration 15, 30, 98, 105, 110–11, 113, 356 labour supply 98–9, 101, 105, 108, 110–14, 351 organized 47, 53–4, 56 Laclau, Ernesto 5–6, 33, 225, 240 left-wing populism 6–7, 9–10, 13, 34, 161, 180, 206, 347, 364 Le Pen, Marine 9, 279, 282 Lighthizer, Robert 67–9, 71, 74, 76 lobbying 4, 8, 16, 29, 46, 143, 187, 237, 266, 290, 293, 295–8, 301, 306, 309, 317, 320 loyalty 23, 27–31, 33, 60, 62, 64–5, 96, 98, 105, 113, 115, 182, 188–9, 193, 225–6, 235, 238, 265, 281, 296, 298–300, 305, 345, 352, 355 loyalty, explicit 27–9, 65, 68, 88, 94–5, 105, 193, 238, 265, 355 loyalty, implicit 27, 88, 94, 98–9, 105–6, 113, 193, 197, 208, 218, 265, 320 Lula, (Luiz Inacio Lula da Silva) 224, 227, 236, 350 M Makati Business Club (MBC) 204–5, 209, 213–14, 218 management 33, 69, 143, 152, 220, 273, 286–7, 305

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managers 73, 123–5, 141, 159, 186, 209, 276, 286–7 media, mass 145, 327, 332, 334 Medicare 45, 49, 51 migrants 20, 98, 102, 107–10, 113–14, 127 migrant workers 101, 108, 110–12 militarists 61, 66, 69–74 minimum wage 111, 126, 168, 291–2, 305 mobilization, populist 16, 26, 40, 57, 79, 200, 350 Modi, Narendra 9, 16, 20, 25, 29, 184–5, 188–90, 192–3, 196, 198–200, 354, 359, 362 Modi government’s illiberalism 196 Modi’s personalist politics 192 Moffitt, Benjamin 5, 8, 33, 61, 77, 81, 97, 332, 340, 346, 364 Monti, Mario 135 Mudde, Cas 4, 6, 14, 33–4, 98, 102, 113, 116, 120, 126, 184, 223, 225, 235–6, 241, 250–1, 261, 270, 328, 347, 364 Mu¨ller, Jan Werner 5–6, 14, 31, 34, 40, 58, 363 N National Competitive Council (NCC) 214–15, 220 National Economic and Development Authority (NEDA) 204, 206, 213, 217, 221 National Economic and Social Council (NESC) 291–2 nationalism 31, 39, 48, 63, 75, 77, 155, 179, 197, 330, 349 national sovereignty 7, 13, 68, 147, 250–2, 254, 258 Navarro, Pete 71–3, 77 neoliberalism 7, 12, 177–8, 229, 234–5, 237–9, 242, 254, 258, 263, 348, 351, 356 noisy politics 23, 25–30, 32–3, 55, 57, 83, 94, 96, 224, 226, 235, 238, 240, 290 No¨lke, Andreas 139, 156, 241 non-governmental organizations (NGOs) 127, 149, 161, 307–8, 315, 321 nonmarket corporate strategies 286–7, 290–1, 295, 301–3, 324 North American Free Trade Agreement (NAFTA) 47, 312 Northern League 118, 120, 132–5 O Obama, Barack 20, 54, 261 Obamacare 49–50 offshore 330–1, 334–7 Orba´n, Viktor, government 24, 174, 179, 291, 294, 353 organized business in Denmark 99 Ostiguy, Pierre 32–5, 242, 261, 364

368

INDE X

P pandemic 15, 33, 88, 130–1, 175, 216, 303, 339, 359–61, 363–4 parties, political 8, 20, 101, 131, 155, 160, 170, 184, 194, 201, 203–4 new 8, 82, 101, 348 populist parties 22, 81, 98, 119–20, 124, 128, 137, 347–8, 353, 355–7, 362 social democratic parties 12, 106, 113, 116, 124, 229, 348, 362 people, the will of the 8, 14, 225, 285, 327, 329, 346 Peronism 162 pharmaceuticals 89, 183, 310, 322 Philippines 9–10, 12, 15, 21, 34, 183, 186, 202, 204–22, 348–9, 359 Pierson, Paul 18–19, 33–4, 236, 240, 327–8, 339, 349, 364 Poland 31, 33–4, 39, 138, 141–3, 145–50, 153–5, 160, 164, 179–80, 346, 350, 355 Polish governments 149, 154 political strategy, corporate 261, 298, 302 politics, celebrity 332, 339, 341 populist politics 80, 94, 119, 181–2, 184, 187, 194–6, 285, 316, 352 populist, ideas 99, 105, 181 populist, ideologies 122–3, 194–5 populist language 43, 347 populist leadership 200, 287 populist mobilization 16, 26, 40, 57, 79, 200, 350 populist policies 110, 308, 311, 347 populist rhetoric 40, 56, 81, 147, 213, 217–18, 269, 291 populists, regional 184, 195 populist strategies 185, 188, 223, 236 populist trade policies 308, 319–20, 322 privatization 141, 143, 150, 154–5, 157, 177, 182–3, 204, 234, 237, 334 professions 52, 332, 339, 354 programmes, social 43, 51, 279 Q quiet politics 13, 16, 18, 23, 26, 33, 55, 83, 89, 91, 94–5, 115, 164, 167, 224–5, 237–8, 265–6, 286, 290, 293, 295–6 R Rassemblement National (RN) 278 regulation 13, 51, 256, 274, 281, 329, 336 religion 7, 9–10, 15, 17, 349 rents 141, 144, 151, 162, 176, 208, 289 rent-seeking business model 154 Republican Party 40, 43, 48, 53–5, 65, 248, 363

Retail sector businesses 21, 153, 163, 165–6, 176, 208, 293 risk, political 13, 179, 263, 287–8, 293, 301–4, 306 Romania 12, 138–9, 141, 145, 159–60, 162–8, 171–4, 176–80, 275 Rousseff, Dilma 224, 227–8, 232, 239, 350 Rovira Kaltwasser, Cristobal 4–6, 14, 184, 223, 225, 235–6, 250–1, 270, 328 rule of law 6, 13–14, 148–9, 171, 220, 304, 350, 356, 358 rules of origin (RoO) 84, 312, 325 S Salvini, Matteo 122, 127, 129–31, 134–6 science and populism 31, 39, 52, 156, 245, 249, 258, 276, 359 Slovakia 138, 142, 160, 170 small business owners 123, 125, 130, 132, 265, 268–9 social bloc 158–60, 162–4, 166, 168, 172–3, 175, 353 Spain 12, 34, 135–6, 180, 364 state-owned enterprises (SOEs) 142–4, 151–2, 234, 299 strategy, nonmarket corporate 286–7, 290–1, 295, 301–3, 324 supply chains 16, 24, 29–30, 70–1, 85, 89–91, 95, 298, 314, 319, 358 Sweden 99, 115, 133, 176, 283 Sweden Democrats 268 Swiss People’s Party (SVP) 267, 272–3, 281 Switzerland 26, 57, 83, 265–8, 272–5, 277, 280–1, 283, 353 businesses 26, 273–4, 281 T Taggart, Paul A. 32–5, 119, 136, 242, 261, 364 tariffs 15, 45–7, 52, 62, 65, 67–9, 74, 80, 84–5, 89, 309–13, 346–7 taxes 19, 47, 49–50, 62, 64–5, 103, 107, 163–4, 172–5, 288, 291–2, 334–5, 338–9 technocrats 213, 218, 234, 237 telecommunications 183–4, 186 Tooze, Adam 18, 34, 358, 361, 363–4 Tormey, Simon 6, 34–5, 332, 340 trade free 10, 44, 56, 98–100, 105, 114, 226, 269, 318 frictionless 84–5, 89 Trade and Cooperation Agreement (TCA) 17, 79, 87–8, 353 trade dependent firms (TDFs) 269, 277, 309, 316–18, 320–1, 324 Trades Union Congress (TUC) 86–7, 315

INDE X trade unions 16, 87, 100–1, 109–11, 113–15, 130–1, 176, 291–2, 307–8, 336, 347 trading system, global 314, 320 Trump, Donald 40, 42–4, 49, 52, 56–7, 59, 241, 245, 327, 329, 332–3, 338, 340–1 Trump administration 24, 49, 51, 60, 64, 66–7, 68, 70, 72–3, 75, 310–11, 316–17, 320–1 Trump’s populism 59–60, 75 Trump’s rhetoric 39–40, 60 Tugal, Cihan 7–9, 11, 30, 35 typology of business responses 308, 320 U United Kingdom Independence Party (UKIP) 81–2, 93 United States-Mexico-Canada Agreement (USMCA) 68–9, 309, 312, 324 United States Trade Representative (USTR) 66–8, 76–7, 312–13, 325 Urbinati, Nadia 5, 9, 35 V varieties of capitalism (VoC) 139, 155–7, 241, 283, 285 voice 4–5, 23–5, 27, 31–3, 72, 80–1, 83, 88, 96, 98, 226, 281–2, 308, 327, 352–3

369

voice and loyalty 23, 31, 33, 96 voice, business 84, 187, 235, 285, 293 voice, loud 25–6, 29, 61, 69, 88, 94–5, 98–9, 105, 110–11, 113, 208, 265, 272, 280, 308, 352–3 voice, soft 23, 26, 29, 65, 83, 88, 91, 94–5, 98, 187, 193, 238, 265, 272, 308, 354–5 voice strategies 224, 309, 320 W wealth 6, 18, 63, 68, 70, 93, 209–10, 267, 274, 326–30, 335–6 Weber, Max 62, 65, 78, 327, 342 welfare chauvinism 7, 27, 98, 101–2, 108, 115, 125, 161, 280 welfare state retrenchment 98, 105, 108 Weyland, Kurt 6, 35, 61, 75, 78, 184, 196, 201, 225, 242, 286, 306, 349, 364 World Bank 100, 117, 173, 182, 213, 222, 233 World Trade Organization (WTO) 13, 15, 69, 307, 309–11, 313–14, 316–21, 323 threat to WTO 309, 317–18, 320 Z Zald, M. 236–7, 242