The economics of pandemics and the future course of populism

By İbrahim Öztürk The University of Duisburg-Essen & European Center for Populism Studies | June 5, 2023


As a dangerous external shock to the global economic and political system, the COVID-19 pandemic arrived at a stage when the negative repercussions of the Global Recession (GR) had not fully subsided, exacerbating existing problems, such as unemployment, loss of income, and inequality, with further political and social repercussions. With the advent of other “horses of the apocalypse” – such as climate change, famine, migration, terrorism, and state failure – the current pandemic could emerge as an endemic part of life worldwide through new mutations.

This article strives to explore the effect of the pandemic on the performance of populists either in government or opposition in the post-pandemic era. Taken together, widespread uncertainties, confusions, fears, and stresses are the main push factors behind populism. Nevertheless, populist rhetoric offers untested (and sometimes) romantic promises to counter the actual social, political, and economic traumas and shocks, referring to an unknown, not yet born “alternative” system. Therefore, even if it is rather more straightforward for populists to come to power with the help of such political-economic conjunctures, they are more likely to experience difficulty fulfilling the expectations their populist rhetoric has caused. The real danger is that, despite failing to fulfil their promises, they tend to employ increasingly authoritarian measures to silence society so as to stay in power by gradually changing the system, manipulating citizens through controlling media, and undermining fundamental institutions.

This article strives to predict whether the global populist environment created by the GR will turn against populist governments during and after the Global Lockdown (GL) of the pandemic. However, the analysis of the performance of mainstream and populist parties during the COVID-19 pandemic is quite a challenging task as it is complicated by several other factors such as the ongoing global power shift and the accompanying national, regional and global geopolitical conflicts. In addition, countries’ overall political and economic situations just before the pandemic crisis have also been immensely influential on their performance. All these parameters have brought additional evaluation criteria other than their actual economic performance during the pandemic and ended up prolonging their lifespan.

The GR has led to the regression of the supposedly successful globalization and liberal world order, which has been going on since the early 2000s, and this has triggered a wave of global populism. However, the GL is an equally important test case, not only for the so-called establishment parties, but also for populist governments which have come into power since the GR. Therefore, as well as their performance during the pandemic, the adverse effects of the measures taken like inflation, accumulating national debts, disruptions in global value chains (GVCs), and deterioration in income distribution might also have undermined the perceived and measured performances of parties from both sides during the pandemic. The corollary is that the governments that failed during the pandemic most probably replaced one another, provided that other game-changing developments did not come to the fore. That also means that even if populism declines cyclically, it might stay with us in a global conjuncture where ruptures in other fault lines in the world system continue. While populism influences all these processes, it also feeds on them. In this symbiosis, recently evolving hybrid regimes, by rejecting the Liberal Multilateral Order (LMLO) and globalization, link populism to undermining existing norms, such as participatory democracy, the market economy, free trade, and merit-based, autonomous and professional institutions. The fear is that, rather than motivating the global system’s desired “creative destruction” process, populist tendencies might add further adverse complications to the ongoing economic disruptions and dislocations.

The structure of the paper is as follows: After contextualizing the pandemic and populism literature in the next section, the third section focuses on economic crises, pandemic contagion, and populist reactions across the board. The fourth section discusses the repercussions of the crisis on the future course of populism. The article ends with concluding remarks and policy recommendations in the final section.

Linking Pandemics to the Populism Literature

The three most-widely used aspects of populism involve cultural (identity), anti-establishment (with the people, for the people), socio-economic (inequality, poverty), as well as anti-globalist dimensions. These are applicable to the two most crucial global crises of the GR and the GL. Although they broke out in the US mortgage sector and in a laboratory in Wuhan in China, respectively, they rapidly crossed national borders and caused deep suffering to billions. That exposed the problems of over-dependence and over-connectivity that came with hyper-globalization and triggered a renewed debate on the so-called “corrupt elites” and comprador bourgeoisie globally, who expand their interests against the “silent majority.” In referring to the failures of local and global incumbent regimes in both crises, particularly, and the global challenges, more generally, populists rely on over-simplistic and fast-track solutions, but also, intending to cultivate further legitimacy, they employ quite divisive rhetoric.

However, despite its rising popularity in academia, the concept of populism does not have a rigorous, that is, “mutually exclusive, collectively exhaustive” definition or a scientifically coherent tool of analysis and theoretical framework. Instead, with a hermeneutic approach, academic discourse on populism relies on a highly subjective interpretation and “mind or intention reading.” For that reason, the competing political-ideological doctrines from far-right to -left, such as socialism, liberalism, and nativism, employ it quite ambiguously. Taken within these limitations, the following four characteristics of populists, primarily in a broader economic context, can be mentioned.

First, at the broadest level, populists divide society on a moral ground into homogeneous versus antagonistic groups to be able to capture and rule it. The provocation of existing social and political fault lines to separate, fragment, and polarize society results in “us vs. them” , “silent majority vs. élite”, and “nativists vs. foreigners.” Accordingly, on paper, “the sovereignty of pure people” has been glorified against the so-called “self-interested and corrupt elite”, whose governance, is argued to affect the former adversely (Moffitt, B., 2016; Mudde, C.,2004; Norris, P., Inglehart, R. 2019; Kaltwasser, R. C., 2018).

Second, as it allows political entrepreneurs to take advantage of ongoing fault lines, pre-existing crises, and dissatisfaction with the status quo, populists adapt an anti-globalist and anti-elitist perspective and, therefore, try to derive their legitimacy from the reasonable demands and concerns of those who see themselves as forgotten, left behind, and the victims of the process. Many experts like Acemoglu (2011), Acharya (2017, 2018), Mearsheimer (2019), and Rodrik (2018, 2020) have well documented the deficiencies of the existing global political-economic architecture that led citizens worldwide not only to question its legitimacy but also increased demand for populist policies. Thus, the criticisms brought to the global elites, who control finance and multinational capital: unsuccessful policies and their outcomes that come down to anti-immigration. The globalization institutions included in such criticism are the UN, the IMF, WTO, and the EU. In other words, the criticism of the incumbent regimes by populist demagogues not only undermines the post-war global architecture, leading to further uncertainty and dissatisfaction, but also denies the proven benefits of globalization, such as lower costs, higher quality, and a broader spectrum of choices.

Third, the rhetoric in favor of the so-called “real people”, or “the silent majority”, ends in heavy “scapegoating” of professionalism and autonomous institutions, which constitute the basis of modern bureaucracy. Professionalism seeks a division of labor based on expertise to increase efficiency by minimizing the cost of transactions. Relatedly, autonomous institutions aim to insulate professional decision-making bodies from contingency, and daily and short-sighted political interventions. A long-term planning horizon with autonomy minimizes the principal-agent problems at the administration, management, and governance levels. Therefore, such denial of merit-based governance undermines time-honored professional and autonomous institutions such as the central bank, competition board, court of account (supreme audit institution), and statistical and banking regulation institutions. It is not surprising, therefore, that the bureaucrats, scientists, economists, and diplomats who run the modern state apparatus have been put under pressure by several autocratic-populist politicians such as Trump in the US, Orban in Hungary, Kaczyński in Poland, Modi in India, Bolsonaro in Brazil, and Erdogan in Turkey (Burni & Tamaki, 2021).

Fourth, in economics, by ignoring fundamental economic constraints, like financial resources, price stability, and sustainability, populists spend too much too quickly, engage in mercantilist-protectionist trade policies, and arbitrarily expropriate or confiscate private property. As Dornbusch and Edwards (1991) first documented in the Latin American experience and Rodrik (2019a, 2019b) later contributed further, even if they advocate fast and high growth, better income distribution, and better representation of the so-called “silent majority”, in the end populists usher in economic collapse. In comparative terms, while left-wing populists often focus on redistribution and deficit spending, right-wing populists typically emphasize issues related to immigration and identity (Torben, M. et al., 2022). As a common point, both types of populism tend to favor protectionism in international trade.

To sum up, although populists claim to design policies for people who fear to lose status in society and who have beenabandoned by the political establishment, as a bottom line, their economic policies lead to economic volatility and stagnation, chronic payments problems, sovereign debt defaults, financial crises, and hyper-inflation. That process, rather paradoxically, is followed by immiseration, inequality, political instability, and economic crisis. Finally, the process starts with several unfulfillable prophecies but ends up in even more pain for the people on fixed-incomes through an unavoidable IMF-based austerity program (Balduzzi et al., 2020; Magistro & Menaldo, 2020:40).

Economic Crises, Pandemic Contagion, and Populist Reaction

Comparing the last two global economic crises

In order to forecast the possible future course of populism in the context of the economic crisis triggered by the pandemic, the measures taken or not taken during this time, and the possible “side effects” that may occur in the post-pandemic era, a brief analysis of the GR and the GL are provided here. Despite the similarities between different historical epochs, history does not fully repeat itself. Rather the contrary, every conjuncture comes with its unique characteristics. That is also true in comparing the GR and the GL. Nevertheless, the two crises, which many experts have interpreted as the largest since the Great Depression of the 1930s, share similarities and dissimilarities and have different repercussions on populist politics.

The main aspects of the comparison, both in terms of similarities and contrasts, can be summarized as follows:

First, both crises underline the critical issue of excessive connectivity in finance, supply chains, cyberspace, transportation, and communication technologies that have spread across national borders. Therefore, as will be discussed in this paper later, the optimal level of globalization to minimize the risks of over-connectivity and increase the resilience of countries and sectors has become a hot topic.

Second, having emerged in the two leading economies (in the US in the last quarter of 2007 and in China in the last quarter of 2019), they also share uncertainty as a critical factor. As it is a non-quantifiable risk factor, uncertainty cannot easily be traced, so its probability of occurrence and impact can hardly be predicted. Therefore, the element of uncertainty and unpredictability increases the crucial role of state capacity, that comes with robust political institutions and social structures, during extraordinary crises (Olivier and Kahn, 2020; Bosancianu et al., 2020).

Third, deep economic contractions along with their contagious effects are also common. That is to say, sharp economic contraction, initial free fall in the stock exchanges in major economies, and the rise of mass unemployment have been analogous in both crises. The GR, fundamentally driven as a mortgage crisis, began with disruption to US real estate and spread to the financial sector and then the real economy worldwide with different pace, depth, and channels of wealth effects, leading progressively to a global recession (Danielsson et al. 2020). As a result, global real gross domestic product (GDP) fell 4.3 percent from its peak in the last quarter of 2007, with a 2.2 percent rate of annual contraction, to its trough in the second half of 2009 and unemployment surged from 5 percent to over 10 percent in the same period (Rich 2013).

In contrast, as an exogenous shock to the global political-economic system, in its initial stage, COVID-19 exerted a more radical and abrupt influence through demand and supply-side disruptions and put the real economy entirely out of order. For example, initial plant closures in China caused supply lines to dry up and per capita output to collapse in all emerging market economies (EMEs) (Kose & Sugawara, 2020; Koh & Yu, 2020). As a result, the global economy contracted 3.3 percent in 2020, which was partly compensated after a growth performance of 5.7 percent in 2021.

The fourth issue concerns the measures taken during both crises. During both crises, many governments have taken immediate comprehensive actions to limit their contagion through implementation of several expansionary monetary and fiscal measures aimed at stabilizing financial markets and ensuring the flow of credit, and therefore, during the GR, the stimulus packages of 48 countries – 20 of them developing countries (DCs) – collectively accounted for 3.9 percent of world GDP (as measured in 2008) and 4.8 percent of their national GDPs (Zhang et al. 2010). Moreover, an ILO (2009) report comparing the composition of interventions in 54 developed and DCs concluded that some measures, such as support for small and medium enterprises (SMEs) and additional public expenditure on infrastructure, were more popular than others, in boosting income, protecting employment, particularly for the vulnerable groups like informal economy workers, young people, and migrant workers.

In the case of the pandemic, the priority was, first, on the flattening of the pandemic curve, and, in the second phase, policy actions shifted to fiscal measures for sustaining economic growth as governments adopted quarantines and social distancing measures. During the pandemic, globally the size of on- and off-budget fiscal stimulus measures amounted to 4.9% and 0.9% of GDP (simple average) respectively (CRS 2020). Finally, government policies shifted to developing, purchasing, and distributing vaccines. (UNCTAD, 2020).

However, the size of the fiscal supports depended on the available fiscal space and external financing pressures, with smaller budgetary measures implemented in countries with higher pre-crisis sovereign credit default swap (CDS) spreads. In addition, constraints on fiscal space stemmed largely from past public debt increases. More specifically, the exporters of energy or industrial commodities and those countries that entered the crisis in a precarious fiscal situation and less capacity to mount significant health care policy responses or support livelihoods were particularly hard hit (IMF-WEO, 2021: 6). The Bank of International Settlements estimated that sovereign debt levels across EMEs had climbed by close to 10 percentage points from 2010 to an average of 48% of GDP in 2019 (BIS, March 2022).[1] More recently, according to the IMF’s Global Debt Database, borrowing jumped by 28 percentage points to 256 percent of GDP in 2020. Government accounted for about half of this increase, with the remainder from non-financial corporations and households. Public debt now represents close to 40 percent of the global total, the most in almost six decades (IMF-WEO, April 2022). Today, 58 percent of the world’s poorest countries are in debt distress or at high risk of it, and the danger is spreading to some middle-income countries as well, including Sri Lanka, Pakistan, Lebanon (Jalles, J. T. & Medas, P. 2022).

To conclude, when the pandemic hit, the world economy had already exceeded its debt capacity and largely lost fiscal flexibility. Even more, the pandemic forced governments to exceed borrowing capacity further and implement a very loose monetary policy that triggered today’s high inflation level to keep the economy afloat. According to the World Bank (2022), under pressure from increasingly high lending rates and high inflation, the real economy targets such as growth, employment creation, and improvement in income distribution are at high risk.

Besides these common elements, one can mention also the following differences:

First, the most significant difference has been the death of millions of people in the pandemic. After the World Health Organization (WHO) first declared COVID-19 a “world health emergency” in January 2020, it officially announced the viral outbreak as a pandemic, the highest level of a health emergency, on March 11, 2020 (Anderson et al., 2020). According to IMF’s Policy Tracker, at one point, more than 80 countries had closed their borders to arrivals from countries with infections, ordered businesses to close, instructed their populations to self-quarantine, and closed schools to an estimated 1.5 billion children (Verma et al., 2021). As of July 2022, total pandemic cases had reached almost 558 million, and the total death exceeded 6.3 million.[2]

Second, the outcomes associated with the crises are also quite asymmetricIn general terms, the course of a contraction, subsequent rebound, and recovery varies according to several conditions such as the start and end dates of the crisis, the existence of global mini-cycles or regional double dips, also different country and region-specific factors, such as resurgences of COVID-19, uneven vaccination, and a partial withdrawal of government economic support measures, pressure on weak health-care systems, loss of trade and tourism, dwindling remittances, subdued capital flows, and tight financial conditions amid mounting debt.

The following particular aspects can be noted:

  • In the GR, insufficiently capitalized banks were part of the problem, whereas, thanks to better regulations, in the pandemic, the financial system has become part of the solution (The FSR, 2021; Sharma et al., 2021).
  • Sectoral impacts have been quite heterogeneous during the two crises. The pandemic has hit industries, such as travel tourism, automotive, and engineering, but supported others, such as tech sectors, online trade, entertainment, healthcare, retail, and communication services (CBI Insights Report, 2020).
  • The GL has shown the heavy dependence of mature economies on some strategically essential inputs such as rare earth minerals used, for instance, in electric batteries and produced mainly in other countries like China. However, as Oliver & Kahn (2020: 3) have noted, this progress “is perceived as something jeopardizing their sovereignty, a concern that caused a major comeback of the roles of the public authorities, the scope of legal (sovereign) powers, and the call for better regulations.”
  • Additionally, with geopolitical risks in Ukraine and Taiwan, economic recovery slowed in 2022. As a result, global growth is projected to slow from an estimated 5.7 percent in 2021 to less than 3 percent in 2022 (IMF, April 2022).

As a conclusion, the growing debts of DCs; the supply-side shortcomings due to disruptions in the GVCs; associated food and energy shortages with severe price hikes due to geopolitical conflicts; and the high global inflation that has emerged in the last 45–50 years and forced increasingly contractionary monetary and fiscal policies to combat it have put the post-pandemic recovery in danger of global stagflation, welfare losses, and further political and economic turbulence in several fragile states globally.

Lack of cooperation vis-à-vis emerging fragilities after the crises

Like the side-effects of drugs used in treating diseases, the steps taken, plus and minus, to solve the problems in any conjuncture also contain the elements of crisis in the period ahead. Although the current global agenda requires science and reason to surface somewhat, quick fixes and the crowd-pleasing policies of prominent personality politicians for complex problems have become predominant. In that the rising great power politics, the emerging “hybrid regimes”, and the populist politics have made this far more complex, as they increasingly drive away from cooperation to partial and individual-based solutions, this fragmentation has not seemed to be promoting cooperation among world leaders or respect for global institutions even during the devastating pandemics (IMF-WEO, 2021).

The first such issue is the lack of pandemic cooperation. For instance, the WHO has been underfunded for decades, with the threat of further draconian loss of funds. China applied immense pressure so that its manipulated data or effectiveness was not challenged. Similarly, the former president of the US, Donald Trump, dismissed the WHO’s warnings of an imminent pandemic because they did not conform to his “hunch” that the health risks had been wildly overstated (Walters, Aratani & Beaumont, 2020). That is to say, crowd-pleasing short-term approaches have been quickly exposed as ill-equipped to deal with emergency situations. Likewise, while the ruptures in the GVCs that emerged after the pandemic, surging inflation, and increasing debt burden require global cooperation, quite the contrary, divergences and conflicts are increasing.

The second issue concerns the financial contagion and collapse in the post-pandemic era. The financial sector has started to negatively impact the post-pandemic crisis spiral due to three related issues. They are reform fatigue in the financial sector, deteriorated fiscal balances (i.e., budget deficits and accumulated national debt) due to the pandemic overspending, and the risk of rising inflationary pressures. As Franklin & Moise (2021) put in their Financial Times article, “the reforms that were implemented in the aftermath of the 2008 financial crisis, although well-intentioned, have not kept banks from falling back into old habits. While cheap mortgages fueled economic growth in the 2000s, easy and risky corporate debt issued at high leverage levels has weakened the US economy over the past ten years. Loan defaults are already rising in the wake of the COVID-19 crisis.”

Moreover, the large-scale financial and monetary supports explained above have resulted in significant macroeconomic erosion. Although, under the given constraints, well-designed supportive fiscal measures, which take advantage of the low interest rates to boost growth while remaining sustainable and targeting a reduction in public debt over the long term were crucially needed, this did not happen in many countries. According to the Institute for International Finance (IIF, 2020), the ratio of global gross debt to world output jumped from an already high 321 per cent at the end of 2019 to 362 per cent at the end of June 2020, the sharpest rise since the Second World War, and this constitutes an essential constraint in restoring growth and safeguarding debt sustainability. Referring to some G20 emerging market economies, such as Brazil, China, India, Russia, Indonesia, Turkey, and South Africa, Flores and Granelli (2021) put that “there has been steepening of the government bond yield curve, which could lead these countries to issue more short-term debt titles and make them more vulnerable.”

The third issue is the possibility of ethnic, religious, and economic backlashes. The management of short-term obligations, which comes under the urgency of the crisis measures, is in sharp conflict with medium- and long-term uncertainties. Among others, disruptions in the GVCs, rising inflation, energy and food crisis, and overall debt pressure are jointly fueling poverty, and, therefore, the term “vulnerability” has much more vast and profound repercussions than mere macroeconomic fragility. As Barrett et al. (2021) put in their commentary to an IMF Blog, “from the Plague of Justinian and the Black Death to the 1918 Influenza Epidemic, history is replete with examples of disease outbreaks casting long shadows of social repercussions: shaping politics, subverting the social order, and some ultimately causing social unrest.” One possible reason is that an epidemic can reveal or aggravate pre-existing fault lines in society, such as inadequate social safety nets, lack of trust in institutions, or perception of government indifference, incompetence, or corruption. However, the critical lesson from the past is that looking beyond the immediate aftermath, the risk of social unrest like riots and anti-government demonstrations spikes in the longer term. Researches show that heightened risk of a significant government crisis — an event that threatens to bring down the government — typically occurs in the two years following a severe epidemic (Madhav N, Oppenheim B, Gallivan M, et al. 2017). As Sedi and Xu (2020) noted, “the threats may be bigger where the crisis exposes or exacerbates pre-existing problems such as a lack of trust in institutions, poor governance, poverty, or inequality.”

The new globalization: Balancing connectivity and resilience

Being subject to several developments, the globalization pendulum swings between deglobalization and re-globalization or new globalization. The deglobalization agenda is related to the under-achievements of the LMLO established post-WWII vis-à-vis worldwide challenges, geopolitical contestations triggered by the power transition, the rise of the multiplex or multipolar world, recent economic and political crises like the GR of 2008–2009 and the GL of 2019–2021, and populism that fracture the global economy along regional or political lines – with competing blocs centered on China, the US, and perhaps Europe.

Several prominent political economists like Acharya (2017, 2018), Mearsheimer (2019), Rodrik (2019a, 2020), and Stiglitz (2002) have shown quite convincingly that, besides its positive feedbacks, ever-increasing interdependency worsened global socio-economic inequality through several transmission mechanisms, such as international capital movements, which have weakened national governments’ regulatory and taxation autonomy. It has also shifted the balance of power within nations away from labor towards capital and allowed it to accrue further political power and wealth, opening yet more opportunities for the internationalization of capital. Inside western societies, there is also rising political conflict over the role markets and the state should play in people’s lives.

Liberalization of markets in trade and finance since the early 1980s and technological progress have been the two main drivers of globalization. The free-market economy system provides arm’s length exchange and sophisticated capital markets; adjusts policies that reduce risks associated with the market exchange process; and triggers Schumpeterian creative destruction — the blend of ideas, firms, and industries that drive economic dynamism — for better economic development (North, Wallis & Weingast, 2009; Albertus & Menaldo, 2018). However, trust in the meritocratic ideals of free-market economics is rapidly fading away. According to a recent report by IPSOS Global Trends (2020), while six in ten (62%) globally agree that if you work hard, you will get ahead, this view is under threat even in the most advanced and social welfare states in key European countries. Only half of those in Germany (53%) and Spain (50%), and just four in ten people in Italy (41%) feel their economies offer chances for “fair competition” that reflect and reward their efforts. This encompasses the widely held view that national economies are rigged to advantage the rich and powerful (74% agree globally) and that significant income differentials are bad news for society (76%).

Perceived inequality in opportunities as well as in outcomes has increased demand for populists, who support income and wealth redistribution, a trend that represents one of the top ten values of IPSOS in 2020. The problems mentioned above cause the system-level criticisms brought by the populists to appeal to the public and turn their faces towards proposals that will reverse globalization and change the LMLO. This should be one of the reasons why after a few decades of dominance, western liberal capitalism has started to compete with authoritarian capitalism, mainly in China and Russia. This or that way, the world has been passing through severe reversals in globalization. After the GR, trade ceased to grow faster than world output due to the exhaustion of opportunities, the absence of global trade liberalization and rising protectionism. With a fall in foreign direct investment (FDI) and global trade of about 30 per cent after the GR, the same is happening after the GL.

New/re-globalization, on the other hand, is fostered by technological shifts like digitization and artificial intelligence. Globalization as we know it might have run its course as technological changes and corporate strategies lead to more products being made locally or delivered digitally. Before the pandemic, many focused on how new technologies could reduce global flows[3], for instance, manufacturers substituting robots at home for low-cost labor abroad, remote work (i.e., home office), and remote interaction in service sectors. The broadband computing and communications technology that allowed the adoption of e-commerce, videoconferencing, and robots have all been supercharged by COVID-19.

Depending on the interests of sectors of the economy and segments of society, the process of “virtual immigration” will come with several long-term implications. On the positive side, the process will contribute to overcoming national barriers to the mobility of labor: improving corporate profits by finding easy and cheap personnel; reducing the problems caused by excessive integration; increasing resilience, and balancing the rise of right-wing populism by overcoming the fear of “status” created by the encounter of local people with foreign cultures are the main benefits. On the negative side, to the extent that process works against the poor, less skilled, and less mobile people, and leads to income inequality between rich and poor, the shift in the new technological paradigms prepares fertile ground for the rise of populism. As Heuer (2020, 4) cites from Angus Gupta, a “demand for containers may be going down, but services trade, capital and data flows keep rising,” underlining new facades of the new globalization.

Another crucial discussion in the context of globalization and populism concerns the future of global supply chains (or GVC), which have been significantly disrupted during the COVID-19 pandemic and because of the US-China polarization.  A recent, marked result is a strong desire to shift supply chains back home. However, unlike popular or populist expectations, that process would harm the poor and complicate the situation. On the one hand, it risks putting hundreds of millions of people back into poverty. On the other hand, as Rogoff (2020) states, the economic policies that populists pursue, whether they emanate from the left or the right, are equally tragic. They converge on a similar political-economic model based on protectionism, crony capitalism, and chronic rent-seeking. Invariably, these movements which are claimed to help the poor end up harming them by doing the exact opposite. As Irwin (2020) suggests, concrete steps need to be taken to discipline the side effects of globalization as soon as possible, but never to give up on multilateralism.

The most urgently needed transition area lies in the rebalancing of neoliberal globalization. Regarding openness and globalization, populists point out such concerns as the risk of excessive dependency, uncontrollability, security, sovereignty, and income distribution injustices globally. More recently, the pandemic has also added a new element of alertness to the potential danger of excessive connectivity, which might lead to the spread of epidemic diseases, financial contagions, and disruptions in GVCs.

As an alternative balancing concept, the term resilience has been supplemented with the aim of minimizing the negative spillovers of connectivity, a buzzword of hyper-globalization (OECD, 2021). Resilience is defined as society’s ability to bounce back from systemic global shocks without sacrificing the mandatory global integration in finance, communication, transportation, technology, production, and GVCs (McKinsey, 2020; Miroudot, 2020). Figure 1 simplifies the complicated trade-off between connectivity and resilience. First, it shows that the connectivity of globalization improves resilience up to a certain level (Q1). Then, it stabilizes at the “resilience zone” (Q1-Q2) before it starts falling back beyond a certain level of connectivity (Q2), which can be described as excessive connectivity and goes beyond effective management. Quite obviously, connectivity in the resilience zone can be defined as the “optimum level” of globalization, where the benefits of connectivity are reaped, whereas excesses or contagious effects of hyper globalization can be kept under control worldwide.

Figure 1: Pandemic, Connectivity and Resilience