When the left meets the right

As the year of elections nears its end, countries continue to vote. Every day, election updates flood news across the world, strikingly defined by “polarisation”. Polarised campaigns have become near universal in 2024, where by December some 40 countries with a combined population of 3.2 billion and GDP (gross domestic product) of US $44.2 trillion would have voted. Countries are witnessing two axes of polarisation: the first is an articulation of nationalistic identity that includes immigration as a major political issue (particularly in the developed block); the second is around “populism” or economic redistribution, with the government offering more and more social benefits to voters. 

In the typical political narrative, elections are being fought between the “left” and “right” blocks of ideology. Even as there is near consensus in the rise of the right, the revival of the left is slowly gaining political traction. These two blocks are primarily economic by origin. While the right block pushes for less government intervention, the left urges a dominant role for governments. Over time, the two are identified with other contrasting ideological stands, but the economic model a government pursues remains at the core of the contest between them.

Across the world, including in India, populism and the nationalistic identity agenda have proven electorally beneficial.  Populism, by definition, is to be with “the people”, pitting them against the advantaged or “elite” population. It is rising in western democracies as well as in emerging and developing economies. The rise of populism has to be understood in the context of high inequality and economic slowdowns. These set the perfect context to the political campaign pitching a population group against the “othering”, mostly comprising immigrants and people from different religious or social backgrounds.  

Does this mean the world is clamouring for the government to return as the dominant factor in the economy? Or, to put it another way, is the right block now pursuing the left’s ideology? First, let's understand the current role of governments. According to the International Monetary Fund (IMF), government debts—including in large economies like the US and China—have reached 93 per cent of GDP in 2023 and may rise to 100 per cent of GDP by 2030. This indicates that governments are spending more and thus, increasing their borrowing. This, contrary to what we tend to believe, vouches for a dominant role for governments in public spending. Moreover, Gita Gopinath, IMF’s first deputy managing director, recently said that government spending may increase further in the coming years. “There are big structural shifts that call for greater government spending. Countries will need to spend more on climate mitigation and adaptation, on healthcare and on pensions as population age, and on defense needs as geopolitical tensions rise,” she said.

Amid this cacophony of left and right voices, it seems that governments have been dominant spenders for the past 60 years, irrespective of ideological affiliations. It is evident now that this trend will continue. There is no real difference between the two blocks of economic governance; the right seems to have embraced the left overwhelmingly. “Conservative politics has traditionally been defined by its emphasis on fiscal prudence and the idea of a small state. While parties leaning left are usually associated with more spending and a larger presence of the state in the economy. The reality may be different though,” says a recent analysis by IMF researchers, who studied content of over “4,500 political platforms from 720 national elections held between 1960 and 2022 in advanced and emerging countries.” They conclude: “Political discourse on fiscal issues has become increasingly favorable to higher government spending since the 1960s. From socialists to nationalists, support for more spending has steadily increased, while fiscal restraint rhetoric has lost favor across the board in the last three decades, after being most popular in the 1980s.”