The Populist Menace: When Manufacturing and Geography Take Centrestage
By: Tausif Bordoloi
Tags: Trump, Brexit, Manufacturing, Politics, Economy

The year: 2015. Japanese car maker Nissan spawning out thousands of cars from its plant in Sunderland, north-east England. Sunderland made up around 75% of the production volume for Nissan in Europe. At the time, it was the only European site that produced the high-end Infiniti brand models Q30 and QX30 — this in addition to Nissan’s top-seller Qashqai, the sports utility vehicle Juke, and the electric car LEAF. The site employed almost 7,000 people, while its supply chain employed a further 20,000. By creating such popular and recognisable automotive models, people in Sunderland were upgrading both their skills and income levels. Local workers were supplying to customers all over Europe and the world. All seemed hale and hearty. A perfect example of how globalisation and international trade can create socio-economic wellbeing.

Yet just a just a year later, when Sunderland’s Brexit result came through, a staggering 61% people had voted to quit the European Union, compared to the national average of 52%. Such a scale of support was unthinkable, given Sunderland is a crown jewel of British manufacturing. Why would you want to jeopardise your cash cow? However incredible it might sound (“Sunderland is too big to fail”), there was always the risk that Nissan could walk away from Sunderland if Brexit seriously undermined the cost-benefit of investments. What happened so suddenly? Or was there always trouble in the making?

Rhetoric and dying industrial districts

A drive through the industrial heartland of the north-east and other so-called manufacturing districts might provide the answer. Long-abandoned factories give impressions of industrial decay. Plant closures have produced spillover effects: shuttering of one local facility caused associated businesses to suffer. As a result, local suppliers lost jobs and their incomes disappeared with those stuck in declining regions finding it ever more difficult to get out. The emergence of China and other low-cost manufacturing locations added another gloom-ridden dimension. It eroded the position of many previously well-paid factory workers in the United States and Europe. But why Sunderland? It was still making a solid mark on Nissan’s European operations after all. Well, add a dash of perception to reality and anything could be possible.

While it is true that many factories have shut down in erstwhile thriving regions in the UK, the addition of an overwhelming rhetoric of “controlling our borders” and “waves of foreigners out to get our public resources” created a lethal concoction. It not only blurred reality — many people voted based on perception — but also reinforced a new world order: right-wing populism.

Move over, the populists are here

Populists are now everywhere. Over the last five years populists have not only given us Brexit, they have helped metamorphose a businessman into a strongman; fought pitched battles on the Avenue des Champs-Élysées; and spawned an explicit hostility towards globalisation, international trade and immigration.

In the midst of all this chaos and confusion, UK auto manufacturing has continued to falter. Ford will close its Bridgend engine manufacturing facility in 2020, Honda its Swindon plant in 2021, and Nissan has already pulled production and planned investments from Sunderland. While the reasons given for such actions generally relate to “unprecedented global changes in the car industry,” meaning fall in demand for diesel vehicles and electrification of the industry, it is inevitable that industrial decline will further deteriorate employment opportunities. Losing manufacturing jobs creates economic pressures: along with rising unemployment, wages tend to decline, and consequently, people’s standard of living. All of these can have a tremendous populist impact.

Demystifying populism, thus requires a deeper understanding of the nexus between the location of manufacturing activities and the effects on local communities. University of California, Berkeley economist Enrico Moretti argues that the externalities of spatial concentration are most felt at the community level: there are five new jobs created in a metropolitan area, for every new job created in the area’s firms, and three out of those five are for workers who have not attended college. In a similar vein, the negative effects of industrial plant shutdowns do not just remain contained within a sector, they spill over into communities outside that sector, resulting in a loss of an average 1.6 additional jobs. Consequently, it is all doom and gloom for dying manufacturing regions where the loss of the once prosperous way of life creates a deep sense of unfairness, injustice and inequality. In his recent book “Tragedy & Challenge: An Inside View of UK Engineering’s Decline and the Challenge of the Brexit Economy” industry veteran Tom Brown laments that the decline of UK manufacturing has created a “caste system of the southern Brahmins, who can’t be expected to leave the oxygen of London, and the northern Untouchables who should consider themselves lucky just to have a job.” It is in these cauldrons of social apathy and imbalance that populism finds its strongest supporters.

Taking advantage of such misfortunes are the world’s strongman and right-wing politicians. For example, right-wing populists may mobilise support by putting the blame on immigrants for infrastructure congestion, healthcare crisis and low wage growth in communities where economic conditions are deteriorating due to deindustrialisation. Populists may vilify a seemingly widening gap that has opened up between the hardworking people of the industrial hinterlands and the elites of “the City.” Results of a preliminary study by US researchers show how right-wing strongmen find their voter base in deindustrialised regions. Their estimates indicate stronger support for Donald Trump in erstwhile industrial hubs and in counties with larger declines in manufacturing employment. In contrast, voters in more competitive local economies are more likely to shun right-wing populism.

Questions and more questions

Clearly, the decline of traditional manufacturing in the western economies has had a powerful impact on the rise of right-wing populism. In the case of Sunderland, it was a bit different: even though it was thriving, inaction on the part of political mainstreams helped amplify a feeling of indifference (“Nissan themselves declared neutrality”) or perhaps arrogance (“Sunderland is too big to fail”), and hence, Sunderland’s leave vote. Nonetheless, a bunch of critical questions emerge: what will happen to deindustrialised places, especially when manufacturing is becoming increasingly digitalised? Can these places be revived by injecting skill-biased technological change? Or whether manufacturing digitalisation will cause fragmentation of geographical knowledge and lead to further deindustrialisation? These are questions that will need to be urgently addressed by policymakers if they are to successfully defeat the menace of right-wing populism.