On 4 October 2019, Professor Andrew Walter, NTUC Professor of International Economic Relations at RSIS and Professor of International Relations at the University of Melbourne, delivered a public lecture at Marina Mandarin Singapore, on how financial insecurity affects support for populist policies. The lecture was titled “Crises, Political Populism, and Wealth Shocks: Why Wealth Anxiety Matters for Domestic and Global Politics”.

Societies, especially the middle class, are facing increasing amounts of economic distress due to rising asset prices, particularly in housing. Moreover, he noted that wealth anxiety is exacerbated by growing divides within the middle class. Rifts are evident between the old and new working class, creating spatial inequalities such as urban-rural divides and intergenerational disparities, i.e., the fear that future generations will not attain middle-class socioeconomic status.

This translates into several trends. First, the risk of middle-income OECD households falling into the lower middle class has increased, but upper middle class households face less risk of being declassed. Second, increasing wealth correlates to decreasing support for welfare systems that aid poorer societal groups, especially among middle class people with more savings. Third, this leads to an increasingly leveraged society, as more people acquire debt to purchase assets such as housing. With more wealth linked to the credit system, financial system stability becomes more critical to assuage feelings of wealth anxiety and reduce shock-induced risks of economic paralysis.

Despite government efforts to manage middle class wealth in financial crises, the perception remains that the government is more interested in helping big banks prevail. Such perceptions give way to populist sentiments as anger and resentment festers from those who are economically left behind. Trump supporters are more prevalent, for instance, among people whose housing prices declined significantly.

A divided society emerges: the bottom socioeconomic classes veer towards anti-establishment populism, whereas the upper socioeconomic classes oppose the welfare policies fuelling further political instability. The policy implication, concluded Prof Walter, is thus a pressing need to prevent and contain wealth shocks. Bailouts are necessary, but should not delay financial reforms such as more stringent regulations. He also stressed that governments must address issues such as affordable public housing prices and pensions in an integrated way.