Politics and the marketsReports of populism’s death are premature

MONDAY April 24th was a day when, in the latest jargon, the markets went “risk on”. Equities rose, the spread between the yields of French and German bonds narrowed and the euro rebounded. The reason was the first round of the French presidential election. As the results emerged on Sunday night, it was clear that a) the nightmare of a second round between Marine Le Pen and Jean-Luc Mélenchon had been avoided and b) Ms Le Pen’s vote was no better than her poll rating, indicating there was no reservoir of shy, far-right voters. The centrist Emmanuel Marcon (pictured) topped the poll and is predicted to get more than 60% of the vote in the second round, far outside the pollsters’ margin of error.

So France will almost certainly not follow America and Britain down the path that led to the election of Donald Trump and the Brexit referendum. But it is way too early to say, as some do, that populism is in retreat. First, France has a much greater tradition of support for the far left than Britain or America; Mr Mélenchon received 19.6% of the vote. Between him and Ms Le Pen, 40% of the French voted for “economic nationalist” policies. (The word populism is very much a catch-all phrase, which can include social conservatism and opposition to immigration as well as economic nationalism.) If elected, Mr Macron will almost certainly lack a Parliamentary majority; his party, En Marche!, has been created from scratch. So he will depend on support from other parties if he wants to push through reforms. Time and time again, reform-minded French Presidents have retreated in the face of opposition on the streets, in the form of strikes and demonstrations. There is a chance, that in five years’ time, Mr Macron will have achieved very little.

Naturally enough, most mainstream politicians are uniting behind the Macron campaign. But the danger is that this hands the job of opposition over to Ms Le Pen. As my Bagehot colleague suggests, we are seeing a sort of 17th-century politicial divide into a “court” and “country” party. Indeed, in this respect, the French vote was very similar to the recent polls in America, Britain and Turkey. There was a big divide between the big cities, which voted for the more outward-looking globalist side, and the small towns and countryside, which took the inward-looking nationalist approach. In Paris, Ms Le Pen got just 5% of the vote. 

The risk is not just that Ms Le Pen wins next time. The risk is that mainstream politicians try to steal the populists’ clothes by adopting their policies. In Britain, the hapless opposition Labour party has moved to a Brexit policy that is virtually identical to that of the Conservatives; accepting restrictions on freedom of movement so that Britain will have access to (not membership) of the single market and customs union. Both are united behind the goals of achieving the “best possible deal”; as if anyone would campaign for the “worst possible” outcome. Only the Liberal Democrats remain committed to the single market. But with the best will in the word, it is hard to imagine they will finish with more than 30 seats, less than 5% of those in Parliament. The assumption that a Tory victory will lead to a “soft Brexit” may not be right.

The fundamental problem is that mainstream parties must govern, which means that they must indulge in the messy art of compromise and the practical difficulties of facing the world as it is, not how people might like it to be. This means, as The Rolling Stones sang, that “You can’t always get what you want”. The populists have the luxury of opposition—of arguing, in the face of every economic setback, every terrorist incident, that things would be different if only mainstream leaders had been “strong” or more patriotic. Like a movie monster, the populist menace will be very hard to finish off.