On 6 November 2024, you delivered the monthly Max Weber Lecture on the rise of knowledge economies and the political and economic divisions they have generated. Could you tell us how these cleavages are affecting our societies?
The knowledge economy has greatly favoured college-educated workers and concentrated income, wealth, and opportunity in major cities. Smaller towns and less densely populated areas have fallen behind. This is particularly true in a highly decentralised system like the US, which is characterised by "superstar clusters" that drive up housing costs and restrict access to good schools and social networks that are essential for success in the new economy.
The effect shows up as a drop in intergenerational mobility as the working class and their children are increasingly locked out of the hubs of opportunity in the cities. This is a major political problem because these disappointed "aspirational voters" become more open to radical solutions, such as those supplied by right-wing populist politicians like Trump. The problem is amplified when the well-educated in the cities use their power over local governments to pursue restrictive housing, zoning, and land-use regulations. Such "opportunity hoarding" amplifies grievances amongst outsiders and reduces insiders’ concern for downward mobility, which is a major source of support for public insurance and redistribution.
As you explained throughout your lecture, knowledge economies have led to the emergence of right-wing populism. How does right-wing populism nourish these divisions, and how do they use it to their advantage?
Right-wing populism is a complex phenomenon with diverse national, cultural, and economic origins. Its current form is recent, however, and I see it as linked to an emerging "Rokkanian" cleavage that is structurally driven by the rising and partially overlapping divisions of skill and region caused by the new knowledge economy. Again, the main drivers are rising inequality and falling intergenerational mobility, which exclude many in the working class from sharing in the prosperity of the new economy. Such exclusion is amplified by an educational system that is increasingly biased towards the educated urban classes, often by creating socioeconomic segregation of school districts. Aspirational voters mostly support mainstream parties and institutions when they see an opportunity for upward mobility, but when they feel locked out, they become susceptible to right-wing populist parties blaming the established party system, as well as "undeserving" minority groups like immigrants.
Stein Rokkan argued that emerging cleavages are also linked to new identity formation, and I think we can see this in the hyper-partisan politics and growing in-group out-group polarisation in the contemporary period. This is often linked to cultural divisions, but how much people identify with their own group and demonise outgroups are remarkably closely related to inequality and (low) mobility. I don’t think this is an accident. When people feel they can no longer share in rising prosperity, they become defensive about the status of their own group and seek more radical solutions.
Knowledge-intensive businesses and highly educated workers are increasingly concentrated in metropolitan clusters. How can public policies shape the agglomeration effects and regional inequalities resulting from these concentrations?
When we examine these patterns comparatively, the US case is extreme because there is little in this exceptionally decentralised political system to “lean against” the inequalising effects of the transition to the knowledge economy. The forces of “region-biased technological change” also impact developments elsewhere, but they are less pronounced in most European counties due to active policies of integration pursued by strong national governments.
These policies fall along three main dimensions. First, by investing in education, infrastructure, and social services in local communities, peripheral areas can be made more attractive to educated workers and knowledge intensive firms. This spurs innovation and local growth.
A second complementary policy is regional fiscal equalisation, where revenue is shared across richer and poorer areas. This is a policy that depends on well-functioning local governments, as well as effective coordination across levels of governments, but when it is well-designed, it can tap local knowledge about what works and what does not. This is different from American-style decentralisation because local governments work within a broader regulatory and fiscal framework set at the national level.
Finally, governments can pursue progressive housing, zooning, and land-use policies to “open up” the cities to outsiders. This works mainly through reducing the costs of agglomeration and encouraging young people to migrate to the successful cities. Korea is an extreme example of such policies, which produced the Seoul megacity. Northern Europe presents a more balanced approach, but even here, we observe smaller variations. Sweden, for example, has pushed progressive housing and migration policies more aggressively than Denmark, which has prioritised spreading economic progress to the more peripheral areas.
As part of the Fernand Braudel Senior Fellowship, you will have the opportunity to pursue research at the EUI. Could you tell us more about the research interests you will be focusing on during your stay?
I am working on the project on innovation and regional inequality described above. A major task is to show the connection between the economic interests represented by governments and public policies along the three dimensions described, as well as the location decision of skilled labour and knowledge-intensive businesses. I am currently working on the first link in this causal chain, trying to classify the interest composition of democratic governments since the Second World War along the two main dimensions in the story: education and region. However, the most important benefit to my research of being at the EUI is the opportunity to interact with the outstanding researchers here who have expertise on aspects of my project that I lack. The EUI has a fabulously talented and lively research community, and I am fortunate to benefit from being part of it for at least a short period.
Torben Iversen is a Fernand Braudel Fellow at the EUI Department of Political and Social Sciences and Professor of Political Economy in the Government Department at Harvard University. On 6 November 2024, he delivered the lecture Democracy and contested prosperity: Rise of the knowledge economy and new cleavages, in the context of the Max Weber Programme's monthly lecture series. His research interests lie at the intersection of comparative political economy, electoral politics, and applied formal theory. He is the co-author of five books and around four dozen articles on advanced capitalist democracies.