Is Globalization Coming to an End Due to the Rise in Income Inequality?

Abstract

The reversal of the trend towards the decline in income inequality in the last four decades in most countries has created favorable grounds for the rise of nationalist and anti-globalization sentiments. Economic failures of countries, groups of people and individuals are among important factors that cause nationalism. The rise of nationalism in many countries in recent decades, as measured by the decline in the “pride in your own country” indicator from the World Values Survey, is statistically significantly related to the change in income inequality (Gini coefficient) within the country. When globalization is properly managed, it is good for growth and income distribution and does not lead to nationalism. But if it is accompanied by the decline in real incomes for large masses of people, nationalist political forces have additional arguments for instigating anti-globalization and isolationist sentiments. The rise in income inequality within major countries since the 1980s poses a threat not only to social stability, but also to globalization.

1. Introduction

“Patriotism is when love of your own people comes first; nationalism, when hate for people other than your own comes first”. This famous statement by Charles de Gaulle may be confusing when trying to distinguish between “good” and “bad” nationalism. Love and hate are emotional categories and do not help to evaluate policy actions and particular measures of authorities providing preferential treatment to a particular group of people—citizens of a country or one of the ethnic groups within the country (affirmative action).

When are such policies justified and when are they not? When are they regarded as patriotism and when are they considered nationalism/chauvinism? The logical answer in the first approximation would depend on the relative position of the country/minority group versus other countries/groups: if a nation/group is behind the others, and especially if it was disadvantaged in the past, preferential treatment is fully justified. But if this nation/group is ahead of the others, providing preferences to this entity at the expense of the other groups would be seen as unfair. Nationalism is the ideology of expanding the rights of the particular ethnic group or country—if this expansion is intended to overcome lagging behind and to catch up with other more privileged groups or countries, it is perceived as fair. If it is aimed at gaining superiority, it is seen as unfair.

To cite a couple of examples, most Western nations provide economic assistance to all developing countries and give preferential access to their markets (low or no tariffs) to the Least Developed Countries (LDCs), whereas many developing countries retain higher trade barriers than developed countries—most economists justify such a policy on the grounds that it helps poor countries to catch up with rich countries. By the same token, special assistance to less developed regions and disadvantaged groups is a basic principle of most countries and international associations, the EU included.

Of course, there are many real and imaginary reasons why a nation may feel disadvantaged—it may be a victim of aggression or colonialism, may be unhappy with its position in international arena, etc. Here, however, I look only at real (not perceived) economic reasons of nationalism. To be more precise, this paper tries to explain the rise of nationalism in many Western countries in the last four decades by the change in income distribution. The hypothesis is that trends in nationalism are explained by both between-country and within-country inequality. If the gains from globalization are distributed evenly, the public is willing to embrace it, but if the gains are appropriated by few, it is easy for nationalist political forces to turn the public against globalization.

Hence, there are several types of globalization models, depending on the trend in inter- and intra-country inequality in the last four decades:

• Great gains from globalization for the country as a whole and a relatively small rise in within-country inequality (Japan, China, some European countries);
• Small gains from globalization for the country as a whole, but a decline in domestic inequality (some Latin American countries, including Brazil);
• Large gains from globalization for the country as a whole, but an increase in domestic inequality (Britain);
• Small gains from globalization for the country as a whole and a high level of domestic inequality (the US, Latin American countries, Russia in the 1990s).

The worst conditions for the rise of nationalism would be in the first group of countries, the best in the last, fourth group, with the second and third group falling in between.

It is certainly true that the rise of nationalism may be caused by a variety of reasons that are not associated with the economic success and change in income and inequality. A nation may feel humiliated after a lost war or after unfair treatment by other countries and the international community, or there may be a propaganda machine at work to create a feeling of superiority over other nationalities—all these reasons are not analyzed in this paper. The goal of this paper is quite modest—it is to show that a considerable portion of the dynamics of nationalist sentiments in recent decades is explained by the change in between- and within-country inequality.

The first section discusses the dynamics of income inequality within countries as a possible cause of the rise of nationalism (and the increase in immigration as a possible alternative explanation). The second section provides empirical evidence—data and regressions—linking the dynamics of the pride (in one’s country) indices with income inequality. The third section examines three case studies—the US, the EU and Russia. The forth section concludes this paper.

2. Nationalism and Inequality Within Countries

Conservative politicians all over the world have recently spoken against globalization. As former French Prime Minister Dominique De Villepin put it recently, “globalization has created political, economic and cultural interdependences that led to facilitate cooperation, on the one side, and to spread fear and violence all around the world on the other side: instead of creating closer links and dialogue, globalization led to new kinds of exclusion, isolation and radicalization” (https://www.cpifa.org/en/cms/book/182; accessed on 25 February 2025). And Donald Trump spoke in favor of “Americanism, not globalism” (http://www.realclearpolitics.com/video/2016/07/21/trump_nominated_we_will_honor_the_american_people_with_the_truth_and_nothing_else.html; accessed on 25 February 2025).

It would be wrong, however, to blame globalization for all the disasters and misfortunes, from non-growing real incomes to the rise of nationalism. As Mark Twain said, history does not repeat itself, but it rhymes. Those who blame globalization today for economic and social misfortunes are similar to the Luddites of the 19th century who believed that the use of machines leads to rising unemployment and falling wages.

There are cases when globalization works and leads to rising incomes among the masses. Theoretically, greater international flows of goods, ideas, technology, capital and labor should increase productivity, but in reality, this happens only if these flows are carefully managed.

Why was greater economic interaction with the world in some countries accompanied in recent decades by rising incomes and its relatively even distribution (China and other East Asian countries1), while modest growth of income coupled with rising inequality left large masses of the population worse off in other countries (many Western countries, including the US, Eastern Europe and former Soviet Union)? The answer is that policy matters a great deal and many good policies that allow benefits from globalization are often non-orthodox and counterintuitive (Polterovich & Popov, 2005). If globalization is accompanied by the increase in income and wealth inequality within countries, gains from globalization are appropriated by the few better off, whereas the masses receive nothing or very little, so it is only too easy for the interested political forces to blame globalization for the negative developments.

The central argument of this paper is that the reversal of the previous trend towards the decline in income inequality in the last four decades in most countries created favorable grounds for the rise of nationalist and anti-globalization sentiments. Lindert and Williamson (2016) claim that income inequality breeds populism and attributes the rise in inequality to globalization (especially in the two periods of American history—the Gilded Age of the late 1800s and the last four decades since the 1980s). This paper argues that income inequality indeed contributes to the rise of populism and nationalism, but that globalization does not necessarily lead to a rise in inequality.

Looking at the recent dynamics of income and wealth inequality from a longer-term perspective, it is easy to notice that the last four decades are quite unique. Secular trends suggest increasing inequality from the ancient times before reaching an all-time peak in the early 20th century (

Table 1. Gini coefficients of income distribution in selected countries since the 1st century, %.

Years	14	1000	1290	1550	1700	1750	1800	2000
Rome	39
Byzantine		41
Holland				56		63	57	30.9
England			36.7		55.6	52.2	59.3	37.4
Old Castille/Spain						52.5		34.7
Kingdom of Naples/Italy							28.1	35.9
France							55	33

Source: Milanovic et al. (2007, 2011); data for 2000 are sometimes from the (World Development Indicators Database, n.d.).

, Figure 1), and then declining inequality after the First World War and the 1917 Russian revolution before the new rise since the 1980s (Piketty, 2014; Jomo & Popov, 2016).

Only during Hobsbaum’s ‘short 20th century’ was the trend towards increased income and wealth inequality temporarily interrupted, probably because of the greater egalitarianism of socialist countries with lower levels of inequality (with Ginis between 25 percent and 30 percent on average) and the checks in the rising inequality with the growth of socialist and other egalitarian movements (Figure 1 and Figure 2).

Inequality in wealth distribution has followed a similar pattern (Figure 3 and Figure 4): inequality grew before the First World War, declined in the 1920s–1970s and started to increase again afterwards. Comparison of the wealth of the richest tycoons in different countries in different epochs (Figure 5) points to a similar conclusion—compared to the average income in the US, Bill Gates was relatively richer than Carnegie and Crassus (though not richer than Rockefeller), whereas Russian tycoon Mikhail Khodorkovsky in 2003 was even richer (compared to the average income in Russia) and Carlos Slim was relatively richer than all of them. The world may not have reached the highest level of inequality yet, but may still be moving to the greatest inequality ever observed in human history.

One explanation is that the reversal of the trend towards growing inequality followed the 1917 Bolshevik revolution in Russia, the emergence of the USSR and other socialist countries, the strengthening of socialist and populist movements, the growth of the welfare state and other changes associated with Karl Polanyi’s Great Transformation (Jomo & Popov, 2016). The strength of robust and egalitarian alternatives has constrained and checked economic inequality, especially as long as socialism was relatively dynamic and seemed to be catching up with the West (Popov, 2014a, Chapter 3; Popov, 2014b).

When socialism lost its dynamism from the 1970s and posed less of a threat, the conservative reaction in the Anglophone West followed, led by Thatcher and Reagan in the 1980s, weakening workers’ movements. Government spending, including social spending, stopped growing, many social security programs were curtailed, and unemployment rose to highs not seen since the 1930s, as trade unions were defeated in their industrial actions (coal miners in the UK, air traffic controllers in the US), causing union membership to decline. The top income tax rates, higher than 50 percent in the United States, United Kingdom, Germany and France during 1940–1980, dropped to below 50 percent by 2010 (Piketty, 2014). The collapse of the Berlin Wall (1989) and the USSR (1991) was among the high points of this resurgence, reflected in the counter-revolution against the welfare state, as well as Keynesian and development economics.

Not surprisingly, income and wealth inequality has risen in most countries since (Figure 1, Figure 2, Figure 3, Figure 4 and Figure 5) and this facilitated, if not caused directly, the rise of nationalist forces and politicians in many countries—from Boris Johnson in Britain, to father and daughter Le Pen in France, the “Alternative” movement in Germany, Donald Trump in the US, and Victor Orban in Eastern Europe. As statistical analysis of voting patterns showed, not so much race or gender issues, but rather economic-based appeals were central to the success of Donald Trump in 2016 (Ferguson et al., 2018).

World inequality—considering the whole globe as a territory with no country boundaries—declined in recent decades, as depicted by the famous “elephant curve”, showing that the world’s super rich (top 1% and 5%) experienced a smaller increase in income than the Global middle class (Lakner & Milanovic, 2013). This happened due to the rapid growth of China and other developing countries—between-country inequality fell (Popov & Jomo, 2018). But inequality within countries in most instances increased and became the driving force of the rise of nationalism.

In some countries of the Global South (Latin American countries and East Asian countries), the postwar trend towards the increase in inequality was interrupted after the 2008–2009 Great Recession, so that Gini coefficients and the share of 1% and 10% of the top income groups in total income somewhat declined in the 2010s, but in the US, many European countries and India, the increase in inequality continued well into the 2020s (WID).

The major alternative explanation of the rise of nationalism in Western countries is the increase in migration from countries of the Global South (see for a discussion: Piketty & Sandel, 2025). However, successful countries, regions and communities—the rich, with fast-growth and even distribution of fruits of growth (inclusive development)—normally do not have problems with assimilation of large inflows of migrants. The US did not have problems with the migrants until recently, when it started to lose its competitiveness to China. In Germany, the strongest anti-migration sentiments are in Eastern Lander, even though the share of foreign-born residents is higher in Western Lander.

In the words of Thomas Pikketty, “in the counties where Trump has been receiving <this is a citation> the most votes, the big predictor is the destruction of manufacturing jobs. It is not the inflow of migrants from Muslim countries or wherever. …We see the same in France. There were, historically, among Jean-Marie Le Pen voters, people who were clearly angry at North African migrants. But today, the party of his daughter Marine le Pen, the National Rally, draws its voters mainly from small cities with no migrant population, where the real issue is opposition to European trade policy and the offshoring of jobs. These voters are saying “Our main problem is trade competition. Whether it’s from Turkey, from China, from Algeria, from Mexico is not the issue. The issue is that we are losing jobs”” (Piketty & Sandel, 2025).

3. Empirical Evidence

There are different measures of nationalism (public opinion polls, asking questions like “Do you think your country is/should be number 1?” and “Do you consider yourself as a world citizen/ citizen of the country?”). The World Value Survey (WVS) has a question (number 254 in the last round) “How proud are you of your nationality” (possible answers: very proud, quite proud, not very proud, not at all proud, do not know). The pride index used below is equal to the number of answers of “very proud” and “quite proud” divided by the number of answers of “not very proud” and “not proud at all”. The decline in the pride index is taken as a proxy for the nationalism variable: if less and less people are proud of their country, they are likely to support nationalist leaders promising “to make the country great again”. The rise in the index is a symptom of healthy development—the country is on the right track, globalization is perceived to be good and fair by more and more people. The decline in the index implies that people are disappointed in the performance of their country and want to “make it great again”.

The WVS, however, provides comparable information for only approximately 30 countries for the period of 1989–2022 (first to seventh rounds of the WVS), but the list of countries changes from one round to another (

Table 2. The pride index in selected countries in 1980–2022 (ratio of the number of answers of “very proud” and “quite proud” to the number of answers of “not very proud” and “not proud at all”).

COUNTRY/PERIOD	Pride Index in Periods of 7 Rounds of World Value Survey							Pride Index in 2020 as a Fraction of 1990
	1981–1984	1989–1993	1994–1998	1999–2004	2005–2009	2010–2014	2017–2022
Argentina	4.9	5.9	7.5	12.7	18.4	11.3	8.9	1.5
Brazil		6.1	5.2		5.2	3.5	1.6	0.3
Belarus		4.6	3.7			4.5	9.2	2.0
Chile		6.1	6.7	13.3	15.5	15.5	3.6	0.6
China		4.4	7.8	4.6	3.7	8.7	11.4	2.6
Czechia		2.0	5.9				4.4	2.2
India		15.5	11.0	14.7	22.5	31.7	18.6	1.2
Japan	1.8	1.9	1.6	1.4	1.5	2.5	4.6	2.4
South Korea	4.0	4.2		3.5	8.1	9.9	4.3	1.0
Mexico	7.9	7.8	15.0	18.8	19.0	19.0	10.1	1.3
Nigeria		6.6	5.7	9.1		13.3	8.9	1.3
Poland		47.5	32.0	24.0		23.8	47.5	1.0
Russia		1.9	2.4		5.4	4.1	11.0	5.9
Slovakia		3.0	8.4				6.5	2.2
South Africa	3.1	9.9	32.0	19.0	32.0	9.9
Sweden	2.7	5.2	8.5	6.8	7.5	7.5	12.6	2.4
Switzerland		4.3	3.0		5.8		8.1	1.9
Turkey		11.3	23.5	8.6	22.5	30.3	12.6	1.1
United States	31.7	47.5	48.5	23.5	10.9	10.9	4.1	0.1

Source: WVS.

). There are data on 12 countries for the first wave of the survey (1981–1984) and for over 100 countries for the sixth and seventh rounds (2010–2014 and 2017–2022), but I have chosen a period of 1989–2020 as a compromise between the need for a reasonable number of points and the length of the period in question. Further, later the force majeure events, like the pandemic (2020–2022) and the Russian–Ukrainian war and associated sanctions (2022–2025), could have changed the previous trends and deserve a special analysis.

Developing countries generally have a higher pride index—probably because these are more traditional and less globalized societies. But it is the dynamics of the pride index that could be used as an indicator of nationalism—when pride in one’s own country declines, it is easier to mobilize support for nationalistic measures.

The dynamics of this index for all countries on which data are available is shown in Table 2 and Figure 6. A total of 10 countries (Russia, China, Czechia, Slovakia, Sweden, Japan, and South Africa) experienced an increase in the index of 2 or more fold in 1990–2020, whereas in 7 countries (Argentina, India, South Korea, Mexico, Nigeria, Poland and Turkey), the increase was moderate (less than 2 fold), and in Brazil, Chile and the United States, the index declined.

The increase in the pride index appears to be associated not only with the economic/social/military success of the country, but with how evenly (fairly) this success was distributed—high income inequality had a negative impact on the increase in the pride index (Figure 7). The only outlier in Figure 7 is Russia, where the increase in the pride index was obviously associated with the reunification with Crimea and Novorossiya and the Russian–Ukrainian war.

It is noteworthy that from 1981–1984 to 2017–2022, the pride index declined in the US and in all the Latin American countries (Argentina, Brazil, and Chile) that were included in the sample except for Mexico.

The regression equations linking the increase in the pride index with the level of the index in 1990 (Pride1990), GDP per capita in constant 2015 USD in 1990 (GDPcap1990), the increase in this per capita GDP in 1990–2020 (GDPcapINCR), inequality in 2020 (GINI2000), and the Russia dummy variable (Russia) are reported in

Table 3. Determinants of the increase in the pride index—regression results, robust estimates. Dependent variable—the increase in the pride index in 1990–2020.

Equations/Variables	1, N = 18	2, N = 18	3, N = 18	4, N = 18	5, N = 18	6, N = 18	7, N = 18	8, N = 18
Pride1990—level of pride index in 1990		−0.04 ***			−0.03 ***	−0.03 ***	−0.03 ***	−0.03 ***
GDPcap1990—GDP per capita in constant 2015 USDs in 1990				8.0 × 10−6		6.0 × 10−6		9.9 × 10−6 *
GDPcapINCR—increase in per capita GDP in 1990–2020, times				0.04 **			0.06 *	0.08 ***
GINI2000—Gini coefficient in 2000 or nearest year, %	−0.07 ***	−0.06 ***	−0.06 ***	−0.06 **	−0.06 ***	−0.06 ***	−0.06 ***	−0.06 ***
Russia—Russia dummy variable			4.4 ***	4.5 ***	4.1 ***	4.2 ***	4.2 ***	4.3 ***
Constant	4.0 ***	4.3 ***	3.7 ***	3.3 ***	3.9 ***	3.8 ***	3.7 ***	3.4 ***
R2	15	32	59	84	90	90	91	93

***, **, and *—significant at 1%, 5%, and 10% level, respectively.

.

The controls for the initial level of GDP per capita (GDPcap1990) and for the initial level of the pride index (Pride1990) are necessary because the level of the pride index is very different in different countries and is determined by a number of factors. One obvious factor is the level of economic development (per-capita income)—more developed countries usually have higher pride indices. But there are more specific factors as well—US nationalism, as argued by Anatol Lieven, is fueled by the traditional messianic vision of the nation’s role in the world, and a recent feeling of defeat. To find a similar level of nationalism in Europe, one has to go to the period before the Second World War or even before the First World War (Lieven, 2012).

After the control for these variables, as well as Russia’s dummy variable discussed above, an increase in the pride index appears to be associated with the economic success of the country—the greater the increase in per-capita income in the period in question (1990–2020), the larger the increase in the pride index; and with how evenly (fairly) the economic success of a country was distributed, income inequality had a negative impact on the increase in pride (Table 3).

Even though there are only 18 observations, the regression results are very robust to the inclusion/exclusion of variables—all variables are significant, except for two cases (per capita 1990 GDP in equations 4 and 6). This variable, however, becomes significant in other specifications that yield higher R². F-statistics is good in the first and second equations (Prob > F = 0.001), but it cannot be computed in other equations—those with too few observations and with too many variables.

4. Case Studies—The US, the EU, and Russia

4.1. The US

In the United States in the late 18th century, income and wealth inequality were initially probably lower than in Europe due to the absence of large accumulated fortunes in the New World and the availability of abundant ‘free land’. In the late 18th century, the top 10 percent of wealth holders accounted for only 45 percent of total wealth in the US, compared to 64 percent in Scotland and 46–80 percent in Finland, Norway, Sweden and Denmark (Soltow, 1989). But it appears that inequality increased greatly in the 19th century and in the 20th twentieth century, reaching a peak between the two world wars. Soltow (1989) finds a decrease in income inequality in the 1798–1850/1860 period in the US, and little or no increase in wealth inequality over the same period. However, the ratio of the largest fortunes to the median wealth of households (Figure 4) (Phillips, 2002) suggests a different story. This ratio increased from 1000 in 1790 (Elias Derby’s wealth was estimated to be worth USD 1 million) to 1,250,000 in 1912 (John D. Rockefeller’s fortune of USD 1 billion), falling to 60,000 in 1982 (Daniel Ludwig’s fortune of ‘only’ USD 2 billion), before increasing again to 1,416,000 in 1999 (Bill Gates’ USD 85 billion fortune). In 2025, the fortune of Elon Mask was approaching USD 1 trillion, approximately 5,000,000-fold larger than the median net wealth of households (USD 192,000 in 2022—https://www.investopedia.com/average-americans-net-worth-8713595; accessed on 25 February 2025).

It may well be, however, that in the long run, the recent rise in inequality in the US (and the UK) has not yet brought the Gini coefficients to the level in the mid-late 19th century, but the speed of the increase in inequality seems to be unprecedented (Figure 8).

Economic misfortunes contributed to the increased mortality and morbidity, especially for the poor non-Hispanic white population, whose relative position and status declined the most. Case and Deaton (2015) document a marked increase in the mortality of the middle-aged white non-Hispanic population in the US after 1998 in all 5-year age groups from 30 to 55. The leading causes for the increased mortality were poisoning, suicide, chronic liver disease, and cirrhosis. Increasing mortality in the middle-aged white population was matched by increasing morbidity. When compared side by side with the mortality increase, declines in self-reported health and mental health, increased reports of pain and greater difficulties with daily life show increasing distress among the white population in midlife after the late 1990s.

They see some economic reasons for such a mortality rise: “Although the epidemic of pain, suicide, and drug overdoses preceded the financial crisis, ties to economic insecurity are possible. After the productivity slow down in the early 1970s, and with widening income inequality, many of the baby-boom generation are the first to find, in midlife, that they will not be better off than were their parents. Growth in real median earnings has been slow for this group, especially those with only a high school education. However, the productivity slow down is common to many rich countries, some of which have seen even slower growth in median earnings than the United States, yet none have had the same mortality experience…. The United States has moved primarily to defined-contribution pension plans with associated stock market risk, whereas, in Europe, defined-benefit pensions are still the norm. Future financial insecurity may weigh more heavily on US workers, if they perceive stock market risk harder to manage than earnings risk, or if they have contributed inadequately to defined-contribution plans” (Case & Deaton, 2015).

This dominant ethnic group of the non-Hispanic white population (approximately 200 million people out of over 300 million), especially men, is exactly the group that gave rise to nationalism in the US. As public opinion polls show, the greatest support for Trump in the US comes from white middle-aged men without a college degree who are relatively poor (http://politicsthatwork.com/blog/trump-supporters.php; accessed on 25 February 2025).

The rise of nationalist sentiments and politics in the US is clearly observable inthe proliferation of the protectionist tendencies to fight the competition of Chinese goods. In May 2024, the Biden administration raised tariffs on many Chinese goods, including electric batteries, solar panels, computer chips, and electric vehicles (the latter by a whopping 4 fold, from 25% to 100%). The irony is not only that the United States, which traditionally defended free trade and demanded that other countries eliminate trade barriers, moved towards outright protectionism, but also that tariffs were imposed on precisely the equipment needed for the transition to a “green economy.” China produced 80% of the world’s photovoltaic modules, 60% of wind turbines, and 60% of electric vehicles and batteries; in 2023, the increase in its solar panel capacity alone was greater than the entire installed capacity in the United States. “The moral, environmental, and economic arguments all favor those who subsidize their green industries, not those who want to tax others’ production” (Rodrik, 2024).

The second victory of Donald Trump in the 2024 presidential elections led to even more protectionist and anti-immigration measures, a decline in world trade, and de-globalization. Traditional roles have changed: today, China is for the elimination of tariffs because it is more competitive, like Britain after 1848 (with the repeal of the Corn Laws) and before the Second World War, and like the US since the Second World War and until recently. The postwar success and high competitiveness of the US prompted it to support openness and to welcome foreign competition—free trade, immigrations and globalization—for nearly half a century. But the loss of competitiveness (current account deficit since the 1970s) and the growth of inequality since the 1980s led to the rise of nationalist sentiments and politicians.

4.2. The EU

In most European countries, income inequality increased since the beginning of the 1980s—the reversal of the trend that predominated since the early 20th century (Figure 9). This increase in inequality may be the single-most important reason for the rise of nationalism. In Eastern Europe, there was a transformational recession in the 1990s associated with the transition to the market economy—output fell by 20–50% in the course of 2–5 years (Popov, 2000), which certainly contributed to the rise of nationalism. But in Western Europe, there was no major recession (except for Greece), economic growth was not very strong, but rather stable, the recessions of 1993 (per capita GDP fell by 0.4%), 2009 (−4.7%) and 2012–2013 (−0.4%) were overcome, and average incomeswere way higher in 2020 than in the 1980s. However, the progressing unevenness in income distribution undermined the real incomes and social status of large groups of the European population, making them easy targets for nationalist politicians.

Britain may be the case in point (Popov, 2023). The rise of nationalism is often explained by unfairness and humiliation experienced by the whole nation (for instance, Germany after the First World War or developing countries where costs of globalization are often higher than benefits). In Britain, however, the recent rise of nationalism did coincide with relatively successful economic development and with the improvement of its economic positions versus major competitors. Britain was falling behind continental Western Europe in terms of its per-capita income and this trend was reversed only after Britain entered the EU (Figure 10).

However, only a minority of the population benefited from the acceleration of economic growth since the early 1980s—income inequality increased (Figure 9) and so did wealth inequality (Figure 11).

From the point of view of economic efficiency and future growth, Brexit seems to be bad for the EU and especially bad for Britain. A total of 70% of Dahrendorf working group members and experts believed that Brexit will weaken the UK, but the EU will muddle through (Oliver, 2016). But the majority of British voters, albeit for a short time, apparently blamed economic difficulties not on policies that allowed inequality to increase, but on European integration and globalization (Figure 12) (Popov, 2022). After the 2016 referendum, the percentage of Brits considering Brexit the wrong decision surpassed the share of those who regarded it as the right move and stayed at this level almost permanently; in 2024 it exceeded 60% (Economist, 25 January 2025).

4.3. Russia

Russia experienced a prolonged and deep transformational recession—output fell by 45% in 1989–1998. Output then nearly recovered to the pre-recession Soviet levels of 1989 by 2008, but fell again by a good 8% in 2009. In 2010–2013, GDP increased by 5%, but fell again by nearly the same amount in 2014–2016. The dynamics of real incomes was similar—they surpassed the 1990 level only after the 2008–2009 recession.

The Russian population, like any other, wants better living standards and a better social climate. Growing incomes, longer life expectancies, lower unemployment and crime rates in Russia, like in other countries, all other things being equal, lead to greater satisfaction with life, higher evaluation of one’s prosperity/happiness and a greater feeling of pride in one’s own country (Table 2 and Figure 13). The sharp decline in living standards in the 1990s and the steep increase in income inequality (Figure 14) led to the rise of nationalism as measured by the decline in the pride index and the decline in the happiness index (Figure 13).

There were two outbursts of nationalism—in the early 1990s (this wave gradually subsided during the macroeconomic stabilization period of 1995–1998) and right after the currency crisis of August 1998 that led to the new drop in real incomes, the rise in crime, mortality and inequality. The turning points in the happiness index and the pride index shown in the charts do not always tell the full story because for some periods, data are lacking. But the correlation of these indicators with GDP growth rates is quite obvious—the reduction in incomes and the pride and happiness indices in the 1990s, the increase in the 2000s when oil prices were growing, and stabilization and some decline during and after the recessions of 2008–2009 and 2014–2016. The percentage of votes casted for the nationalist Liberal Democratic Party and their leader Zhirinovsky was generally high when the happiness index was low (Figure 13)—additional evidence that nationalism thrives on economic turmoil and a rise in social inequality.

It is also noteworthy that there was no major surge in nationalist sentiments in Russia during and after the 2008–2009 recession, when the economy was barely growing or not growing at all. The explanation is probably associated with some stabilization of the social sphere—income inequality stopped growing and even declined somewhat (Figure 14), and mortality rates, crime rates and murder rates declined markedly.

5. Conclusions

The rise of nationalism in recent decades seems to be associated with the increase in income inequality. In some countries, income inequality did not increase and nationalist and anti-globalist sentiments are more related to the slow down of growth and other reasons, but there was an increase in income and wealth inequality since the 1980s in most countries—a reversal of the previous trend of over 50 years that created a fertile ground for the rise of nationalism.

The fall of the Berlin Wall, the collapse of the USSR and the conversion of Eastern Europe and former Soviet republics to capitalism added additional push to the growing income inequality trend due to both the increase in inequality in Western countries caused by the disappearance of the “socialist counterbalance” to Western capitalism and the rise in inequality in the transition countries of Eastern Europe and the former Soviet Union.

In recent years, the growth of international trade slowed down and was not as fast as the growth of the economy in many countries, so the ratio of external trade to GDP declined (Federico & Junguito, 2018) (Figure 15), as well as the ratio of foreign direct investment inflows to GDP (Figure 16). The process started after the Great Recession of 2008–2009, well before the COVID-19 pandemic (2020–2022) and the outburst of sanction politics associated with the Russian–Ukrainian war (2022–2025).

It may be hypothesized that the continuation of these trends could result in two outcomes. First, there may be social upheavals in some countries, where social tensions due to growing inequality will become unbearable and produce social turmoil. And the rise of nationalism may lead to conflicts, if not wars, between countries, with the collapse of international trade and capital flows, like in the 1930s. In this case, the world may once again take the familiar 20th-century track: there may be a pause or even a reversal of globalization, like during the Great Depression, when the outburst of protectionism led to the decline in international trade and capital movement. This is the worst scenario: the world degrading into social and national conflicts.

The second scenario implies that countries that carry out successful policies limiting inequality will become more competitive, driving other countries “out of business”. Even small countries, if they are successful, may create a counterbalance through demonstrating a counter example of “unconstrained capitalism” to cut welfare programs and increase inequality. They may regulate the functioning of market mechanisms through direct interventions—the proliferation of free education and health care, as well as high progressive taxation to reduce bubbles and windfall profits. Further, a crucial way of lowering inequality is public and collective property, so it might be expected that state enterprises, non-profit institutions, labor-managed enterprises and co-ops, not-for-profit organizations, for public good become more common. There may be a rise of new grass-root socialism that becomes more competitive than capitalism (Popov, 2014b). Such an optimistic scenario implies that social upheaval within countries and conflicts between countries could be largely avoided. These are of course only hypotheses based on the projection of current trends into the future.