The federalist proposals of Morelli and Piketty

I was recently invited to a dinner in Barcelona where I met Massimo Morelli, Professor of Economics and Political Science at Bocconi University. I was deeply impressed by his ideas on populism and federalism, and in the following days I downloaded and read several of his most recent academic papers.

In his research, Morelli analyzes both the demand and supply sides of populism. The demand side stems from public dissatisfaction with the unequal outcomes of globalization, economic crises, and technological change. The supply side arises from the strategies of political actors who seek to exploit these grievances, often combining them with established or newly constructed narratives.

The vicious circle of populism becomes reality when the economic costs of failed populist governments make it increasingly difficult for conventional parties to repair the damage (as seen with Starmer’s challenges in the UK). The scope for genuine reform is extremely limited in national democracies with little fiscal space—at least within the current context of free capital movement.

Morelli argues that Dani Rodrik’s Trilemma has been overtaken by reality: authoritarian populists have shown that protectionism, authoritarianism, and a smaller state can coexist. The prospect of a democratic nation-state that restricts globalization has effectively vanished. According to Morelli, the only real hope for Europe—his “dream”—is a federal United States of Europe that pools resources to create a common defense, coordinated policies, and a genuine European budget and fiscal policy.

He also contends that earlier work by Italian economists such as Alberto Alesina and Enrico Spolaore—who argued that small nations could thrive in a globalized world—has become obsolete. Today, only deeper European integration can offer hope to a working majority and break the vicious circle of populism.

Morelli’s originality lies in his attention to the dynamic effects of policies designed to counter populism. A strategy aimed at discrediting populist leaders may succeed in the short term, but in the long run it can also foster an anti-politics climate that benefits new populist movements.

While Morelli does not propose an ambitious progressive platform like Thomas Piketty does in A Brief History of Equality, he shares with the French economist the conviction that a federal (instead of national) welfare state is a key ingredient in building an egalitarian coalition.