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It is argued that far‐right (FR) populism in the West is fuelled by inequality. In this paper, we argue that three social psychological processes are central to explaining these phenomena. We suggest that these processes are recursive although we do not specify their temporal order. Drawing on the social identity tradition, we first examine how inequality is linked to reduced social trust and cohesion, which has consequences for both low‐ and high‐income groups. We examine the known effects of perceived threat in amplifying tensions between groups and consolidating identity positions. Second, we argue that national identity consolidation is a particularly likely response to inequality, which, in turn, reduces tolerance of cultural diversity as an associated consequence. Finally, we consider the value of these strengthened national identities to those who harness them effectively to gain political ground. In this way, those who offer FR populist rhetoric aligned with nationalism can blame immigrants, "foreign" powers, and mainstream politics for both the lack of social cohesion and reduced economic circumstances of many. We conclude that FR populist leaders not only tap into the negative social consequences of inequality, their policy positions also fail to address and may even compound the situation. [ABSTRACT FROM AUTHOR]