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Why Trump won

Globalisation's losers are biting back. The introduction to John Mills' pamphlet.

Donald Trump, by Gage Skidmore.

Against all the odds, Donald Trump won the 2016 US presidential election. Something new, important and disturbing has very clearly been happening recently right across the West, with ominous implications especially for the political estab-lishment. In addition to the astounding recent election outcome in the USA – very largely unexpected by those who thought they were in the know either side of the Atlantic – not long ago UKIP won more votes than any other party in the 2014 UK election to the European Parliament. More recently, the result of the June 2016 EU referendum in the UK was clearly substantially a vote against the establishment. In France, the Front Nationale is very likely to do well enough in the French presidential elections in 2017 for Marine Le Pen to be in the final ballot. In Germany Alternativ für Deutschland surprised Angela Merkel by beating her party’s CDU candidate in September 2016 in her own home state. In Spain, in December 2015, Podemos won 69 seats out of 350 in the Spanish general election. In Greece, Syriza has since January 2015 been the largest party in the Greek parliament. In Italy, in June 2016, the Five Star Movement won control of Rome and Turin1.

There are evidently overlapping reasons for these developments, although all the political movements involved are not, by any means, the same. Some are of the right and some of the left. Some have authoritarian streaks which others lack. Some are relatively liberal and outward looking while others are more orientated towards protectionism. All of them, however, share some common features. They are patriotic rather than internationalist. They all have varying concerns about immigration, reflecting the nativism – the feeling that indigenous residents ought to be given more consideration and support than immigrants – of a majority of their supporters. They all exhibit distrust and a measure of contempt for the established political systems.

Above all, supporters of all these parties feel let down by the way they have been treated economically. Nearly all of them have, at best, seen little or no increases in their living standards, some since 2008 but many – especially in the USA where the median wage is no higher in real terms now than it was in the 1970s – with no improvement for much longer. Others have seen major reductions rather than just no rises. In the UK, according to a recent TUC report, for those in work the median wage dropped as sharply as it did in Greece – by 10.4% in each case between 2007 and 2015 – although Greek unemployment is much higher than in the UK. By contrast, those in the upper income brackets in the West have all done much better while those in the top 1% have done better still. Those still employed in the upper echelons of banking and financial services continue to earn massive sums while practically no-one has been brought to book to account for the chicanery, misjudgements and bad management which were the proximate causes of the 2008 financial crisis.

How should we explain what is happening? What has caused protest and populist parties to emerge and flourish right across the western world? Some of it has to do with social media. Some of it has to do with the increasing strains that mass migration has generated. But it is globalisation, and all that is encapsulated by it, which almost certainly has more to do with it than anything else. If a line needs to be drawn between those who are attracted to the new parties and those who are not, as good a place as any for it to be located is between those who, on the one hand, have done well out of globalisation, internationalism, increased travel and trade, rising migration and the increasing dominance of financial interests, and those, on the other hand, who have found themselves on the wrong side of the tracks.

It is no coincidence that all the protest parties referred to above were formed relatively recently. Nor should it be surprising that, as discontent has mounted, they have become more prominent. Although during the Great Moderation of the 1990s and the 2000s up to 2008, there were underlying economic trends developing which were dangerous and in the end very damaging, most people during this period experienced rising living standards and were reasonably contented. When the crisis hit in 2008, therefore, by and large people turned to their established political leaders for succour and support. It was politicians of the moderate left and moderate right – indeed the political establishment everywhere – who were regarded initially as the most likely people to find solutions to the problems then confronting everyone. Unfortunately, eight years later, those in charge have failed to deliver a substantial economic recovery to benefit everyone and patience has run out, especially among those at the wrong end of globalisation. This is why so many centrist political parties, especially those of the moderate left, are now in such decline and disarray, and why those that remain are being pulled strongly in directions with which many of their members feel unhappy.

For protest sheers very easily into populism and over-simple solutions to complicated problems. This is why trust between the governors, who have to find their way through complex and intractable reality, and the governed, who have to feel confident that their interests are being protected, is so important. Once this bond fractures, it becomes increasingly difficult to get rational decisions taken, for politicians to hold enough respect from the electors to be able to face down multiple powerful self-serving interests, and for the political process to work sufficiently well for stable and effective governments to be formed and then to provide stable administrations. The danger across large swathes of the western world at the moment is that we may be getting far too far from comfort as these conditions fail to be fulfilled.

The question is whether there is some fundamental reason why the malaise described above – globalisation hugely benefiting some groups but disadvantaging others – has spread across the West and, if so, what can be done about it. The case put forward in this pamphlet is not that there is a simple silver bullet which will cure all the West’s ills. It is, however, that there are some clearly identifiable mistakes, made by western policy makers over the decades since the post-war Bretton Woods consensus broke up in 1971, which have led to the benefits of globalisation – great as in many ways they are – being much too unevenly spread, and that this is the sources of a very large proportion of the discontent which is now so manifest.

For it is not the case that the world as a whole is a much worse place than it was 45 years ago. On the contrary, in many ways it is immeasurably better. It is cleaner, healthier, better fed, longer lived and freer. Millions of people have been lifted out of poverty. The problem is that average improvements across the world have left large swathes of people, especially those on medium and low incomes in the West, little or no better off, especially recently, while almost everyone else has seen his or her lot vastly improved. Identifying and avoiding some of the mistakes made since the 1970s, when the post-World War II international settlement broke up, may not on its own be a sufficient condition for improving the prospects, life chances and hope for those who have missed out on the benefits of globalisation but it is a necessary requirement for getting any real improvements in their circumstances being achieved.

And what, essentially, are the key mistakes which the West has made? Essentially they revolve round competitiveness and, in particular, the ability of the West to compete commercially with the East on reasonably level terms. The charge-sheet is that we have completely failed to do this. We have allowed the East – which, in this context, is shorthand for the countries on the Pacific Rim but particularly China – comprehensively to outflank the West – the USA, Europe and Japan – by allowing them to run their economies on far more competitive lines than ours. As a result, while we have de-industrialised, their manufacturing has gone from strength to strength. On the back of strong export-led growth, their economies have grown much faster than ours and their average standards of living have risen by a large multiple of those in the West. They invest far more than we do in the future; they are not dogged by balance of payments and government deficits rising far faster than their capacity to service or repay them; and their growth is sustainable because it is fuelled by net trade and investment and not just by ultra-low interest rates, asset inflation and consequently rising consumer demand.

It is because of these mistakes that so many of our people have done badly out of globalisation. Of course, increased international trade in services as well as goods has certainly not been disadvantageous to everyone in the West. Those in the upper ranges of the service industries, in particular, have done phenomenally well out of it and they are in a very powerful economic and political position to influence public opinion and policy development. Understandably, perhaps, they think that what has been good for them ought to be fine for everyone else – and if it isn’t this is because of failure by the losers to take advantage of opportunities which they ought to have been able to grab. What these people fail to recognise is that the other side of globalisation is good manufacturing jobs disappearing in the face of unmanageable competition from the Far East, leaving a large percentage of the population dependent instead on much less productive, lower paid and less secure service sector employment. The powerful position occupied by those who have done well out of globalisation means that there is a huge amount of inertia which is inclined to keep the status quo broadly maintained in policy terms. Recent political developments in both the USA and Europe, however, suggest that time may be running out, that discontent is materialising on an unmanageable scale, and that expectations that we can go on as we are with impunity may be wide of the mark.

Read John's full pamphlet "Why Trump Won" here. John is a generous supporter of openDemocracy.

About the author

John Mills is a businessman and economist. He is chairman of direct to consumer retailer, JML, and has published widely as an economist. He sits on the openDemocracy board and is a donor to oD. His most recent book is Exchange Rate Allignments.


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