January 26, 2016
7:26 pm
The
economic losers are in revolt against the elites
Martin WolfMartin
Wolf
Nativist
populists must not win. We know that story: it ends very badly indeed
Losers have votes,
too. That is what democracy means — and rightly so. If they feel
sufficiently cheated and humiliated, they will vote for Donald Trump,
a candidate for the Republican party’s presidential nomination in
the US, Marine Le Pen of the National Front in France or Nigel Farage
of the UK Independence party. There are those, particularly the
native working class, who are seduced by the siren song of
politicians who combine the nativism of the hard right, the statism
of the hard left and the authoritarianism of both.
Above all, they
reject the elites that dominate the economic and cultural lives of
their countries: those assembled last week in Davos for the World
Economic Forum. The potential consequences are frightening. Elites
need to work out intelligent responses. It might already be too late
to do so.
The projects of the
rightwing elite have long been low marginal tax rates, liberal
immigration, globalisation, curbs on costly “entitlement
programmes”, deregulated labour markets and maximisation of
shareholder value. The projects of the leftwing elite have been
liberal immigration (again), multiculturalism, secularism, diversity,
choice on abortion, and racial and gender equality. Libertarians
embrace the causes of the elites of both sides; that is why they are
a tiny minority.
In the process,
elites have become detached from domestic loyalties and concerns,
forming instead a global super-elite. It is not hard to see why
ordinary people, notably native-born men, are alienated. They are
losers, at least relatively; they do not share equally in the gains.
They feel used and abused. After the financial crisis and slow
recovery in standards of living, they see elites as incompetent and
predatory. The surprise is not that many are angry but that so many
are not.
Branko Milanovic,
formerly of the World Bank, has shown that only two parts of the
global income distribution enjoyed virtually no gains in real incomes
between 1988 and 2008: the poorest five percentiles and those between
the 75th and the 90th percentile. The latter includes the bulk of the
population of high-income countries.
Change-in-global-incomes
Similarly, a study
by the Economic Policy Institute in Washington shows that the
compensation of ordinary workers has lagged significantly behind the
rise in productivity since the mid-1970s. The explanations are a
complex mixture of technological innovation, liberal trade, changes
in corporate governance and financial liberalisation. But the fact is
unquestionable. In the US — but also, to a smaller extent, in other
high-income countries — the fruits of growth are concentrated at
the top.
Finally, the share
of immigrants in populations has jumped sharply. It is hard to argue
that this has brought large economic, social and cultural benefits to
the mass of the population. But it has unquestionably benefited those
at the top, including business.
Despite offering its
support for welfare benefits one might think very valuable to the
native working classes, the respectable left has increasingly lost
their support. This seems to be particularly true in the US, where
racial and cultural factors have been particularly important.
The “southern
strategy” of Richard Nixon, a former Republican US president, aimed
at attracting the support of southern whites, has generated political
results. But the core strategy of his party’s elite — exploiting
middle-class (especially male) rage over racial, gender and cultural
change — is bearing bitter fruit. The focus on tax cuts and
deregulation offers little comfort to the great majority of the
party’s base.
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