Confronting the Curse of Populism

There are a lot of gloomy people out there. Brexit and Trump have ‘triumphed’, the far right and far left in western democratic societies have all gathered more support than feels comfortable (Corbyn, Sanders, Le Pen, the AfD to name but a few) and ‘elites’, whatever this title means, are despised. Nationalism is on the increase and King Canute-like, key economies are trying to turn their back on globalism. The world feels a much less safe place nowadays.

Why are we at this point? For decades in western democracies politicians have over-promised and under-delivered, telling the electorate what they want to hear and racking up deficits in their attempt to deliver. At the same time, post the 2008 crash, the rich seem to have got richer with cuts disproportionately impacting the less well-off. The long term benefits of globalisation for many have been out-weighed by shorter term pain.

What is the solution? Well, first, things are only going to get worse before they get better. The anger with the establishment is not going to abate soon. Trump is still absurdly popular amongst his core base (don’t be reassured by the Democrat win in Alabama); Brexit is happening (regardless of MPs now having the final say on terms) and deficits mean there will be no helping the relatively less well off soon. Corbyn looks alarmingly electable in the UK whilst extremists in continental Europe continue to prosper. And that is before all these populists with their manifest incompetence fail to deliver for their supporters.

And financial markets seem oblivious to any sort of geopolitical risk. A journalist from The Economist speaking recently on rising tensions, reached the conclusion that growing disillusionment with the current order is simply not reflected in the level of markets or price of real assets. If threats cause the bull market in bonds and equities to end sharply, there will be even less money around to oil the wheels of consensual capitalist democracies, further fuelling extremism.

Now back to the solution…What is required is a new political class of higher calibre politicians who tells it to the electorate as it is. Firm on budgets and over-blown promises, socially liberal and willing to take the risk of walking away from existing Party structures, they must act and talk long term, ignoring the 24 hour media cycle. They must measure their success by creating a new economic consensus not by how long they remain at the top.

Remind you of anyone? Well let’s start with Macron in France. Then let’s look to the future; individuals forming a break away Labour Party, a moderate Conservative Party leader not obsessed with Europe or a full political party realignment in the UK? A rejuvenated Democratic Party in the US? That’s just the start.

Sounds optimistic? I hope so. It is the only option.