Are Trump and Brexit voters trying to solve the wrong problem?

Over the last few months, political commentators and the so-called establishment have been shocked by the results of the electoral processes in the UK, voting for Brexit, and the US election, electing an unproven, unpredictable Donald Trump to the presidency.

How could this happen? A lot of analysis has gone on trying to explain it, most of it, in my opinion, misguided. Most analysts are focusing on how these results are the wrong solution to the problem. However, I think that the fact is that voters are addressing the wrong problem.

Both the UK and US electorates have voted in protest to what they perceive as being a worsening of their living conditions. Jobs are being lost to global competition and immigrants, life is highly pressured and unaffordable, there is lack of opportunity in our societies, etc. The problem, from voters’ perspective, is a lack of success in the UK and US economy. The economy is doing badly, this is impacting standards of living, and therefore the solution is to vote for political programs which promise (and sadly, that is all they do) success.

Common wisdom, and the narrative of the winning sides in both elections, goes something like this:

In the US, the Obama administration has failed at leading the recovery of the economy from the 2008 recession. Things are bad, and third party countries and foreigners are taking what is rightfully American. Trump is coming to the rescue, promising to make America great again.

In the UK, the EU has acted as a brake to the UK economy, preventing it from growing and succeeding as it otherwise might. The EU is slowing the UK down, with unwieldly red tape, curtailing the UK’s freedom to trade and flooding the country with uncontrolled immigration. The obvious solution is Brexit, which will make the UK great again.

I will look at whether Trump and Brexit are the right solutions to these problems in another post (in fact, they aren’t, but I don’t want too much of a spoiler here). But even before I do that, the first thing we should be looking at is whether these problems are real. And here is where facts come in. Facts used to be the way that reality was evaluated prior to decision making. Although they seem to have lost importance and to have been replaced by the loudest noise, I still believe they are the only logical basis to the decisions we take.

A few facts about the American economy you may or may not know:

The starting point is the financial crisis of 2008 and 2009, which coincides with the beginning of the Obama administration (although its causes are to be found, at least in good part, in the financial sector de-regulation presided over by the Bush and, to a lesser extent, Clinton administrations). In 2009, when Obama took the presidency, the US economy in real GDP terms fell a massive 5.4%, with unemployment at its highest level in 70 years, around 10%.

What has happened since?

• In the third quarter of 2016, the US economy, in nominal GDP terms, has grown 3.5% (this is above the average growth in the US economy since 1940, no mean feat http://www.tradingeconomics.com/united-states/gdp-growth).  
• The growth for 2016 is estimated at 3.1%. This is the highest in any ‘first World’ sizeable economy, with most other around the 1.5% GDP growth rate (https://www.gfmag.com/global-data/economic-data/countries-highest-gdp-growth).  
• 12 million jobs have been created since 2009, with unemployment at an all time low of 4.7% (https://www.bls.gov/news.release/empsit.nr0.htm). In fact, unemployment levels of below 5% are considered full employment, as this accounts for the percentage of people between jobs or willingly out of work at any given time in an economy.
• Budget deficit has been reduced by 60% since the trauma of 2009 (http://www.usgovernmentspending.com/federal_deficit_chart.html).
• 20 million Americans have health insurance for the first time, as a result of Obamacare.
• On the downside, public debt has increased by 90% since 2008, so that is the big issue for the US economy (the average debt per capita is still looking good compared to many developed countries such as the UK for example, see https://en.wikipedia.org/wiki/List_of_countries_by_external_debt).

This is, in anyone’s terms, an incredible recovery in a short period of time. The US economy is succeeding. Big time. So how can it be that Americans think they are doing so badly that they are choosing a candidate whose main promise is to take down the system? There are several reasons for this. I cannot enumerate them all here, but these are some of my favourite explanations:

• Negative news. The fact is, bad news sells better than good news. Fear sells better than hope. Human nature aims to protect what it has before aspiring to grow. Fear of loss is a much more powerful motivator than hope of improvement. This was discovered by psychologists in the 70s and has been the basis of sales and marketing theory ever since. As a result, the media, financed by advertising, publish majorly bad news. The growth in national debt in the US, and anecdotal stories about illegal immigration, get a lot more airtime than the economic recovery.
• Inequality. The distribution of wealth in the US has deteriorated in the last 8 years, worsening the prospects of those at the bottom of the economy. This is not by design of a socially progressive (at least by US standards) Obama administration, it is a global consequence of the dynamics of capitalism. By definition, it fosters inequality by ‘redistributing’ wealth (this is an euphemism for concentrating wealth in the hands of the owners of the means of production). This is classical economic theory, well studied by Adam Smith, Karl Marx, Milton Keynes et al.
• Envy and comparison with others. This was pointed out to me by a friend the other day. When humans compare themselves to others, that influences their perception of how they are doing. Success and failure, wealth and poverty, are relative terms, at least once you get over a basic line. There may be some truth in this. I don’t have any facts to back this up, only anecdotal evidence, which can be hugely misleading. If there is some truth in it, though, that would make some sense. Nowadays, we are bombarded by a culture of celebrity. The people we see in TV and in the media are wildly successful, earn unprecedented amounts of money and accumulate wealth and plaudits. If we compare ourselves with them, we may feel we are doing a lot worse than we really are.

And here comes the really interesting part. If we leave aside the rejection of immigrants, racism, and a few other, unedifying feelings which may have caused some pro-Trump votes but which Trump supporters are at pains to tell us are only a minority, we are left, when trying to explain the vote for Trump, and considering that he practically run with no program or plan, with two main explanations:

• A reaction against an establishment that is failing the American public, ignoring it and presiding over a significant deterioration of its standard of living,
• and the concept that Trump’s success in private life may equip him to show America the way to economic success.

Those arguments may stand in a situation where the economy is failing and the government is forgetting the working people. But, as we saw at the beginning of the article, the facts tell us that this is not the case. All the opposite.

And now comes the big question: In a reality in which the economy is succeeding, the recovery is well underway and Americans are getting access to universal services they never enjoyed before, but where they still have the problems of national debt and inequality, is the solution a president:

• who is a multibillionaire (multibillionaire status is typically a result of lack of equality, since most people are not multibillionaires),
• whose most clear policy is undoing most of what the previous administration has based the very successful recovery on,
• who is running on a ticket of greatly increased public spending and reduced taxation, hardly the recipes to reduce public debt.

That seems a real stretch. It seems that Americans may be voting to solve the wrong problem. 

Unfortunately, that has consequences and, in this case, some of them may be very serious, and contribute to very significantly aggravating the real problems, whilst undoing the real successes. I promised to blog on the Chinese and US relationship, but this post has got very long, so I will have to leave that for one of the next posts.

Before that, we should look at the vote for Brexit in the light of the real UK situation. My next post will be looking at some quite incredible facts about the misconceptions and fallacies that led to the Brexit vote.