10 November 2016

Americans turn to Trump – but can he cure what ails them?


And now it gets interesting.

In a piece written on the eve of the election, I argued that a Trump victory would be a “peasants’ revolt”, given that it could only come from turning out an overwhelmingly number of white men (and women) without college degrees, who had flocked to his banner even as the more educated turned away.

In the end, that is exactly what happened. Trump’s data team started to suspect an upset was on the cards when they caught wind of the enthusiasm for him outside the cities, which had been grotesquely underestimated both by the Democrats and the media. The peasants weren’t only out there – they were armed with pitchforks.

It reminded me of how Remain voters in the UK, cocooned in their metropolitan bubble, were shocked during the referendum to find the roads out of London festooned with Leave signs.

Indeed, Trump’s data guru tweeted that the urban-rural divide, not ethnicity, was the key demographic faultline of the election:

It is a measure of the failure of the political system that, in exit poll after exit poll, these voters agreed entirely with the Democrats’ charge that Trump does not have the qualifications or the temperament to be a good President. (Not to mention the sexism, and the racism, and the mocking the disabled, and the refusing to release his tax returns, and so on.)

But there was a more important factor: they just didn’t care.

As technology speeds up the world, our societies are being polarised between the fast and slow, haves and have-nots, with entire communities or professions left behind both socially and economically.

These are the voters who delivered Brexit, and Trump’s victory – and could pull off similar shocks next year in France and Germany. They turned to the outsiders because they were furious and frustrated with the insiders. And because the insiders – for all the reasons outlined in Chris Deerin’s brilliant article for CapX yesterday – deserved their scorn.

But the question now is: what next?

Trump’s supporters voted for him not because they thought he was a modern Lincoln, but because he promised to right the wrongs they feel have been done to them: to secure them from terrorists, immigrants and foreign competitors, not to mention the cultural condescension and interference of the liberal elites.

Indeed, that is the real transformation in both British and American politics. We no longer have leaders who mouth pious platitudes about the “left behind”. We have leaders whose entire professed purpose is to help them.

Like the Brexiteers, Trump has offered to give them back control – of their lives and of their country. Yet in order to do so, he will have to take extraordinary steps.

People may feel that the system is unfair – that globalisation and automation are taking away the decent jobs, that Wall Street brought down the economy and the rest of us paid the price. But the forces behind that process are very hard indeed to stop.

Thanks to relentless improvements in logistics – especially the “containerisation” revolution in cargo shipping – the transport costs of any product are now roughly 1 per cent of the total.

In a largely tariff-free world, that puts manufacturers of every nation on a level playing field. And under WTO rules, you have to apply the same tariffs to all your trading partners, so cannot simply single out China or another perceived enemy for punishment.

Globalisation has also produced a winner-takes-all economy. In an international marketplace for talent, it has never been more rewarding to be one of the elite. But it has seldom been tougher to be one of the drones.

Even the technology that we depend on is pushing this process forward.

As Ben Thompson, author of the excellent Stratechery bulletins, wrote in response to the election result, technology is an industry “that employs far fewer people than it puts out of work. Yes, in the long run, the gains from technology will make everyone richer, but the mechanism by which those riches are distributed by default heavily favor the few.”

The question of how to cope with the inequalities and resentments that result from this – of how to ensure that the free market delivers growth for everyone, rather than just the rich – has long been the most important in politics. (Indeed, it was the impetus behind the creation of CapX.) But now it is absolutely dominant.

And Donald Trump therefore finds himself as the canary in the coal mine – or, perhaps, the surgeon poised over the patient.

Trump’s headline promise – apart from kicking out the Mexicans and bringing back the jobs from China – is to get the economy going again. Indeed, in his victory speech he promised to double the rate of growth.

To that end, he is promising a splurge in infrastructure investment (and not just on building his famous border wall) and heavy cuts in corporation tax and income tax.

The economic logic behind this plan is not just to entice US corporations to repatriate profits from abroad, but to give wealth-creators more money to spend. Yet unless there’s gangbuster growth as a result, it’s hard to see how giving a multi-billion-dollar handout to the wealthiest in society will reduce people’s anger about social divisions.

Furthermore, this new era of Reaganomics may indeed raise growth – but it will also add to America’s colossal deficit. If the growth fails to materialise, the landing could be truly painful.

The same is true of Trump’s trade plans. He is an old-fashioned mercantilist: for him, trade is not a mutually beneficial process, but a zero-sum game of winners and losers.

Under Trump, America’s trade deals with Europe and the Pacific are dead. Even NAFTA, the Clintons’ pride and joy, may be unpicked. This represents a complete reversal of US policy lasting decades – and should be deeply alarming to America’s friends and partners. (One of the more interesting stories over the next four years is the extent to which Trump will override, or be forced to reach an accommodation with, Washington’s “deep state” – the diplomats, soldiers, spies and bureaucrats who view America’s global commitments as the bedrock of its prosperity and influence, and will react to his scepticism towards them with horror.)

The trouble is, of course, that such policies are likely to punish the very people who voted for them – both by shrinking the economy, and raising the prices of basic goods. We have written ad infinitum on CapX about why free trade is good for the world – but Trump’s prescription seems closer to the Smoot-Hawley Act, the disastrous trade bill that helped trigger the Great Depression.

This isn’t just about Donald Trump – it applies to all others faced with the same challenges, which effectively means all Western leaders.

Trump may be able to appease his voters’ social concerns – and that is no small thing. Living in a country where they feel they like those in charge are on their side, and will listen to their complaints, may not Make America Great Again, but it will certainly help those embittered rural voters Take Their Country Back (at others’ expense).

Yet in the long run, it is devilishly hard to see how he can soothe their economic angst.

Cities are not just faster places – they are, as a result, more productive, creative, energetic and all the rest of it. Those angry rural voters, in other words, may be doomed to find the rest of the world racing away from them – and it is hard to see much in Trump’s policy platform which will ameliorate that process.

Trump may therefore find himself, at best, in the position of King Canute, trying and failing to hold back the tide – and at worst as the surgeon who botches the operation, inflicting even more damage on his patient.

Still, while his presidency has been hailed by many – with good reason – as a retrograde step, it also represents a progression. The need to deliver genuine mass prosperity has gone from a nagging problem for the elites to an absolute priority.

It is an understatement to say that Trump’s policies do not seem like the answer. But at least we are finally asking the right questions.

Robert Colvile is Editor of CapX, and author of 'The Great Acceleration: How the World is Getting Faster, Faster' (Bloomsbury).