Anyone puzzled by the sustained popularity of Donald Trump and Bernie Sanders should look no further than the latest US jobs report. The share of prime age males in work is now markedly lower than it is in France. Yes, France. The share of US adults in jobs as a whole is lower than at any time since Jimmy Carter was president.
Yet America’s overall outlook is better than that of France. Silicon Valley is in the middle of another golden age and the US mints new billionaires every month. It is a tale of two different Americas. It should be no surprise that the fate of the rest — and particularly America’s idle male population — is fuelling its angriest bout of populism in decades.We should not expect it to peter out. Conventional wisdom on politics is as misleading as it has been on the economy. The first tells us to disregard opinion polls in an odd-numbered year. Voters are being frivolous. By 2016 the freak show will fade and establishment candidates, such as former Florida governor Jeb Bush and former US secretary of state Hillary Clinton, will win the nominations of their respective parties. Perhaps so. But this is from the mindset that has been wrongfooted by the surge of outsider candidates all year. The socialist Sanders is still standing. Last quarter he came within a whisper of out-raising Clinton. He is also ahead of her in the polls in Iowa and New Hampshire. Likewise, the trigger-happy Trump, and Ben Carson, the celebrity neurosurgeon, remain streets ahead of their Republican rivals. The economic consensus has been equally off beam.
From the US Federal Reserve down, analysts have for years predicted that wage growth is set to resume any day. Yet real median household incomes remain stubbornly lower than they were in 2008. In some sectors, such as manufacturing, both jobs and wages are declining. There is little sign of America’s widely forecast manufacturing renaissance. Only in high-skilled jobs is there evidence of income growth. — in some cases spectacularly so.
Billionaires and budgets
Both of these conventional points of view result from group thinking. Forecasters seek safety in numbers — by sticking together and by splitting each other’s averages. No one was ever fired for being collectively inaccurate. But there are reasons to discount their worldview. The most serious US campaign development in the past three months is Sanders’ ability to match Clinton’s financial war chest. In the past three months he collected $26 million, $2 million less than Clinton.
Any hopes she had of knocking him out of the race by out-spending him have been dashed. Most interestingly, Sanders raised his cash from hundreds of thousands of small donors giving an average of about $25 apiece. His campaign claims he has received more than one million individual donations. He held seven fundraisers in the third quarter. A huge chunk of Clinton’s time was spent seeking donations from wealthy people. Sanders spent next to no time raising money from ordinary people over the internet. We should not be surprised.
Sanders is running a populist campaign in which he rails against the capture of US politics by billionaires. Clinton is sounding all the right notes about the struggling US middle class. But she cannot afford to be too rude about Wall Street while she is passing round the hat.The same anti-establishment rhetoric is driving the Republican race. Carson raised $20 million in the third quarter, chiefly from small donors. More than 350,000 people chipped into his campaign.
Trump has no need to raise money at all. His net wealth is at least $4 billion (or $10 billion, if you ask him). But a breakdown of who is supporting him tells the same story. The less educated the Republican voter, the more likely he is to be supporting Trump. Those without university degrees are far likelier to back him than Bush. They are also likelier to be male.
The fact that he is considerably wealthier than Bush is no obstacle. He can afford to be his own man. Trump proclaims that Washington is run by people who are “bought and paid for”. Bush’s fundraising schedule, on the other hand, targets much the same type of donor as Clinton’s. What does this mean for 2016? The labour market will dictate the answer. Should the Panglossians finally be proved right, US wage growth will start to pick up and some of the anger will drain from the debate. American populism has a dramatic history. But its bark is usually worse than its bite.
Since the mid-19th century, no populist has ever made it to the White House. Middle-class stagnation stretches back at least two business cycles. There is little reason to think the US will go into recession next year. Yet it would take a dramatic twist for the labour market to start generating big income gains. The official jobless rate has dropped to 5.1 per cent; yet, if the labour force were as big as it was in 2008, the rate would be almost double that.
The best guess is that the US economy will continue to amble along lopsidedly. Politics will stay ill-tempered but it will demoralise, rather than decapitate, the Washington establishment. A damaged Clinton will square off against a weak Republican nominee. Both will be heavily reliant on billionaires. Whoever prevails will inherit the whirlwind.
— Financial Times
