This week, the new UK premier, Theresa May, highlighted how the central banks have encouraged the populists’ rise:
“We have to acknowledge some of the bad side-effects. People with assets have got richer, people without have not.”
The problem, of course, goes wider than this. The continuing failure to recover from the 2008 Financial Crisis is one of the 3 major policy errors of recent years, along with the disaster of the Iraq War and its aftermath, and the seemingly uncontrolled growth in immigration. Collectively, these have undermined confidence in the Western political system.
In turn, this loss of confidence has led to the rise of the populists. The chart above, based on the insight of American psychologist Abraham Maslow, highlights why this has happened. Maslow’s research showed that people were motivated by a range of needs:
The most basic needs are for Safety and Security – if people are worried about possible dangers, or their ability to earn a living, they will become frightened and insecure
Social standing and Status are also critical – people want to understand their place in society, and be recognised for their role within it
Less tangible needs then develop, if these needs are being met – Self-actualisation, Self-development and Service
These focus on realising one’s own potential, developing new skills, and on helping others and serving society
This analysis makes it easy to see why the comfortable certainties of the SuperCycle are now history for an increasing number of people in the West.
The rise of terrorism, and the seeming inability of governments to respond successfully to domestic and international threats, naturally makes people uncertain and worried. Similarly, the rise of the “gig economy” has meant tens of millions of people are now dependent on temporary work and zero-hours contracts – often juggling several jobs in a day to earn enough to eat and pay the bills.
Equally important is that the seemingly inevitable “rise of the middle class” has ended. People are no longer confident that going to college will provide them with a steadily rising income, along with healthcare and the prospect of a comfortable retirement. Many Millennials have large tuition fee debts, and find it hard to believe that their generation will end up doing better than their parents. As Fortune magazine reported earlier this year:
“The vast majority of American workers expect to have less money at the end of their careers than their parents did—and that fear is highest among 20-something millennials”
This trend has been developing for some time, as Forbes reported in 2013 on a survey in Montreal and Vancouver:
“Somebody with the same degree, the same job and the same demographic profile is earning less today than they were in the 1980s”
And yet, despite all the growth of social media, it is clear that policymakers are not even listening to these concerns, let alone responding to them, as the Wall Street Journal noted last year:
“The biggest thing leaders don’t do now is listen. They no longer hear the voices of common people. Or they imitate what they think it is and it sounds backward and embarrassing. In this age we will see political leaders, and institutions, rock, shatter and fall due to that deafness.” (my emphasis)
Fortune, Forbes and the Wall Street Journal are not revolutionary media, keen to stir up unrest and incite social disorder. They are simply reporting facts. And yet, these facts have continued to be ignored – to the point where populists have a real chance of gaining power – if not this year, then perhaps next year or the year after.
As I noted recently, nearly two-thirds of Americans feel their country is headed in the wrong direction, and their views are widely shared across the West.
It really is long past time for policymakers to stop sheltering behind the fig-leaf of the central banks, and the absurd idea these can stimulate economic growth by creating more and more debt. The voters simply want straight-talking about the issues in the Hierarchy of Needs that concern them.
If today’s leaders continue to refuse to listen, they will inevitably find populists who will.