Friday 30 September 2016

Rising public anger is not just down to economics

A flawed consensus is emerging about those who are left behind by economic change

Published 10/07/2016 | 02:30

Take leave: Boris Johnson, left, leading the Vote Leave campaign, speaking at an event in Bristol ahead of the Brexit referendum, flanked by former Defence Secretary Liam Fox Photo: Ben Birchall/PA
Take leave: Boris Johnson, left, leading the Vote Leave campaign, speaking at an event in Bristol ahead of the Brexit referendum, flanked by former Defence Secretary Liam Fox Photo: Ben Birchall/PA

Last Friday, US President Barack Obama spoke of those who have been "left behind" by economic change generally, and globalisation in particular. He is one of many. Across the western world and across the spectrum of political opinion, a new consensus is emerging.

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The swelling of the ranks of those left behind is, the emerging consensus holds, the reason for rising popular anger. The manifestation of this is the lashing out at elites, the establishment and experts. Donald Trump, Brexit and the rise of populist parties across Europe are symptoms of the same phenomenon.

Anger and disillusionment are plain to see in election results and opinion polls across the western world. But there are many reason to question the 'Left Behind' thesis.

There is, from an Irish perspective, a very good reason to question it. This country was left behind on the periphery of Europe for most of its post-independence history. Few facts illustrate this better than the failure to increase employment over seven decades to the mid-1990s. Then, as foreign companies poured in and the Celtic Tiger took legs, employment almost doubled in a single decade.

Ireland is, admittedly, an exception in how it has hitched its wagon so successfully to the engine of globalisation, but it does show that opening up to the world can help a country to catch up, not fall behind.

But what of the downsides?

The 'Left Behind' thesis is based on a rosy looking back on the decades after the World War II. Then, jobs were more secure, particularly in heavy industry which employed workers with lower skills. But things began changing in the 1970s. Manufacturing employment started shrinking. Automation and off-shoring to low wage economies created rustbelts.

Those who lost their jobs were forced into doing less secure and lower-paid jobs. Immigration made life harder still, by dampening wage increases in lower-skilled sectors, such as retail and hospitality, where immigrants tend to cluster. Those who don't work are also falling further behind as austerity and "neoliberalism" have cut the size and scope of the welfare state.

There is no doubt some of these trends have been in evidence. But how much they have changed people's material well-being and happiness is open to question. To attribute all of the rise in political anger to discontent linked to those changes is an ever bigger leap.

As in many things, ideas and intellectual trends from the US inform debates in Europe. One is the observation that incomes of average Americans in real term (ie when the eroding effect of inflation on purchasing power is taken into account) have not increased in 40 years. This is perfectly true. But it is not true in Europe, and Ireland is but one example.

That is reflected in income equality. The US has become much more unequal in recent decades and income distribution is now back at 1920s levels. While there has been a trend towards greater income inequality in many European countries, it is has not been universal (in Ireland, for instance, it has been remarkably stable over decades) and where it has happened it has been much less marked than in the US. No country in Europe is even close to the US in terms of income inequality.

Another, related, US trend which is not replicated in Europe is the decline in employment among low-skilled men, the stereotypical angry Trump supporter. It is undisputed that the share of this cohort in the US in employment has been falling. But it is not the case in Europe. Work I have done for a forthcoming paper shows that from the 1990s (the earliest figures available) there was no trend decline in percentage of low-skilled men in employment up to the crash of 2008 even though globalisation was going at full belt at the time.

The next argument of the Left Behinders is that work has become more precarious and less secure - the rise of zero-hour contracts in the UK is a particularly iniquitous example. This has happened, but it is less marked than the Left Behind narrative would have it. For instance, Eurostat data show that last year 14pc of people at work in the rich 15 countries of the EU were on temporary contracts. In 1995, the first year figures were published, it was 11.5pc.

To attribute big declines in political support for establishment parties in Europe to such a small change seems a stretch.

Another variant of the 'Left Behind' thesis relates not to the wages and terms of employment of those in work, but to the lot of those out of work. This claim is that because the welfare state has been under assault since the 1980s, those who depend on it are being left even further behind. It may be that those who are out of the labour force are becoming angrier, but it is not because the welfare state is being dismantled.

In every OECD country for which figures are available social spending per person has risen sharply in real terms over recent decades. In every country bar one it has also risen as a share of GDP (the Netherlands is the exception, where it has been high and stable).

It is worth noting that this is also the case in the countries of Trump and Brexit. In 1980, the year Ronald Reagan won the White House, US social spending stood at 13pc of GDP. In 2014 it is half as big again, at 19pc.

In Margaret Thatcher's first full year as prime minister, British social spending was 16pc of GDP. In 2014 it had reached 22pc.

If people such as Thatcher and Reagan really did want to dismantle the welfare state, they were spectacularly unsuccessful.

It is very probable that the above factors in combination have contributed to the anger upswell, but non-economic factors are likely to be as important as economic ones.

One is the changing nature of the media and social media. In the past, when sources of information were limited to national broadcasters and a handful of newspapers, people were exposed to less partisan reporting and analysis. Today, with the proliferation of sources of media, many of which take a particular line on issues, people can access sources that confirm their biases. Even more importantly, they can avoid having their opinions challenged by staying away from sources of information that give a different view to their own. This may well have led to polarisation of opinion away from the centre ground.

This factor, along with rising assertiveness and higher education levels, also probably makes people more certain in their own views regardless of how informed and well thought out those views are.

The "death of deference" since the 1960s is a thoroughly good phenomenon in most ways, but it has its downsides. One is the belief that a view held by an expert in a field is no better than the opinion of someone who is non-expert.

While experts can be wrong - individually and collectively - they are usually more correct than non-experts in their field.

The habit of climate change deniers to dismiss the overwhelming majority of expert opinion on that subject is just one example. That a sizeable chunk of British voters dismissed the warnings of nearly all economists on the consequences of Brexit is another.

Yet another factor in boosting support for populists and their causes could be a taking for granted of the uniquely good era in which we live.

The period since World War II brought the first ever era of mass prosperity. The generations that remember the violence and famines in Europe of the 1940s are dwindling. Those of us who have never known really bad times may take for granted the relative prosperity and stability that we have always known. We could assume that the good aspects of our world are the natural order of things and not the result of political structures. This could explain why many British people believed leaving the EU would not have negative consequences.

None of this is to say that economic factors are not contributing to more people feeling anger towards the powers that be.

But there are real questions of the scale of the negative changes that have taken place and the numbers of people involved in different societies, and whether these changes really do explain more bad-tempered politics. Economics rarely explains everything.

Sunday Independent

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