The Win­ter OF Global dis­con­tent

Forbes - - Investing -

Pol­i­tics th­ese days seems have the mind-set of “I’m as mad as hell and I’m not go­ing to take this any­more!”—a line frst ut­tered by Howard Beale in the 1976 flm Net­work.

How else to ex­plain the cur­rent pop­u­lar­ity of Don­ald Trump and Ben Car­son, po­lit­i­cal neo­phytes who are seen as giv­ing voice to frus­trated vot­ers? Or Sen­a­tor Bernie San­ders, a self­de­scribed so­cial­ist who has been giv­ing Hil­lary Clin­ton a run for her money? Fringe po­lit­i­cal par­ties have sprung up across an eco­nom­i­cally strug­gling and in­creas­ingly xeno­pho­bic Europe, which is also now be­set by an in­fux of refugees from Syria. An an­gry pub­lic has been lend­ing its sup­port to rad­i­cal par­ties like the left­ist Syriza and rightwing In­de­pen­dent Greeks par­ties in Greece, the left­ist Pode­mos party in Spain, the Left Bloc in Por­tu­gal, the far-right Na­tional Front party in France and the U.K. In­de­pen­dence Party in the U.K. Bri­tain’s Labour Party is now headed by a rel­a­tively un­known left­ist, Jeremy Cor­byn, who is ap­peal­ing to a frus­trated mid­dle class with a fo­cus on elim­i­nat­ing so­cial in­equal­ity and poverty in the U.K. by beefng up gov­ern­ment pro­grams and in­volve­ment in the econ­omy. come re­ceived by the top 20% to the bot­tom 20%, a mea­sure of in­come in­equal­ity, has in­creased across the euro zone since 2005.

Then there’s im­mi­gra­tion. There is a fear both here and abroad that the large in­fuxes of peo­ple—from Latin Amer­ica into the U.S. and from the Mid­dle East and North Africa into Europe—will lead to in­creased crime and gov­ern­ment wel­fare spend­ing while th­ese new­com­ers “steal our jobs.”

Gov­ern­ments have difer­ing re­sponses to bud­ding po­lit­i­cal dis­con­tent. Vladimir Putin is di­vert­ing pub­lic at­ten­tion away from Rus­sia’s wors­en­ing econ­omy by blam­ing the prob­lems on the West and by fy­ing sor­ties over the Mid­dle East. In the U.S., Europe and Ja­pan gov­ern­ments have re­lied on mone­tary and fs­cal pol­icy; how­ever, none of th­ese ap­proaches has been efec­tive enough to as­suage voter con­cerns.

Mone­tary stim­u­lus has propped up stock mar­kets but hasn’t cre­ated any sig­nif­cant “real wealth efect.” Ja­pan’s most re­cent round of QE, for ex­am­ple, suc­ceeded in boost­ing stocks but failed to stim­u­late house­hold con­sump­tion ex­pen­di­tures. The Euro­pean Cen­tral Bank’s new QE pro­gram has pro­pelled the Euro­pean STOXX 600 in­dex up 14% since last Oc­to­ber but hasn’t done much for euro zone house­hold con­sump­tion ex­pen­di­tures, which grew at a weak 1.5%.

The fail­ure of mone­tary pol­icy to efec­tively stim­u­late global economies sug­gests that the next big thing will be ad­di­tional fs­cal stim­uli to boost in­comes and soothe frus­trated vot­ers. Tax re­bates and tax cuts are a pos­si­bil­ity, but both Repub­li­cans and Democrats are likely to em­brace in­creased spend­ing on the na­tion’s in­fras­truc­ture. Our high­ways, bridges, ports, rail­roads and power plants are in dras­tic need of re­fur­bish­ing, and such an efort would cre­ate jobs. As we head into the fnal stretch of this elec­tion cy­cle, you’ll be hear­ing more about this.

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