The Winter OF Global discontent
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.