Populism’s Broken Promises: Two Emblematic Cases

An article published on Impakter that I am particularly proud of: I got compliments from a great professional journalist Judy Bachrach who is also a contributing editor at Vanity Fair, the author of bestselling “Glimpsing Heaven” and professor of investigative journalism at John Cabot University. Here is the first part (concerning the U.S. and Trump); the second part is about Europe (and Salvini):

Populists make empty promises. They exploit people’s discontent, raise expectations but cannot deliver solutions. They claim to represent the “will of the people”. Yet they spread lies and accuse leaders of other parties, particularly progressive ones, to be the root cause of all the problems people face. Populists thrive on divisiveness and partisanship in both America and Europe. And it is happening in the world’s oldest democracies, places that should have been inured to the populists’ siren songs.

Two recent cases are emblematic of what is going on.

Case # 1: The United States

Consider America. Trump constantly attacks the “failing New York Times” for spreading “fake news”:

“Former @NYTimes editor Jill Abramson rips paper’s ‘unmistakably anti-Trump’ bias.”

Ms. Abramson is 100% correct. Horrible and totally dishonest reporting on almost everything they write. Hence the term Fake News, Enemy of the People, and Opposition Party!

— Donald J. Trump (@realDonaldTrump) January 5, 2019

He flatly overlooks the fact that the New York Times has never been more successful, with extraordinary financial results and a fast-growing audience – Forbes estimates NYT’s online subscriber base to be its biggest value driver, and forecast this growth to pick up in the coming years and reach 4.5 million by 2022. A remarkable performance at a time of great difficulty for the industry battered by digital publications and online news.

But Trump, like all populists, has an Achilles’ heel: He can’t deliver on his promises. And he never will. Because his promises are nonsensical, none of them can resolve the problems they are meant to address.

What is happening now with his promised border wall is only the start. He incautiously caused the shutdown of government, sending home 800,000 government employees without pay. And he is doubling down on his mistake, with false accusations at the Democrats when everyone knows that the Democrats have nothing to do with it.

Trump, and he alone, is the cause of the mess. And if the shutdown lasts a year or more as Trump says he’s ready to do, don’t go ask all those employees sitting at home how happy they are with him or what they think of his MAGA policies.

But what about employment and Trump’s promise to create more blue-collar jobs to revive the rust belt? The just published employment data was fantastic, almost double what economists had predicted, shattering Wall Street forecasts of doom: 312,000 jobs were created in December, bringing total employment gains in 2018 to a three-year high of 2.64 million. The Labor Department adjusted its figures for October, raising them from 237,000 to 274,000 and for November, from 155,000 to 176,000.

Cherry on the cake: the average wage rose 11 cents, or 0.4%, to $27.48 an hour. OK, 0.4% doesn’t sound like a big deal, but it’s an average and it means some people did get ahead. And if the employment rate crept up to 3.9 percent from a 49 year low of  3.7 percent, that’s a small creep and it was because more people, attracted by a booming economy, entered the workforce.

So has Trump delivered on his promise? First, it’s too soon to tell. The impact of whatever Trump did will take some years to show up. No political measure is ever instantly translated into measurable economic effects.

Second, we need to remember that Trump in his first two years has only really achieved two things:

(1) deregulation of the environment, paralyzing the Environmental Protection Agency – a boon for the fuel and coal industry and steel; and

(2) an unprecedented tax break for Big Business and the One Percent – at the expense of the middle class and the lower blue-collar working class.

Both measures will need time to impact the economy in full, but we already see early signs that can tell us which way things will be going.

The expected early burst due to Trump’s tax break is much like a wave of fresh funding currently translating into higher overall employment and attracting new people in the labor market. Problem: It is not going into every nook and cranny in the economy, as the Republicans expected.

There is a good reason for this shortcoming. A considerable amount of the funding freed from the tax is not going into new investment, but instead going into stock buybacks to please shareholders. For now, that makes Wall Street and the One Percent very happy. But every cent and dollar going into stock buybacks means it is not going into Main Street and jobs for blue-collar workers.

The amounts diverted into stock buybacks is extensive: By end 2018, it is estimated that of the announced 1.1 trillion in buybacks, a record amount, already $800 billion have actually been purchased. Record buybacks are usually a sign that CFOs believe their stock is undervalued. But not all buybacks have happy outcomes. Consider the case of Apple that was recently badly hit by dropping sales for its smartphones in China:

Then there’s another problem: Robotization. This had nothing to do with Trump’s policies. The trend to automation started a long time before Trump reached the White House. Except for one thing, he should have foreseen the problem.

A good leader sees farther than his voting base. He should have understood that jobs in the coal and steel/aluminum industries that existed twenty years ago are no longer there because of automation. For example, Austria boasts of an almost entirely automated steel plant: It only needs 14 people to run.

The same is true for the United States, as a Brookings article abundantly documents. The last time employment peaked in the coal industry was in the 1920s. Already, by 1980, it was plunging – from 785,000 in 1920 to 242,000. And by 2015, it had lost 59% of its workforce compared to 1980 – most of the loss due not to trade but to automation.

The change from pit mining to surface mining (using explosives and considerably less labor) accelerated the move. Capital intensive highly productive technologies are already in use everywhere and it is expected that over the next 10 to 15 years, their deployment will be ramped up.

But Trump didn’t see that coming. He is not interested in either automation or the opportunities opened up by Artificial Intelligence.

As a result of his tax cut, jobs in the steel, aluminum and coal industries have rebounded, sure, but only modestly. Not enough to change the equation in the rust belt. Moreover, Big Business hasn’t changed its modus operandi, as the recent decision of General Motors to close down plants in the U.S. and send 45,000 people home shows.

Bottom line, Trump is only interested in easy-to-sell slogans, not in resolving difficult problems.

Case # 2: Europe

Consider the European Union, and take a close look at one of its best-grounded, most  emblematic democracies: Italy. The country where after the disaster of World War II, a particularly representative democracy was set up with a carefully crafted Constitution, intended to avoid the dictatorship of the majority and give equal representation to all citizens, excluding none.

The rest on Impakter, click here. Let me know what you think!

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