THE SLEEPING GIANT OF WESTERN POLITICS José Maria Brandão de Brito
Global Interdependence Center Conference Fundación Rafael del Pino, Madrid, 3rd October
Introduction: Sleeping Giant “(…) the pro-anti EU orientation, despite its apparent irrelevance for political behavior, constitutes something of a ‘sleeping giant’ that has the potential, if awakened, to impel voters to political behavior that (because of its orthogonality with left-right orientations) undercuts the bases for contemporary party mobilization in many, if not most, European
polities” Cees van der Eijk and Mark Franklin, The sleeping Giant: Potential for Contestation on European Matters at National Elections in Europe, 2001
The crux of national politics in Western countries has been shifting from the left-right binomial to a debate centered on supranational issues, such as diplomatic and military activism, trade agreements, financial regulation, migration and terrorism.
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The Giant Has Awakened
Source: The Telegraph, (online edition) 29 September 2016.
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Why Now? A Supply-Side Issue OLD MOTIVATIONS • Migration, terrorism? Yes, sure, but there was a lot of that before! • Effects of the economic crisis? Yes, sure, but the hollowing out of the middle class has started long before in Europe and in the US!
MARKET FAILURE
• In Europe, the political establishment snubbed the outcome of national referenda; • The European Parliament is toothless; • In the US there used to be a bipartisan consensus on international affairs, geopolitical or economic.
• Matter of time until the supply side of the market for political ideas filled the void. • Like’em or not, people like Farage or Trump sniffed the opportunity that the incumbents failed (or didn’t want) to identify.
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What Awoke the Giant... In Europe?
EVEN HOPING HAS BECOME HARD 26
26
24
24
22
22
20
20
18
18
16
16
14 Jan-00
14 Jan-03
Jan-06
Jan-09
Jan-12
Jan-15
Youth unemployment rate - euro area (%)
Source: Datastream; Millennium bcp
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What Awoke the Giant... In Europe? WHAT DO YOU THINK ARE THE TWO
MOST IMPORTANT ISSUES FACING THE
EU AT THE
60
MOMENT?
60 54
50
48
48 38
40
39
32 30
34
5
19
17
6
7 2013
2014 Terrorism
40 30
15
Immigration
Source: Eurobarometer; Millennium bcp
24
10
9
0 2012
39
27
21
20 10
38
50
20 10 0
2015 Economic Situation
2016 Unemployment
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What Awoke the Giant... In Europe? DO YOU
TRUST THE
EUROPEAN UNION?
65
65 57
60
60
55
55
47
50
41
45 40
50 45
44
40
35
31
32
33
35
30
30
25 2005
25 2007
2009
2011
2013
2015
Tend to trust EU (%)
Source: Eurobarometer; Millennium bcp
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What Awoke the Giant... In Europe? INTEREST
RATES TOO LOW FOR SAVERS, TOO HIGH FOR DEBTORS
4,5
4,5
4,0
4,0
3,5
3,5
3,0
3,0
2,5
2,5
2,0
2,0
1,5
1,5
1,0
1,0
0,5
0,5
0,0
0,0
-0,5 Jan-15
-0,5 Mai-15
Set-15
Jan-16
Mai-16
Set-16
German 10-year government bonds yield Portuguese 10-year government bonds yield
Source: Datastream; Millennium bcp
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What Awoke the Giant... In the US?
UNSUSTAINABLE
IN DEMOCRACY
Source: Murray, Charles; Coming Apart: the State of White America, 1960-2010; Kindle edition, 2013; page 49
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What Awoke the Giant... In the US?
WHITE
MEN NOT MAKING A LIVING
Upper class Lower class
Source: Murray, Charles; Coming Apart: the State of White America, 1960-2010; Kindle edition , 2013; page 227
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What Awoke the Giant... In the US?
TWO
WORLDS APART
Upper class Lower class
Source: Murray, Charles; Coming Apart: the State of White America, 1960-2010; Kindle edition, 2013; page 167
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What Awoke the Giant... In the US?
DANGEROUS
TRENDS
Upper class Lower class
Source: Murray, Charles; Coming Apart: the State of White America, 1960-2010; Kindle edition, 2013; page 191
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What Now? Centrifugal Forces • The anti-establishment sentiment is spinning ever faster in Europe & US.
• The Brexit campaign shows that elites have lost their clout with public opinion in the West. • Anti-EU sentiment is already shaping European matters at national level (e.g. Merkel v Renzi on banks).
The Litmus test will be the next recession for which there’ll be no economic policy cushion. SOME
PEOPLE HAVE SOME GREAT SENSE OF HUMOR
(SATYAJIT DAS)
• Grexit • Departugal • Italeave • Czechout • Oustria • Finish
• Slovaknockout •Latervia • Bygium • Looks like only Remainia will stay! •13
Should We Worry?
“Things fall apart; the centre cannot hold; (…) The best lack all conviction, while the worst Are full of passionate intensity”
William Butler Yeats, The Second Coming
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Life After Brexit in the UK: It Could Be Worse... RE-PRICING,
NOT COLLAPSE
4.000
1,50
3.800
1,46 1,42
3.600
1,38 3.400
1,34
3.200
1,30
3.000 Jan-16
1,26 Mar-16
Mai-16
Footsie 350 Stock Index
Source: Datastream; Bloomberg; Millennium bcp
Jul-16
Set-16 USD/GBP
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Life After Brexit in the UK: It Could Be Worse...
NO
PANIC FOR NOW
56
56
54
54
52
52
50
50
48
48
46
46
44 Jan-16
44 Mar-16 PMI Manufacturing PMI Construction
Source: Datastream; Bloomberg; Millennium bcp
Mai-16
Jul-16 PMI Services
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Life After Brexit in the UK: It Could Be Worse... NEWS
OF THE DEATH OF
UK’S
HOUSING MARKET A BIT EXAGGERATED
705
5
700
0
695
690
-5
685
-10 -15 Jan-16
680
675 Mar-16
Mai-16
Jul-16
Consumer Confidence (GFK) House prices index (Halifax) Source: Datastream; Bloomberg; Millennium bcp
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Architect’s Hand? THE
PROBLEM IS LACK OF GROWTH
=
SLOW PRODUCTIVITY
6
4
5
3
4 2 3
its limits, that’s why productivity is slowing… • … despite the internet • We’re on the verge of the 4th industrial revolution based on advanced robots and 3D printing
1
2 1 1960
• We’ve stretched the current industrial model to
0 1968
1976
1984
1992
2000
2008
2016
• Labor costs will be replaced by proximity and flexibility as the main location drivers • Globalism will give way to Localism
US Real GDP (yoy, 10yma) US Productivity - nonfarm business (yoy, 10yma)
The unraveling of the globalist super-structure will (perhaps) fit like a glove on the new
industrial paradigm. That would be just perfect! The revival of local manufacturing in the Western world will generate many jobs, albeit requiring totally different skills, which in itself requires another revolution Source: Datastream; Millennium bcp
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