February 10, 2016

Alternative Populist Futures

Peter Kennedy
Partner

In the immediate aftermath of the New Hampshire primaries all of us vested in the future of the most powerful nation on earth have to be asking ourselves, “Where’s all this leading?” It’s true that the outcomes of the first few primaries (Iowa, New Hampshire and South Carolina) are hardly representative of national sentiments and indeed often send conflicting or deceiving signals about national voter sentiments. The only thing certain is that it’s going to be a long election season, with still more surprising plot twists in store before it’s all decided.  As scenario planners, we are decidedly not in the prediction business. But we are very interested in the underlying dynamics that this interminable campaign uncovers, and what those dynamics tell us about future direction of national policies and their effects.  

One of the evident dynamics is populism – understood as a belief in the power of ordinary people, and in their right to have control over the government. What’s striking is the force of the populist appeals coming from both Republican and Democratic camps.  Donald Trump rails against American citizens losing their jobs to undocumented workers and promises to protect US jobs against unfair trade practices. Ted Cruz attacks big government and (some forms of) corporate privilege, while calling for radical tax reform to ostensibly help ordinary middle-class Americans. Bernie Sanders excoriates a “rigged economy” and promises instead “an economy that works for working families.”  Tellingly, even the so-called “establishment” candidates, like Hillary Clinton and Marco Rubio, are honing their respective pitches to appeal to the worries and hopes of the average person on the street.

Admittedly, much of this is predictable electoral pandering. (I mean, no one campaigns on a platform calling for greater wealth concentration and upper class privilege!) And it’s possible that if the two final nominees come from the political mainstream – say Hillary Clinton and John Kasich – then hard populist edges will likely be smoothed off the candidates’ platforms as the campaign heats up and the votes of uncommitted moderates are vigorously pursued.

But maybe not.  Maybe it’s different this time around. Maybe some kind of tolerance threshold has been passed after years (decades, actually) of stagnant middle-class incomes, glaring inequality, and ever increasing uncertainty about the future.  Maybe the Sanders appeal is just as much about pursuit of material benefits (e.g., college tuition relief, truly affordable healthcare, etc.) as it is about youthful idealism. And maybe Republican voters of modest means are tiring of lining up behind pro-business policies and empty social symbols that fail to connect concretely with the economic security of average families.

What’s interesting is that it’s possible to play this populism scenario out under either Democratic or Republican leadership.  There would be different policy emphases, for sure, but some potentially powerful commonalities, too.  Among the things that would probably not take place, for example, would be wholesale immigration reform, new free trade initiatives (parts of NAFTA might even be junked), and serious proposals for ending Obamacare, unless replaced by some scheme offering better coverage and cheaper premiums for average families.

Tax and fiscal policies are interesting to contemplate. A truly populist swing could endanger tax provisions that currently benefit highest-earning Americans.  Even the unabashedly pro-business Donald Trump has called into question the wisdom of the carried interest loophole (which allows hedge fund managers and private equity investors to pay lower taxes on certain income than average wage earners).  Watch for tax relief proposals for middle- and working-class families, but possibly higher tax burdens on affluent households.  How the poor make out in populist times is a lot less clear, though.  

All of this is speculative, of course. But for planners, the speculation process is itself a useful exercise. In fact, for several years, FSG scenario-planning engagements have explored the implications of rising populist sentiments (whether from the left, right or even third parties). The possibility that the nation could move in a decidedly populist direction has just seemed so credible to us, with widening income and opportunity disparities, a markedly reduced rate of economic growth, and a pace of economic, technological and social change that for many is profoundly destabilizing.  The US is not alone either.  As the current immigration crisis has demonstrated, populist fires are raging across the EU as well.  

Populism’s ascent seems to be one take-away from New Hampshire and the US election campaign so far.  And it’s not too early to start thinking about the implications for the US and the world.

 

Thoughts?