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Trump, Brexit and neoliberalism

To understand the twin electoral disasters of 2016 we need to consider the central role played by austerity and the media

Simon Wren-Lewis, Professor of Economic Policy, Blavatnik School of Government, Oxford University

Simon Wren-Lewis is the winner of the 2016 New Statesman/SPERI Prize for Political Economy. Tonight he will deliver his Prize Lecture to a sold-out audience in London.

Simon-Wren-Lewis-100How do we explain the two great Anglo-Saxon electoral disasters of 2016: Brexit and Trump? The chart below embodies what is becoming a dominant narrative trying to explain recent events. The rapid globalisation of the last few decades, and the rapid development of China in particular, helped economies around the world to achieve sustained growth until the financial crisis, but in the Anglo-Saxon world the benefits of that growth were distributed very unevenly. Although there has been plenty of discussion of the role of technological change and globalisation in driving inequality, what this chart shows is that there was something else going on in Anglo-Saxon economies. The dominant narrative points the finger of blame at the neoliberalism of Thatcher and Reagan, with large cuts in income taxes for the already well-off. This maldistribution of economic gains created a backlash which is behind Brexit and Trump.

Share of income growth going to income groups from 1975 to 2007

Share of income growth going to income groups from 1975 to 2007Source OECD

There is empirical evidence to back-up this story. The de-industrialised or ‘left behind’ parts of the UK did provide strong support for leaving the EU (even after controlling for age and education), and there was a big swing towards Trump among the poor of the American rust-belt. Yet this in turn creates a different puzzle, which is that the dominant concern of either set of voters is not inequality. Trump supporters were much less concerned about inequality and poverty than Clinton supporters. Indeed it would seem extremely odd to vote for Trump, who will cut taxes for the very rich, if you were at all concerned about the additional inequality that neoliberalism has helped create. The main concern of those who voted to leave the EU was immigration, not inequality, and immigration was also a strong part of Trump’s appeal.

There is another problem with a narrative that focuses on neoliberalism. Globalisation was a consequence of simple and old-fashioned economic liberalism. That liberalism may have started with trade but, as is perhaps inevitable in service dominated economies, spread to involve greater movement of people. That, together with other factors of course, has led to rising tensions around migration in many countries beside the Anglo-Saxon world. It is not obvious how much additional state intervention in terms of looking after the ‘left behind’ would have radically changed these growing resentments.

In this post I want to suggest two mechanisms whereby neoliberalism helped bring about the momentous changes of 2016. The first applies mainly to the UK, and concerns austerity, and the second applies to the US and concerns the liberalisation of the media.

Austerity is part of the neoliberal project to the extent that it represents an underhand way of shrinking the state: what I call deficit deceit. Cuts in public spending are ostensibly made because ‘the markets demand we bring down the deficit’, although in reality they demand no such thing. The real motive behind this false narrative is to achieve cuts which would otherwise be unpopular. Now while it is pretty clear deficit deceit was the reason for Republicans pushing austerity in the US, in the UK it remains possible that the original policy was made through simple economic ignorance, and retained simply because it proved popular. However that explanation based on ignorance is difficult to square with the focus on cuts in spending rather than tax increases, and in later years the combination of spending cuts with tax cuts. As a result, deficit deceit to achieve the neoliberal aim of shrinking the state seems the most likely explanation for UK austerity.

Austerity put pressure on public services, and particularly the NHS. Yet the government chose to pretend they were ‘protecting the NHS’, and deflect people’s concern about deteriorating services from austerity to immigration. (The share of NHS spending in GDP tends to rise over time for well known reasons, whereas government plans implied a steadily fall in this share.) This policy backfired in a huge way with Brexit. The ‘left behind’ were unconvinced about how Brexit would damage their prosperity, in part because of the de-industrialisation that globalisation had caused and rising inequality that had been at their expense. As someone said to an economist who had campaigned hard to put the Remain case, being part of the EU ‘might have improved your GDP but it hasn’t improved mine’. In contrast to these uncertain economic arguments, it was clear that you couldn’t control EU immigration while part of the EU.

It is easy to dismiss concerns about immigration as xenophobia or even racism. But, as this poll shows, a large part of the concern about immigration is instrumental: it is thought to damage access to public services, and the NHS in particular. In fact economists have good reason, in terms of theory and evidence, to think that immigration puts in through taxes more resources for public spending than it takes out, but that view is hardly ever reflected by politicians or the media.

figure2

The media played a large part in the Brexit result. The way most of the tabloid press pushed Brexit hard is well known. It is also important to note that the non-partisan broadcast media failed to provide any kind of counterweight to them. That academic economists were almost unanimous in warning of the economic dangers of Brexit was hardly mentioned, even though academics are more trusted than most other groups in society. Much the same had been true for austerity, which had in all probability always been opposed by the majority of academic economists, a majority that became greater over time. The broadcast media constantly reinforced the spin that the NHS had been ‘protected’ from cuts, even though it was being squeezed like all other public services. In these circumstances it is not surprising that concern about the NHS should translate into concern about immigration.

In the US, the Fairness Doctrine that applied to broadcasters and ensured limits to how partisan radio and TV could be, was abolished under pressure from Ronald Reagan who regarded it as excessive and unhelpful regulation. This neoliberalisation applied to the media would end up creating Fox News, who in turn helped create President Trump. Bruce Bartlett describes how media liberalisation first led to talk radio and later Fox News. Initially the role of Fox News appeared simply supportive of the Republican machine, but it gradually started playing a more autonomous role, firing up the base and helping the rise of the Tea Party, such that it started to wag the Republican dog.

Bartlett argues that fear of getting on the wrong side of Fox News helped prevent Republicans cooperating with Democrats in Congress. It also created the conditions for the rise of someone like Trump, by using all the tactics that the right wing tabloid press in the UK uses, such as highlighting the threat from immigrants. Indeed, although Trump and Fox have had the odd spat, it has largely promoted his candidacy over other Republican rivals. The language of Trump is the language of Fox news.

Just as with Brexit in the UK, the non-partisan media in the US did little to counteract this influence, and with their obsession with the Clinton email affair actually played into the narrative that Clinton was untrustworthy. This led to the remarkable finding that a large majority of US voters thought that Trump was more trustworthy than Clinton, despite Trump regularly telling lies that were easily established as lies.

By considering the role of austerity in influencing Brexit, and how liberalisation helped create an autonomous right wing broadcast media in the US that backed Trump, it is possible to flesh out the argument that the twin electoral disasters of 2016 are in part a consequence of neoliberalism rather than simply economic liberalism.

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Categories: SPERI Comment | Tags: , , , , , , , | 2 comments

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Comments (2)

  1. This is very interesting and makes absolute sense. The question now is how do we overcome the power of the right wing press to expose the far right takeover and rising spectre of fascism. Gove said we are “sick of experts” so now it seems we follow liars and fools.

  2. In spite of all this kerfuffle, in both instances the better result prevailed. Why? because we desperately needed a circuit breaker to stop the corporate takeover of the planet. The corporatocracy wants to have these nefarious trade agreements, misnamed “free” trade. A free trade policy would only be, as Steve Keen says, a single sentence. The other 6000 pages is all restrictions and provisos. What we need is Fair Trade, not what the PTB would want at all. Well, we have now a glimmer of opportunity. We might dismante neo-liberalism, and see the end of such organisations as the Bilderberg group, now becoming irrelevant and counterproductive.
    All this is background to the BIG problem, the end of our civilization, our techno-industrial dynasty. It is doomed and already is well downhill from it peak at the time of the Moon shot. We have masked it with massive credit creation, but it’s not sustainable. We have ordained things to collapse by default and wilful ignorance, and it’s too late to turn it around. So, get busy with the deckchairs!

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