We are living in a depression – that's why Trump took the White House
Published in Guardian on 2016-11-13T15:29:04+00:00

Words matter. The process of understanding why Donald Trump is now heading for the White House starts with the correct description of what has happened in the eight years since Barack Obama became president.

Some economists call the turbulent period that followed the collapse of Lehman Brothers the Great Recession. Others say the US along with other developed nations is experiencing secular stagnation. Anything, it seems, to avoid using the D word: depression.

The dictionary definition of a depression is a sustained, long-term downturn in economic activity, which sums up precisely what has occurred since 2008. Growth rates globally have remained low despite colossal amounts of stimulus. Living standards have barely risen and the threat of deflation has loomed large. The depression since 2008 has not been as severe as that of the 1930s but there are echoes of it all the same: in the food banks that are the new soup kitchens; in the mass movements of migrants in search of a better life who are the modern equivalent of the Okies in the Grapes of Wrath; and in Trump, who has tapped into anger that has been bubbling away quietly for decades.

The turning point for the average American worker came in the mid-1970s because for the first 30 years after the second world war the gains from rising prosperity were evenly shared.

But this trend was broken around the time of Watergate and the end of the Vietnam war. Since 1975, productivity in the US has more than doubled, but average hourly compensation has increased by only 50%. The fruits of growth have been captured by the few, not the many.

This tendency was especially pronounced in the years immediately after 2008, when lower interest rates and quantitative easing fed through into rising asset prices rather than into higher wages. Between 2009-2012, more than 90% of US growth went to the richest 1%, which included the financiers who had caused the crisis in the first place.

It is not just that workers have been struggling to get a decent pay rise. Jobs have become harder to find in the last decade, with many Americans dropping out of the labour market altogether. The participation rate among prime-age males (25- to 54-year-olds) fell at the time of the crash and has never recovered.

As in the UK, the outlook for working people in the US has improved over the past couple of years because the collapse of energy prices has led to lower inflation and higher real incomes. But it has not been enough to counter the feeling that the system is rigged.

Torsten Bell, director of the Resolution Foundation, provided a useful breakdown of voting patterns in last Tuesdays presidential election. Taken at face value, the results seem to show that Hillary Clinton did well among those voters on the lowest incomes. She led 53%-41% among those earning less than $30,000 a year and by 51%-42% among those earning between $30,000 and $50,000.

But these statistics are misleading. There was actually a 16-point net swing to the Republicans between the 2012 and 2016 elections among those earning less than $30,000 a year and a 6-point swing among those earning $30,000 to $50,000. By contrast, there was a swing to the Democrats among those on higher incomes, and this was particularly pronounced among those earning more than $100,000 a year.

Related: The reasons for Trump were also the reasons for Brexit | John Harris

One interpretation of these numbers would be that Americans on average or below average incomes voted for Barack Obama in 2008 and 2012 because they expected fundamental change from which they would benefit. They were still waiting for the change to come in 2016 and thought Trump was more likely to provide it than Clinton. The better off, who have being doing just fine out of business as usual, supported Clinton as the candidate of the status quo. For Wall Street and Silicon Valley she was the safer choice. As in other western countries, the party ostensibly of the left had nothing to say that its traditional base wanted to hear.

There have been three stages to this process of political estrangement. When the postwar era began, parties of the left focused exclusively on economic issues. The emphasis was on curing the ills of the 1930s: unemployment, poverty and slum housing. Governments were committed to full employment and redistribution and were prepared to use controls on money, goods and people to deliver those goals. Conversely, there was little appetite for fighting cultural wars. Neither Harry Truman in the US nor Clement Attlee in Britain could be described as a social liberal.

The second phase came in the 1960s, when the parties of the left backed both economic and social reform. In the US, it was the era of civil rights legislation and Lyndon Johnsons Great Society programmes to tackle poverty. In Britain, the Labour government had its National Plan for the economy but also gave a fair wind to changes Attlee never delivered: the abolition of capital punishment, the decriminalisation of homosexuality, legal abortions, easier divorce and the relaxation of censorship laws.

The third and final phase of this process began in the mid-1970s. Parties of the left gradually accepted defeat in the economic war and devoted their energies to winning the cultural war instead. It was taken as a given that the focus of macro-economic policy should be control of inflation rather than full employment. It was accepted that there should be as few impediments to free markets as possible, with government intervention limited to tackling any short-term problems that might arise. Curbs on trade unions introduced by parties of the right were not rolled back. Globalisation was seen as an unstoppable force that ruled out the interventionist policies of the past. Instead, the Democrats in the US and Labour in the UK limited themselves to topping up poverty wages and argued that the answer to jobs being shipped overseas was for the newly unemployed to get better qualifications.

As a result, parties of the left had nothing to say when the financial crisis of 2008 exposed the weaknesses of globalised finance, debt-fuelled growth and trickle-down economics. They could point to some notable victories in the culture wars reforms that have made the US and the UK much more tolerant countries than they were three or four decades ago. But under depression conditions that has not been enough. The failure to articulate an alternative economic strategy has led to the erosion of political support in their old heartlands, where disenchanted voters feel ignored and despised.

What that means is that the political divide is now not really between left and right but between liberals who believe in free trade and free movement of people and populists who believe in the nation state and controls on the movement of goods, people and capital. That, too, has echoes of the 1930s.

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Negative Comments

What's wrong with attempting to keep your countries culture in tact. In doing so you are labelled xenophobic, homophobic, fascist, nationalist. But none of these things explain what's wrong with it.

Leaving people poverty stricken

Joel Marcuson:
What a joke. The actual Depression had over 25% unemployment. Nothing close to the 4.9% we have today. Write about something real.

Well, trump made atrocities great again one trespass at the time or how do you boil a frog? You turn up the heat very slowly.

No it's because the left have been played by global elites so easily, who sing kumbaya, play the race card and the brainwashed step into line. The elites get richer and the little people get poorer. Trump will save the planet

Positive Comments

David Hann:
Great article in terms of providing an explanation of how we got to this situation, but how to get out of it? At least it helps to define the problem, but who is there on the left that's doing anything about defining a solution? Corbyn and Sanders? Nice enough guys no doubt, but is there anything there with the kind of intellectual/academic depth or imagination to build any kind of progressive paradigm to take us forward?

I find it interesting -- amusing -- that the ideology that causes the massive disparity in wealth distribution manages to sell itself to the electorate as the only ideology that's capable of redressing that inequality. I suppose its the lottery effect -- everyone imagines they're a winner.

One person's depression is another person's opportunity. That so many women voted in favor of Trump (5-4 among whites, higher among married women) surprised even me, the class warrior, I who have tended to discount gender identities. Screwing the hardcore Bernistas turned out to be bad business for the Clintonistas.

So WW3 in about 10 years then?

Excellent article. The Left had shifted to the right and abandoned the working class. Corporatocracy took hold and wealth and hence power became concentrated. Governments, democracies and economies have been undermined by the mega corporations and the Davos crowd, the real enemies of humanity.

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