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WHEN people strike comparisons with Hitler — or Munich — I usually reach for my earplugs. The same applies to the Great Depression. There is nothing on today’s horizon that compares with the Nazis or the mass privation that followed the 1929 stock market crash.
Yet there are echoes we would be foolish to ignore. Western democracy faces no mortal threat. But it is going through an acute stress test. On both sides of the Atlantic, people have lost faith in their public institutions. They are also losing trust in their neighbours. Cooperation is fraying and open borders are in question. We can no longer be sure the centre will hold — or even that it deserves to.
The most insidious trend is vanishing optimism about the future. Contrary to what is widely believed, the majority’s pessimism pre-dates the 2008 financial collapse. At the height of the last property bubble in 2005, Alan Greenspan, then chairman of the Federal Reserve, said society could not long tolerate a situation where most people were suffering from declining standards of living.
“This is not the sort of thing that a democratic society — a capitalist democratic society — can readily accept without addressing,” he said. This came after several years of falling median income.
For most Americans and Europeans the situation is worse today than it was then. Many have since had their homes repossessed. Median incomes were lower in 2015 than when Mr Greenspan issued his warning. A majority on both sides of the Atlantic believe their children will be worse off than they are.
They may be right. Economists debate whether the sharp decline in productivity growth during the past 15 years is the result of mismeasurement. Polls suggest there is nothing wrong with the yardstick. Most people feel worse off, which is what matters in politics. In his book, the Rise and fall of American growth, Robert Gordon argues that the century-long leap in productivity that began in 1870 can never be repeated. Even if Mr Gordon is eventually proved wrong, will society have the patience to wait and see?
The second disturbing trend is a growing sense of unfairness — the feeling that elites are continually lining their pockets. Scholars talk about the ‘Great Gatsby Curve’ — the massive rise in inequality that took place in the 1920s before the Wall Street crash. The numbers today are eerily similar to then. Labour’s share of national income keeps plummeting. Despite the US economy’s recovery, 2015 saw the sharpest rise in US wage inequality since the end of the Great Recession.
The final echo from the 1930s is in the declining global order. In a widely cited interview with the Atlantic earlier this month, Mr Obama complained about ‘free riders’ among US allies, including David Cameron’s Britain
The average American’s chances of moving up an income bracket are no better today than when President Barack Obama took office. Last year he said that for too many Americans the ‘ladders of opportunity’ had disappeared. He was right. Yet he has been unable to do much about it.
The third is a rising culture of nihilism. When people think their concerns are being ignored — and worse, that they are also being belittled — they lash out. Hell hath no fury like an angry electorate. It is easy to poke fun at the likes of Republican frontrunner Donald Trump and the leader of the UK’s Labour party, Jeremy Corbyn. They provide an endless supply of material.
But the ease with which they can be lampooned should not obscure what is driving their success. The puzzle is not that such figures are finding an audience, but that they did not emerge sooner. Do not expect them to vanish into the night.
Contrast Mr Trump’s promise of strong leadership and ‘winning big’ with the timid incrementalism of Hillary Clinton’s platform. She promises to finesse the gains of Mr Obama’s first two terms. Mr Trump vows to change the rules of the game entirely.
The final echo from the 1930s is in the declining global order. In a widely cited interview with the Atlantic earlier this month last week, Mr Obama complained about ‘free riders’ among America’s allies, including David Cameron’s Britain. He also expressed disdain for the US establishment’s obsession with ‘credibility’ as the measure of American power, and force as their perennial solution.
Mr Obama’s words have elicited outrage in both London and Washington. Yet he gave a good summary of US public opinion. Indeed, what Mr Obama said is not wildly different from what Mr Trump has been arguing. Americans are tired of paying for Pax Americana.
Unlike Britain in the 1930s, the US can still bear the burden. But it does not want to.
Neville Chamberlain, the proponent of Nazi appeasement, said Czechoslovakia was not worth the bones of a single British grenadier. Mr Obama believes much the same about the people of Syria. He expressed no concern about Syria’s impact on Europe. The flood of refugees is Europe’s problem. Ukraine is in Russia’s neighbourhood. The Middle East must fend for itself. Such were the valedictory thoughts of a world-weary president. They were not a million miles from Mr Trump’s.
The coming months provide a test. In June, the UK votes on whether to leave the EU. If Brexit takes place, the European project could start to go backwards. Will America care?
By then, we will also know the battle lines for the US presidential election. In all probability it will be Mrs Clinton against Mr Trump. Western democracy is on trial. Autocrats in Russia and China will be watching keenly.
Published in Dawn, Business & Finance weekly, March 21st, 2016
