Gerald F. Seib
A few days after George H.W. Bush lost his bid for re-election
as president in 1992, one of his aides, Ed Rogers, mused: "There
wasn't anything wrong with this campaign that 4% economic growth
wouldn't have fixed."
Mr. Rogers's lament then is one that leaders across the
industrialized world can appreciate now. In country after country,
the political establishment is under sustained attack from
disgruntled voters. In the face of this assault, the governing
class is missing the one reliable line of defense: the kind of
robust economic growth that would calm nerves and soothe
passions.
Instead, political leaders find themselves struggling to survive
in an era of sustained low economic growth. Though there are other
causes for the ferment that has produced Donald Trump in the U.S.,
a vote to exit from the European Union in Britain and the demise of
the ruling party in Italy in recent months, the dissatisfaction
flowing from unsatisfying long-term economic performance is a root
cause.
"Low growth, the resulting lack of economic activity, and
therefore the missing money is what fueled politics in 2016," Mr.
Rogers says now.
In fact, the industrialized world has been without sustained
high growth for so long that the weakness has started to appear
normal. The U.S. provides a compelling illustration.
Starting in 1983, when Ronald Reagan was in the middle of his
first presidential term, the American economy reeled off three
straight years of 4% growth. The economy went on to hit that
politically important target in nine of the next 17 years. In fact,
even as Mr. Bush ran for re-election, the economy actually was
revving up after a two-year lull, though the surge came too late
for voters to realize it.
Then, at the turn into a new millennium, that streak stopped. In
the last 15 years, the American economy hasn't grown at a 4% annual
rate even once.
But it isn't just the U.S. In the last 15 years, according to
International Monetary Fund data, exactly one of the traditional
seven major industrialized nations achieved annual economic growth
of 4%, one time: Japan in 2010.
In sum, the kind of economic growth that used to be relatively
routine in the industrialized world has become virtually
extinct.
This low-growth era leaves political leaders facing two unsavory
tasks. The first is to explain to unhappy voters why growth is so
anemic, and the second is to convince them that they know what to
do about it.
Voters in industrialized economies "are used to reaping most of
the benefits" of economic globalization, said Tony Fratto, an
assistant Treasury secretary in the George W. Bush administration.
Now, though, many are concluding globalization and technological
advances, once seen as benefits, have become liabilities, or at
least causes for concern and anxiety.
In fact, voters came to that conclusion before their political
leaders did.
"For years, people in communities that depended on
high-value-added manufacturing were telling us, in so many words,
that globalization was hurting them and yet no one was really
listening," said Jared Bernstein, who served as Vice President Joe
Biden's top economic adviser. "If anything, elites promised the
next trade deal would be the one that renewed their
opportunities."
Now, some political leaders have begun to succeed by telling
voters they are right to conclude the political and financial
elites aren't working in their best interest. Mr. Trump is one
example; another is Nigel Farage, a leader of the Brexit movement
in the U.K. Leaders of nationalist parties elsewhere in Europe are
trying to follow suit.
The question, of course, is whether such leaders can actually
provide solutions to the low-growth problem. Mr. Trump is
calculating that a combination of tax cuts, regulatory relief,
tougher trade policies and controls on immigration will do the
trick.
Others, though, worry that the proposals may not match up to the
real problem. Douglas Holtz-Eakin, who was the chief economic
adviser to Sen. John McCain's 2008 Republican presidential
campaign, says the global economy suffers from a mismatch: The
industrialized nations have the capital, but developing countries
have the labor.
Economists' belief that capital would move to meet labor hasn't
been borne out, he says, so now labor is seeking, through
immigration, to move to capital. But nationalist political
movements actually seek to stop that from happening.
"There's no way to get to 4% [growth] without more people," Mr.
Holtz-Eakin said.
Write to Gerald F. Seib at jerry.seib@wsj.com
(END) Dow Jones Newswires
January 16, 2017 05:15 ET (10:15 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.