GROWING POPULISM & ELECTION RESULTS SIGNALLING A "BROKEN SOCIAL CONTRACT"



A global wave of "Populism" is dominating election results of increasingly more democratic economies around the world. This is reflective of how voters are increasingly sensing the system  has become "unfair" and more importantly, is not working for them!  The data (below) clearly shows the dramatic growth of Inequality over the last 20 years.  The growing populist furor additionally places a spotlight on political corruption which is becoming increasingly more evident and frankly blatant!

The emotional response  to this has been the rejection of Globalization in favor of what is often labeled as "Nationalism" (or what is really the feeling of wanting the protection of the status quo - pre-Globalization) AND additionally what may be best termed "QE for the People"!

Taking away the emotional response we see the hard realities are the failure of the government to enforce "Anti-Trust" Laws, limit Crony Capitalism feeding off the public trough and the Financialization of Economies at the expense of capped and worsening standards of living.

The bottom line of what elections are screaming is that the unwritten "Social Contract" between the elected and electorate has broken down! This always leads to social unrest and worse!

NOTE: View our 2016 UnderTheLens video entitled "A Failed Social Contract"

INEQUALITY

The growing Inequality is not the purview of any one party, nor unique to the US.  It is rampant in all the developed economies.

POST PUBLICATION NOTE: I strongly encourage you to read Charles Hugh Smith's article "The Political Rebellion Gathers Momentum" which expands further on our video "Election Takeaways" and on the subjects of "Unfairness" & "Inequality".

We have covered this topic extensively at MATASII from a Global perspective (search MATASII by title) - Examples:

What is particularly alarming regarding "Unfairness" & "Inequality" is the dramatic increase in suicide rates in America which ZeroHedge recently highlighted based on new research from the Centers for Disease Control and Prevention (CDC):

During 2000–2016, suicide rates among American workers (aged 16–64 years) jumped 34%, from 12.9 per 100,000 population to 17.3, according to a newly published report by the Centers for Disease Control and Prevention (CDC).

“Increasing suicide rates in the US are a concerning trend that represents a tragedy for families and communities and impact the American workforce,” said Dr. Debra Houry, director of the CDC National Center for Injury Prevention and Control.

“Knowing who is at greater risk for suicide can help save lives through focused prevention efforts,” Houry said.

With the American workforce declining for decades, only now it this disturbing evidence of the catastrophic damage that has already been done being released.  Suicide rates are rapidly expanding in almost every state, as it now becomes the 10th leading cause of death in the US and is one of three leading reasons that are on the rise. The CDC discovered that in recent years suicide rates were the highest among males in construction jobs and the highest for females working in arts, design, entertainment, sports, and media.

Michael Snyder of The Economic Collapse blog analyzed recent Social Security Administration data of median yearly wages in the US.  He discovered 50% of all American workers make less than $30,533 per year, which of course is not enough money to sustain a middle-class lifestyle.

"The American people are working harder than ever, and yet the middle class just continues to erode," he said.

Snyder said the "deeper we dig into the numbers provided by the Social Security Administration, the more depressing they become." Here are just a few examples from their official website:

  • 34% of all American workers made less than $20,000 last year.
  • 48% of all American workers made less than $30,000 last year.
  • 59% of all American workers made less than $40,000 last year.
  • 68% of all American workers made less than $50,000 last year.

In retrospect, it all makes sense as the inequality gap between the rich and poor is the largest that it has ever been since right before the 1929 crash, and America’s once-thriving middle class has been systematically eviscerated over the last thirty years. 

GROWING ANTI-ESTABLISHMENT SENTIMENT

The anti-Establishment, anti-Globalization is a sentiment that is challenging global political Governance.

We have also followed this development closely at MATASII from a global perspective (search MATASII by title) - Examples:

LACK OF ENFORCEMENT

The overwhelming and central problem has been ineffective and the absence of  the ENFORCEMENT of the Rule of Law.

Today Anti-Trust actions are seldom brought or enforced due to the power of corporate lobbies and campaign contributions.  The power of the Crony Tribute System (download 15 page pdf) is smothering effective and required change.

As you might have noted I wrote & published this paper in 2014 as my growing concerns with Crony Capitalism crystallized.  I recently had the opportunity to review  "The Myth of Capitalism"  written by the Co-founder of Variant Perception, Jonathan Tepper.

He explains that he wanted to write the book as a defense of capitalism amid attacks levied by Thomas Piketty that the capitalist system conceals a fatal flaw: That workers receive persistently smaller share of the spoils from corporate earnings. What Tepper discovered during his research is that this phenomenon is related to why corporate profits, which Jeremy Grantham once described as the "most mean-reverting data set in finance", haven't undergone a genuine retrenchment in years. Meanwhile, the share of earnings going to workers has consistently shrunk.

But the fact that corporate profits have remained elevated while worker pay in real terms has continued to sink isn't a flaw inherent to the capitalist system, Tepper explained. Rather, it's a flaw inherent in our version of capitalism. And a lot of it is tied to the wave of consolidation that has swept most industries since the 1980s. This consolidation has hampered competition, and caused markets to start behaving in an unhealthy way, which has led to our current secular stagnation and all kinds of other ills. And tech giants like Facebook and Google are among the worst offenders.

It was really when I started digging that I realized the main reason for this is that, in industry after industry in the US, we’ve seen a merger wave every decade since the early ‘80s. The merger wave has basically – it’s like the US Sweet 16 in the NCAA basketball or the World Cup, where you start out with 16 teams and you go down to 8 and then 4 and then 2 and then 1.What’s happened is we moved from an open economy with lots of competitors essentially down to oligopolies and monopolies in many industries. And that has an impact. It affects the way everyone lives, whether it’s in the US or Canada or the UK. The Canadians know this particularly when they pay for their phone bills. The US people know this when they pay for their cable bills or they pay for medical bills. When there is no competition, the prices are very high. And this clearly means you get higher prices. It also means that wages are lower. And, overall, because barriers to interest tend to be very high – I have a chapter on regulation – you just get fewer competitors coming in. So it leads to a collapse in startups.

And while competition has disappeared in traditional industries from health care to cable, few realize how problematic the role of tech giants like Facebook and Google has been. These monopolies have been allowed to expand their market influence virtually unchallenged by regulators, buying competitors and strengthening their monopolies with impunity.

But if you look at the online ad market and talk to people who have been in it for decades – a very good friend of mine actually works at Google – he worked at DoubleClick beforehand. And Google was allowed to buy DoubleClick. So, Google does search ads. DoubleClick did display ads. What’s extraordinary is the FTC allowed for this merger to go through, even though Google was essentially taking out its main competitor in terms of online ads. And Facebook likewise bought Instagram and WhatsApp. They were able to merge WhatsApp with Facebook to the point where you can’t get a Facebook account without a phone number. So now Facebook on thousands of sites across the web functions essentially as your digital passport. You can’t get an account on various apps or websites without a Facebook login.

This has created a "highly centralized" system where the 70% of Web traffic runs through two companies - Google and Facebook - and as Tepper said, that's not good for anyone.

But what should be done to restore competition? Tepper has an idea: Regulators should implement a hard rule that they won't sign off on any mergers that would leave a given industry with fewer than six competitors. But will that undo the damage that has already been done? Well, it's hard to say.

CONCLUSION

  • The Social Contract is being broken across most democratic developed economies,
  • We are witnessing a shift to the Left & Growing Socialist sentiment in the Millennial generation,
  • We need a New Political Class to emerge with the Vision & Courage to take back the system & money from the oligarchs & Crony Capitalists and prepare the voters for the Fourth Industrial Revolution,
  • The Money in a slowing rate of growth economy is normally  found by "feeding off" the public purse. Government contracts for products and services for their use or as part of "redistribution" of wealth,
  • Government laws, regulations, licensing, fees et al are used by corporations and the wealthy to put a protective moat around their wealth and "skimming" methods,
  • Votes are increasingly more amenable in tougher times to seeing money spent for Infrastructure and Defense,
  • Advancements in Financial Repression and programs such as "QE for the People" (Helicopter Money) are to be expected, which will place downward pressures on bond yields (to finance the government debt) and currency (due to debasement).

As a share of a slowing growth of the global pie is increasingly fought over, conflicts & tensions are to be expected.  Currency Wars move to Trade Wars which move to Shooting Wars.