Those G20 leaders in China better enjoy the champagne and caviar while they can. The next G20 meeting of world leaders isn’t until July of next year, in Hamburg. The world may be a very different place by then. You may even see the legitimacy of some democratic governments called into question as the gap between the government and the governed grows.
I’ll get to how disconnected political elites are from ordinary people in a moment. But first, bad news continues to be good news for stocks. The US non-farm payrolls report wasn’t bad news exactly. But the news wasn’t as good as some people had hoped.
And for that reason, it was even better news!
US businesses added 151,000 new jobs in August, according to government data. That was less than the 180,000 economists surveyed by Bloomberg had expected. And it was a lot less that the 275,000 jobs that were supposedly created in July. How is lower-than-expected job growth good news?
It means the US Federal Reserve is less likely to hike interest rates. The case of such a hike – that job growth is putting pressure on wages and inflation – isn’t that strong when the job and wage growth figures don’t support it. But markets certainly loved the data.
The FTSE 100 was up 2.2% on Friday. You can’t give all the credit to the US jobs data though. The much-anticipated post-Brexit economic meltdown has yet to materialise. It will get a chance to show itself this week with manufacturing and industrial production data to be released. House price figures will also be worth watching.
Westminster takes the stage
David Davis, the “Brexit Secretary” for the government, fronts Parliament today. What will he say? The prime minister made some Brexit related comments in a taped interview with the BBC before jetting off to China. None of the comments have added much clarity to the question of what Brexit looks like.
We know it won’t be this year. But we still don’t know if it includes access to the single market. Or whether Britain will accept the EU’s demand for the “free movement” of people in exchange for continued access to the single market. That kind of Brexit – all the EU rules without any of the EU benefits – doesn’t seem like much of a Brexit to write to your mother about.
The prime minister seemed to cast doubt on the viability of the Australian-style points system put forward by Boris Johnson during the referendum campaign. I have an idea! How about a point-based system for EU citizenship? Once you’re in you’re in and you can move freely. But you’re not in unless you’re in.
Is it really so quaint an idea that you should be selective about who you let into your borders these days? In a world with no welfare states and no terrorism, you wouldn’t worry too much about borders. But we don’t live in that world. I know that and you know that. Do political leaders know that?
Is there such a thing as sovereign national territory anymore?
Let me open the week by suggesting to you a chasm has emerged and is growing between the government and the governed in the Western world. Let’s take the local German elections this weekend. They were only state elections (in Mecklenburg-Vorpommern). But they’re worth a look.
Angela Merkel’s Christian Democrats came in third with 19% of the vote. Their percentage of the vote was down from 23% in 2011, according to the Financial Times. And that’s after an increase in voter turnout from 51.5% to 61%. Who did all those new voters vote for?
Merkel’s coalition partners, the Social Democrats, came in first. They captured 30.6% of the vote. But even that was down from 35.6% in the last election. Who was the big winner?
It was the Alternatives for Germany party (AfD), a party that didn’t even exist until 2013. It captured 20.8% of the vote to come in second. It’s described by the FT as the anti-immigration party. It’s described more colourfully by the Christian Democrats as a party full of “simple and stupid slogans.”
Hmm. That sounds familiar.
German Federal elections are scheduled for next year. The earliest they’ll happen is in late August. By then, perhaps Frau Merkel will have turned the momentum around at the local level. She’ll have allayed the public concerns that Germany’s been too generous and inviting with immigrants. She’ll retain power and carry on doing what she’s intended to do all along.
But there’s the risk that people who vote for one result and get another become fed up with the political process altogether. That’s the same risk with the Brexit vote. If Brexit turns out to not really mean Brexit because the PM’s party can’t deliver the result more than 17 million Britons voted for, how much confidence will people have in the political process anymore?
Probably not much. You see it in America already. One factor in the rise of Donald Trump is the complete failure of the national leadership of the Republican Party in Washington to do any of the things it was sent to DC to do (reduce spending, make government smaller, reduce regulation, solve the immigration problem).
“Closer together”
The trouble, for politicians, is that they need people to vote for them to get into office. Once they’re in office, the tendency is to favour laws and regulations and treaties which brings governments “closer together”. They vote for the interests of the government, not the interests of the governed.
In the name of promoting free trade (big corporate interests), economic growth (global financial companies and credit growth) and anti-terrorism (global defence companies and an attack on personal liberty) you get supranational organisations. It’s the exact opposite of local and accountable government. It’s a lot like the EU, in fact, but bigger and more global.
Elected officials and elites running national governments believe the populist tempest that’s led to Trump, Corbyn, Brexit and “simple and stupid slogans” will blow itself out like a summer squall. But they may be missing a much more important point. This could be their last chance to do what they were elected to do before irreparable damage is done to the relationship between themselves and the public.
Category: Geopolitics