How Did We Get To Where We Are?

This has been a shocking year for the Establishment. First, there was the Brexit vote in June. Neither the Establishment in the UK, nor in Europe, could conceive of the impossible - the British public voted to leave the European Union. Now we have the election of President Trump, who had to overcome two sets of established figures - the Patrician Republicans to secure the nomination, and then an established Democratic Washington insider to secure the office. To the urbane liberal elites, their world appears to be ending. But is it?

In many respects, both of these events were relatively predictable, as they represent the convergence of a series of long term trends. Over the past 20 to 30 years, we have seen a huge transfer of wealth in the global economy. The rise of the middle class in Asia - predominantly in India and China - has been at the expense of the stagnation of living standards of the middle class in Europe and North America. For a long while, the middle class in Europe and North America could disguise this stagnation by incurring ever greater levels of household debt to maintain their living standards, but that bubble burst rather abruptly in 2007.

This has had a number of unfortunate consequences. The course of this decade has been to expose the precarious nature of middle class prosperity in Europe and North America. It has been blamed, with a good deal of cause, upon globalisation. It has been exacerbated by the apparent indifference of those who have done well from globalisation in Europe and North America - those characterised and demonised as 'the 1%' - and it has now reached a point where people are angry enough to want to do something about it.

In many respects this was quite foreseeable. Since 2009, policy has been to return the economy back to 'business as usual'. To a very limited degree, this has been successful. However, 'business as usual' cannot deliver the levels of prosperity to placate an angry middle class - a point that is important when we think about going forward. In many communities, the standards of living are still worse than they were in 2006 - a lost decade of reduced living standards. In the face of this, the established political structures seem unable to do anything about it, and electorates are now turning to those who they believe can - the disestablished political fringes.

We are concerned about the future rather than the past, so what does this mean going forward? There are two key uncertainties that we currently face. Will Brexit occur? And will President Trump deliver his campaign promises? We can look at the worlds in which one occurs and the other doesn't, but that isn't entirely interesting. We can look at a world in which neither occurs, but that would imply a continuation of current trends. That might be an exercise worth pursuing as an alternative future.

Or we could look at a world in which Brexit does occur, and where President Trump delivers his campaign speeches. This is the world where we ought to focus our attention at the moment because this is the world in which our expected future appears. We are planning a series of pieces on how this future might unfold in coming weeks.

As always, people want to know immediately how the future might unfold. It is, however, worth taking our time over this. After all, it is not easy to divert a long term trend, which is what Brexit and a Trump Presidency both promise to do.

Stephen Aguilar-Millan

© The European Futures Observatory 2016