The forthcoming mid-term elections have taken on the hue of a referendum on the popularity of President Obama. A mere two years ago, the President was billed as a new and dynamic political force in America. His rally cry was ‘Hope’, his exhortation ‘Yes, we can.’ And yet, the programme seems to have come off the boil. ‘Hope’ now turns out to be ‘Hype’ and, in an unguarded moment on a TV show recently, he now says ‘Yes, we can. But, …’ If the polls are anywhere near to being correct, the President’s party is facing a substantial defeat in the voting next week. As an outsider looking in, I am interested in why America has fallen out of love with Obama? Why is it that his opponents are so hostile towards him? What exactly is driving the extreme views of the Tea Party opponents to the President?
I guess that the single word answer is ‘recession’. America is experiencing a recession that is at the worse end of the OECD experience, and this is exposing some of the fractures within American society. However, we like to take a longer view of these fractures in seeking an explanation.
According to Edward Luce of the FT, “the annual incomes of the bottom 90 per cent of US families have been essentially flat since 1973 – having risen by only 10 per cent in real terms over the past 37 years”. This is quite an interesting statistic because it also explains so much. If income has flatlined in this period, and living standards have been increasing, then how has the American Dream been paid for? By an increase in household debt. It would appear that American consumers have been borrowing to improve their living standards. A good part of this increase in debt was underwritten by a boom in the housing market, as households used their mortgages as credit cards.
Of course, there is nothing inherently unstable about this money-go-round until the music stops. Once that occurs, then everyone wants to ditch the parcel rather than being left with a dud asset. As the credit crunch – essentially a financial phenomenon – bled into the real economy, the resulting recession has had two important consequences. First, there is an acute shortage of credit to finance further expansion of consumer expenditure (more on this later), and second, there arises unemployment at sufficient volumes that the servicing of existing debt is called into question.
This is compounded by the composition of the borrowers. Many of those who have borrowed to finance their lifestyles are of the Boomer generation, and one thing that characterises the Boomers is their deep sense of entitlement. We now have a situation where a generational cohort, who are accustomed to being treated like spoilt children, have had their toys taken away from them. They are angry. They are angry enough to form Tea Party groups. They are angry enough to call into question whether their own President is American. They are angry enough to give credence to extremists such as Glenn Beck. And they may just be angry enough to vote into office someone like Christine O’Donnell, who is manifestly unfit for office.
It could be quite easy for Europeans to become smug over the discomfort of America. However, just an element of deep thought stops this train of thought. It is the angry, white, lower middle class who are giving electoral backing to the Neo-Nazi parties in the UK. It is the respectable burghers who are giving electoral support to the anti-Islamic parties in the Netherlands. It is the middle class establishment who are behind the hounding of the Roma in France and Italy. There are angry middle class voters across the developed world at the moment.
This is likely to be a feature of our near future. If recovery is sluggish (the best case scenario) or if recession makes a re-appearance (the worst case scenario), it is unlikely that middle class household balance sheets will be repaired quickly. In the past, the world has waited for American households to start borrowing to finance their consumption, thus kick-starting the world economy. This is unlikely to happen for some time – American households are simply too maxed out. This suggests that middle class anger will remain for some time to come, which will make our politics just a little more xenophobic and our economies just a little less globalised.
We call this trend the ‘New Nationalism’.
© The European Futures Observatory 2010