From the Watson Institute for International and Public Affairs at Brown University, this is Trending Globally. I'm Dan Richards. Over the course of 2024, roughly half of the world's population will participate in national elections. We've already looked at a few of those elections on Trending Globally this year, and we'll be looking at one in particular, that is, November's election in the United States, much more closely over the next few months. But on this episode, we're going to take a look at two elections that occurred this summer in two of the largest countries in Europe, two of the world's biggest economies, the United Kingdom and France. In the UK, the center-left Labour Party won in a landslide, ending 14 years of conservative party rule. In France, an alliance of left-leaning parties banded together to defeat the nationalist right-wing national rally party, led by Marine Le Pen. But as our guest on this episode explains, "The story of these elections is much more complicated than the top-line results led on, and if these new governments can't address the distress that so many people in their countries are experiencing, they may not stay in power for long." And what you will get coming back in will be something far more reactionary. That's Mark Blythe. He is a political economist at Brown's Rhodes Center for International Economics and Finance at the Watson Institute. He's also host of the Rhodes Center podcast. If you know this show, you probably know Mark Blythe, and you know there is no one better to help explain the political and economic fault lines that exist in Europe today. In this episode, we talked about these two elections and why, despite these victories on the left, the right-wing in those countries and in many parts of the rest of the world, is as powerful as ever. It's very similar to Trumpism, right? It's very easy to set back and sort of poo-poo the whole things and the other deplorables etc. And then you've got to ask yourself the question, "If they're so deplorable and so stupid, why do they keep doing that?" We started with the UK and the long-running confluence of factors that shaped Labor's landslide victory this year. From the fallout of austerity, politics, and Brexit to the remarkably tumultuous and short reign of Prime Minister Liz Truss, here's our conversation. Mark Blythe, thank you so much for coming back on to Trending Globally. It's always a pleasure to Trending Globally. We like to Trending Globally here. I want to talk about this election that was held on July 4th this year in the UK. And so let's start with the Labor Party, which won a ton of seats. They gained over 200 seats. They have some two-thirds of the seats in Parliament now. Do they have as widespread support in the UK as that majority suggests? Did they somehow take the country by storm in the last five years? No, no, they did not. It was very much a vote against rather than the vote for. And to put this into perspective, there's two things going on here. One is a first-past-the-post voting system with individual member constituencies. That means that once you win it, all the votes that other people cast are not constituents that say, "Don't count for anything," right? So if you have a strong position in a constituency level, you can rack these things up, wear out a proportion to the number of people who are actually voting. That brings us to participation. This is actually a pretty low participation election. Labor won a huge majority with about 2 million less than Jeremy Corbyn lost one in 2019. Wow. So when Labor lost in 2019, they actually got more votes than they did in this election. Yeah. So what's behind that? Basically, the Tories were hated. This animosity towards the Conservative Party, in Mark's view, begins all the way back when they gained control of the UK's government 14 years ago. Back in 2010, the Tories came in with David Cameron and Osborne and instituted the austerity programs in the country, which basically took the number of food banks in the United Kingdom from close to zero to being a fixture of the lives of around 15% of the population. While poverty is sore to avoid the expound minister, Gordon Brown is now making a one-man national campaign about it, and a few years ago, in Manchester United footballer called Marcus Rashford basically made childhood poverty in the summer because the lack of school meals into a national sort of incident. We then lived through the chaos of Boris and the whole Boris administration, which included the inaction of Brexit in 2020 and then the global pandemic, telling everyone they can't go with their parents' funeral as well, he's living it up at parties and downing street. And then, of course, the Trussanomics. Trussanomics being the nickname for an extremely conservative, some would say, radical, budget put forth by Boris Johnson's successor, Liz Truss, that would have led to the biggest tax cuts in the UK since 1972. It was widely criticized, caused instability within the financial markets, and contributed to Truss stepping down shortly thereafter. So it's just been a legacy of incompetence and insider dealing, which the British public got totally fed up of, where they also got surprised there was the re-emergence of Farage, the guy who was behind Brexit, coming over to his own party, the Reform Party, which split the Tory vote. And when you stick that in that first pass to post-constituency system, that magnifies the Tory losses and makes the Liberal Democrats and the Labour gains all that much bigger. That last thing you mentioned is really similar for listeners in the United States to how a third party in the US could really negatively affect the outcome of another party. Totally. So you have this break between the Conservative Party and the real Brexit hardcore led by Nigel Farage, that played a big role in the Tory loss. And then, like you said, they were also just really unpopular by the time this election came around. My question is if the Tories were so hated, or maybe hated, it's a strong word. No, no. They were absolutely hated. I mean, literally look at these sort of approval figures and it's just catastrophic. So why did they stay in power for as long as they did in that case? Because 14 years, that's a long run by UK standards for one party to be in power. Oh, absolutely. Well, the thing is historically, it just alternates between Conservative and Labour, and they tend to get multiple terms. So the Conservatives come in in 2019 on the back of the financial crisis, and successfully spun this as it's all the fault of Labour spending too much, which despite the fact that it was a global financial crisis, obviously was not really true. They may have spent much, but that was not what was the problem. And unless they managed to weaponise this into a drive against poorer members in society, they licensed television programmes that were called Benefit Street that made a mockery of people on social welfare programmes. They really polarised the country for political effect. And then they promised that it would be an economic nirvana by cutting all this public spending, and they basically never recovered from the 2008 crisis. Productivity collapse has been flatline since then. In real wages in Britain are about 13% lower than they were before the financial crisis. I mean, it's an absolute catastrophe. Now, how do they get to stay in? Because you have an opposition party, it's led by Jeremy Corbyn. Jeremy Corbyn was painted first as a radical leftist, which he may be by American standards, but then more successfully as a generic anti-Semite, and that's basically what got him tired with that brush. And then his party was discredited. They win the 2015 election back of this, then you get to 2019, the Tories nearly lose it with the new leader May, but they'd managed to hold on to power. And then they stagger from that into the pandemic with Boris and then on to Trussonomics. And then you get that quote-unquote "adults" back in the room, which is Sunak. And they are unable to change anything. We have a complete dearth of public investment. As I mentioned earlier, child poverty hasn't been this high in 50 years. The place is screaming out for change. Now, you would think that Labour would have a mandate and would capitalize upon this. Labour are absolutely terrified of not being seen as credible by the financial markets. I think they massively overplay this and overestimate it. The tragedy being if they basically produce austerity, light, more of the same with the human face, then they will be out and what you will get coming back in will be something far more reactionary. So the next five years are incredibly important in terms of how British politics works out. Do you expect that it will be something like austerity, light under this new Labour Party? Or might there be a different direction entirely with regards to those policies? I think they want a different direction. I think they know that they have to have a different direction. The debate in the party is about how different can we be. There's a lot of talk about the low-hanging fruit that you can do. A lot of this goes through housing. It's a huge shortage of housing in the United Kingdom. And that means rents are unbelievably expensive, particularly in London, which is the main growth area. It used to be three times income when we started in the 1980s to get a house in London. Now it's 10 to 11 times income. You can be earning £50,000 a year, $80,000 a year, and you'll never stand a chance of getting a mortgage if you want to live in London. It's that dire shreds. So a lot of this is you need to build houses. Now, one way of doing this is you keep them on the state's balance sheet. We used to call these council houses. These are properties that have a net present asset value, and they also have an income generated from them called rents. So if you do this right, you build up the asset side of the balance sheet, and you also have income coming in, which means that you reduce your debt. That's true, but that's also a scary proposition for the real sort of small-sea conservatives in the party who will be like, "No, it'll just be seen as more debt." And then the financial markets will do to us what they did to trust. So labor's looking around for ways to be credible in a different way. They do have real sort of finance and constraints. I think they overplay it a little bit, but I think there's a desire to do much more. And they know that they have to because the country's in a terrible, terrible state. How much of an effect do you think Brexit and the ensuing chaos and drama that came from Brexit affected the second half of this time of the Tories being in power and just generally affected this election? How big an effect do you think this had that it's scramble politics in a way that just was new? So we tend to think of a Brexit in terms of the economic effects, which while they've been large, export volumes are down, imports are still up, balance the trades in worse shape, et cetera, hasn't been catastrophic, right? So you can say there was no obvious Brexit bonus, but you can't say there was a Brexit collapse. But what Brexit did was to show that the country's not serious, that you can basically get caught up in these kind of political infighting memes. If only we were independent from the largest free trade zone in the world, we could have more access to free trade. That literally makes no sense, but that was the core of the argument. So then when you basically have a bunch of people who will do this to their own economy and there were real casualties, for example, the Scottish seafood industry was entirely dependent on refrigerated trucks, seamless transport and getting to continental Europe, that died overnight along with thousands of jobs in that industry. So there were real costs and what it showed in this sort of lack of seriousness is what you'll put politics and theater above the actual good of the economy. And that's when the rot starts to get in, because when you then double down on this with like, what we need is more migration restrictions. Now, maybe the United Kingdom does, maybe it doesn't, but there was no actual debate about this. It was just this insistence that we're going to send everyone who's not coming by normal channels to Rwanda. This for listeners who might have missed was a very real proposal put forth by the conservative government. It was passed by parliament earlier in 2024, although the plan has since been scrapped by the incoming labor government. This law would essentially have allowed the UK to deport migrants who entered the country illegally to Rwanda. In the years that it wound its way through the UK's government, the plan was widely criticized around the world as inhumane and just generally unfeasible. So this huge destruction with the Rwanda scheme, et cetera, then what actually happens is they figure out that their universities are close to bankruptcy. The close to bankruptcy, because they said to them, you can increase fees to 9,000 pounds a year, but beyond that, you're on their own. The university is anticipating endless Chinese students coming to the United Kingdom for the next 20 years, engaged in a series of massive projects of building houses, all those houses being student accommodations. And then the Chinese stopped coming, plus they got hit by Brexit, so all the balance sheets are knackered. At this point in time, the only way they keep things going is by importing foreign students. They didn't get Chinese, so they were still doing Americans. Then they started to do Indians, and they started to do Nigerians. Guess what? Two years after Brexit, you start to get higher net mongeration than you had prior to Brexit despite the conservatives promising that they're going to do something about it. And rather than focus on any of this stuff, because education is essentially the fourth or fifth biggest industry in the United Kingdom when you consider it as a service as an explorer. So when you consider you've got a strategic industry that's going down unless you do this, what you do is you start pointing the finger at all these little boats in the channel as a national crisis. And it's just more of this politics of theatre and destruction and self-harm. So Brexit's one part of that rather than the centre of it. You know, talking about Brexit in the context of all these other issues, some of which are really serious and some of which sound almost kind of preposterous or unserious. And then as well looking at the parade of conservative prime ministers, it all just made me think of a line I read from Sam Knight who covers politics in the UK for the New Yorker and American publication. He said, and I'm probably getting the exact wording wrong, but that covering the UK can sometimes feel like trying to remember and explain a very convoluted and ultimately boring dream. No, that's kind of brilliant. I think that's actually kind of brilliant. That's it. Yeah. There's a great phrase for this that Brits use, which is when things are bad, and it used to be good to know they're bad, which is a lot of things, whether it's the health service, whether it's a state of infrastructure, railroads, whatever, right? And they'll say, someone sent this to the Department of Making Things Crappier. Has this been to the department? I think we should re-send this to the Department of Making Things Crappier. And it's for many people, it seems as if the past sort of 14 years has just been an endless set of trips to the Department of Making Things Crappier. So I guess I wonder if you have thoughts about like, where is the energy and excitement in British politics? Does it exist? Is it in like smaller parties or more local movements like, or is it really all this kind of like, exasperated malaise? There is. And it's basically on the right and the reform party, in the sense of what you've got, there is a bunch of people who think rightly or wrongly, and I think that some of the things that they think are right are actually right, that you do have to a certain extent the classic populist critique, which doesn't mean it's wrong, that you have a political class, which is largely self-serving, absolutely true under the Tories, or means to be seen about labor. People who hand their contracts to the friends worth hundreds of millions of pounds during the pandemic, where nobody ever goes to jail for this stuff, self-serving, double dealing, they care more about stuff that's miles away from home than what's going on just now. And an absolute refusal amongst both parties to act, well, particularly the Labor Party, but to a certain extent the Conservatives will, to do something about that they care about, which are those voters care about, which is immigration. And what we mean by this is the distributive effects of immigration, because when you live in a top 20%, in London, and you live in a nice neighborhood, immigration to you means essentially lots of cosmopolitan restaurants to go to, and the people who are coming in, who are from vastly different backgrounds, with vastly different experiences, don't live near you because your house costs too much. And for everybody else who actually sees their local high splits, transformed, displaced, et cetera, and for them it's an uncomfortable feeling, you can't talk about that, because if you talk about that, you are a racist, right? And when you create that type of, nothing to live in I wrote about this years ago in a piece in Foreign Affairs, we call it a volatility constraint, that basically once you just push down on these things, and keep pushing down on it, and saying that you can't talk about things, when it finally explodes it's going to be much bigger than you think. And Brexit was one of those eruptions, right? And what you saw with the sort of the reaction against the consistent failure of the Tories has been one of those eruptions. If Labor doesn't do something serious, to change the trajectory, then this is when people like reform get the energy because they are saying these people will never solve your problems. They don't care. That's where the energy comes from. And the reform party is the party led by Nigel Farage. Nigel Farage. And like personally I wouldn't let Nigel Farage lead me to the pub, right? But what he's got and what he's got with him is a bunch of people who really have lost faith in the governing classes of the United Kingdom. And there's a lot of people in the public who share that opinion, and that can be channeled into a positive direction or be charged in a negative direction. So far it seems to be pretty negative. But the jury's out. And that's why that's where the interesting part of politics is. It's very similar to Trumpism, right? It's very easy to sit back and sort of poo poo the whole things and the other deplorables etc. And then you've got to ask yourself the question of the so deplorable and so stupid, why do they keep doing it? Maybe they don't believe you, maybe they think what you're doing is pretty deplorable because all you see, McKerriba, is guaranteeing your 501(c)(3) or your 403(b) plan or all the stuff that makes your nice upper and middle class livelihood possible. Meanwhile, they're just told to adjust. I want to talk more about Trump and Trumpism maybe a little bit later. But for now, let's just stick with Europe for a little bit more because I want to talk about the election that happened in France this summer, where President Macron held this snap election in June. And it was expected that the right-wing nationalist national rally party was going to do very well. They ended up doing worse than I think a lot of people expected. And this sort of left-led coalition ended up doing best, getting the plurality of seats. Do you see any parallels between the elections in France and the elections in the UK? Well, the elections in the UK, but I see the parallel with the elections that they used to have in Italy and that they still have in Germany, let me explain. What happened there was nobody likes Macron, nobody believes in Macron, he hasn't actually done that bad in fairness, but whatever, it's just messaging or he just doesn't really look good to most people or he looks too slick or whatever. But what he did was he created a kind of centrist populism when lots of parties collapsed around 2015, 2016. And he said, you know, I'm the radical senator. And he got a war support for that and it was a transformative agenda. And then they ran into what was called the G.E.A. Jean movement, right? This is the yellow jackets. The yellow jackets, or the yellow jacket protests or yellow vest protests, was a movement in France that started in 2018 in response to, among other things, a green tax that would increase the price of fuel. Many saw it as a proposal that would disproportionately affect the poor and working classes in France. Essentially, what it was originally meant to be was a tax on companies to decarbonize, they ended up being a tax on people because it's easier to push them around the nest to push around corporations. The yellow jackets, which got their name because they wore yellow high visibility vests while protesting, came from across the political spectrum and largely from the working classes and more rural parts of the country. So what those people were upset about was a classic example of sort of disconnect for the elites. The elites don't drive diesel cars into Paris. The elites live in Paris. The people who service them are the ones that live in the barbs in half to basically pay this tax that they put on diesel. It added to the sense that Macron's radical center was out of touch with much of his country. And it all blew up on his face and he never really recovered from that. So this snap election was basically the right kept getting more and more powerful. He said, "Right fine. You deal with it. Have your fantasy. Go and vote for that. See what happens." He's kind of threw his toys out of the prom to a certain extent. Now what happens, and this is what happened the last time in France, what happens in Germany, is essentially the Germans call this a grand coalition because they've got their right wing party called the AFD and nobody touches them. And what happens here is you've got the left sort of coalition, all of which who hate each other, basically come together and then vote tactically with the center to keep out the right. Here's the problem with that. You're basically saying to one third of the population, 34%, your votes don't count. Your voice is illegitimate. You will never be represented. We will block. But you're not creating. You're not offering. You're not transforming. You're just blocking. When democracy becomes nothing more than a blocking coalition, that's when it's in trouble. Why worry about Germany, I worry about France much more than I worry about the United Kingdom and even the United States. So as we start to wrap up, I want to turn to the U.S. a little bit, which will of course be having its own election in November where right wing populism is very much on the ballot. But you know, four years ago, a center left leader defeated a right wing populist in the United States. And I wonder if there's anything that countries like France and the UK today can learn from how the Biden administration has or has not attempted to address the anger and frustration and inequality that can drive right wing populist movements. So let's think about what Biden actually did. His signature achievement was the inflation reduction act, which was originally billed back better, which would have been even bigger and bolder. And what was that? That was the recognition among certain parts of the Democratic Party that the strategy of essentially endless globalism and corporate welfare was ultimately going to cost them their existence as a party. And there was only so many coalitions of suburban women and African Americans you can put together on a regular basis and when the material basis is falling out of the working class. So billed back better, especially, but laterally, the inflation reduction act is in the sense that an attempt to re-industrialize the United States. And what you're doing there is you're basically trying to give people a stake in the game that they feel they no longer have and give them jobs and employment that actually has a future, et cetera, et cetera. Now let's, you know, take Biden out of the equation. Let's assume that the Democrats win the next time. Let's assume that Harris continues those policies. Is that going to work? Well, it's not clear that this is a sustainable strategy on its own, but it is something they're trying to do. Those countries don't have that option, right? They don't have the dollar. They don't have the global reserve asset. They can't just do unlimited sort of tax credits, the bribe companies from all over the world. The fact that loads of European companies and Korean companies have come to the United States to take advantage of these credits and to build here, France can't do the reverse, right? It's just not going to happen. So it's limited in what the response is. And if you think about the world over the past 30 years, yes, it's generated tremendous wealth and prosperity on a global basis. But in the core OECD countries, it has created basically a lack of public investment, a rundown of public services, a rise in inequality, a rise in what sociologists call precarious work, which is extremely stressful, which basically impacts on family structures, fertility and a whole host of things, which, you know, we are sort of, you know, this is the sending things to the department to make things crap here, right? So if you're the US and you want to do something about that, you can probably give it a shot. It's not clear it's going to work. Everybody else, I'm not quite sure what you do. Now that's not a council of despair, because I could actually tell you lots of things you could do that would be pretty easy. You could build citizens wealth funds. You could actually enforce taxes on corporations as lots of things you could do, right? You could build houses. They're with houses. You get skills with skills. You get jobs, all this sort of stuff. You don't don't build chip factories, they'll be far too expensive. Just build houses with eight fuck that are green and therefore you train people to be electricians, right? It's pretty straightforward stuff. But that's sort of not the way the conversation is structured. The conversation is now structured about we need to capture the gains from AI, spoiler alert. We've been through this before. It was called the blockchain revolution. Yeah. So anyway, you know, we keep chasing profits in banking done while the country gets more and more unequal and the people who are not banking those profits get more and more angry. It's not a great mix. The examples I feel like you were just kind of throwing out feels so straightforward and simple. Build houses with HVAT, train people in skills and building things. Are people talking like that to go back to the UK in the labor party these days? Yeah, they are. But here's the problem. Let's put this in the US context because we live here and this is what we're familiar with, right? Where do we get skilled labor from in the United States? A lot of other countries. Yes. And number one, number two, what exactly are our labor training institutions? Universities. Okay. So that's for the people who can basically wall up themselves with $100,000 of debts. Yeah. And then you get a job whereby pretty much a lot of the stuff you did in the university unless you're in a technical field, doesn't really apply and you get on the job training. The fastest growing job in the United States by volume is elder kernus. Right. Right. That's a good example of that. Right. So where do you get elder kernus is from? They're broad. They're called immigrants. We don't like immigrants anymore. You can see where I'm going with this, right? We have a huge labor skills mismatch problem. We train people to do things that they're never actually don't need to do in the job. Even when you get a job in finance, they're like, can you count? Can you count? Do you know what a spreadsheet is? Right. We will take it from there. Right. You're not learning this in university. Right. So what are the training institutions that do HVAC, electricians, so on and so forth? We allowed them to atrophy and a huge part of that used to be a feeder complex that went from the military to sort of technical colleges and then out into manufacturing. We sent the manufacturing abroad, we let the technical colleges die and we still got the army. So that's your skill supply. Now, you want to build a chip factory in the middle of Kansas. Where do you get the labor from? It doesn't exist. Right. But these, once you outsource everything and insource your labor, when those constraints are suddenly back on and you have to do it yourself, suddenly you realize what you've done. And getting out of that is a multi-year process. But it's not impossible. Right. The logic behind Build Back Better, although or inflation reduction, I personally, I think we should just let China make all the green tech that we want and encourage them to actually consume more of it themselves. So there's not a glut in the market and over supply. People in America trying to make solar panels with a polysilicon, they're going to get from China anyway, literally makes no sense. Right. But should we be training people? Oh, yeah. Because the great thing about training is it's kind of multi-option. You might be trained as an electrician to do X, but then you can be an electrician in Y and Z, right? Same with plumbing. I think everyone thinks plumbing is like getting the bad stuff out of your house. No, it's not. It's hydraulic engineering. It's a whole bunch of things, right? So there's loads of things that we can't do and it's not that difficult to do, we just really need to actually have a better imaginary about how to do these things. We've got the resources. We've got the people. Let's make it happen. And for countries that maybe don't have the options of the United States for whatever reason, like the UK or France, can that type of investment and training be a path forward for those countries or they need to do something else? One of the attractions of de-globalization is the notion that it strengthens the national economy. So let's go back to a world in the '96 days whereby you had countries that basically made the same things as each other, traded a little bit with each other, but consumed a lot of the stuff they made themselves. So the Brits made cars, the Swedes made cars for Swedes and others and occasionally sold them to Germans, that sort of thing, right? When you live in that economy, London is important, but so is Birmingham and so is Manchester. And then when you internationalize and globalize, what happens is London becomes super important and specialized in finance. And then Paris becomes more important to London than Manchester. And Birmingham, once it stops doing manufacturing, is a big city that doesn't really have that much going on. So unless you're going to basically re-industrialize in some kind of project, they shift into low productivity services, you get this big productivity differential across the cities and then people move to London. More people move to London, more wealth, more energy, more talent, more entrepreneurship was in London. And at that point, London and LA have more in common or London and New York have more in common than New York and LA have with their regional cities, right? So when you think of it in this kind of spatial geography of wealth terms, the world that we've created, a global world has loads of upsides, particularly if you're able to take advantage of it. But the number of people who are unable to take advantage of that actually outweighs those who are able to. And you can say, ah, but they get cheaper goods than Walmart, yeah, but they also have much crappier wages to buy them. Whenever you build a system, which is like extremely sort of complex as we have, then you know, accidents happen, or years ago, a sociologist called these things normal accidents. It's just a question of time until they happen, given the nature of the system. And you know, when you push wages down in core countries, eventually people are going to bite back, right? When you stall productivity growth and wages stagnate, there's going to be a consequence. The job of politicians is to then be engineers, first identify the problem, second figure out the parameters, third fix it. And what we've had is people who over the past 20 years think that the job is to show up and manage success. And now we're not in that world, so you need a different type of politics. And what you get with the energy of the right is at least a recognition, even if it's a misrecognition of some of these problems. And the really dangerous version of this is when you get complacency in the center. And all they can do is say, no, we need to keep these people out, thereby deeming a third of their own citizens illegitimate in their own voice. That's where you want to avoid. Mark Blythe, thank you so much for coming back on to trending globally. That is my pleasure. This episode was produced by me, Dan Richards, and Zach Hirsch. Our theme music is by Henry Bloomfield, additional music by the Blue Dot Sessions. If you liked this episode, you should definitely subscribe to the Rhodes Center podcast. It's hosted by Mark Blythe, and on each episode he explores some of the biggest and most important questions in the world's political economy and international finance with the world's leading experts. And if you haven't subscribed to our show, please do that too. If you have any questions, comments, or ideas for guests or topics for us, send us an email at trending globally at brown dot edu. Again, that's all one word trending globally at brown dot edu. We'll be back in two weeks with another episode of Trending Globally. Thanks for listening. [MUSIC] [BLANK_AUDIO]
