US Vice President Harris presumed that, as positive GDP, inflation and stock market trends reflected broadly improving living standards, she could become president by exploiting identity politics.
As former president Trump better appreciated the disconnects between capital market metrics and the living standards of ordinary Americans, millions of non-college-educated young adults, particularly men, abandoned the Democratic party. Our government of national unity (GNU) is similarly vulnerable.
The take-away from the US election most relevant here is that household economics trump identity politics. Most of our young adults are poor, poorly educated and unemployed. Those that haven’t developed skills and work experience by their mid-twenties probably never will. More than half of our 20-somethings are on this trajectory.
The range of plausible political scenarios between now and late 2029 is troublingly wide. The best we can realistically hope for is that five years from now a less electorally successful and more pragmatic ANC will be in a coalition with a more economically savvy DA. Yet the risk is that the two leading parties in the GNU will both be punished by voters.
That our coalition government hasn’t transcended from promoting investment-led growth was disturbing prior to the Democrats taking a proper drubbing in the US elections. Whether reviewing forecasts of the IMF, World Bank, asset managers or those presented recently by the Treasury, our per capita income growth over the next few years will be nearly nil.
The ANC has prioritised avoiding rampant inflation and preventing a credit crisis. Instead, its policies have entrenched the world’s most severe youth unemployment crisis. This explains why voters have identified jobs as their top priority. US Democrats sought to counter surveys identifying inflation and migration as top concerns by boasting about their economic accomplishments and how they would manage the flood of illegal immigrants through speeding their path to citizenship. The constant vilifying of Trump could not offset such tone-deaf campaigning. That our political elites downplay unemployment is similarly risky.
Class warfare
To a surprising degree, class warfare displaced identity politics in the US election. Trump fared significantly better than expected with those earning under $100,000 per year while Harris did well with the affluent − particularly with extremely wealthy campaign donors. Trump’s success with blacks and Hispanics is a blow to the identity politics whose relevance relies on emphasising historical injustices perpetrated against ethnic groups.
The Trump team understood the risks Democrats were taking in assuming women and people of colour would instinctively vote for a woman of colour instead of an old white guy. In the US and elsewhere, the two groups that have benefited disproportionately in recent decades have been women, half the population, and college graduates. Many people need look no further than the diverse paths taken by family members to appreciate that such gains mostly trace to individual initiative. The other key factor has been the US’s macro transformation from being an industrial-focused economy toward emphasising services and digital possibilities.
While Democrats and their many media allies have hyped oppression narratives to politically charge ethnic divides, the economic relevance of such divisions has steadily declined. The ongoing modernisation of the US’s economy has sharply reset that country’s distribution of incomes at the expense of blue-collar workers irrespective of ethnicity. This created an opportunity to realign the loyalties of millions of ethnically diverse voters who shared similar economic interests. Whatever one thinks about Trump’s personality or policies, his ability to connect across ethnic divides to attract low-wage earners to the Republican party is impressive.
The parallel challenge for our GNU parties is to appeal to our many millions of idled would-be workers. This requires a plan supported by a well-informed vision. Trump’s focus on commercial realities provides much needed clues.
Replacing the dollar
People who hyperventilate about BRICS countries replacing the dollar or the US’s purchasing power tend to think their value judgments are relevant. The reality is that only the US consistently runs massive trade deficits and this has the effect of exporting millions of jobs. Other major economies run much smaller trade deficits which are often dominated by commodity imports such as oil, gas or coal. Exporting such commodities tends to be vastly less effective at creating jobs than value-added exporting.
Given how our economy is structured, if our commodity exports were to surge, few jobs would be created. Rather, the government would have more capacity to fund grants.
Autos dominate our value-added exports to the US but this sector is heavily distorted by regulations to create high-paying union jobs. We don’t really try to increase value-added exports despite it being the only path to meaningfully spur job creation. Our per-person purchasing power in 2030 will have changed little from 2010.
South Africa isn’t particularly vulnerable to Trump using tariffs to advance America’s interests as our value-added exporting is so modest. Then again, the fact that our political elites don’t want to meaningfully pursue value-added exporting opportunities explains both our economic stagnation and our ultra-elevated unemployment. This tempts profound political consequences.
[Image: https://www.flickr.com/photos/governmentza/9181659327/in/photostream/]
The views of the writer are not necessarily the views of the Daily Friend or the IRR.
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