Mr Brightside: Darklands 

 

“And I awake from dreams 

To a scary world of screams” 

 

And so the seemingly unthinkable has happened, Trump is back in the White House, and for the hard-right everywhere this is a benchmark event. 

 
There will be numerous bouts of soul searching as to why and how he won. Most will be in greater depth and by far more learned commentators. 

My view is that, as much as I am surprised by the result, it sums up the political era we are in. As in the UK we are seeing unpredictable elections. 

Johnson in 2019 won a victory far in excess of expectations, mainly because traditional Labour voters had lost the faith and wanted change. In 2024, that vote returned to Labour as the hoped for change hadn’t materialised, enabling them to win a far bigger than expected victory. 

The pattern is much the same in the US, bouncing from pillar to post since 2008; we have had two-terms of the Democrats under Obama, the one turn of the Republicans under Trump, then back to the Democrats under Biden, and now back to Trump. 
 

‘voters aren’t getting what they expected, therefore they vote for change’

 
The message is clear voters aren’t getting what they expected, therefore they vote for change. 

This helps explain how Trump won, but what of the why? 

Much is made of Trumps racism, and he is clearly a racist. And, whilst I readily accept that a minority of the US electorate are also racists, that is too simple an explanation.  

The cause has been long in the making, 45-yrs to be exact.  From 1980 onward we have seen governments of all creeds base their economic planning on neoliberalism, supply-side economics. What happened? Small state, lower taxes, and the market decided that traditional industry in established economies were inefficient in the face of globalism. 

As a result we have massive inequality, the UK and US are the two most unequal economies in the OECD, and towns have become ghost towns; Detroit no longer dominates the car industry, and the same is the case with Sheffield and steel, 
 

‘the UK and US are the two most unequal economies in the OECD, and towns have become ghost towns

 
This has been a constant theme in my articles, as has been the warning that the failure to deal with this would open the door to right-wing extremists. Most recently this featured in “ Left Behind, Inequality, and Why it Matters part 2”. 

Economic reality for voters is simple, do they feel wealthy, better off than before? The answer is binary; yes or no. 

Since 1980 the answer has, for the majority, become more and more, no. For the few, it is clearly yes.   

In theory, in the US, the answer, looking a traditional measures should be yes and yes. As Mark Zandi, the respected chief economist at Moody’s, recently wrote “But … there is no denying it: this is among the best performing economies in my 35+ years as an economist.” Growth: up. Jobs: up. Wages: rising. The value of your home: up. Share prices: booming. Inflation: falling. Borrowing rates: dropping.” 

Yet, today, even as economic powerhouses such as Germany and Japan face recession, magazines toast the US economy’s “superstar status”. Yet, still most Americans don’t feel better off. 
 

‘as Germany and Japan face recession, magazines toast the US economy’s “superstar status”. Yet, still most Americans don’t feel better off’

 
And the numbers confirm this; for teachers, clerical workers, sales reps and the great bulk of US employees, whether white or blue collar, wages have flatlined for most of the past half century. Strip out inflation and average hourly earnings for 70% of 10 US employees have barely risen since Richard Nixon was in the White House. 

During his term as president, Biden has spent trillions on boosting the economy and adapting to the climate crisis, and has supported unions and intervened in strikes. To date, this has produced little impact, Americans are better off than they were four years ago, it’s just that so many were in distress in 2020. 

Looking back we can see the milestones; Reagan destroyed the unions, shrunk the state and reduced taxes; Clinton threw open their trade barriers, Bush Jr dispatched their kids to fight and die abroad, Barack Obama bailed out Wall Street and Trump ran a glorified protection racket.  

Only in 2020 did real wages for “production and non-supervisory employees” rise above where they were in 1973. This was not because they were unproductive: the US economy continues to do more with less almost every year. It’s just that most of the gains from that have gone to the top. 
 

‘the US economy continues to do more with less almost every year. It’s just that most of the gains from that have gone to the top’

 
This confirms what I have been thinking for a while; the traditional measures of economic success give a false picture. The level of stockmarket, and GDP growth mean little to Main St. 

What measure should we use?  

Well, there is unemployment, but that can be misleading. For example,, there is the “gig economy” where people have jobs but with zero hours, which has the effect of taking them off unemployment numbers but with no clear economic benefit to the worker. 

Then, there is inflation. It isn’t rocket science to say that rising prices impact most on those who have the least. As such, this a key indicator and may have been a big influence on the Democrats failing to convince Main St. 

Last, and from left-field is the GINI Coefficient, the measure of inequality. This, for the majority, is their GDP.   

What might Trump mean for the US economy? 

Well, his tariff and immigration policies are seen as inflationary by analysts, which should see a strong dollar. 

But, as I have already said, Inflation has a greater impact on the have nots. Traditionally, high inflation has meant higher interest rates, and there are already concerns that this will force the Fed to scrap plans to cut interest rates which again impacts the have not, and benefits the have’s.  

James Knightley, the chief international economist at ING, said lower taxes after a Trump victory should boost consumer and business sentiment and lift spending in the near term. 
 

‘promised tariffs, immigration controls and higher borrowing costs will increasingly become headwinds through his presidential term’

 
“However, promised tariffs, immigration controls and higher borrowing costs will increasingly become headwinds through his presidential term,” he said. 

This is the great irony, Trump isn’t change he’s more of the same; small state and low taxes. If there is a change it is tariffs. Main St won’t benefit, the vast majority of the gains will remain with the haves. 

This is the same president who, in his first term, did much to impoverish working-class families, with cuts that favoured the top-1% (those earning > $837,800 in 2017) and cost the US treasury money that could have been spent on social services that could have helped his voters, from trainings for trade schools to affordable housing, as rental costs surge and home ownership has become historically unattainable. 

There are, of course, other issue at play here, such as the anger of his largely white, male base. They are very different to billionaires such as Trump, but who have felt their social and financial status threatened by some “other”, whether real or imagined. Trump and his Republican party have long tapped into that resentment. Exit polls suggest that he attracted 54% of male voters – 10 points higher than among women. 

All Trump has done is to plug into people’s discontent, sell himself as someone who understands and represents them, and throw the rabid dog some red meat; immigrants! 
 

‘plug into people’s discontent, sell himself as someone who understands and represents them, and throw the rabid dog some red meat; immigrants!’ 

 
This is Germany 90-yrs on. 

Turning back to the domestic economy, The National Institute of Economic and Social Research (NIESR) is predicting  that Trump’s victory could see UK growth halved, should he, as promised, impose swingeing new tariffs, which would result in weaker activity, rising inflation and higher interest rates from the Bank of England. 

Ahmet Kaya, a NIESR economist, said that, were Trump to go ahead with a 60% tariff on Chinese goods and a 10% tariff on goods from all other countries, the resulting trade war would lower UK growth by 0.7 percentage points and 0.5 percentage points in the first two years. 

Kaya said. NIESR has estimated that over two years the UK inflation rate would be 3-4 points higher while interest rates would be 2-3 points higher. 

In the absence of the Trump tariffs, NIESR forecasts the UK will grow by 1.2% in 2025 and by 1.4% in 2026, inflation settling at close to the government’s 2% target, and official interest rates falling from their current level of 5% to 3.25%. 

Should there be tit-for-tat tariffs, US growth would be reduced by about 1.3% to 1.8% in the first two years of the tariffs coming into force, depending on whether they prompted retaliation. 
 

‘It is no secret that Nigel Farage, the Reform leader, is a fan of Trump, and not only will he welcome his victory he will see it as precursor for what can be achieved’

 
Stephen Millard, NIESR’s deputy director for macroeconomic modelling and forecasting, said the boost to public infrastructure spending announced by Rachel Reeves would only make good the cuts announced by the previous government. 

Millar said; “Last week’s landmark budget – the first by a Labour chancellor in 14 years – will boost demand over the next couple of years, implying higher GDP growth and inflation, as well as slow down the fall in interest rates. And the rise in the employer rate of national insurance contributions will act to reduce job creation over the coming years, which will lead to greater unemployment.” 

But they also found that Main St was, once again, negatively impacted as the freeze on income tax allowances and thresholds in place until April 2028 would cost the poorest 15% of households £600 a year in extra tax. 

It is no secret that Nigel Farage, the Reform leader, is a fan of Trump, and not only will he welcome his victory he will see it as precursor for what can be achieved.  
 

“There are going to be mass layoffs, whole departments closing and I’m hoping and praying that’s the blueprint for what we then do on our side of the pond”

 
Farage is also a fan of Trump bringing in Elon Musk to make big cuts to US spending, which Farage was quoted as admiring, saying: “This is the sexy bit: Elon comes in and takes a knife to the deep state. Just like when he bought Twitter he sacked 80% of the staff,” Farage said. “There are going to be mass layoffs, whole departments closing and I’m hoping and praying that’s the blueprint for what we then do on our side of the pond. 

“Because that’s what Reform UK believes in – that we’re overbureaucratised and none of it works. This assault on the bureaucratic state is the thing that’s really exciting.” 

For the avoidance of doubt, Musk has said that ordinary Americans would face “temporary hardship” as welfare programmes are slashed in order to restructure the economy, but they should embrace the pain, as “it will ensure long-term prosperity”.  

The challenge for Labour is to stop this being repeated in the UK. 

I remain neutral/underwhelmed by last week’s budget. It doesn’t feel radical enough to usher in change, more a continuities with failed Tory ideas and policies that haven’t worked. 

This increase in public spending were inevitable, given the past austerity and previously planned cuts. Had Labour not committed to raising spending we would have seen increasing NHS waiting lists, schools with fewer teachers, and public investment falling to only 1.7% of GDP. An already dysfunctional state would not see supposed productivity gains, but would instead cease functioning.  
 

‘the events of last evening shows what can happen; say hello to PM Farage!’ 

 
When the government had to make choices the still appear to be Torylite, E.G., cutting the winter fuel allowance, maintaining the two-child limit, and raising the cost of many bus fares while continuing to cut taxes on motoring. As a result spending on public services still lags behind where New Labour left it in 2010, Priorities seem skewed by events, E.G., spending £1.2bn on new prison places in 2025 and 2026, compared with £1.4bn on school buildings.  

Disappointingly, give the scale of their electoral mandate, Labour had the opportunity to create a fairer and more progressive tax system. Instead they ruled out increasing income tax, the major progressive tax, and barely exploited the redistributive opportunities offered by increasing capital gains and inheritance taxes. 

As a result rentiers have, as always, remained unscathed, whilst employers and workers have been hit hard. Raising employers’ NIC is an indirect tax on working people. This was done in preference to increasing corporation tax which would have impacted profits and shareholder dividends. 

Writing in the FT, Starmer said his party was about growth, not tax and spend: it was the party of business, reform, modern supply-side policies, of world-leading innovation, entrepreneurship, risk-taking and artificial intelligence. And the key policy? Financial stability and getting rid of “overweening regulators and a dysfunctional planning regime”; “[rooting] out the bureaucracy that stifles growth” to attract foreign investment to this liberalised nirvana.  
 

‘UKIB plan for massive support for carbon capture and storage, which directly benefits oil and gas companies’

 
In other words, a continuation of the failures since 1980. Yes, we now have a sovereign wealth fund, sadly it’s little more than a slightly improved version of the Conservatives’ UK Infrastructure Bank (UKIB). The UKIB plan for massive support for carbon capture and storage, which directly benefits oil and gas companies, was not only continued but trumpeted as a major feature of Labour’s investment programme. Labour will also continue to subsidise North Sea oil and gas investment.  

Labour is, or at least it was, all about transforming the economy and society, and of increasing equality. As I wrote earlier I no longer see GDP as a benchmark that benefits the majority, they want to feel better off, if the last 45-yrs of neoliberalism haven’t delivered that, there is no reason to expect anything different now.  

Labour has 5-yrs and a massive majority to deliver change. If they don’t the events of last evening shows what can happen; say hello to PM Farage! 
 

“So what now? Do we shake hands 

And go on our separate ways? 

Or do I open my mind 

And bump you into the haze?” 

 
German newspaper Die Zeit didn’t leave anyone wondering; it’s headline announcing Trump’s incredible victory, just read ‘Fuck’. Well, quite.

And what happened to ‘too close to call’? Whether Trump won it, or the Democrats lost it will be debated long and hard, but it is difficult not to be slightly in awe of the achievement.

And how do you reckon Mother Earth is feeling just now?

Philip delivers an excellent summary of events, but leaves us with a warning of a potenial threat that feels more credible, yet more unpalatable by the day. Fuck.

‘It appears that lightning does strike twice.

Trump is back. The thrice-married New Yorker, found liable for sexual abuse, an unlikely hero of evangelical Christians and the white working class, and polling suggested that he gained small but significant traction among African American and Latino voters. 

Four criminal cases – including a conviction on 34 felony counts over concealing hush-money payments to the adult film performer Stormy Daniels – would have been devastating to any other politician but only appeared to strengthen Trump’s standing with his “Make America Great Again” (Maga) base.

Why? Because it reminds voters of themselves. White males can feel better about themselves knowing they are on a moral par with the president.

There is talk of women becoming second class citizens but the great white male won’t care about that, most don’t like women anyway. That doesn’t imply they are gay, just that they don’t like women, they don’t see them as being on a par, despite the fact that the majority couldn’t survive without their wife’s salary cheque.

Will they be better off under Trump? Not a hope. The rich will get richer whilst the poor will stay just that, although their numbers might increase.

The lesson our government must learn is that people care about their own finances, GDP, FTSE, it’s all just noise.

Spare a thought for Ukrainians, they have fought heroically for several years, and will now have the rug pulled from under there feet by someone thousands of miles away.

But nothing is forever. Provided Trump resists doing away with democratic elections, we go again in 4-years’ time, and in the interim I hope Americans can overcome their differences.

Lyrically, we open with the Jesus and Mary Chain and “Darklands”. Selected because of the apt title, and a band name that will hopefully offend the religious right. We finish with Minor Threat and “Betray”, one of the hardcore bands who so hated Reagan.

Enjoy! Philip.

 
@coldwarsteve
 

Philip Gilbert is a city-based corporate financier, and former investment banker.

Philip is a great believer in meritocracy, and in the belief that if you want something enough you can make it happen. These beliefs were formed in his formative years, of the late 1970s and 80s

 

Click on the link to see all Brexit Bulletins: