Friday, November 11, 2016

What just happened on Nov 8th?

Nov 8th happened to prove one of the classic maxims of politics to be true : "You don't declare a winner until all the votes are counted". The underlying reasons for this seismic shock were there all along but I didn't believe that enough people who held Trump's view of the current state of affairs will come out to vote. Digging deeper into the election results, in hindsight it is easy to be a Monday Morning QuarterBack Wednesday morning Quarterback saying that the signs for this were visible all along & no one connected the dots causing it to be missed by everyone. 
As with any shocking result like this there is more than just a single reason to describe the outcome that we just had on this past Tuesday.


1. NUMBERS GAME

 Trump will win the presidency by winning lesser number of votes (~60 million as of today) than Romney's 60.9 million [who was soundly beaten in 2012] & very close to McCain's 59.9 million [who was routed in 2008 in the electoral college]. Over the same period Democratic numbers have consistently trended down from 69.4 in 2008 to 65.9 in 2012 to 60.4  million in 2016. This ~5 million reduction of the vote total for Hillary (vs Obama in 2012) will be studied for years to come by political scientists as to where the missing voters from past elections went. With the increase in voting population every 4 years this is not the trend you want to be on. The question now asked by political experts & pollsters is that were the higher numbers for Democrats in past 2 cycles solely due to Obama & will it be replicable moving forward?.i.e. Is the Obama coalition transferable to future Democratic candidates?
Looking at the numbers even though Trump won comfortably in the electoral college, Hillary won the popular vote by 1% which was just 2% different from the foretasted +3%. To emphasize the quirkiness of the electoral college vs popular vote, Nate Silver has a great FiveThirtyEight piece on what would have happened if just 1% of the vote shifted to Clinton, where the electoral map would have basically flipped in favor of Clinton emphasizing the super closeness of this race.
Coming to the electoral college, 3 states which made ultimately the difference in the end were Pennsylvania, Michigan & Wisconsin which hadn't gone for a Republican since the 1980's in the heyday of the Reagan & Bush Sr. years. Clinton lost Michigan by just 13,000 votes, Wisconsin by 27,000 votes & Pennsylvania by about 68,000 votes, a grand total of 108,000 votes. Putting it in a different way if just 54,000 people of these Trump voters would have voted for Democrats (out of approx. 125+ million nationally) or if 110,000 more voters had voted for Democrats, the election result would have been vastly different & we would have been talking today about a comfortable win for Democrats. These are the razor thin margins that elections are won & lost by!
Trump according to the exist poll data won the white voters without college degree by an astonishing 39% which was a margin last seen in 84 when Reagan won a landslide against Walter Mondale. With his issues on women & Hillary being the 1st major female nominee she was supposed to do very well with women. However in the end his support among women was bad but it didn't crater as expected. These shifts plus the slightly lower turnouts among minorities lowered Hillary's chances of winning.
Trump earlier in the campaign was criticized for campaigning in rural America where there weren't that many voters to begin with & most of them were voting Republican anyways. In the end it proved the master stroke as he simply ran up the numbers in smaller rural counties to offset the expected losses in the cities. The image below for Pennsylvania is one of these examples which shows how the Democratic vote % which was either constant or little lower in the urban areas got overcome with huge increases in Republican vote% in multiple rural counties negating the big advantage Democrats had in the cities & statewide.


Another number to keep in mind is 1: Number of times the same party has won the White House 3 times in a row since the dying days of World War 2. (Reagan 80, 84 & Bush 88). Incumbency does set in after 8 years as it does in most parts of the world. People crave for change after few years & as we now know change was a big theme in this election cycle.


2. HILLARY'S ISSUES

Hillary did tout herself as the most prepared candidate for the highest office in the land. But the electorate wanted someone new who was not a career politician. In this climate of craving for change she was the wrong candidate for this cycle. Her unpopularity remained constantly high even when Trump was self destructing. Her email issue whatever you think it was never handled properly from day one & kept festering on till election day eroding her trust among the electorate. Among the rural working class whites who had enough of the Washington elites her long record of being in Washington plus these trust issues made them feel that she was the embodiment of what was wrong with the country irrespective of the fact that if she alone was responsible for all the ills facing them or not. She could never gain the confidence of  enough of the rural white working class voters to put her over the top in Rust Belt states that she narrowly lost. Hindsight is 20/20 but the warning signs were all there with the shock upset victory of Sanders in Michigan & later in Wisconsin in the Democratic primaries. As J.D. Vance of the N.Y. Times bestseller Hillbilly Elegy told Chuck Todd that based on his interactions with many folks he had in the Rust Belt where he grew up, he said that this was more of a anti-Hillary vote than a pro-Trump vote. Many of them knew that Trump wouldn't be able to fulfill many of his promises but they knew that Trump was at least seen trying to change things.
Many people now believe that Sanders would have carried these Rust Belt states on his way to the presidency. I think that the 100+K vote margin that I talked about in the 3 Rust belt states would have been overcome if someone like Sanders was the candidate. Democratic party establishment will now have to shoulder some of the blame of being too cozy with the Clinton's helping her win the nomination at expense of Sanders.


That brings me to my last 2 factors which you probably have not heard of:  MORAL LICENSING & NEOLIBERALISM.


3. MORAL LICENSING

I came across this fascinating term this summer listening to one of favorite authors: Malcolm Gladwell. By definition moral licensing Malcolm says is a new social psychology concept that basically says that "Past good deeds can liberate individuals to engage in behaviors that are immoral, unethical or otherwise problematic, behaviors that they would otherwise avoid for the fear of feeling or appearing immoral. When we do something good then sometimes we give ourselves permission to do something bad". As a simple example one might think the following : Since I went to the gym today, I can eat unhealthy fast food.
Barack Obama got elected twice with support from not just minorities but also a significant % of white men & women. In theory one would think that since Obama was elected it would allow his supporters to be in future to be more open minded, express non biased opinions & elect more non traditional candidates. But as per a study by Daniel Effron the opposite was true. Since they voted for Obama these people feel like they had shown already that they were not biased, giving them a license to subsequently express racially prejudicial views & not vote for anyone who is different. Gladwell also describes this "tokenism" phenomenon which says that when a favored group, a majority group, does an act of generosity towards an outsider, it doesn’t necessarily signal that more acts of generosity are coming, sometimes it just gives them license to then go back to their old ways. So the thing that perpetuates prejudice is acts of openness.
Basically since we had 8 years of black president certain part of the population consciously or subconsciously are wanting to go back to the male white candidate that they grown accustomed to. Gladwell asserted that support for Donald Trump was at least partially driven by an anti-black racial backlash against the first black president. I believe that even though Hillary is not black but just because she is female, disqualifies her in their eye. They want to return to the original status quo/tradition of electing a while male for presidency as it was done for over 200 years till 2008.


4. NEOLIBERALISM/POPULISM

I believe this is the most important factor in understanding why the events that happened on Nov 8th occurred. 
Neoliberalism refers primarily to ideas associated with laissez-faire economic liberalism. These include economic liberalization policies such as privatization, deregulation, free trade, and reductions in government spending in order to enhance the role of the private sector in the economy.
An excellent book on how this neoliberalism caused populism to rise today is the The Populist Explosion: How the Great Recession Transformed American and European Politics by John Judas. It is a must read for anyone who wants to study the origins & history of populism in the Western world. Much of what I describe below is derived from it.

HISTORY OF NEOLIBERALISM IN US 
Origins of neoliberalism in the modern US history can be traced back to 1970's when after couple of decades of prosperity post World War 2, business started facing competition from Japan & Western Europe who had rebuilt their industries post war. Facing issues the business created think tanks, policy groups & lobbying entities to promote tax cuts and the repeal or weakening of regulations. Democrats initially had skepticism about these policies but faced with inflation & rising unemployment gave in to these deals promoted mostly by the Republicans who were advocates of free trade & supply side economics. Over the years both parties would accept other key aspects of the neoliberal agenda, including trade pacts like NAFTA , deregulation of finance, and immigration measures to accommodate unskilled and highly skilled guest workers. The key contention that sustained the neoliberal agenda was that the older New Deal liberalism, by focusing on raising consumer demand and reducing inequality, would stifle growth and reduce Americans’ standard of living. By contrast, the neoliberal and supply-side agenda, while not directly confronting economic inequality, promised to spur economic growth, which would benefit all Americans. By the 1980's this created a “dual economy” composed of a high-wage FTE (finance, technology and electronics) sector and a low-wage one of semi-skilled and unskilled workers in a shrinking middle-income group of manufacturing and white-collar jobs fueling discontent among the blue collar workers. However with the economy booming during the 90's plus the incomes rising the issues seemed to have been swept under the rug for the time being. Recession after 9/11 was  blamed on the war & the dot-com excesses & not the neoliberal policies.During the Great Recession of 2007 the financial deregulation policies passed both under Democratic & Republican administrations came back to hurt everyday older middle class Americans hard who now saw their savings dwindle & incomes reduce. Obama administration didn't prosecute any of the bankers while bailing out the banks. The stimulus package spending was interpreted by some as runaway spending helping the fat cat bankers & not everyday Americans. Obamacare which passed a few years later was seen by white working class folks interpreted as more government intervention in their lives. 
During the Great Depression (1930's), unemployment climbed as high as 25 percent, and threatened the middle as well as the lower classes. During the Great Recession (2008), most Americans enjoyed the protections (Social Security & MediCare) created by the New Deal after Depression. They didn’t have to fear actual starvation, homelessness, and having their savings wiped out in a bank crash. The recession far less affected the older, white middle classes, who formed the base of the Tea Party movement than it did the lower classes. During the Great Recession, the middle class, lost some income but the unemployment rates were far higher for those with only a high school education or less than for those with some college or a bachelor’s degree. That created a situation in which what parts of the middle class feared most was having to subsidize through higher taxes or healthcare premiums those in the lower classes or illegal and recent legal immigrants. It encouraged a right-wing rather than a left-wing response to the Great Recession.

POPULISM 

This phenomenon of populism is not only seen in US with Donald Trump (& to an extent with Bernie Sanders) but also seen in Europe where both right wing & left wing populism have captured the imagination of a part of the electorate. Main difference between which takes hold in a country as described by John Judas in the book as the following. 
When the "bottom falls out" causing very high unemployment (similar to Depression like levels) both the lower & middle classes fall into poverty like it did in Greece left wing populism takes hold. Here the people want more benefits from government as a safety net, more taxes on the wealthy to redistribute wealth & anti capitalist measures to rein in the wealthy from becoming more richer. But when there is a Recession where the economy is doing bad but nowhere near Depression levels, the lower class will fall into poverty while the middle class is doing worse in terms of savings & income but not have exactly fallen into poverty, right wing populism takes hold. Here the problems are usually blamed on on immigrants & more nativist feelings take hold. This is what happened here in the US.


EFFECT OF NEOLIBERALISM IN US & GROWTH OF DONALD TRUMP

The majority of growth in US over the last few decades has occurred in the big cities. Most of the new jobs today are in the technology & finance sector which are primarily concentrated either on the coasts or in large cities. For e.g. One of the biggest innovators 100 years ago was the Ford Company who manufactured automobiles. This would require them to open up factories in multiple states employing 100's of thousands of workers greatly boosting employment & raising living standards of wide section of society. However today's biggest innovators are in the tech world where let's say a company like a Facebook or Google might create only few thousand jobs concentrated in just a few urban cities limiting the benefits to smaller section society concentrated in a few areas predominantly cities. On top of the the neoliberalism policies we also had globalization, automation & transference to a digitized economy. All of this together has led to a crushing blow to middle America which was heavily dependent on manufacturing & heavy industries earlier. White working folks in middle American feel that they have been left behind & ignored by the elites. The benefits of free trade sold to them by the politicians were false & it simply benefited the big businesses & their corporate lobbyists who were close to the Washington based politicians. They therefore no longer trust regular politicians who they believe have contributed to their current misery, left them high & dry to suffer & no longer care about their well being. This has stoked anger in middle & rural America against unregulated finance, growing economic inequality, and a corrupt and undemocratic political system. Many authors have described this situation as 2 Americas completely out of sync with each other where the urban America has progressed very well over the fast few decades while the rural America has been stuck in rut. This dichotomy of America has left the people living in the urban areas totally insulated from what's happening in rural America.With more passing years the feelings of angst among the rural Americans has been growing feeling that the elites living in cities especially the politicians while not doing anything for them have grown themselves rich  cozying up to lobbyists in Washington at their expense.
 Donald Trump whatever you think of him has tapped into this "throw the bums in Washington out" anger successfully in a way never seen before in American politics. He was able to successfully combine the xenophobic, racist impulses of the far right along with the proposing of tearing up of free trade deals, imposing tariffs on Chinese goods etc. which are far left wing proposals. He additionally has advocated getting rid of all the corrupt politicians in Washington of the with "drain the swamp" talk. His anti establishment talk with combining both extreme right wing & left wing ideas has resonated with the white working class. They especially like his straight talk as they grown tired of the double talk given to them by the regular politicians. They are so tired of their situation that they don't at all about the misogyny, hate & xenophobia that he spews on the campaign trail. He for them is straight talking messiah who will improve their lives by bringing well paying jobs back to their towns & lives which are currently hopelessly broken down beyond repair .

FUTURE OF POPULISM:
Northern Europe which was able to whether the Great Recession much better has sprung up more Right wing populist parties opposing immigrants most of which are Muslim from Syria & talk about reasserting control of their currency & borders (which was lost by joining the European Union) while Southern Europe where recession hit very hard had left wing populist parties like Syriza in Greece & Podemos in Spain gained popularity.
Future of populism is hard to predict as we have little data of them being in power or influencing ballot measures (like BREXIT). Current results from Europe seem to be mixed, Left wing populist Syriza party in Greece came to power on back of anger of the Greek people to hardships experienced by the tough austerity measure enacted by ECB (European Central Bank). Once in power they threatened to default on their debt obligations to renegotiate for better terms. After a lengthy standoff they later capitulated to even worse terms than what were offered before angering the electorate which elected them hoping for change. Syriza found out that you can rant all you want against the establishment when in opposition but once in power it is not easy to govern, a sentiment that Arvind Kejriwal (a left wing populist by the way) is finding out the hard way while running the Delhi state in India. In Britain the UKIP (UK Independence Party) were able to successfully like in US convince the rural British public who had suffered similar to those in US, that their government was not working for them & immigrants from the other European Union countries were coming over & taking over their jobs. Similar to here in US on back of high turnout in rural Britain they drove up the vote count for Leave campaign vs the STAY vote in the cities to win the BREXIT vote. Long term we will have to look if any of the European populist parties like UKIP in Britain or National Front led by Marine Le Pen, or People's Party in Denmark, Five Start in Italy or Geert Wilder's Party for Freedom if elected how do they actually govern.


5. CONCLUSION

Trump's win was the perfect storm of several factors such as high white working class turnout, ignoring of the working class by politicians, lack of enthusiasm among Democrats, Hillary unfavorability, moral licensing among white voters , etc. The question now is what is generally asked with about other populists: How many of the dozens of promises (many populist) that were made by Trump are going to be actually fulfilled in the next 4 years? Can President Trump can fulfill his promises on the jobs for the Rust Belt & middle America? If so it will go a long way to helping him getting reelected in 2020, but if nothing changes & people think that they got swindled by him like any other politician, they will throw him out like they have done to others before him.. Republicans who always do poorly in elections in the cities. Due to them faring poorly with minorities the changing demographics also hurts them long term. So they have to nurture & work for development of this working class who feels neglected because if they simply revert to championing neoliberal policies once again they might be at the receiving end of a serous hiding next time around.
For Democrats it isn't a lost cause as they lost an extremely close election where 110K votes could completely changed the outcome. Getting a candidate who excites their base plus championing policies that help all Americans including white working class will help them win. But they shouldn't rely too much on the just the changing demographics to win. 
Trump won by both tapping into anger among the working class people & simultaneously tapping into the underlying prejudiced subconsciousness of certain part of the electorate. There are for good reasons a lot of worries now regarding freedom of speech, press & religion, tolerance for minorities, authoritarianism, etc. Since now he is elected president he simply can't disavow what he said & called for on the campaign trail. I am not trying to be a Trump apologist here, but it would simply disingenuous for all those who opposed him to generalize & say that each & every one of the 60 million Americans who voted for him are dumb & simply racist which many have been saying over the past few days on social media.I agree that some % of his supporters are racist & nothing will change that but what the rest of us all who disagree with him & especially the politicians on both sides of the aisle need to understand is that what kind of situation including economic hardships, lack of jobs & opportunities would force some Americans vote for a person who displays all tendencies of demagoguery, xenophobia, nativism, authoritarianism & has big red flags in both personal behavior & business. Even if the economy improves in the next few years, adding a lot more jobs this problem  is not going to magically vanish into thin air. With ever increasing automation & digitization day by day more low income - low skilled jobs are going to disappear in the next few years leading to more angst among the working class in general. If these issues are not addressed there is a risk of all out class warfare between the upper class & the working class in the future which could even bring to the front a populist person more dangerous than Donald Trump.



REFERENCES:

1. Judis, John B.. The Populist Explosion: How the Great Recession Transformed American and European Politics

2. Washington Post

3. NY Times

4. FiveThirtyEight

5. Malcolm Gladwell: Revisionist History 

6. BBC NEWS

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