by Bill O’Grady
The rise of populism and the preference for unconventional leaders are upending the world order that the U.S. created after WWII. Accordingly, across the West, we are seeing a steady rejection of centrist, establishment parties. Here are some of the changes we have observed recently:
France: Emmanuel Macron was elected to the presidency last year without previous experience of holding an elected office. He started a new party which now holds the majority in the French National Assembly. His election and new party are clear rejections of the existing establishment parties.
Germany: Although Chancellor Merkel continues to hold power, her party, the CDU, had the weakest performance in last year’s election since 1949. The SDU, the other party in the “grand coalition,” had its worst showing since WWII. The Alternative for Germany (AfD), a populist right-wing party, was the first of its kind to win seats in the Bundestag in the postwar era and is the official opposition.
Italy: Voters rejected mainstream parties and elected a coalition consisting of the Five-Star Movement, a left-wing populist party, and the League, a right-wing populist party.
Mexico: Lopez Obrador, better known as AMLO, won the election held on July 1. He is the first Mexican president since 1929 who doesn’t represent one of the mainstream parties.
United States: Donald Trump, who had never held elected office, won the presidency and has been mostly governing as a right-wing populist.
This list isn’t exhaustive. Populists are currently governing in Hungary, the Czech Republic, Austria and Poland. It is quite possible that Brazil’s October presidential election will give the office to Jair Bolsonaro, who seems to be running as a right-wing populist strongman. In addition, Brexit is a populist movement; if Theresa May’s government, which is teetering toward a no-confidence vote, fails, there is a good possibility that a populist left-wing government led by Jeremy Corbyn will emerge.
In the media, there is much consternation about a number of developments, including non-establishment candidates on both the left and right defeating experienced political figures. This report is our attempt to put context around these developments.
In Part I of this report, we will define the terms that we use to describe the political landscape. These definitions will be used to characterize the four major political coalitions and their basic policy positions. Part II will begin with general observations about the effects of class and identity. From there, we will discuss actual historical developments that describe how these four coalitions interact. As always, we will conclude with market ramifications.