Date posted: 1/12/2016 6 min read

Voter disillusionment forcing economic rethink

If recent election and referendum results are anything to go by, then voters are increasingly fed up with the political establishment. And it is forcing an economic rethink.

In brief

  • The era of the angry voter is here, and anti-establishment parties are appealing to a growing number from both the left and right of the political spectrum
  • Low wages, insecurity about retirement savings and a sense that the rich are benefitting disproportionately from economic reform have been named – by organisations as entrenched in the system as the G20 and the IMF – as causes of the present voter disillusionment
  • What you are seeing in a number of countries around the world is not just about inequality. It is as much about the increasing rate of change in society, and the fact that groups are left behind who are not beneficiaries of that change

By Steve Lewis

Photography by Dan Kitwood 

The era of the angry voter is here, and anti-establishment parties are appealing to a growing number from both the left and right of the political spectrum.

How else do we explain the simultaneous rise of Bernie Sanders and Donald Trump in the United States; Sanders proudly proclaiming his socialist roots as he championed greater intervention to prevent another GFC-style collapse, and Trump reaching out to democracy’s dropouts in the far-flung hamlets of middle America?

In the UK, the Brexit vote sent shockwaves through the markets and the political establishment. Just days before Britain’s shock decision to exit the European Union, global investment bank Morgan Stanley issued a stark warning to the investment community.

“The political fragmentation that currently manifests itself in an increasingly populist debate about the UK’s EU membership is neither limited to the UK or Europe nor is it likely to dissipate quickly,” three senior Morgan Stanley analysts said, in a strongly worded statement.

“In our view, the voter backlash against established political parties and international institutions is only starting (and) is on the rise.”

This analysis was particularly relevant for global investors with the bank warning “the negative impact of rising political uncertainty on risk assets and demand growth is well documented”.

The shock of Brexit caused an immediate bloodbath on global financial markets although conditions improved after a week or so of heavy selling.

What the longer term impact of Brexit will be on both the British and European economies is difficult to predict. But Brexit — and the recent Australian election, in which minor parties saw a surge in popularity — reinforced the sense of political fragmentation that has taken hold around the world.

Change mismanagement

Low wages, insecurity about retirement savings and a sense that the rich are benefitting disproportionately from economic reform have been named — by organisations as entrenched in the system as the G20 and the IMF — as causes of the present voter disillusionment.

But former New Zealand Deputy Prime Minister Michael Cullen says there are other political triggers at work alongside economic inequality.

“What you are seeing in a number of countries around the world is not just about inequality. It is as much about the increasing rate of change in society, and the fact that groups are left behind who are not beneficiaries of that change,” says Cullen, who also served as New Zealand’s finance minister and Attorney-General.

He points to the “diversification of society” resulting from heavy patterns of migration along with a number of “progressive” social causes such as marriage, gender and sexual-orientation “equality” as contributors to the rise of disenchanted voters. 

“If you look at the Trump base, those issues show up just as much as issues around jobs or wages,” Cullen says.

“So where you have those things coming together in particular pockets of the population, then that is a pretty toxic mix which creates considerable challenges for mainstream politics, of both the centre-left and the centre-right.”

In a candid interview, Cullen agreed that voter disenchantment and cynicism with mainstream politics and politicians is at a record high. This in part can be blamed on the “nature of modern media scrutiny” which he says is “very up close and personal”. 

“If you think back to 60 years ago, politicians were seen at a distance. They were framed in a somewhat idealistic framework, in the sense that they were a little beyond and above. Now it is very obvious that politicians are just ordinary human beings.”

As for the drift away from major political parties, Cullen believes it is likely to continue, including in New Zealand where the voting system of proportional representation encourages the proliferation of minor parties.

Big wins for small players

This trend was evident when Australia’s 45th Federal Parliament gathered in late August with record number of crossbench Senators and MPs on the leather benches.

After a marathon and uninspiring eight-week election campaign, around one in four voters turned their backs on the major parties.

There are some who believe Australia’s two-party system could fracture, over time, and morph into something closer to that of New Zealand’s multi-party structure. Support for the Coalition and Labor is at an all-time low with voters increasingly turning to minor parties and independent candidates. 

Having achieved the narrowest of victories, Malcolm Turnbull and his Coalition team will be forced to navigate their legislative agenda through a Senate that looks as unfriendly as any since federation.

With the Labor opposition — now just a handful of seats away from forming government — signalling it will play hard ball on key budgetary measures, the Prime Minister will be forced to negotiate with the likes of One Nation’s Pauline Hanson. 

After a decade in the political wilderness, One Nation secured just under 600,000 Senate votes nationally, appealing to many former Coalition voters who were fed up with mainstream economics and the mantra of free trade and budgetary restraint.

One Nation’s populist agenda appealed to an Australian electorate that appeared to have taken its cue from those disenchanted voters who backed Brexit.

Securing four Senators, One Nation’s electoral success was matched by the Nick Xenophon Team (NXT) that cashed in the popularity of the South Australian Senator to secure around 456,000 votes nationally. The NXT also elected four parliamentarians — including first-time politician Rebekha Sharkie, who ousted former Liberal Minister Jamie Briggs in the once Liberal stronghold of Mayo.

Even national regulators, who have traditionally backed the neo-liberal agenda of small government and budgetary restraint, appear to be speaking out and challenging the economic orthodoxy.

With just under 200,000 votes, Family First had its sole Senate representative Bob Day re-elected while other non-mainstream parties, such as the Christian Democratic Party, which snared 162,000 Senate votes, narrowly avoided election to parliament.

Even “micro” parties such as Animal Justice managed to double its vote to 160,000, a remarkable result that underscores the challenge for the two major parties as they try to plot their way through an uncertain future.

Economics of disillusionment

The consequences of this rise in voter disenchantment is hard to quantify but there are many pundits who argue it will make the task of economic reform much tougher.

Ian Marsh, an adjunct professor from Sydney’s UTS, is uncertain whether this parliament will end in gridlock or even survive its full three-year term.

“This parliament is very fragile, there are a huge number of wildcards out there,” Marsh says.

Richard Dennis, one of Australia’s leading progressive economists, agrees minor parties are likely to continue to benefit as voters shun the major political institutions and look for new solutions to economic problems.

“There is obviously a link between the growing economic inequality in Australia, the sense that the major parties are too similar on economic policy, and the rise in support for small parties,” says Dennis, who is chief economist at The Australia Institute.

In a recent essay, Dennis predicted the demise of the traditional left-versus-right paradigm:

The “old world order of the Washington Consensus has broken apart more quickly than a new one has been built,” he wrote, adding that the “lack of a clear path forward in no way diminishes the significance of the collapse in public support for free trade, trickle-down economics and the privatisation of essential services”.

Even national regulators, who have traditionally backed the neoliberal agenda of small government and budgetary restraint, appear to be speaking out and challenging the economic orthodoxy, perhaps spurred on by the rise of the disenchanted punter.

In mid-July the head of Australia’s Competition and Consumer Commission (ACCC), Rod Sims, lashed out at the manner in which successive governments had sold off assets.

While he claimed to have been a supporter of asset sales for the past 30 years, the regulator said he was now “almost at the point of opposing privatisation” because state and federal governments had used them as a means of maximising proceeds at the expense of competition.

Coming from such an influential economic agency these were extraordinary remarks. But perhaps the ACCC chairman was merely reflecting the views of the many who have shunned the mainstream parties and are joining the ranks of those seeking something more than economic and political orthodoxy.

Steve Lewis is an author and journalist and a senior adviser with Newgate Communications.

This article was first published in the October 2016 issue of Acuity magazine.

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