After The Election

I try to avoid commenting on U.S. politics – anything I say tends to anger at least one-third of the room. But from time to time the United States takes a turn that elevates its internal issues to international import. Of late, evolutions in the American political system has taken such a turn. So here we go …

The American governing system isn’t small. U.S. local, state, and national governments are the country’s first-, second-, and third-largest employers. Combined, their staff is more than 22 million. So long as Americans disagree over how to do things, parallel structures are required to manage those disagreements in the context of the governmental apparatus. Those parallel structures are the Republicans and Democrats. With people constantly moving in and out of office at various levels, the parties need their own deep bench of support personnel to bulwark candidates-turned-mayors and representatives and senators and governors and presidents. The American parties are not traditionally tools of ideology, but tools of governance.

One, among many, outcomes is that various private interests get involved in building that bench of support. That way they can influence government decision-making both indirectly (via lobbyists) and directly (via elected officials and their staff). That takes money, and for decades the folks with the most money in the political system were those in the business community. The result was a somewhat revolving door of business leaders giving cash and staff to the parties to get people into government. When those people left government they returned to business to make more money. Some of that money then flowed back into influencing the political parties and government, and so the wheel turned. It was pretty rare for a stark-raving-mad politician to rise to the top. Business hates risk and likes continuity. Staffing choices reflected that.

Critics called this corrupt — and they had a point. Throughout the 1990s a consensus built that there was too much money in politics. The campaign finance reform effort was designed to minimize, and ideally eliminate, large donations to political campaigns, and thus root-out the perceived corruption. This weakened the business community’s connection to the political process to the point that it really didn’t have a candidate in the 2016 presidential run. This is the first piece of the parties’ unravelling: the single-largest and most cohesive and most status-quo-vested wedge of the political system was shown the door.

The second piece was even more disruptive: technology. In the pre-PC and smartphone age your options for contributing to campaigns of any sort were limited. You could give your time, or you could write a check and send it via snail mail. Checks of $20 or less were barely worth the man hours required to process them, so not a lot of effort went into bushbeating. In 2000 the landscape started to shift. Electronic checks, online bill pay, and money-by-text steadily reduced processing costs to nearly zero, even as social media techs enabled fundraising campaigns to be spread by email, SMS, Facebook, and Twitter at negligible cost. There’s now room for the masses to play politics with their cash.

The third factor almost seems prosaic: redistricting. State legislatures dominated by single parties would redraw their congressional districts’ boundaries, excising or including this or that population to build up their party’s electoral presence in the House of Representatives. The majority of such districts are now “safe” seats.

This all makes American politics loud and messy.

  • Courtesy of redistricting, the real competition for most House seats is no longer at the general election, but instead at the primary level among party stalwarts. That pushes the debate from the center to the edges.
  • At those edges, single-issue-voter money comes hugely into play. While businesses are interested in stability and continuity, individuals have axes to grind. Most Americans find it sexier to donate to specific causes and issues than to political parties and general platforms.
  • Single-issue penetration into both party and government politics polarized the system away from the consensus-building required to get on with the business of governing, and into razor-sharp disputes on issues of principle. Disagreement didn’t lead to bargaining and compromise, but was instead perceived as treasonous or flat-out evil.
  • Social media’s presence in the news cycle enabled people with a lot of extra time to prat on endlessly about this or that issue, blissfully unmoored from social trends, economic developments, decorum, facts, or reality. Biased or even fake “news” — much of it generated by folks outside of journalism — is now par for the course.

In such an environment the parties are largely incapable of appealing to the political center (by definition the political center is made up of people who are not single-issue voters). The parties have devolved from being tools of governance to vehicles for narrowly defined ideologies. America has become a great place to have an argument, but without functional parties it is almost impossible to have a debate.

American political candidates now break along a simple line.

On one side are those who cater to the ideological extremes to harness the increasingly-radicalized party structure: people like Ted Cruz, Elizabeth Warren, Bernie Sanders, and Michele Bachmann. On the other are those who can exist independent of the party structure and run their own campaigns: the Bush family, the Clinton Foundation, Trump Inc., and even Barack Obama. For them the parties were useful in a supporting role, but all of them succeeded because of their independent wealth and/or gravitas. W. Bush won by coalescing the evangelicals into a voting block independent of the Republican Party. Hillary Clinton manipulated the Democratic Party machinery, not the other way around. Barack Obama’s popularity was built on a social media network that co-opted the Democrats; once he was in office his connections with “his” party were cool at best. Trump could not only self-fund, he succeeded despite the Republican party.

At first the Republican Party got the worst of these changes. As a rule the business community is pro-Republican, so campaign finance disproportionally impacted their bottom line. In a double-blow the Democratic Party’s coalition is a much broader sweep of the American electorate. Reduce transaction costs and the Democrats’ larger party base can funnel a larger number of small donations. Before 2010 the Republicans were always the party that could raise more money. That’s now flipped, and Democrats have been able to use their superior financial position to fund ever-larger campaigns.

The Democrat Party stalwarts looked at this turn of events and got very excited about the 2016 presidential race. As America’s leftists tell it, American conservatives are a bunch of old white rich dudes who lord over the world. Campaign finance largely ejected them from the election process, which stripped the Republican party down to its racist, sexist, homophobic dregs. Beating those dregs in a general election would be child’s play because every single minority group in the country combined with the liberal Millennials would be able to sweep the field, eliminate the Republican position in Congress, and usher in a socialist utopia.

The Democrats got it completely right. Except how blacks would vote. And gays. And Hispanics. And unions and Millennials and women. They were wrong about everything. As a result Trump captured every single swing state except Virginia, and several blue states to boot. The Republicans now control both the presidency and Congress for only the second time since World War II. Barring some truly impressive breakthroughs in geriatrics they’ll also control the Supreme Court for another couple of decades.

What is fundamentally revolutionary in my mind isn’t what has changed, but what hasn’t. The technology has changed, dispersing political power far and wide. The way money is raised has changed, enabling the issue of the moment to dominate the Internet and airwaves and national debate. The parties have changed to the point of near irrelevance. But what hasn’t changed is that most Americans are still centrists.

Fully 42% of women, 30% of Hispanics, 45% of Millennials, and 33% of Californians voted for Trump. On the other side, 41% of men, 34% of rural inhabitants, 45% of people without high school diplomas, 25% of Mormons, and 43% of Texans voted for Clinton. The American political center endures, it is just now completely unmoored from the political selection and reporting process. And so it will remain until the American political parties can regenerate themselves.

That will take a lot of soul-searching. I hear encouraging bits. For the Democrats who aren’t part of those single-party factions, it has really sunk in that every election of the past generation that their candidate lacked charisma, they’ve lost. All those single-issue voters just can’t deliver success, because their screaming pisses off left-leaning moderates (not to mention everyone else). And since all but a half dozen of the Senate seats that will be up for grabs in the 2018 bi-elections are held by Democrats, they’d best get a move on unless they want to risk a generational blow out. For the Republicans willing to stand up to Trump, there’s already a realization that a party led by those rebelling against the order can’t rebel against their own order. The Trump election is a one-shot deal.

So it isn’t as bad as it seems…in the United States anyway. In the meantime, things are looking horrible for the rest of the world. The United States is the country that guarantees global security, global trade, and global energy. There are no single-issue voters who are interested in global management. America’s bandwidth to understand — much less discuss — what is going on in the wider world is nil until such time that the American political parties can regenerate themselves. Until then, the superpower that makes the world work is simply absent.

A Step Back From the Brink

I’ve been a worried about Europe.

The Continent faces a whole host of challenges, but of late my rising concern has been the broad-spectrum breakdown of the attitudes that make the European Union possible. Brexit is the loudest and sexiest example of this, but it is hardly the only one.

After nearly two decades of stability (admittedly the vigorous hand-gesture, prime minister-hosted orgy version of stability that only Italy could produce), Italy’s government is returning to a chaotic morass. Spain and Belgium are barely able to form governments. The Netherlands and Austria seem perilously close to going off the rails. Hungary’s executive seems to find democracy mildly offensive. Poland is now ruled by a team espousing the worst characteristics of Trump, Clinton, Pope Innocent III and Kanye.

But all is small fry in comparison to what has evolved this year in the two core countries: Germany and France.

The two Continental heavyweights are not just the European Union, they are Europe. When opposed, the only result is war. When united, something better can take shape. After World War II the French took over the Continent. They could do this because the defeated Germans were not allowed to have a foreign or strategic policy of their own. German defense planning was run from the Pentagon, while the Élysée Palace took care of most everything else. The result was the forging of the European Union and the harnessing of German economic power to elevate France to global relevance. Road bumps abounded but all in all it worked pretty well.

With the Cold War’s end, Germany has slowly evolved its foreign policy beyond “I’m sorry” and found its own voice. Germany and France now run the EU together. There is certainly tension (and the French aren’t happy about the Germans rediscovering their spine) but no breach is imminent. Good thing too. Any break between the two means the end of the EU writ large.

Yet nowhere in the Western world has been immune to the populist rise.

In France, President Francois Hollande is so delightfully out-of-touch that he’s dreaming idly of maybe returning to George W. Bush popularity lows; Hollande is now right at about 5% approval. With Hollande’s Socialists nearly as unpopular as he is (and even less organized), the only question for 2017’s presidential contest is who else will run? As of November 1, it looked like the race would be between former President Nicholas Sarkozy and Marine Le Pen of the National Front.

Not to put too fine a point on it, but the National Front is fairly…horrible. Critics call it anti-Semitic, anti-democratic, anti-European, anti-Arab, anti-market, and a fair number of other things you wouldn’t want folks to put on your Twitter feed. Sarko, as part of his effort to break back into national politics, has taken a hard turn for the fences and enumerated a not-short list of topics that normally are not considered part of the European mainstream. The race was shaping up to be a run between someone who wants to chip Muslims in the hundreds of thousands and put them in internment camps…and a racist.

That just leaves German Chancellor Angela Merkel as the only powerful, competent, relevant, moderate statesperson of note in the Union. Unfortunately, she is under siege from all sides. Her decision on purely humanitarian grounds to admit nearly 1 million Syrian refugees has cost her much of her political capital. It has emboldened not just the hard left and hard right, but it has also threatened the core of her own political coalition. Her term is up in 2017; the personalities testing the waters to replace her are, in a word, Trumpesque. Say what you will about Trump in the U.S., but the slogan “Make Germany great again” should make everyone a bit twitchy.

This week things brightened a bit.

In France, the conservatives’ primary delivered Sarko a crushing third place finish, leading the former president to announce his permanent retirement from politics. The two top place finishers — François Fillon and Alain Juppe — are both former prime ministers. There is much many undoubtedly dislike about both, but both are economic reformers and avowed Europeanists. They’d aim to regenerate France, but within the European rubric without any revanchist challenges to French or the European system. Whoever wins the second-round primary vote will easily defeat Le Pen to become the president of the Fifth Republic.

In Germany, the shift might prove to be even more substantial. Merkel decided to stand for re-election. Like Fillon and Juppe, not everyone is a fan of Frau Merkel, but even her opponents hail her as being a steady, consensus-building leader in troubling times. Barring some catastrophic event that involves her personally, it’s hard to see her losing the ability to lead her party coalition. The German socialists are nearly as disarrayed as their French peers, making Merkel a shoo-in for a fourth term.

At a time when everything in Europe is on a downward slide, it seems that these two critical countries are taking at least one small step back from the brink. Will it be enough? Hell no. As I began, Europe faces a whole host of problems:

  • America is ending the global trade order and there is no EU or modern, open, democratic Germany without it.
  • America’s commitment to NATO is nearly gone and without it the Germans must rearm, triggering a whole new avalanche of security problems throughout the Continent.
  • The European financial crisis is worse than ever, and has now been joined by a European banking crisis. Both crises are so deeply structural that recovery is impossible without a political reckoning and/or revolution.
  • The civil wars in Syria and Libya are only the leading edges of a broader Middle East and African breakdown; the refugee waves we’ve seen so far are just the beginning.
  • Europe is imploding demographically, not only making Europe more dependent upon the dissolving global trade order and exacerbating the financial and banking crises, but also soon putting zero percent economic growth out of reach. The ongoing existence of several European countries as modern societies is no longer assured.
  • And let’s not forget that Russia is only in the beginning stages of its Hail Mary effort to secure its western sphere of influence (i.e. control of parts of the EU’s eastern periphery) before its own problems overwhelm it.

But I’ll take my good news where I can get it these days. There may still be a trigger-happy platoon full of guns aimed at Europe’s head, but as of this week there are two less.

For now at least.

Scared New World

This isn’t a brag piece.

Many have credited me with predicting the Trump rise. To be clear, I never predicted Trump’s entry into politics, or that he’d win the Republican party nomination or that he’d carry the presidency.

But this is still a bit of an “I told you so.”

Everything about the American position in the international system is based upon the Americans holding together what we currently call the international order. Americans have been doing this since 1944. At that point the Americans re-forged the global system, shifting it from a series of warring imperial networks into a global system they personally managed. The Americans imposed global order — the first global order — and created free trade as a means of purchasing the loyalty of the Western and Asian allies, the defeated Axis powers, and in time Communist China. It was all about paying for alliance networks to contain and defeat the Soviet Union. When the Cold War ended the Americans neglected to shift their policies. The Americans continued to provide global security and empower global trade, but did so without the requisite security quid pro quo.

People noticed. The Brazil/Russia/China/India boom could only happen in such a strategic moment in time. The euro could only exist when economics were protected and security was free. But it wasn’t just in the wider world that people noticed. Free trade isn’t really free. Free trade requires someone providing the physical security and global ballast and market access to indirectly subsidize the rest of the system. The Americans have provided that for seven decades, and for the last three decades they have done so without asking for anything in return. With the Trump rise, this whole thing is now in its final years. Perhaps in its final months.

The reason for the accelerated timeframe isn’t just temperament, although I agree TrumpTantrumsTM will certainly play a role. It is far more structural than that. The entire webwork of elite relations that maintains the free-trade system just found itself without access to the leader of the free world. It’s not so much that the new American president is populist, although that is definitely a piece of it, but that he is not really affiliated with either American political party or the overall American business community or any other institutions that are linked into international trade. Trump is a purely domestic entity, disconnected from U.S. governance at all levels. Presidential history isn’t my strong point, but I think the United States hasn’t had one of those since Andrew Jackson, another strongly populist president who didn’t think all that highly of the wider world. But Jackson didn’t inherit responsibility for the global system. Trump has. And if there is one point on which Trump has been consistent, it is that that responsibility will be abandoned.

Yet this isn’t all Trump. The United States has been moving this way for a good 25 years, and I’ve little doubt that even a President Hillary Clinton would have ended the global system one way or another. I have been saying for months that the primary difference to the international order of Trump versus Clinton is timeframe. Clinton would move the United States away from the international order in a relatively slow manner. Probably 4 to 8 years. Trump would do it in 4 to 8 months.

To me the timeframe never really mattered. One way or another the global system was going to breakdown and we would find ourselves in the Disorder. This allowed me to view the world from afar and focus on the structure. The details would take care of themselves in time.

Well, that mode of operation is now about as relevant as the Clinton family.

With a shorter runway, a few things have clarified.

  • Almost everything from the Obama presidency will be undone by the end of January 2017. Obama has shown next to no ability/interest in having conversations with Congress, even with members of his own party. The only large law passed during his entire tenure is Obamacare, so only it cannot be undone with a few strokes of a pen. How that law is modified or unwound requires Congressional involvement, and since Congress remains in the hands of the Republicans, that too is on deck — it will just take a bit more time. Any international treaties negotiated by Obama — whether they be the Paris Climate Accords or the TransPacific Partnership — are dead.
  • The World Trade Organization has less than a year to respond to what will undoubtedly be a tidal wave of U.S. cases. Should those cases not be dealt with in adjudication at a pace and in the way the new White House desires, the United States will start taking unilateral moves which will, in essence, obviate the global trade order.
  • One of those first moves — which might not even wait for the WTO to try and act — will be to declare China a currency manipulator as well as revoke its status as a free market economy. Any countries that attempt to relabel Chinese goods are likely to be caught in a dragnet. This one push should be enough to throw China into its first recession in 30 years. The question now is whether or not President Xi’s political consolidation efforts have progressed enough that China can weather the resultant internal political and economic explosion.
  • NATO is for all intents and purposes dead. Russia’s moves into Ukraine will increase, and broadscale Russian plans for its entire western periphery — everything from Latvia to Poland to Romania to Azerbaijan — will accelerate. The only way forward for Europe is for Sweden and Germany to massively rearm.
  • Formal talks between the United States and the United Kingdom on some sort of post-Brexit trade deal will open. (Technically these are illegal under EU law, but what is Brussels going to do? Kick the Brits out?) The only question is whether these talks herald British entrance into NAFTA.
  • The alliance with Korea and Japan will no longer require U.S. troops in those countries, and even that assumes the alliance isn’t ended outright. Both countries will have little choice but to beef up their power projection capabilities, which is highly likely to include nuclear weapons. A much more aggressive Japan ends China’s creeping power projection to the northeast.
  • Alberta may have just gotten a fresh lease on life. One of those Obama executive orders that will be scratched out is the Keystone pipeline. Its construction will enable Albertan crude to access the U.S. refining network where it will be blended with light/sweet U.S. shale crude. The resultant blend will save U.S. refiners a couple hundred billion in refinery overhauls, resulting in lower cost gasoline for the country. It also just might provide Alberta with enough income to climb out of what would have otherwise been a multi-year recession. The question now is how much of that income will Ottawa take, and how Alberta will respond to the forced transfer.
  • Mexico now has no choice but to work with Donald Trump. Since most of the migration that comes into the U.S. actually comes from Central America and not Mexico, the most constructive path forward will indeed be a border wall that Mexico will indeed pay for…but on Mexico’s southern border rather than its northern one. How Mexico City handles this issue will determine the future success of both Mexico and NAFTA.

And now if you’ll excuse me, I’d better get back to that book writing. Apparently I have less time to get these projects out than I had thought.