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efore attempting to suggest routes

through the current uncertainty, it is

important to examine in more detail

where we stand today - and why.

After a period in which shock has followed shock, it is tempting

to cast everything in a negative light. But as Lionel Barber -

echoing Macquarie's note - put it in the Financial Times:

'Brexit and the Trump triumph mark a revolutionary moment.

Not quite 1789 or 1989, but certainly a thundering repudiation

of the status quo. [However] we are nowhere near a Great

Depression. The US economy is approaching full employment…

Credit is flowing. Corporate profits are up. The trouble is that

swaths of the population, often those living outside the great

cities, have little sense of the economic recovery.'

While it is reductive to draw encouragement from purely

economic indicators, the last point is key. Research shows that

in times of rising prosperity, people are more optimistic and can

better tolerate rapid economic and social change. But for at least

the last decade that cushion has been absent. Since 2005, more

than 65 per cent of households in the West have experienced

flat or falling wages - reversing the trend that has dominated

since the Second World War. Recent research by the Resolution

Foundation shows UK millennials (those born between 1981

and 2000) are set to become the first generation in centuries

to earn less than their parents over the course of their working

lives; a study by The Guardian shows this picture also extends

across much of the Western world.

Contributing factors such as sluggish productivity provoke

no emotional response. But globalisation is a different story.

The populist narrative is that as cheap goods made in poorer

countries have flooded into developed markets, so manufacturing

jobs have moved in the opposite direction, hollowing out workingclass

communities in former industrial heartlands. This message

struck a chord during the US election, even though data shows

'reshoring' has been the prevailing trend in North America since

the turn of the decade. Low-skilled factory roles have disappeared

but this has been driven by the advance of technology. No amount

of policy reform is going to bring them back.

Then there is the wider issue of economic inequality, identified

by Thomas Piketty in his bestselling book Capital in the twenty-first

century. Piketty crunched centuries of data to show that wealth

grows faster than income, and that the gap widens in periods

of low economic growth like the one that followed the financial

crisis. Figures for 2017 point to a broad-based economic upswing

across the world, but those who are already well-off are pulling

further away from those who aren't.

B Populists also feed off the sense

that citizens lack 'control'. That was

the free-floating word via which

the Leave campaign found its way

into British hearts.


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