4 | BUSINESS AND SOCIETY freshfields.com
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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