The first lesson is that rising inequality is the major threat to economic growth in developed countries. Unless economic policy is aimed at securing inclusive growth that delivers benefits to those outside the 1% it is now clear that a majority of voters will block that reform. The thing that now scares the working class the most is a bigger dose of free-market capitalism.
The second lesson for all politicians is that voters no longer fear the wrath of “the markets” if they refuse to swallow the bitter pill of trickle-down tax and trade policies. The idea that the cure for unemployment, poverty and regional decline is another dose of trade agreements and tax cuts is dead. Working-class voters now fear the medicine of neoliberal reform more than they fear the problem of slow growth.
While it is unlikely the Brexiteers or Donald Trump have any interest in targeting economic growth to the workers and communities that have missed out for decades, it is clear that there is enormous political benefit in simply promising to try. Low-income earners in the US have experienced declining living standards for decades. They know what it is like to live without growth. They know what it is like to live without hope. And they have now made it clear that they are willing to impose such conditions on corporations and high-income earners as well. Put simply, it now seems likely that unless countries can find a way to deliver inclusive growth it is possible they will wind up with no growth at all.
Wayne Swan knows it’s the economy, stupid.