Explaining The "Rise Of The American Protest Vote": It's The "Popular Discontent," Stupid

One theme we’ve explored at length and on a number of occasions over the past 12 months is the global shift towards so-called “radical” political parties and candidates.

Whether it’s Syriza in Greece, Podemos in Spain, or Donald Trump in the US, voters are increasingly turning to candidates outside of the establishment.

Why is the electorate turning its back on the traditional bases of political power, you ask? Well, that is the question of the day and indeed it’s one quite a few people are trying to answer. BofA’s Michael Hartnett recently asked why, if the global “recovery” is real, are populist parties and politicians dominating the political landscape. For those who missed it, here’s a look at how these parties and politicians are polling:

As hinted above, one reason for the political sea change may well be voter disaffection with the economy.

While the general public is probably ignorant to the nuances, Main Street is in tune to a kind of inescapable suspicion that things aren’t what they once were and that the gap between the haves and the have nots is growing. That goes double in countries like Spain, where unemployment is still running above 20%.

As RBS’ Alberto Gallo put it a few months back, “persistent low growth, high youth unemployment and increasing inequality have hurt Europe's young generation.”

The same can be said of America, although one could argue the problem is less acute.

Ahead of primary season in the US, RBS’ Gallo is out with a fresh look at the rise of “the all-American protest vote" which he says is being driven by “the deeply imbalanced nature of the recovery.” Here’s how RBS describes the state of the American economy:

The deeply imbalanced nature of the recovery could well be driving the protest vote. This US recovery is one of the most uneven on record, looking across both states and industries. In 2014 55% of states grew at a rate of 1.75% or less, whilst only a small number of states (12%) grew faster than 3.25%. This compares to 1988-2014 average of 24% growing less than or equal to a rate of 1.75% and 20% growing faster than 3.25%.

 

 

Looking across industries, structural shrinkage in the manufacturing and construction sectors, where employment has been declining since the crisis, is contributing to pockets of structurally higher unemployment. With many parts of the economy not feeling the full benefits from the US recovery almost 8 years after it began, the protest vote seems to have grown strong enough within the two main parties to begin to challenge for power.

 

And here’s a bit on where the “radicals” are enjoying support:

Who is supporting “protest” candidates? According to YouGov Sep 2015 data, Trump’s supporters are older, less educated and earn less than the Republican average. Over one-third of his supporters earn less than $50,000 per year vs 11% earning over $100,000 per year. One half of his voters have high school education or less vs 19% with a college or post-graduate degree. This pattern was also seen by Civis Analytics data in December, which continues to show stronger support for Trump from older and less educated voters. For Cruz, support is the strongest among women and people over the age of 50. While there is no clear correlation between support for Trump and economic growth statewise, it is notable that the majority of the states that are still in recession or have below 1% growth have strong poll ratings for Trump (e.g. West Virginia, New Hampshire, South Dakota, Mississippi).

 

 

Gallo's conclusion: "The sustained growth in support for protest parties across Europe provides a lesson for the US – unless the root causes of popular discontent are addressed (uneven growth, pockets of high unemployment and weak wage growth), the protest vote is unlikely to go away. In fact, it may well grow."

Yes, it "may well" just do that, and the consequences of a protest candidate taking the White House "may well" be decidedly unpredictable.

As we saw in Greece, attempts to rekindle "the dream" (so to speak) can end in new nightmares. That's not to say America should resign itself to four more years of business as usual inside the Beltway. But we wonder if the old adage "be careful what you wish for" doesn't apply to both Donald Trump and Bernie Sanders.