Somewhat despondently, Oaktree Capital's Howard Marks begins his latest letter to investors by noting that "the outcome of the election won’t change these things as far as I’m concerned."
Of course, the big story of this election year has been the unprecedented, unconventional rise of Donald Trump. Trump threw his hat into the ring with a complete lack of experience in elected office or other public service, and without an established campaign organization. In fact, he had no established party’s ideology. He adopted some Republican elements but rejected others. And yet he has been able to attract a large group of voters, probably about 50 million strong.
He did this by assembling backing from an unusually diverse mix of elements. These included dedicated Republicans who weren’t about to vote for a candidate of another party; the many Clinton haters who’ve had 24 years to gel since Bill’s first inauguration; people who were attracted to Trump’s celebrity, reputation for business success, outspokenness and colorful manner; and supporters of the right. But this tells only part of the story.
The aspect I consider most important for the future relates to the Trump supporters – and some of the most active and vocal ones – who are motivated by an anger regarding “the system” that is neither purely emotional nor illegitimate.
Many are older, white, non-college-educated men who might be described as “demographically dislocated.” When these men were born, white males ran America; their communities weren’t mixed and becoming more so; and the cultural shifts occasioned by the civil and women’s rights movements, technological change and mass immigration were unimagined. Certainly the shift to the America of today – with all these things quite different – might be jarring and unpleasant to the people I describe.
At the same time, many Americans – and often the same ones – are experiencing the effects of job loss and diminished economic prospects. Fifty or even thirty years ago, men without college degrees could easily obtain good-paying jobs and the pride associated with being able to maintain their families at a good standard of living. One earner per household was enough, and one job per earner. Strong labor unions ensured adequate pay and benefits and protected workers from too-rapid changes in work rules and processes.
Now the number of unskilled jobs has been reduced by automation, foreign manufacturing and increased globalization of trade. Unions are much less powerful in the private sector (name a powerful union leader of today who comes to mind). Men of the sort described above – older, white and non-collegeeducated – are likely to have lost jobs, know someone who has, or seen the impact on their communities.
Importantly, until 2000, most Americans felt their children would live better than they did. Now this is no longer true:
When asked if “life for our children’s generation will be better than it has been for us,” fully 76 percent said they do not have such confidence. Only 21 percent did. That was the worst ever recorded in the poll; in 2001, 49 percent were confident and 43 percent were not. . . . virtually all polling shows a steep decline in optimism since the late 1990s and early 2000s. (The Washington Post, August 12, 2014)
Here’s a quote from Thomas Friedman in The International New York Times of June 30 that I used to sum up in “Political Reality” (August 2016). As I wrote there, I think it does a great job of capturing the situation:
It’s the story of our time: The pace of change in technology, globalization and climate have started to outrun the ability of our political systems to build the social, educational, community, workplace and political innovations needed for some citizens to keep up.
We have globalized trade and manufacturing, and we have introduced robots and artificial intelligent systems, far faster than we have designed the social safety nets, trade surge protectors and educational advancement options that would allow people caught in this transition to have the time, space and tools to thrive. It’s left a lot of people dizzy and dislocated.
What we have is a country – in fact, a world – that is changing rapidly and in ways that are unpleasant and disorienting for large segments of the population. The present is different from the past, and the future looks worse than it used to. Slower economic growth is producing less opportunity overall, and a number of forces are supplementing slow growth in diminishing the outlook. Rising income inequality is directing an increasing share of the gains to top earners. Older people lacking higher education are particularly ill-equipped to deal with the changes.
I think this is an apt description of conditions in the U.S., but it seems equally applicable to much of the developed world. In an opinion piece on October 26, starting from the German point of view, Joachen Bittner of the International New York Times described a broad group he called Wutbürgers, or “angry citizens.” I think they’re rising everywhere:
It is a relatively new expression, with a derogatory connotation. A Wutbürger rages against a new train station and tilts against wind turbines. Wutbürgers came out in protest after the Berlin government decided to bail out Greece and to accept roughly one million refugees and migrants into Germany.
Wutbürgers lie at both ends of the political spectrum; they flock to the right-wing Alternative für Deutschland and the socialist Linke (Left) Party. The left wing has long had a place in German politics, and the Linke has deep roots in the former East Germany’s ruling party. And we’ve had a fringe right wing since the postwar period began. But the populist anger of the A.F.D. is something new: Anti-establishment, antiEuropean Union and anti-globalization. . . .
The same thing is happening elsewhere in Europe: Many British Wutbürgers voted for Brexit. French Wutbürgers will vote for Marine Le Pen’s National Front. Perhaps the most powerful Wutbürger of them all is Donald J. Trump.
Which raises the question: How was anger hijacked?
In its pure form, anger is a wonderful force of change. Just imagine a world without anger. In Germany, without the anger of the labor movement, we would still have a class-based voting system that privileged the wealthy, and workers would still toil 16 hours a day without pension rights. Britain and France would still be ruled by absolute monarchs. The Iron Curtain would still divide Europe, the United States would still be a British colony and its slaves could only dream of casting a vote this Nov. 8.
Karl Marx was a Wutbürger. So were Montesquieu [who articulated the concept of separation of powers within a government], William Wilberforce [the leader of the abolitionist movement in Britain], the Rev. Dr. Martin Luther King Jr. and the tens of thousands of Eastern German protesters who brought down the Berlin Wall in 1989. . . .
Now: Compare these spirits to the current parties claiming to stand for necessary change. . . . Sadly, the leaders of today’s Wutbürger movements never grasped the difference between anger driven by righteousness and anger driven by hate.
Anger works like gasoline. If you use it intelligently and in a controlled manner, you can move the world. That’s called progress. Or you just spill it about and ignite it, creating spectacular explosions. That’s called arson.
Unfortunately, this lack of maturity and prudence today exists among not just the new populist class, but parts of the political establishment. The governing class needs to understand that just because people are embittered and paranoid doesn’t mean they don’t have a case. A growing number of voters are going into meltdown because they believe that politicians – and journalists – don’t see what they see. . . .
The grievances of white, often less-educated voters on both sides of the Atlantic are often dismissed as xenophobic, simplistic hillbillyism. But doing so comes at a cost. Europe’s traditional source of social change, its social democrats, appear to just not get it. When Hillary Clinton calls half of Mr. Trump’s voters a “basket of deplorables,” she sounds as aloof as Marie Antoinette, telling French subjects who had no bread to “eat cake.”
. . . Amid their mutual finger-pointing, neither populist nor established parties acknowledge that both are squandering people’s anger, either by turning this anger into counter-productive hatred or by denouncing and dismissing it. Mrs. Clinton [making the presumption that she would win, as seemed clear on October 26] has the chance to change, by leading a political establishment that examines and processes anger instead of merely producing and dismissing it. If she does, let’s hope Europe once again looks to America as a model for democracy. (Emphasis added)
The point of all of this is that Trump is importantly supported by dislocated, disoriented voters who are angry about a number of unquestionably significant trends that are impacting them and their communities. Regardless of the outcome of the election, they and their sentiments will remain a powerful force.
Marks goes on to note the importance of bipartisanship and heralds a call to action for Washington's drain-dwellers to do something before it's too late...
I’m frustrated when I see Americans of both parties failing to punish – or even encouraging – behavior on the part of their elected officials that is fractious, partisan, ideological and non-compromising. Gridlock and inaction won’t solve our problems. Cooperation, adaptability and Friedman’s “imagination” must be the watchwords for the years ahead.
We need constructive action to solve the many problems we face, and there’s only one way for it to materialize: bipartisanship.
And worries over the flaws in our democracy...
There’s a good chance that this year’s election result will demonstrate the presence of elements capable of rendering our elections less than perfectly democratic. The main culprit is the Electoral College.
Our system was designed in the eighteenth century to centralize the job of choosing a president in the hands of a few wise leaders and avoid the uncertainties associated with a widespread and uninformed populace with which it was hard to communicate.
But in the twenty-first century, with the impediments to a meaningful popular election much reduced, it’s time to reassess the benefits of the electoral college – it’s hard to say what they are – versus the costs in terms of potentially weird outcomes. In the days just before the election, it seemed that for the second time in twelve years we could have a president who’d lost the popular vote. That tells me it’s time to reassess our system of voting.
The existence of the Electoral College can lead to other possible complications.
I’ll give you the answer: in the absence of an electoral majority, the president is chosen through a vote of the House of Representatives, with each state having one vote. Thus, theoretically, the 26 least-populous states – containing just 17% of America’s people and, by definition, almost none of its big cities – could choose the president. For me, regardless of the political makeup of the House, the loss of proportional election is of great concern.
Marks then touches on the role of money...
It wasn’t many years ago that contributions were limited to a couple of thousand dollars per candidate per race. Now $100,000 isn’t an uncommon ask, and there are legitimate (but possibly cynical) ways to donate millions. Given the amounts involved and the private sourcing, I find it hard to believe that elected officials are able to entirely ignore donors’ interests and preferences when they do their jobs. I’m not talking about corruption, just a not-quite-level playing field. This area is ripe for change. But given that the Supreme Court ruled that political donations are “speech” and thus can’t be regulated, change would require a constitutional amendment or a different decision from the Supreme Court.
He is furthermore concerns at the outlook for the two parties...
One thing that’s uncertain as we move forward from here is what the future holds for the two main parties.
Many voters crossed long-standing party lines during this campaign:
- Working class Americans, traditionally Democrats, were attracted to Trump by his antiestablishment, non-politically-correct, “Make America Great Again” approach.
- Big business, traditionally Republican, failed to support Trump, perhaps because of his anti-trade positions – even though he might well be a more pro-business president than Clinton.
- College-educated white Republicans – and especially women among them – backed Clinton, presumably because of Trump’s controversial behavior and Clinton’s role as the first woman candidate.
Will these new party allegiances hold? Or, if they arose largely because voters felt either attracted to or repelled by one of the 2016 candidates, will some or all of these developments reverse when the candidates are different?
The leaders of both parties were challenged this year by angry members. Will those members stay with their parties, or will they be less rooted in the future and “up for grabs”? The make-up – and the cohesiveness – of both parties is in flux, and thus the next election may be another that deviates from the usual path.
If Trump’s supporters desert the Republican party (or the political process) due to disenchantment with the behavior of its leaders, the party may have a hard time pulling together a meaningful following in future elections.
“Trump has essentially run as an outsider who staged a hostile takeover of the Republican party. If he loses, as is expected, he will still have won the votes of some 50 million voters or more, and they will represent a continuing, potent force, roiling with resentments,” said [David Gergen, an adviser to four presidents – three of them Republicans]. “Before Donald Trump brought his wrecking ball to the party, one might have thought it highly likely that Republicans could unite after yet another losing election. But one of Trump’s many ugly legacies is that the chances of the party losing its coherence – or even breaking up – now seems better than 50:50. (Financial Times, October 29/30 – clearly not a Democratic, or even an American, publication)
The Republicans’ plan after the defeat of Mitt Romney in 2012 centered around increasing its appeal to women and Hispanics and other minorities. In this campaign, however, that effort probably went into reverse.
I think the Republican party faces real issues. And my point here is that our country needs two strong parties, not an elected dictatorship. With two strong parties there can be an active debate of ideas, and neither is able to operate unopposed in a Washington devoid of meaningful resistance. The complete opposite of gridlock – free rein – isn’t desirable either.
But it is Marks' concluding thoughts that are most worrisome...
The political arena this year seems like a battlefield, divided much more than usual by antagonism, incivility, anger and downright hatred. Elites, establishments, experts, incumbents, insiders, internationalists and political correctness all came under attack, with no one to defend them. Slow economic growth – accentuated by continuing automation and international trade – is likely to continue to leave dissatisfaction within the working class. And after having seen behavioral norms wiped away in the first x-rated campaign – and doubts raised about the impartiality of the FBI and even the fairness of our elections – large numbers of people may be left alienated. When the election is over, these things are likely to remain the case.
But as I look forward, I see the need for constructive, bipartisan governmental action. Is that wishful thinking? Winning future elections could become a function of producing solutions, and that in turn could lead to cooperation and compromise between the two parties. I’ll use a rarely seen word to describe my dream: comity. Its definition makes it perfect for this use: “courtesy and considerate behavior toward others.”
The environment described above doesn’t feel like one that encourages comity or one in which the parties can function internally and work together. Therefore we might have to hope that politicians will conclude not only that the future of the country requires bipartisanship, but that their own success does as well.
Unlikely? Perhaps. But after a post-election memo in 2012 that proved far too optimistic, I say, “why quit now?”