The fall of the middle class and rise of populism

Picture of President Obama and Donald Trump

President Barack Obama and Presidential candidate Donald Trump

President Obama wrote for this week’s Economist discussing “the crucial areas of unfinished business in economic policy” the next president will need to tackle and then questioned the rise of “crude populism” which promises to return the country to the past. We thought it was time to investigate this rise of populism and how it has evolved.

Despite the majority of experts and others with influence encouraging the UK to Bremain, the public had a different idea and voted to Brexit. They wanted their sovereignty back and didn’t seem to care much for the opinion of the establishment. The same is currently happening in the US. No former president has given their endorsement towards Donald Trump, President Obama is now actively attacking him at rallies, most experts are against him (including mainstream media) and yet, he continues to rise. Whilst this has perplexed many, we did find some interesting graphs that make some sense of it.

us-shrinking-middle-class-graph

The graph above shows that since 1971, the middle class has been steadily falling whilst the highest earners have increased by over 100%. This has been happening regardless of whether the Democrats or Republicans have been in power.

 

us-public-trusting-the-fed-graph

At its core, populism is a belief that the regular people should have control over their government rather than the wealthy elite. As the middle class has been shrinking along with the public’s trust in the government, it shouldn’t be a surprise that Sanders almost won the Democratic nomination and that Trump did win the Republican. Trump’s anti-establishment and demagogue style of politics represents a populist movement that could well win the majority of votes come November 8th.

7th October, 2016 – Dan Jenkins is NZAM’s Business Analyst.

This NZAM article is provided for general information purposes only and does not purport to give investment advice. This information is not intended for or directed towards retail investors but is for the use of researchers, financial advisers and wholesale clients. While the information contained in this document has been prepared with all reasonable care and has been sourced from published information believed to be reliable, accurate and complete at the time of preparation, its accuracy and completeness is not guaranteed. New Zealand Assets Management Ltd accepts no responsibility or liability for any errors or omissions or misstatements however caused. Information and any analysis, opinions or views contained herein reflect a judgement at the date of publication and are subject to change without notice. To the extent that any such information, analysis, opinions or views constitute advice, they do not take into account any person’s particular financial situation or goals and, accordingly, do not constitute personalised advice under the Financial Advisers Act 2008, nor do they constitute advice of a legal, tax, accounting or other nature to any persons.