What does Tiririca think of Corbyn and Trump?
As people, Jeremy Corbyn and Donald Trump couldn’t be more different. Mr Corbyn seems like a genuinely nice guy, while Mr Trump is rude and brash. The latter is a good orator, unlike Mr Corbyn. The former is said to listen, but Mr Trump is too important to do that. They couldn’t be further apart as people, or on the political spectrum. Yet despite their differences, both are anti-establishment and feel authentic. And that resonates with voters. But is there any substance? And how worried should we be?
When I lived in Brazil a clown – called Tiririca [see picture above] – was elected to be a member of the Brazilian Congress. I’m not being facetious: before becoming a politician, Mr Tiririca actually was a clown. In 2010, he won over a million votes, the second most in Brazil’s history for a congressman. His message was something like this: “Do you know what members of Congress actually do? Nope? Well, neither do I. Vote for me and I’ll find out and tell you”.
I’m not sure about Tiririca’s effectiveness as a politician, but this was the first protest vote I can remember. Is the protest vote something new? Are populist politics on the rise or am I just getting older and more politically aware? Another comedian – Beppe Grillo – has been ruffling the feathers of the establishment in Italy. Those other upstarts from Greece – Syriza – actually won! Marie Le Pen’s Front National is polling well in France. Podemos could win in Spain. When the economy gets bad, people demand change. But it seems that these days people are demanding change even when the economy is strong. Brazil grew 7.5% in 2010, the year Tiririca was elected. UKIP – initially considered a protest vote and now having to be taken seriously – have done well in the UK despite a relatively strong economy. Trump and Corbyn are doing well in the rich world’s two fastest growing economies.
The source of Messrs Corbyn and Trump’s originality is, of course, very different. For Mr Trump, other than bigotry an saying whatever comes to his mind, I’m not sure what platform he is standing on. Xenophobia, perhaps? The tea party had shifted the political debate to the right in the last Republican primaries, but Mr Trump is different. Politicians nearly always promise things that they cannot deliver so perhaps this is his appeal: people expect him to deliver what he says. An excellent quality to have, of course. Its what he says and promises that is something of a problem.
As far as his economic policies go, despite his success in business, I think Trump would be a weak candidate. Although he is rich, firms of his have filed for bankruptcy on four occassions. He is a risk-taker… this may be good for certain businesses, but it is not a quality that a country needs in a president. Building a wall with Mexico – that the Mexican’s would finance. How does that work?
While the Trump circus rolls on, matters relating to Mr Corbyn are somewhat more serious I would say. Voting Corbyn would be a lurch to the left, socially and economically. He would withdraw from Nato, disband Trident and opposes the TTIP (Transatlantic Trade and Investment Partnership) – a proposed free trade agreement between the EU and US. I think the first two points are irresponsible and I do not have an opinion on the latter. He does propose, a “radically different international policy”, based on “political and not military solutions”. I agree with this in principal, although as we know, talk is, of course, cheap.
I have bigger issues with Mr Corbyn’s view on the economy. He promises an end to austerity even though the UK is running a budget deficit of 4.8% of GDP [2014] and national debt as a share of GDP has risen from 51.8% in 2008 to 89.4% in 2014. So in fact, the UK is not very austere at all. The lack of austerity is a bigger problem. Perhaps instead of focusing on austerity, the media should focus on inequality.
Aside from his originality, inequality is the big reason Mr Corbyn is doing so well. This is nothing new and has driven political arguments for decades, but inequality is rising in the rich world. And this is a particularly big concern with younger, urban voters, with whom Corbyn is most popular and whose economic prospects for life are worse than their parents. I don’t have data on hand to support this point but I’m pretty sure I could find it if I dedicated some more time (perhaps I will). I am fairly confident in saying that in the UK after adjusting for inflation, the median wage has fallen, while the gini coefficient has risen (for some data click here and here).
Tuition fees have risen and housing costs are very high, particularly in London. Home ownership is on the decline and the average age of first time buyers has risen. It should also be said that inequality (measured by the gini coefficient) was rising under the Labour government, before the financial crisis. Perhaps they were able to mask this inequality with rising household sector debt and generous, but unsustainable, benefits payments? What the economics profession needs to do is figure out ways to address inequality, in a responsible way. The debate too often becomes toxic, ideological and drifts away from the facts.
Sadly, I do not propose to have an answer. However, what I will say is that an economic lurch to the left (and the solutions proposed by Mr Corbyn) is clearly not the solution. Government bailouts are not the answer. Look at the facts. When Mr Hollande became president in France in mid 2012, business and investment sentiment dropped, unemployment rose and his ratings plummeted. [I can’t get exact statistics because Eurostat seems incredibly difficult to use – but look at this chart, which shows how the French uneployment rate while falling in the rest of the rich world]. He was eventually forced to adopt a more sensible, business friendly approach, to save himself. Syriza promised something they couldn’t deliver. Social promises are easy to make. Harder to deliver.
To create jobs and create a fairer society, businesses need to invest. Business people can be left-leaning and have a social conscience too…. And I personally believe that hard-working people should then be allowed to decide how to spend that money themselves (instead of the state deciding).
So here are a few of Mr Corbyn’s economic plans and some of my thoughts:
- Raising tax on the wealthy. That doesn’t sound like a bad idea to me (since under the current system they are the group which is getting richer, fastest). I would only do this to get the budget back into surplus (which is needed in the good times so that the option of a temporary counter-cyclical spending can be done in the bad times). Obviously don’t raise it too far so that business stops investing or leaves. No point in overly pissing off the people who are creating jobs (like Mr Hollande did).
- Increase social spending. Definitely oppose. Isn’t the benefits bill already too high considering our unemployment rate is just 5.4%? I far prefer the Tory plan of creating more jobs and raising the minimum wage a better one.
- People’s quantitative easing in order to fund “new large scale housing, energy, transport and digital projects” which would create “a million skilled jobs and genuine apprenticeships” with knock-on boosts for the supply chain. But its that old chestnut – what would that do to the value of the pound? What would that do to inflation? By printing money – the same money that us mere mortals have to work for – and just spending it, you are eroding purchasing power in the economy. That’s what Robert Mugabe did. And that’s why conventional QE involves the central bank printing money, buying government debt AND a commitment from the government to be fiscally responsible. If not, you can create hyperinflation as I previously discussed in my post about Eurozone monetary economics.
- Increase corporation tax. Perhaps not a bad idea – but how far?
- Re-nationalise energy and train companies. I agree that our trains services are poor and expensive. But where would the money come from for this? Wouldn’t better regulation be preferable?
- Save money through clampdown on tax avoidance. I think everybody agrees on that. Just do it already!
I’m just not sure why Mr Corbyn proposes money printing and state spending when we already have a low, and falling, unemployment rate? Wages are also rising. Why do governments need to build more homes instead of just allowing private companies to do more of that? Britain voted against a lurch to the left at the last election, so it seems silly to go further down that road now, which is why the Tories will be celebrating and exactly why Tony Blair and the rest of the Labour party is so worried. This is Mr Blair said in his recent article in the Guardian:
Even more so today, they [the public] do not think their challenges can be met by old-fashioned state control as the way to personal or social empowerment; they do not think breaking up Nato unilaterally is sensible; and they realise that a party without a serious deficit-reduction plan is not in these times a serious contender to govern them.
Looks about spot on to me. Inequality and the problems faced by many parts of society do need to be addressed. But Britain is on the right track and the recovery is going fine. A bigger risk would be forgetting what got us into this mess. And important work is being done in that regard. Another potential blog topic for another day, perhaps.
So to conclude, even if you are cold-hearted [like Mr Trump] and don’t care about inequality, there is a compelling economic reason for a fairer society. To grow in the longer run, society should be harmonious, fair, where citizens have decent standard of living and one that provides opportunities to those that work hard. Most politicians would agree on that point, but I doubt either Mr Trump or Mr Corbyn could deliver. Perhaps the only difference is that Jeremy Corbyn would try.
Note: these views are mine, and mine alone. They do not reflect those of my employer (past, present or future) or anybody that has or will pay me money. They may be inaccurate and you should not rely on them, at all. They are also subject to change, at the drop of a hat.