Big societies challenge big governments

Chief Economist Richard Jeffrey considers the causes of the shock EU referendum and US election results.


Richard Jeffrey

Richard Jeffrey

Chief Economist

What seems to connect the UK referendum and the US presidential election is the apparent willingness of electorates to reject the established order and take a step into the unknown. There have been similar moments of rejection in the past. The landslide vote for Labour in 1945 was one, though its cause was more obvious. And in 1970, the left-wing Labour politician Richard Crossman wrote: “There is a cracking sound in the political atmosphere: the sound of the consensus breaking up,” although this fracturing did not manifest until almost a decade later, with the election of Margaret Thatcher.

Disconnected politicians

What appears to have come together with so much force over the past year is a potent combination of political and economic influences on elector attitudes. These have brought about a distinct feeling of social ennui and disassociation from Westminster and Washington. Rightly or wrongly, the political classes have been judged to have become increasingly disconnected from the man and woman on the street. This, in itself, is nothing new – indeed, you could argue that it has been the case for most of history. What is new is the confidence that electors have shown in challenging the established order.

To a certain extent, modern media and communications may be responsible. The deficiencies of politicians are now continually exposed. Yet this still does not explain the risk that electorates took in 2016. Is it just that the disconnect between the common people and their political masters has become too extreme? In the referendum campaign, Nigel Farage addressed directly the concerns of many about the overarching influence of the EU. Likewise, Mr Trump developed a style that appealed to at least a proportion of the population. In both cases, the outcomes reflected the feeling of many people that their interests had been ignored for too long.

Workers aren’t benefiting

In themselves, these influences may have been enough for voters to reject the status quo. But there has been another source of dissatisfaction. Statistics tell us that the UK and US have enjoyed seven consecutive years of decent growth. UK households have seen an average annual gain of 1% in total real disposable income. However, this is not the whole story. Over the period, the numbers of people in employment and the number of households have both risen. So, whereas total wages and salaries have increased by 2.75% per annum in cash terms, the increase per employee has been about 1.75% – less than the inflation rate.

Weak productivity is not peculiar to the UK or US – it is more or less pervasive in advanced economies. It is my strong belief that the consequences for employee incomes have had a much greater impact on electoral mood than might have been realised. The inescapable conclusion is that most employees have not seen the benefits of growth slip into their pay packets. And it may not just be in the UK and US that the dissatisfaction of voters is starting to manifest. 


Richard Jeffrey

Richard Jeffrey

Chief Economist

Richard Jeffrey was Chief Economist at Cazenove Capital until he retired in January 2018. 

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