It's not the economy, stupid

Back when Bill Clinton was running for re-election as President, he famously had a big sign on his desk that read "it's the economy, stupid". It was there to remind him and his campaign team that pocketbook issues were all-important to the electorate.

Clinton's mantra doesn't seem to hold up any more. There are elections coming fairly soon in three countries that I follow quite closely: the UK in July, the US in November, and Canada on a date yet to be announced, but likely some time in the next twelve months.  The incumbents in all three countries seem very likely to be defeated, even though their economies seem to be doing tolerably well.

Consider. In the UK, the economy has finally emerged from recession and may actually be growing faster than near neighbours such as Germany. Inflation has dropped sharply. It's true that the economy is smaller than it would have been in the absence of Brexit, but given the short memories of most voters, that ought not to count for much any more. In the US, a remarkably high percentage of voters believe the economy is in recession, which is very far from the truth. Inflation is well down from its cyclical peak, though it is starting to look a bit sticky, and unemployment is very low. The fiscal situation is a mess, but when did voters ever care about that? And in Canada, despite the negative tone of much media coverage over the past year, the economy has stayed out of recession. Inflation has come down to the Bank of Canada's target range, likely setting the stage for an interest rate cut as early as next week.

What has changed since Clinton's day?  A few thoughts come to mind. The first is that perceptions of what constitutes a "good" economy have evolved. In Clinton's day it was still common to hear talk of the "misery index", calculated by adding the inflation and unemployment rates together. Evidently that no longer works.  After a couple of decades of persistently low inflation, the surge in prices that resulted mainly from the COVID pandemic was an entirely new experience for much of the electorate, and they didn't much like it. It's true that unemployment briefly spiked higher during COVID, but it's worth keeping in mind that even in a very weak economy, unemployment may only affect 10 percent of the population, whereas inflation is felt by everyone. 

Then there's the change in the availability of information. The days when media outlets employed full-time business reporters who could accurately convey economic data to the public are largely gone.  Looking at inflation again, it would be hard to find an economics writer at most newspapers today who could accurately describe the difference between disinflation (which most countries now have) and deflation (which they don't, and in truth really don't want). News obtained from social media sites is even worse: there seems to be a small army of people out there who see it as their mission to peddle as much disinformation about the state of the economy (and of the world in general) as they possibly can. 

Another aspect of the explosion of social media is the increased polarization of the electorate. Traditional media certainly hosted a wide range of opinions, but the tone was generally respectful and tolerant. Those are not words that can be used to describe the discourse on social media, where innumerable people hide behind their anonymity to post views that would clearly have attracted lawsuits in gentler times. The belligerent tone of social media has, perhaps inevitably, spilled back onto the traditional outlets. Take a look some time at the home page of the London Daily Telegraph -- the paper's columnists are in a scarcely concealed state of rage at the state they perceive the country to be in, and the cataclysm that awaits if the voters are foolish enough to vote Labour in July. (Do yourself a favour and don't read any of the actual articles).

As things stand, it looks as if Messrs Sunak, Biden and Trudeau will all be lined up at the unemployment office the day after voting day, despite the healthy-ish economies they oversee. It's not as if their likely replacements are at all inspiring -- in the UK, Keir Starmer is dull and unambitious; in the US, well, nothing to add here; and in Canada, Pierre Poilievre is a shrill right-winger with no real-world experience to speak of. In all three countries, it looks like change for change's sake is what the voters want.