Who says populist politicians are too serious?
Harper’s Weekly cover from 1900. Public Domain. Source: Wikipedia
A lot of folks have compared the current economic and political environment to that of the late 19th century. And there are a lot of similarities. Rapid technological change has brought the world closer than ever before. Millions of people fled low-wage, dictatorial regimes for better opportunities in the US and Canada. Free trade swept the world—growing from 5% to 8% of global GDP.
These changes spread the benefits of the industrial revolution, but they also worsened inequality. As a result, populist movements grew up, including a takeover of the Democratic Party in the US. William Jennings Bryan’s Cross of Gold speech was a high-point of “prairie populism.”
Now we see nationalistic populism growing around the world. Over the next year there will be a series of high-stakes elections in France, Holland, Germany, and possibly Italy which will test the staying power of the European Union. The National Front in France has established itself as a major political force, and its policies are anti-trade, anti-immigration, and anti-Euro. The uncertain status of the EU has kept valuations depressed in European markets.
Some see the British “Brexit” referendum as a sign of things to come—an national in-or-out vote on whether countries are better off with lower or higher trader barriers. Since the benefits of free trade are unevenly distributed, it’s not clear how people will vote. And—as happened after the Brexit vote and the November elections in the US, it’s not clear how markets will react.
Recently, Robert Sanchez—a National Front mayor of a small town near Marseille in southern France—named one of his streets “Rue de Brexit.” He said he wanted to pay tribute to the British voters who chose to leave the EU. Significantly, he placed it next to “Rue Robert Schumann” and “Rue Jean Monnet”—two men who helped lay the foundation for the post-WWII European Union.
Beaucaire, France. Source: Google Maps
But here’s the funny part: Rue de Brexit is a commercial ring road: a circular street in a gritty industrial zone that goes nowhere. Think of it: a small-town mayor with a Spanish surname uses an English election result to display French national pride—with Gallic irony. Even folks opposed to trade can’t help but show that we live in an increasingly small world.
Happy New Year!
Douglas R. Tengdin, CFA
Chief Investment Officer