Walter Molano | Beware politicians trying to do good
The saying 'do well by doing good' is the mantra among elites.
It is the rationale that many well-educated and well-intentioned individuals use to justify making fortunes from running charities, foundations, non-governmental organisations, universities, think tanks, religions and non-profit organisations.
Although the Blairs and Clintons were adept at it, it was a process that was embraced by both sides of the political divide. Under the guise of improving life for the masses, they agreed to sign on to policies, trade deals and deregulation that often harmed the interests of the people they were protecting, while succumbing to the greed of corporate interests.
Along the way, they benefited personally. Brilliant specialists, such as Larry Summers, Hank Paulson, Robert Rubin and Alan Greenspan, were sent to explain the efficacy of these initiatives. But they often did more to obfuscate issues, making it such that no one wanted to challenge their ideas for fear of appearing ignorant.
Unfortunately, the drive for greater productivity bloated corporate profits, while hollowing out much of the middle class. Although higher productivity can justify better earnings and wages, there is no guarantee that the benefits will trickle down. This is why many industrial towns in the Midwest and Midlands were hit hard, moving millions of households into poverty.
President Barack Obama once described these people as fearful individuals who clung to "religion and guns". Yet, what the political class could not construe was that the dissonance that was being produced by their 'productivity revolution' would eventually manifest itself into the election of Donald Trump. Albeit he was a member of the economic elite, he claimed to be fighting for the working class by seeking to dismantle his predecessors' policies.
Many people, particularly those on the coasts, were shocked by the electoral outcome. On the surface, it seemed like a choice between ignorance and competence. How could the electorate pick such an inferior candidate?
The problem is that coastal residents are usually not familiar with the interior of the country. Political pundits call this 'flyover country'. The cosmopolitan denizens of New York, Boston, San Francisco and Los Angeles are often ignorant of the derelict hulks of Gary, Indiana, Independence, Missouri, and East St Louis, Illinois.
They do not know the small farming communities that witnessed their commercial middle class wiped out when their pharmacies, drug stores, gas stations, shoe stores, supermarkets and clothing emporiums were replaced by Walmart.
Hundreds of main streets are lined with empty store fronts, with a few of them replaced by the occasional tattoo parlour, payday loan shop and Mexican bodega. Indeed, three out of the five richest families in the United States are from the Walton family.
Of course, the company was born in Arkansas, and hit its stride when Bill Clinton was governor and his wife served on the board of directors. Hence, the 2016 elections was not a vote in favour of misogyny; it was an outright rejection of the political class who were much more interested in doing well, rather than doing good.
A close look at the electoral results showed a few surprises. For example, it is well known that the coasts are commonly known as Blue States. This means that they tend to vote for Democrats. The rest of the country is known as Red States, because they tend to vote Republican.
Yet, a closer look at individual voting districts showed an interesting development. Many coastal districts that had gone for Mitt Romney, a member of the political elite, had moved into the Clinton camp. Some commentators said that this was a reaction to Trump's bombastic and sexist comments.
Yet, rich people tend to vote with their wallets, and Trump's tax policies will be a big payday for most of these communities.
It could be that they voted against him because his policies will threaten their economic interests. As officers, employees and shareholders of corporate America, they are the ones who will have the most to lose from the modifications to existing trade policies.
There were also other surprises, including the number of people who did not vote in this election versus the previous contest, and the relatively large number of women who went for the Republican ticket.
Nevertheless, the point I want to make is that the 2016 presidential election highlighted the frustration that the electorate has with the political class. The same thing happened during the Brexit vote.
Interestingly, this is not a new concept. It was thoroughly discussed in Plato's Republic. Plato pointed out that political leaders, who claim to fight for the common good, usually focus on taking care of themselves.
This is something that we recently saw in Argentina, Brazil and Venezuela, but we were not ready to see it in the developed world.
Therefore, be careful when politicians say that they are just trying to do good. They may be more focused on doing well for themselves.
- Dr Walter T. Molano is a managing partner and the head of research at BCP Securities LLC.