Surprise of the Year: Populist Pivot

Forecasters like to get things right. Honest ones reach year-end and reflect on what surprised them the most, a polite way of asking what went wrong. Every year, I put this question to my team, and it usually elicits an avalanche of ideas. Same thing this year, but the votes had a very strong tilt to a single issue: the shocking upsets in some very critical games played out in full view. It looks like we could be dealing with the repercussions for some time to come. If so, it’s doubly troubling that these out-comes weren’t foreseen. Which games are we referring to?

The Olympic Games in Rio were expected to be a disaster. The surprise is that they were carried out reasonably well. A poor prediction, but a good outcome. On the flipside, there was the David-Goliath story of Iceland’s Euro 2016 victory over the far-better-paid England squad. That might have been a bellwether of other things to come. The Cubs’ come-from-behind World Series victory was also emblematic of a year of upsets. But it’s a different sport that saw the big about-faces this year.

Hard on the heels of the agonizing soccer loss, England carried the day in the jarring Brexit vote. Outside of London, the English cast their ballots for the leave side, going against not only their huge metropolis, but also Scotland, Northern Ireland and other urban areas. Overall, the divisive vote tilted ever-so-slightly to exiting the EU. Although polls were close in the run-up to referendum day, most went to bed expecting status quo to prevail. Perhaps the greatest surprise was that the world – and Brits themselves – were so surprised by the actual outcome.

At the same time, the drama in the US election was intensifying. Here, there was a sequence of surprises that set new limits for electoral deportment. First, facts and accuracy tests became almost irrelevant, thanks in great part to 140-character limits and generally short attention spans. In fact, one could easily posit that the gulf between rhetoric and reality has never been greater in a US election. This was true both of assertions that were made about the current economic and political situation and the policy ‘remedies’ floated out on the hustings. Second, the discourse smashed through perceived norms of political correctness, provoking, at times, outlandish backlash. Third, late-breaking, compelling allegations of scandalous behavior hit both candidates. Along the way, new limits were set for acceptable bombast and rancor, on the road and at the debates.

And then the real head-turner: popularity polls vacillated through-out, but reliable models of electoral college outcomes pointed consistently to a decided Clinton victory. Some even foresaw a landslide. Both inside and outside the US, there was a stunned disbelief when, as Eastern Standard Time moved into the wee hours of November 9, it became apparent that swing states went the other way, and that ‘middle America’ was deeply GOP-red.

Since then, the world has been trying to sort out what the results add up to. Two major votes went the ‘other way’, an unexpected plebiscite-pivot that got everyone’s attention. We are still in the silent aftermath, with the people in place, but the programs not. Devoid of a policy roadmap, businesses are in limbo, unsure of where or whether to make their next big investment play – a phase we are calling The Great Hesitation.

What does it all mean? Voters in the West appear to have joined a growing chorus of those disenchanted with the miserable performance of the post-recession economy, of policy remedies, and the effects on them personally – so much so that a slim majority is lashing out at institutions, politicians, large enterprises, and anyone else that is either responsible for the current eco-political architecture, or benefiting from it. What they seem to have chosen is an undefined, ill-articulated and at times, counter-factual alternative that promises to fix what is wrong – somehow. Such appears to be the state of desperation. What is remarkable is that political pivot-points seem to have coincided with economic prosperity-pivots in both the US and UK economies. The timing is ironic.

The bottom line?

If the proof of the pudding is in the eating, on many fronts we have not yet sat down at the table that 2016 has served up. As we do, we can hope that as the reconciliation between rhetoric and reality commences, it proves to lean a lot more heavily on the latter.

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