They were duped, manipulated and lied to. Vladimir Putin and a few tax-dodging billionaires hacked their Facebook feeds with fake news. None of them understood that they were voting to make themselves poorer. Wherever “populist” governments have been elected, plenty of commentators have argued that their working-class supporters were in some way tricked with divisive rhetoric, and that they would suffer the most as the economy crashed. But hold on. It turns out that maybe they were just voting with their pockets.
An impressive record
By far the most significant of the countries that have broken with the liberal consensus so far has, of course, been the US. Donald Trump mobilised angry working-class voters to get himself elected in 2016. Cue predictions that this would hammer the economy and hit his core voters hardest of all. So far, that is not quite how it is playing out. The stockmarket has been strong. The economy has grown faster than expected, even if it is slowing down slightly this year. And now it turns out that wages are rising strongly as well. Measured by the hourly rate, wage growth has hit a ten-year high of 3.4%, faster than inflation at 2%, and back to the level of growth chalked up over the last three decades. Overall, real median household income has risen by $7,000 (£5,800) since Trump was elected to $65,000, a faster rate of growth than under Obama, and the highest figure on record, according to Sentier Research. The record so far is impressive.
Here in the UK, it has been a similar story since the “populist” vote to leave the EU in 2016. The warnings of a collapse in the economy were even more hysterical than they were for Trump. Very few of those predictions have come true either. But it is what is happening to wages that is really interesting. The latest figures show that in June earnings growth hit an 11-year high of 3.9%, well ahead of inflation at just 2%. The years of stagnant wages are clearly over. With the numbers of jobs hitting record highs as well, workers are doing better than they have for a long time.
As for Poland, unemployment has dropped to a 28-year low and wages are rising at over 7% annually. It is hardly struggling. In Hungary, wages are rising at more than 10% a year.
In truth, there is no great mystery here. Policies that are labelled populist are often pretty good for working people. A slightly more restrictive immigration policy means the labour market is tighter, especially among the low-skilled, putting upwards pressure on wages. Tax cuts and a drive to deregulate the economy boost productivity, and lift living standards.
Trump, for example, has pushed through major tax cuts and rolled back regulations, and that has led to a rise in the number of small businesses, which is already feeding through to more jobs and higher wages. In Poland, taxes keep being rolled back. This summer, the country proposed a new tax rate specifically targeted at persuading its young people to stay at home rather than move abroad: anyone under 26 will pay no income tax on earnings up to 85,000 zloty (£17,700).
Higher minimum wages help as well. In the UK, we have one of the fastest-rising minimum wages in the world. In the US, Trump has done nothing to stop states increasing mandated salaries, and the House of Representatives just passed legislation to increase the federal minimum wage for the first time since 2009.
Hard rhetoric softened with cash
True, there is plenty to complain about in the typical “populist” agenda – tariffs, tearing up trade agreements, more protectionism and often an unhealthy degree of state meddling in industry. It is often served up with some nasty rhetoric too. But as wages keep rising, it is hardly surprising that people keep voting for them.