The famous “It's the economy, stupid” slogan from Bill Clinton's 1992 presidential campaign was believed to capture the primary concern of American voters in any election. Will that mantra be vindicated once again this year?
Although it is premature to declare an economic victory, Inflation appears to have been controlled without triggering a recession. The labor market remains strong, and President Joe Biden's policies have disproportionately benefited low-income Americans (there is still much to be done). Yet in survey after survey, people express deep dissatisfaction with how the country is being led.
The discontent is not only with Biden, but extends to all “top economic leaders,” including US Federal Reserve Chairman Jerome Powell, who was not even appointed by the current administration. This discontent cannot be attributed to recent foreign policy decisions in the Middle East, because the low approval numbers predate the Hamas attack on October 7. Instead, there appears to be a strong disconnect between the way economists view the state of the American economy and people's perception of their own well-being.
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What's in the background
What is the explanation? One hypothesis is inequality. On the one hand, standard income inequality – measured by the Gini coefficient or wage dispersion – obviously does not explain growing discontent. After increasing in previous decades, Income inequality has remained stable in recent years, and Biden's policies have explicitly tried to address it.
On the other hand, inequalities in the health sector or between regions continue to be flagrant, and current economic policies cannot do much to reverse them in the short term. Even more important is the growing sense among people in many parts of the country that political and academic elites have forgotten about them and care more about Palestine in the Middle East than about Eastern Palestine in Ohio.
A second hypothesis, especially relevant for the younger generation, is that uncertainty about career and economic prospects has increased in a world marked by artificial intelligence, geopolitical conflicts and climate change. The upward mobility that previous generations enjoyed no longer seems likely.
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The problem with this hypothesis is that it is based on an after-the-fact evaluation of the achievements of previous generations. In retrospect, we know that obtaining a college degree or higher and entering the job market in the early 1990s – at the beginning of hyper-globalization and rapid economic growth – It was equivalent to winning the lottery for those of us who were lucky enough to do so. At the time, however, we had no idea what was to come. Previous generations experienced the same everyday anxieties and uncertainties that the younger generation faces today, but these did not cause the same widespread discontent felt among young people today.
A third hypothesis focuses on the general decline of institutions and public life, which encompasses everything from the loss of civil discourse to gerontocracy, growing political polarization and recurring political paralysis (think debt ceilings and government shutdowns). These issues may have only tenuous ties to the economy, but they contribute to growing disillusionment with the functioning of American democracy.
Positive aspects
A less bleak view is that the current discontent is a byproduct of the progress the United States has made as a society. While some forms of inequality have increased, others have markedly decreased. Few would dispute that women, African Americans, and members of the LGBTQ+ community have many more opportunities to compete today than they did two decades ago, when they were still excluded from many fields. Relatively speaking, white men have lost the most. If we view the world through the prism of an ongoing zero-sum power struggle, we should not be surprised by the reaction of those who are losing privileges they have long taken for granted.
Another “positive” aspect is that Pre-existing sources of discontent, such as unequal treatment, are more evident today, precisely because people are aware of new opportunities and the factors that lead to success (i.e. “how the game is played”). Instead of feeling satisfied with what they have achieved, they focus on the areas in which they have not lived up to their aspirations.
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Consider the case of elite college admissions. Yale University received about 18,000 applications for the class of 2007, compared to about 52,000 for the class of 2027. A generation ago, Yale might have been considered out of reach for all but a few; but now the dream is getting closer and closer, and the requests have poured in. The other side of the coin is the bitterness an applicant's family feels after being rejected by an elite university. What they take away from the experience is not that they had a chance, but that the promise did not materialize.
The same disappointment that arises from broken promises in a world of rising aspirations can explain discontent in many other contexts, from career advancement to the fate of companies. The positive side is that people feel empowered to aspire to the next rung of the ladder.
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As is often the case with social phenomena, the origin of the current discontent is likely to be multidimensional and include elements of all the above reasons that explain the current feeling, as well as other motivations. Although it may be difficult for an economist to admit it, one thing is certain: it is not just the economy, idiot.
PINELOPI KOUJIANOU GOLDBERG
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