Elections Across the World Carry Distinct Economic Messages
2024 was a blowout year for elections. From Asia to Europe to the Americas, nearly half the world’s population went to the polls last year to decide important national, regional, and provincial contests. What happened in the United States was pretty much in line with what happened elsewhere. Voters almost universally turned out incumbents and when incumbents held on to office, they were weakened. Voters also leaned more toward national than internationalist sensibilities. Mexico was the single and remarkable exception to the first of these points, though was fully in line with the second.
From this complex of decisions, four economic messages emerge:
One, policy emphasis has shifted from climate and equity concerns toward matters of living costs and growth promotion.
Two, nothing in these results offers hope that governments will do much about budget deficits and the worrying world-wide trend to greater accumulations of debt.
Three, despite the emphasis on growth, these new administrations – in North America and elsewhere — will take a much harsher stance on immigration.
Four, the nationalist emphasis makes trade frictions all but inevitable in response to Trump’s tariff promises but also independent of them.
Outcomes in the US, UK and France
Much of the media has described the elections as a shift to the right. These discussions typically point as exceptions to Labour’s victory in the United Kingdom and the success in France of a leftist effort to block the ascension of Marine Le Pen’s right-leaning National Rally Party. While this framework allows journalists to rely on old categories, it does more to obfuscate than elucidate. Rather than a left or right preference, the elections showed a strong dissatisfaction with the job that existing governments were doing, whatever their left-right affiliation. Living standards had deteriorated and people had despaired over the quality of life and opportunities to improve their lot, especially for the younger generation.
Thus, Labour’s victory in Britain, for example, reflected an embrace of socialism less than a disgust of how the country had been governed for years. Labour’s landslide occurred even though its overall vote tally differed little from 2019. It was the decimation of the incumbent Tories in favor of other parties that created the result. France’s voters, whether they cast their ballot for the left or the right, mostly showed a disdain for the way France had gone under President Macron. His En Marche Party was the big loser. And in the United States, it should be clear that the vote reflected a rejection of what had been more than an enthusiasm over what Trump might bring. It is these kinds of rejections that color the economic likelihoods.
The Economic Impact of 2024 Elections
Top of the list is the emphasis on living costs and growth. Concern about climate change will remain, especially in the rich nations of the west, as will other green issues, but these will likely take a back seat to policies that aim directly at inflation control and economic growth. The shift will be most pronounced in North America and Europe.
Both sides of the Atlantic will likely see a de-emphasis of the kinds of subsidies and support the Biden administration and others gave to electric vehicles (EVs), wind, and solar. Canada, which did not have a vote last year, will, if it follows the 2024 trend, which seems likely, will give up or pare back its carbon tax. In Europe, the cost of energy had a high profile in many of the electoral contests, making it likely that an easier acceptance of fossil fuels (or perhaps even nuclear) will color future policy. The United States will also pursue cost controls and growth through de-regulation and tax cuts for business on the presumption that these will promote more rapid growth rates by encouraging investment and hiring as well as productivity gains.
The emphasis on growth – whether pursued by tax cuts, spending initiatives or both — makes it highly unlikely that governments will do much to curtail the size of budget deficits or slow the growth of outstanding debt levels. Such issues received little attention in the elections, though they are connected to the high and rising cost of living and both economists and financial people have warned that the debt overhang makes economies and financial markets dangerously fragile. Still, these issues will take a back seat as the winners of these elections begin to govern and presumably deliver on voters’ demands. The Trump administration will try to square this circle with its Department of Government Efficiency (DOGE), but promises aside, it is not likely to make much difference in deficits or debt accumulation, especially in its beginnings. There is little likelihood that other governments will follow this approach.
Unchecked immigration was another matter that prompted voters to punish incumbents. To be sure, it was less of an issue in Japan or Indonesia or Bhutan, for example, than in the rich countries of the west. Trump made it a centerpiece of his successful campaign against President Biden and then Vice President Harris. It fueled the disruptive power of Le Pen’s party in France. In Germany, anti-immigrant feelings moved two important provincial elections drawing votes from established parties to the right-leaning Alternative for Germany (SfD) and the left-leaning Sahra Wagenknecht Alliance, because, for all their other disagreements, both blamed immigration for Germany’s economic woes. Conventional economic analyses would warn that an anti-immigrant stance would work against voters’ clear preference for reduced living costs and greater rates of economic expansion, but the voters see matters differently, blaming immigration for absorbing social services, which otherwise could help the general population, and depressing real wages. Contradictory or not from an economic standpoint, efforts to control immigration will remain a political winner for the time being, almost regardless of the underlying economic effects.
Trade, too, is a matter that cuts both ways economically. Tariffs had a higher profile in the US campaign than elsewhere in the world, but the stance against immigration and for greater levels of economic well-being bear on this matter. These concerns have brought out a kind of economic nationalism from many of these elections, a bit of a “citizens first” demand. That, in itself, could create trade friction but is especially likely to do so in response to the kinds of punitive tariffs that Trump plans to impose on China as well as other nations. Trade wars, even on a moderate scale, seldom help growth. If, as it seems, voters have rejected this insight from economic history, the politicians who have just gained power will as well, at least initially.
Admittedly, this discussion is just a look at broad likelihoods even before these new governments have had a chance to formulate specific policies. Doubtless the give and take that inevitably occurs during policy creation will offer many surprises. But if any of these governments want to stay in power, they will have to gratify the voters’ clear preference for economic growth and putting citizens first. They will also have to avoid any restraint for the sake of fiscal prudence.
