M.K. Venu 
“It is the economy, stupid,” was the popular slogan used by Bill Clinton in his 1992 election campaign when he comprehensively defeated George Bush Sr. The US economy then had just come out of a recession.
Donald Trump may not have imitated Bill Clinton’s famous line but in effect, his campaign’s core was focused on how high inflation after COVID-19 had badly eroded the real incomes of the working class which was hurting badly. In fact nearly 90% of registered Republican voters said in a survey that they were worse off today than they were four years ago. But the top 10% of the US population – by income and wealth – was doing very well.
Post-COVID, income and wealth inequality in the US had reached a new peak as the great economic stimulus created a surge in the stock markets and those who had big investments in stocks saw a further bulge in their wealth. Following the Federal Reserve’s massive $4 trillion plus liquidity injection after COVID, the number of billionaires in US grew by 16%, from 600 to 700, as Ruchir Sharma notes in his book, What Went Wrong with Capitalism.
Ironically Elon Musk, who helped Trump win over the working class, saw his wealth go up over six times, from $20 billion to $150, following the unprecedented COVID-19 stimulus in 2020. However, by 2022, inflation soared to over 7% and eroded the wages of the working class – something which Donald Trump has exploited to the hilt.
The US is the most unequal society in terms of income and wealth distribution among its peers in the developed world.
The combination of heightened income inequality and inflation have contributed significantly to the eroding popularity of incumbent governments in various democracies in 2024. We have seen this happen in India too, as inflation, wage stagnation and unemployment delivered Modi a big shock in crucial states like Uttar Pradesh and Maharashtra, bringing his party well below the majority mark in the general elections.
Also read: Consumption Data Shows the Indian Middle-Class Is Shrinking
As economic disparities grow, the middle- and lower-income voters often feel a deepening sense of economic insecurity. In the US, for instance, the top 10% of households control nearly 75% of total wealth, leaving the bottom 50% with just 2% of wealth, which amplifies frustration among the voters feeling left behind by current economic policies. These disparities have continued to expand despite some wage increases, which have been largely offset by ever rising prices.
Kamala Harris did promise that she would reduce the cost of living for the working class but she could not carry enough conviction simply because she was part of the incumbent regime.
People’s perception that inflation is eroding their financial well-being, even in countries that have managed economic growth, further drives dissatisfaction with the incumbents. This secular trend is visible across many countries which have gone to the polls this year.
The combination of inflation and income inequality has led voters to view current leaders as failing to address their concerns. The opposition parties promising reforms on these issues are automatic beneficiaries.
In 2024, many incumbent governments worldwide have struggled in elections, with significant shifts in power taking place across many democracies. In the UK, the Conservative Party lost its majority, facing challenges with voter dissatisfaction over economic issues. Similarly, Japan’s Liberal Democratic Party, which had dominated for decades, lost its majority in recent elections, marking a shift in the political landscape.
France and Germany have seen similar trends. French president Emmanuel Macron’s government faced backlash when he called for snap elections, and in Germany, the ruling coalition parties faced voter discontent in important state elections. In South Africa, the African National Congress lost its majority for the first time.
This trend clearly reflects widespread dissatisfaction with the post-pandemic economic management by governments. In almost all economies the big fiscal and monetary stimulus after COVID seems to have helped the rich grow their wealth manifold even as the poor and lower middle classes have seen their incomes and purchasing power eroded by inflation. This is a structural problem and there are no quick-fix solutions to this.
Trump’s promise of making America prosperous again by raising import tariffs for China, India and other large economies is fraught with the same risk of causing runaway inflation and hurting the working class with whose support he has won the elections.
Global capitalism fed on endless fiscal and monetary stimulus is facing a deep structural crisis which needs a durable solution which makes growth politically and democratically sustainable.