Federal treasurer Scott Morrison is one of the few Australian politicians calling out the elephant in the room.
“Politics across the globe has been turned on its head,” he told colleagues at the Liberal Party federal council last month. “In election after election we have seen conventional politics left standing at the polls. Entrenched cynicism. Widespread disconnection. Broad based economic frustration and disempowerment. Distrust of whether the system is working for them.”
This was, he said, a reality that political parties needed to “face and embrace”.
It was on the very night he delivered this speech that his cabinet colleague Christopher Pyne was recorded indicating to colleagues that moves were afoot to legalise same-sex marriage, comments that enraged conservative elements of the party and set the political class off for another week of self-reference and talk about a leadership challenge to Malcolm Turnbull.
Plus ça change.
What was notably absent from Morrison’s speech, however, was a set of solutions to address the evident chasm between what establishment political parties believe is the right course of action and what voters seek. Election after election delivers surprise surges in support for anti-establishment candidates – Donald Trump, Marine Le Pen and Emmanuel Macron, Jeremy Corbyn – who run from a starting point that something needs to change.
A recent extensive research note from Macquarie strategists Viktor Shvets and Chetan Seth offers a fresh perspective on why this is happening, using a psychology theory first developed by Abraham Maslow in the 1940s that seeks to explain the basis for human motivation.
The basic argument is that because of the disruption to career paths being wrought by globalisation, people are realising that they may never be able to achieve their life goals, or reach the point in their lives where they thought they would find happiness. What were previously seen as conventional routes to success and achievements are being closed off as automation, supply chain disruption, offshoring and the app-ification of all manner of industries progresses at a seemingly relentless rate of acceleration.
This chart will be familiar to many:
It’s Maslow’s hierarchy of needs, and has been found to have widespread applications across psychology, education, and economics since it was first devised. The simple concept is people will seek to have the lower needs met first before they progress up the ladder. Over time they will progress up and down the hierarchy as life presents opportunities and setbacks. The ultimate fulfilment of existence — self-actualisation — can only occur after a person has built physical security and a sense of belonging and esteem.
The principle applies to societies and nations, too. Shvets and Seth explain:
For example, residents of the Democratic Republic of Congo or Somalia are barely subsisting in the first two stages, whilst most citizens in Denmark or Switzerland are now in the selfactualization stage (or even beyond that, in what Maslow described as ‘self-transcendence’ – altruism and spirituality). Sometimes, societies could slide backwards (for example in 1950s Lebanon was renowned as a Switzerland of the Middle East, however by the 1980s, the country was wrecked in a civil war; Argentina in the 1900s was one of the richest and most developed countries in the world; however by 1990s it was broke and in many ways destitute) or forward (such as Korea today vs. 1960s or Israel today vs. 1950s). Clearly, most Korean residents over the last five decades have gone from a survival mode to at least self-respect if not self-actualization, whilst Lebanon (until recently) was regressing in the opposite direction.
Thinking about how this applies to people’s careers, it’s easy to see how economic disillusionment can set in:
The pyramid can answer the question of what happens when the nature of jobs changes…. what happens to a computer programmer who never managed to become truly creative in writing code and now connects computers in various offices? Similarly, what happens to an equity trader who has been replaced by computer trading and is now either trading on his own account, marketing credit cards or selling real estate? What happens to a CPA, after technology automated most taxation and accounting functions, or paralegals which are no longer required? Unless this CPA is truly innovative in creating sophisticated legal and taxation systems, he would be suddenly surviving on the margins of the workforce.
People ages in their 20s and 30s in advanced economies — millennials, if you like — and even people in their 40s and 50s are staring down the reality that careers are no longer linear. In fact, there’s a high likelihood that any job they’ve set their sights on won’t exist by the time they’re ready to do it.
One of the major talking points in markets and economics at the moment is the absence of the inflationary pressures that would be expected to accompany the levels of job creation and low unemployment observed in many countries, including Australia and the US. RBA governor Phillip Lowe recently remarked: “When any one of us feel like there’s more competition you are less inclined to put your price up. Firms act like that and workers act like that.”
Lowe encouraged workers to start pressuring for wage rises. But to his point on competition, the list of industries that will be disrupted over the coming years goes on and on. Here’s Macquarie again, drawing on their analysis:
Over the next decade or two, it is expected that over the next decade or two, around 95% of accountants, 90% of technical writers and almost half of economists and pilots would be replaced. The same largely applies to lawyers, paralegals, traders and investment advisors. It is expected that almost 90% of real estate agents would disappear and almost 100% of telemarketers. Increasingly, routine articles by magazines like Forbes or various newspapers (such as sports news, weather) are written by computers, with limited, if any, human involvement. The same unfortunately applies to routine tasks undertaken by investment analysts (such as quarterly results notes).
What populist politics — reflected in the popularity of Trump, the Brexit result, and the surge of support for Marine Le Pen — are tapping is this disintegration of labour markets that is cutting off what are generally thought of as career paths but Maslow would argue are paths to people’s level of life satisfaction.
“Whether one calls this group ‘angry white man’ or designs some other name, it is essentially the majority of population in developed markets which have been on receiving end
of globalization as well as growing shift towards assets rather than income as the source of wealth,” Shvets and Seth write.
Unfortunately — and as BI UK’s Jim Edwards highlights in detail here — trade protectionism is muddled thinking that has the potential to ruin economies and incentivise bypass mechanisms, including black markets.
So far, however, this has seemingly been the only answer that political leaders have been able to offer as an answer to people’s concerns.
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