Slide 1

Misreading Change

Published: Friday, 20 January 2017 11:35

Category: The Pamphleteers

I have in several of my posts on this blog pointed to what I saw was a coming breakdown in the dominant economic-political narrative, which is often given the unhelpful umbrella term of “neoliberalism”. The two big events of 2016, Trump and Brexit, have certainly shaken things up. We now have President Xi at Davos calling for Free Trade and a US Republican President Elect arguing against it! In the UK, people who claim to be Thatcher’s heirs are busy extricating us from what was once seen as one of her great achievements, the Single Market.

The level of uncertainty for investors and the economy at large is believed to be higher than in decades. The failure of economic forecasts makes daily news. For me, the problem is that each item of news, from a bank relocating to the EU from London or McKinsey investing in the UK, tends to be seen as an opportunity for confirmation bias on all sides of any argument. Any item is a heralded as sign of doom and joy to either side of an argument.

One of the first parts of any futures exercise is to look back. If you want to look forward Y years, look back Y to start. Some advocate that “as things are changing faster now”, you need to look back 2Y. In my experience, you need to add one other layer to ground the exercise.

I don’t argue that history repeats itself, but it often rhymes. So, I argue that it is important to look for historical precedents for the scale of challenge we may be facing in turbulent times. That may be 100 or even 500 years ago. In 2012, on this blog I compared the times we are living in to the fall of Sienna and the rise of Florence.

To avoid falling into the confirmation bias trap, I’d like to suggest some examples to illustrate how past periods have worked out, so as to support scenario developments that get beyond the doom/boom models and open our eyes to some possible plausible futures that may feel unreal today.

Consider the UK in 1906. The Liberals are elected with a large majority. A small Labour Party is on the rise and the Conservatives are in retreat. The great reforming government introduces the Pension, starts House of Lords reform. Clearly, Labour will grow into the opposition and the Conservatives will die out! It didn’t work out that way, did it?

In the 19th Century the Whigs and Tories swapped sides on Free Trade. It is argued that the 1906 landslide was in part caused by Conservative splits over Free Trade.

We think of the Democrats as the more Liberal/Left of the 2 US major parties, but it was the Democrats who opposed the abolition of slavery.

While both the Liberal and Conservative Parties in the 1900s were on both sides of the female suffrage movement, the Conservatives were the natural home of the antis. Yet it was votes for women that made the Conservative Party the most successful of the 20th Century.

It is often argued that history is written by the winners, and certainly the narrative can be misleading. Churchill having won the war was booted out of office by a massive Labour Landslide. In 1951, Labour's proportion of the vote was higher than in 1945, but it lost because of failure to reform electoral boundaries. In 1974, Heath lost the “who governs Britain?” election despite getting 1 million more votes than Wilson. Thatcher’s vote share was highest in 1979, declining in 83 and 87 yet getting larger majorities because of splits in the opposition.

There is much written (and tweeted) about populism, the 1930s, the Cold War and the Nazis as parallels with the time we live in, but mostly to support existing prejudices.

The last 2 republican victories in the US have both lost the public vote but won the electoral college.

In every period of significant change there can be both a cohort effect (Generation X Y Z…, baby boomers), but also a backlash. Some of the fiercest advocates of change become the most vitriolic opponents when they see how it works out. Only looking at the perceived trends and not thinking about potential backlashes can blind people to opportunities, threats and potential.

I make no claim to be able to see the future better than anyone else, but I am increasingly sceptical about people who claim unique insights as to why the electorate voted the way it did on Brexit/Trump and may well vote in France, Germany and the Netherlands this year.

As for a prediction for 2017, I think 1914 provides the best one: “It’ll be all over by Christmas”. Take that as you will.

 

Have a good 2017. Be prepared for the unexpected. The future is not what it used to be.

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