It has been over six years since the Great Recession officially ended, and some economists are starting to worry that another recession may be on the horizon. The average period between recessions tends to be around five to six years, so if we are looking purely at historical averages, a slowdown is due within the next few years at the most (which is scary, considering Federal Reserve interest rates remain at zero). But beyond historical averages and business cycles, disappointing data from around the world, especially with the economic powerhouse of China, has concerned economists. As Ylan Q. Mui reports in the Washington Post:
“It starts with the slowdown in China, which is already straining the global recovery. The world’s second-largest economy has lost its appetite for the raw materials that fueled its industrial boom, leaving the smaller countries that supplied it with resources stumbling in its wake. Slower growth abroad translates into weaker foreign currencies and a stronger U.S. dollar, which makes American goods harder to sell in the global marketplace.”
Some economists believe this could lead to a new global recession within the next two years, while others are less certain. Meanwhile, U.S. job growth has slowed this year, and it has been quite clear recently that the stock market is in bubble territory. In September, the economist, Robert Schiller, who correctly predicted the stock market crash at the start of the century, told the Financial Times:
“It looks to me a bit like a bubble again with essentially a tripling of stock prices since 2009 in just six years, and at the same time people losing confidence in the valuation of the market.”
The good news is that most recessions are mild compared to the Great Recession (or the Great Depression), and most economists believe the next one will be mild. Still, while Wall Street quickly recovered from the ’08 crisis, Main Street’s recovery has dragged on like the Benghazi hearings. Another recession, even if mild, would certainly inflict pain on average Americans.
It could also be dangerous in a political sense. Currently, we are seeing the rise of populism on both sides of the aisle, and while Sen. Bernie Sanders’ (I-VT) reform populism is a good thing, and a step towards making the economy work for everyone, the reactionary populism that we see with Donald Trump, based on scapegoats and intolerance, would certainly get a boost if the economy were to take a downturn in the next year (especially with President Obama at the helm). Forget that recessions tend to occur twice a decade or that Obama inherited the worst economic disaster since the Great Depression, after decades of neoliberal policies, such as the deregulation of Wall Street; if a recession comes during the election year, Republican candidates will blame it all on Obama. And sadly, the truth won’t matter. Republicans candidates have proven over the past few months that lying is of no consequence, and that, if anything, it helps their campaign.
Historically, downturns in the economy tend to bring out the reactionary populists. Indeed, if it weren’t for the Great Depression (and the disastrous Treaty of Versailles), the rise of Adolf Hitler and the Nazi’s may have never occurred. After years of economic disasters, including the hyperinflation of the early '20s in the Weimar Republic and the Great Depression 10 years later, which cut industrial output by half and put six million people out of work, the desperation and hopelessness was perfect for a charismatic leader like Hitler, who blamed scapegoats and preached a kind of nationalist revenge after the humiliating defeat of WW1.
Meanwhile, in the United States, reactionary populists like Father Coughlin and Huey Long rose rapidly in popularity, and in the mid-'30s threatened Roosevelt and the New Deal. Phillip Roth’s novel “The Plot Against America” tells the alternative history of Charles Lindbergh, who was an early supporter of the Nazi’s, getting elected President in 1940, and a pro-fascist regime ensuing. A strong president like Roosevelt, who enacted important economic reforms, may have very well prevented the rise of fascism in America.
Today, we see Donald Trump, who has embraced the old right-wing strategy of scapegoating minorities and foreigners, leading in the GOP primary during a contentious period in America. If the economy took a downward turn in the next year, it would probably work in favor of reactionaries like Trump.
In a study done by assistant professor from UC Berkeley, Gabriel Lenz, it was found that most Americans are not aware of the regularity of recessions, which, as mentioned above, happen on average every five to six years. As a result, he writes:
"When the economy happens to experience a downturn in an election year—as it did in 1980 and 2008—[voters] see it as an unusual event with ominous implications, not realizing that recessions regularly occur. As a result, they may more often vote against the incumbent party."
Trump is charismatic, and to many, “authentic,” which for those less informed or less educated voters, is of prime importance. He has made a campaign out of blasting immigrants, accusing them of criminal acts and stealing our jobs, while bragging about how he would defeat foreign countries and “get the best deals,” all of which is enough for those of a more paranoid persuasion, or those who feel desperate and discontent. If the economy were to take a downturn, it would certainly favor Trump, and possibly attract more voters to him.
Of course, it would also favor Sanders, whose reform policies and anti-Wall Street politics could be an antidote to Trump’s reactionary politics. And, in any case, there is also a good chance that the economy will continue its slow but steady recovery for the years to come, which would no doubt benefit Hillary Clinton the most.
One thing is sure: In the near future, a strong reform leader will be needed to combat the reactionary movement that has suddenly taken over the Republican party. On the left, there is a lot of doubt about whether Clinton, who Sanders called out for political opportunism on Saturday, is that leader. Nonetheless, both progressive and reactionary populism are here to stay, and if the reactionaries manage to get hold of Washington, the United States is in for a lot of pain.