By Christian Takushi MA UZH, Macro Economist & Strategist. Switzerland – 10 Sep 2018 (adapted public release 15 Sep 2018).
The elections in Sweden have come out as expected. The Far Right advanced, and the extreme scenarios painted by the media failed to materialise. While the Swedish Currency is behaving as we foretold, all eyes are turning to Bavaria now, where much more is at stake in a few weeks.
Sweden’s ultra-liberal course has been shaken, but not reversed
According to the Swedish Election Authority, the Left Block led by the Social Democrats has 40.6% of the vote, the Alliance Block led by the Moderates has 40.3%. The nationalist Sweden Democrats have 17.6%. No block has an absolute majority to rule. Snap elections cannot be ruled out. Sweden Democrats could sway the balance, but the final result – emotions aside – will be a watered-down compromise.
Many European voters depend on big government
While the liberal mainstream parties in Sweden have been dealt a blow, the anti-immigration party (Sweden Democrats) will be systematically blocked and shunned. We have been saying over the past three years that – barring a major Risk Event – it is very unlikely that the Far Right parties will get more than 33% of the vote in EU-crucial countries like France and Germany. There are financial, demographic and political reasons for our forecast, and so far it is proving correct. Countries like Hungary and Italy are special cases and they don’t drive EU policy. We forecast in 2016 that the EU will shift decidedly to a more liberal course in coming years. And we haven’t changed our forecast since – not one bit despite the much drummed up rise of the Far Right.
There might be exceptions to this rule, but as a whole, European battle-ground states (as I call those that can shape EU-policy) will continue to vote liberal and to tolerate a bigger government. The gravitation towards big government – peacefully or violently – is the history and future of Europe.
In Anglo-Saxon countries however, the conservative vote might be able to still carry a majority in years to come and oppose a bigger state. This is part of a Great Normalisation (see below). I am not sure for how long though, because these nations have also gigantic corporations that rule over the political process.
In fact, the survival of the conservative movement in the USA and other Anglo-Saxon nations will depend on their ability to re-energise smaller firms and competition (split up monopolistic giants). Economics and Politics are interconnected. The idea that capitalistic competition and monopolies can co-exist is a well-financed marketing farce. I am not saying as a macro economist, that huge oligopolies don’t offer some value to consumers, the point is that they invariably destroy free competition and take democracies hostage. Oligopolies and monopolies are indeed the biggest threat to capitalism and democracy. Big firms and mainstream parties led Swiss voters to accept the Bilateral Agreements with the EU – 18 years later, many Swiss citizens lament their referendums are meaningless when Brussels raises an objection. In all fairness, big firms simply look after their own interests, Swiss voters can only blame themselves for the erosion of Direct Democracy. Democracy in Europe is fading away – It is the price of integration.
As we warned in recent weeks, the rise of the Far Right in Sweden was over-dramatised on purpose. Those professional investors that followed our research have been able to close their currency positions (Krona) already. The next few weeks is muddy waters for investors. Just as in France and Germany before, the results are less dramatic than expected. This is the pattern of recent years: Governments and media successfully drum up the rise of the Far Right and the “fear” factor, rallying support for mainstream forces.
Sweden may need 2-3 weeks to get more clarity over a new government: I expect a grand coalition or moderate coalition to rule.
More importantly, Sweden sets the pace for the more important Bavaria Elections in 4 weeks: The EURO should remain vulnerable until 2nd week October. Please, see our recent analysis on Bavaria elections and Merkel.
“Left Behind”: Does the Far Right in Europe really have such momentum?
Two phenomena: Big vacuums left and right of the center; Normalisation
What we are seeing in Europe is the rise of new Right and Left Parties – They are filling the vacuum that the mainstream parties have created by their relentless shift to the liberal center. Best example: In Germany the formerly conservative CSU is no longer really conservative; likewise the formerly Socialist SPD, is no longer a leftist party. Both government parties CSU and SPD have become liberal center parties with some mere shades of conservative or leftist agenda during election seasons. They abandoned most of their original political beliefs to become permanent government-coalition parties in Berlin. There are some extremist elements voting for the Far Right and Far Left in Western and Northern Europe, but most of their supporters were simply LEFT BEHIND by the mainstream parties. I don’t see the extremist momentum that most experts and media are painting. More than half of so called “polarised” voters are simply loyal to their conservative or leftist beliefs.
Thus, the so called polarisation of Europe has been enabled by the mainstream parties’ efforts to perpetuate their hold to power, becoming center parties. Many former SPD voters now support the “emphatically leftist” Die Linke, just as many former CSU voters now support the “emphatically conservative” AfD. While the leaders of the CSU, CDU and SPD (government parties) blame the AfD for the polarisation of Germany, .. the polarisation in key European battleground states is less dramatic when analysed from economic, geopolitical and historic perspectives.
Normalisation processes in Politics, Military & Economics under way
The rise of so called Far Right Parties is also part of a common normalisation process in human behaviour. After decades of a relentless advance of ever more liberal policies in Europe, it is normal to see a corrective move back to the right. I deem this the Great Normalisation in Political, Military & Economic Processes. Can developed states embrace ever more liberal policies that grant all sovereign powers to a centralised organ? Yes, but corrective movements back to the mean are expected along the way. The same can be seen in the Military Scope: Europe embraced an extreme form of Pacifism that foresaw Global Peace through Trade. The EU rendered Armed Forces as obsolete. After realising its erroneous strategic assessment, the EU has begun to rearm fast. Normalisation in Economics might be underway too: After a massive regulatory onslaught that benefitted the rise of corporate giants – which in turn rendered nation states impotent, there is talk about the need to return to Competition and Deregulation.
These processes are overlapping with demographic and geopolitical trends, making it a highly complex, but not an unpredictable 21st century. Despite growing polarisation, I still see a majority of Europeans tolerating the status quo and even more integration (read power concentration) down the road. 2/3 of them rely upon or depend on state-owned media, government pensions, subsidies or jobs (also government induced jobs via regulation).
By Christian Takushi MA UZH, Macro Economist & Geopolitical Strategist. Switzerland – 10 Sep 2018.
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