5收割災難

本章標題： 5 收割災難（Chapter Five: Harvesting Disaster）

以下為本章的主要結構與重點提煉（本章聚焦中左派政黨長期採取新自由主義「三角化」策略，背離傳統選民，最終導致民粹主義反撲）：

一、前言：歐巴馬失誤助長民粹主義

• 歐巴馬的政策失誤為2016年川普上台創造條件，但並非唯一原因。
• 全球民主國家中，中左派政黨數十年來背離傳統勞工階級選民。

二、英國新工黨的轉向與代價

• 東尼·布萊爾（Tony Blair）推動「新工黨」，模仿柯林頓三角化策略，大力私有化、放鬆金融管制。
• 積極支持小布希的反恐戰爭（尤其是伊拉克戰爭），被嘲諷為「布希的貴賓犬」。
• Chilcot報告嚴厲譴責布萊爾誤導國會。

三、歐洲社會民主黨的普遍右傾

• 法國密特朗（Mitterrand）上台後放棄社會主義，轉向緊縮政策。
• 德國社民黨（SPD）與綠黨推動Hartz改革，增加勞動市場彈性，導致中下階層薪資停滯。
• 義大利、西班牙、荷蘭、瑞典等國中左派均放棄凱因斯主義，轉向債務削減、通膨控制與供給面改革。
• 結果：傳統左派支持度大幅下滑，選票流向極左或新興民粹政黨。

四、葡萄牙的例外與幻滅

• 葡萄牙社會黨曾被視為例外，維持較高支持度並降低不平等。
• 但深層問題（高不平等、低教育品質、服務業低薪工作、房價上漲）在COVID後浮現。
• 2024年起極右翼Chega黨快速崛起，社會黨支持度崩跌，葡萄牙例外結束。

五、右派政黨的回應與英國保守黨轉變

• 英國保守黨因歐元機制危機、布雷克斯特（Brexit）走向硬右路線。
• 強調本土主義（nativism）、反移民、供給面政策與小政府。
• 緊縮政策大幅削減公共支出，導致公共服務惡化。
• 2024年大選保守黨慘敗，但改革黨（Reform）崛起，進一步右移政治光譜。

六、馬克宏的錯失良機（Macron’s Blown Opportunity）

• 2017年馬克宏以中間派姿態大勝，擁有極大政治空間。
• 卻繼續推動供給面改革：減稅、放鬆勞動保護、削減公共支出。
• 被嘲諷為「富人的總統」，未能解決中下階層困境。
• 引發黃背心（Yellow Jackets）運動大規模抗議。
• 雖做出部分讓步，但堅持不改變核心政策，進一步加劇民粹反彈。

整體核心論點：

中左派政黨長期採取新自由主義「三角化」（triangulation）策略，向中右靠攏，推行緊縮、放鬆管制與全球化政策，忽略傳統勞工階級的經濟困境與不安全感。這為右翼民粹主義政黨提供了肥沃土壤，最終「收割災難」——導致西方民主政治嚴重碎片化與極化。

需要更簡潔版、中英文對照、或繼續整理下一章嗎？

Chapter Five

Harvesting Disaster

Obama’s missteps would play into Donald Trump’s hands in 2016, but he was hardly alone in setting the stage for a populist backlash. Across much of the democratic world, left-of-center parties had been failing their traditional constituencies for decades while secure long-term employment was disappearing to globalization and, increasingly, to technology. Tony Blair didn’t limit himself to wresting control of the Labour Party from hard-line Marxists and abolishing Clause Four of its constitution, which had promised to nationalize the commanding heights of the economy. His New Labour mimicked Clinton’s triangulation, pursuing more aggressive privatization than had Margaret Thatcher’s governments of the 1980s, granting operational independence to the Bank of England, and expanding on Thatcher’s deregulatory Big Bang with a stripped down Financial Services Authority, which diluted financial regulation so extensively that New York City Mayor Mike Bloomberg and Senator Charles Schumer found themselves lobbying Congress to do likewise—arguing that otherwise Wall Street couldn’t compete. Blair compounded New Labour’s alienation of the party’s traditional base by clambering aboard George Bush’s Global War on Terror. His initial commitment of seventeen hundred troops to Afghanistan would grow to ten thousand under his successor, Gordon Brown, during Obama’s military surge there in 2010—more troops than any country except the US. But it was Blair’s full-throated support for the Iraq War, to which he committed forty-six thousand British troops, that garnered him the moniker “George Bush’s Poodle” and, eventually, scathing condemnation for misleading Parliament in the exhaustive report published by Sir John Chilcot in 2016.1

Most European social democrats shunned American military adventurism, but not the neoliberal triangulation of economic policy. Soon after his decisive victory in France’s 1981 presidential elections, François Mitterrand jettisoned his socialist program, devalued the franc twice, embraced harsh austerity measures, including wage and spending freezes, declared price stability rather than employment to be his top priority, and dispatched the left-wing members of his government. The French also led the charge on European monetary integration and the creation of a European Central Bank in the 1990s, hoping to limit the dominance of a newly unified Germany and its Deutschmark in setting the terms of intra-European trade and monetary policy.

In Germany, it was a coalition of the Social Democrats and the Greens that implemented the pro-business Hartz reforms starting in 2003. Brainchild of Volkswagen executive Peter Hartz, they were designed to restore labor market flexibility by forcing the long-term unemployed into low-paid service jobs—replicating the American pattern in which Germany’s dramatic productivity gains were accompanied by working- and middle-class wage stagnation. Even when the coalition between the Social Democratic Party (SPD) and the Greens that had ruled Germany since 1998 lost to Angela Merkel’s ascendent Christian Democratic Union (CDU) in 2005—relegating the SPD to junior partner status in her grand coalition—it was the SPD finance minister Peer Steinbrück, a deficit hawk, who ramped up Germany’s anti-Keynesian supply-side reforms. The result, as Adam Tooze put it, was that the SPD and the CDU found themselves “huddling together” at the shrinking center of Germany’s fragmenting political landscape.2

By then, the SPD was hemorrhaging votes to the reconstituted former East German Communists and other left parties, which in 2007 consolidated themselves into the neo-Marxist Die Linke. It garnered about a tenth of Germany’s vote for the next decade. The SPD, which had commanded between one-third and 40 percent of the vote until 2005, would never win more than a quarter thereafter. Yet aside from a brief stint in opposition from 2009 to 2013, successive SPD leaders clung to Merkel in a series of grand coalitions, during which their electoral support continued to dwindle. They eventually broke this pattern in 2021, but not for long. In February 2025 they suffered a devastating defeat, winning a mere 16.4 percent of the vote—their worst result in well over a century.3

Comparable stories can be told across much of Europe. Italy’s center left abandoned Keynesian thinking in favor of debt reduction and inflation fighting as they triangulated toward the technocratic center under the leadership of Romano Prodi. In Spain it was Felipe González’s Socialists who privatized state firms, devalued the peseta, and enacted financial sector deregulation as the country adapted to the demands of European integration. The Labour Party in the Netherlands talked about a third way and campaigned against austerity in the 2012 elections, but like Germany’s SPD, it then joined a conservative government and got behind €40 billion in austerity measures that included brutal cuts to social security, social care, housing, and education. Despite its electoral implosion in the 2017 elections, from which it has yet to recover, its leaders continued insisting that they had done the right thing, even though, as Finance Minister Jeroen Dijsselbloem lamented, “We weren’t able to take our electorate along with us.” In this they echoed the Swedish Social Democrats under Olof Palme in the 1980s, whose anti-Keynesian third way had quickly morphed into devaluation, tight budgets, supply-side tax cuts, financial deregulation, and partial privatization of social services.4

For a time, Portugal seemed to be the exception that proved the rule. The confusingly named center-right Social Democrats governed from the 1980s through the mid-1990s, pursuing strongly promarket policies as the country’s already high levels of inequality escalated still further. Between 1995 and 2024, however, the center-left Socialists were in government continuously except for seven years, usually governing alone—if with implicit backing from other left parties. They were out of office between 2011 and 2015, so they were not saddled with implementing the austerity reforms demanded by the European Commission, European Central Bank, and International Monetary Fund in return for a €78 billion bailout in the wake of the European sovereign debt crisis. When in office they invested in education for those at the economic bottom, protected and even encouraged collective bargaining, and increased the minimum wage. As a result, both pre- and posttax inequality fell over the first two decades of the new century when it was rising almost everywhere else. After 2016, Portugal outperformed the EU averages in economic growth and employment rates, leading some commentators—including Paul Krugman—to herald the performance as an economic miracle. The Socialists managed to hold on to their economic base when their sister parties were fragmenting across Europe, and no far-right party emerged until 2019, when the new Chega (“Enough”) won a single seat. By 2022, it had expanded to a modest 7.2 percent of the vote and twelve seats. The Socialists and Social Democrats always accounted for more than 60 percent of the vote between them, making it seem that Portugal was defying the political fragmentation that was working its way across the rest of Europe—a political miracle as well.5

But appearances can be deceptive. The very high levels of inequality inherited from the 1990s mean that even with the subsequent reductions, Portugal remains one of the most unequal countries in Europe. Ditto with education. Portugal started so far behind that literacy and numeracy rates remain among the lowest in the Organisation for Economic Co-operation and Development (OECD). Portugal’s reductions in its public debt were achieved via brutal austerity programs, starving an already slim welfare state. The comparatively good economic growth has mostly been in tourism and housing. It has done little for Portugal’s struggling industrial north, once prosperous towns like Abrantes, or the dilapidated Lisnave shipyards in Margueira. Employment growth is mostly in low-paying, insecure service-sector jobs. The real estate boom has been concentrated in Lisbon, Porto, and a few large towns, creating some instant millionaires but driving up rents and putting home ownership out of reach for most people. Economic stress became more widespread in the wake of the COVID pandemic, so that by 2023 inequality was increasing again and more than a fifth of the population was at risk of living either in poverty or in severe material and social deprivation. The Socialists were living on borrowed time.6

A sea change began in 2024. Historically, both mainstream parties had been relaxed about immigration, which had not been contentious in Portugal, but as the economic stress intensified, particularly for young people, Chega leader André Ventura saw his opening. In the 2024 election, his party won 18.1 percent of the vote and 50 seats in the legislature, while the Socialists dropped precipitously—from 41.4 percent of the vote and 120 seats to 28 percent and 78 seats. Any question that the Chega movement was a flash in the pan was laid to rest in the snap election fourteen months later. Chega jumped into second place, with 22.8 percent of the vote and 60 seats, while the Socialists had their worst showing since the 1980s. The Social Democrats picked up 11 seats to a total of 91, forcing them to continue as a precarious minority government since they were unwilling to form a coalition with Chega. The Portuguese exception was no more.

Bearing the Costs

As in the US, many right-of-center European parties responded to the left’s triangulation by shifting the goalposts. Britain’s Tories got a running start at this while Neil Kinnock, John Smith, and Tony Blair were reinventing the Labour Party in opposition. By 1990 Margaret Thatcher’s remaking of the Conservative (Tory) Party seemed to have run its course. Despite the fact that she was the first prime minister in 160 years to win three consecutive elections, her cabinet dumped her that year in a palace coup when her popularity plummeted over her regressive poll tax and what had by then become her relentless hostility to the EU. The final straw was a fight over joining the Exchange Rate Mechanism, which required members to align their currencies in the run-up to the anticipated introduction of the euro at the end of the decade. The cabinet muscled the ERM through over her objections, some because they wanted Britain eventually to adopt the euro and some because they saw it as a source of fiscal discipline. Thatcher’s successor, John Major, was a staunch ERM proponent who appeared vindicated when he led the Tories to an unprecedented fourth consecutive win in April 1992. The Thatcher era, it seemed, was over.

But everything changed five months later. George Soros shorted the British pound just as the Bank of England began hiking interest rates in a desperate—and what turned out to be futile—effort to maintain the pound’s peg to the Deutschmark, forcing the UK to crash out of the ERM and netting Soros a billion-pound profit. It was a watershed moment in British politics that shattered the Tory reputation for competent economic management. This helped Labour reinvent itself as the party of competent technocrats, but it also set up the revenge of the Euroskeptic Thatcherites in the Conservative Party, which began under the leadership of William Hague and Iain Duncan Smith. In 2013, they badgered Prime Minister David Cameron into promising the Brexit referendum that would become the hinge for the hard-right takeover of the party.7

Brexit brought the Tories full circle. In 1973 Prime Minister Edward Heath had taken Britain into Europe, fulfilling a long-standing Conservative aspiration—Harold Macmillan’s application a decade earlier had been vetoed by Charles de Gaulle. Long before the move toward monetary union would appeal to mainstream Tories as a source of fiscal discipline at home, they expected that joining what was then the European Economic Community would force Britain’s sclerotic industrial economy to become more competitive. In those days Labour was divided over Europe, with its left wing virulently opposed for the same reason that the Tories were in favor: Membership would erode Britain’s strong union protections and give employers greater labor market flexibility. It was not until Thatcher’s governments decimated those protections in the 1980s and Europe adopted its Social Chapter as part of the Maastricht Treaty in 1992 that this rationale disappeared.

Thatcher’s approach to Europe had been to run it or ruin it. Initially, she made significant strides with the former. In 1984 she won substantial UK tax rebates as compensation for common agricultural and fisheries policies that worked to Britain’s disadvantage. Two years later she succeeded in replacing the Community’s unanimity rule with qualified majority voting on tariffs and other barriers to trade—effectively ending the French, German, and Italian veto power that had locked in their advantages before Britain joined. But as post-Maastricht Europe moved toward more intrusive regulation from Brussels, monetary integration, and talk even of fiscal union, Thatcher and her followers slammed on the brakes—not least because by then Britain’s unions had been successfully cowed.

And then there was nativism, that potent—if sometimes latent—ingredient of Tory ideology that dates back at least to Britain’s imperial heyday. Always a tempting card to play to mobilize voters, it comes with the added appeal of diverting attention from distributive inequities and focusing economic anxieties on antipathy for foreigners and immigrants—however spuriously. So it was unsurprising that resurgent Thatcherites discerned an elective affinity between anti-Europeanism and their supply-side agenda to limit taxation. Still, this alignment carried risks—most notably, as former Tory Cabinet member and Deputy Prime Minister Michael Heseltine never tired of pointing out, the potential to threaten the free trade agenda favored by many business conservatives. That danger would mostly remain submerged so long as the bogeyman was the EU, lending plausibility to the expectation that casting off its yoke would improve wages and conditions for British workers—notwithstanding the reality that much of the growth in immigration to the UK in recent decades has been from the Indian subcontinent. Fueling anti-immigrant sentiment would turn out to be a mixed bag for the Tories, as it would for center-right parties elsewhere once they discovered that others were better than they were at nativist politics—but that challenge lay in the future.8

The Brexit referendum did not spell out what the post-EU British economy would be like, but most Tory Euroskeptics and the United Kingdom Independence Party, led by the ascendent populist Nigel Farage, envisaged a low-regulation, smaller state—a kind of Singapore-on-the-Thames—as senior Tory ministers began intimating in the media. Farage helped shift their center of gravity even further to the right by forming the single-issue Brexit Party (subsequently renamed Reform) to push for a hard or “no-deal” Brexit, and threatening either to run candidates in Tory constituencies or to mount “entryist” challenges to individual members for renomination as Tory candidates. The result was to push most former Remainers (including Cameron’s successor as prime minister, Theresa May) into the hard Brexit camp and pave the way for Boris Johnson, Liz Truss, and Rishi Sunak to continue rebranding the Conservative Party as an anti-immigration, supply-side party. This came on top of the tens of billions of pounds in spending cuts that Tory Chancellor George Osborne had implemented as a proud champion of austerity between 2010 and 2016. The cumulative effect was to reduce public spending from 41 percent of GDP in 2010 to 35 percent of GDP in 2019, decimating the court system, prisons, the police, schools, care for the elderly, youth programs, and investments in public health and local government services.9

In July 2024, Labour won a landslide 174-seat majority while the Tories collapsed, losing 251 seats, which left them with 121—their worst rout ever. But these numbers masked the degree to which the ideological terrain had shifted. Reform won more than 4 million votes and came second in 89 constituencies that Labour won, effectively displacing the Tories, for the moment, as their main challenger on the right. Labour won only 9.7 million votes, amounting to a historically low 33.7 percent of the electorate for a winning party. But instead of capitalizing on this windfall benefit of Britain’s two-party system—which made him the envy of center-left parties all over the democratic world—the new prime minister, Keir Starmer, opted for a scatter of small-bore measures that signaled he was triangulating rightward. He rejected widespread calls to get rid of the two-child benefit limit instituted by Theresa May in 2017, despite the Archbishop of Canterbury pointing out that it kept half a million children in poverty. By the end of Labour’s first hundred days, Sam Knight was writing in The New Yorker that the government’s most notable accomplishment had been to cut a home heating program for the elderly, a measure that was so unpopular Starmer would be forced to abandon it a year later. The baffling question was why, with his enormous majority and a five-year parliament ahead of him, Starmer was frittering his advantage away.10

Within six months of the election, Labour’s support had collapsed to 26 percent, putting it neck and neck with the Tories and Reform. Starmer’s approval rating was by then trailing Farage’s by five percentage points, and some three million disgruntled Labour supporters had signed a petition demanding new elections in view of Labour’s failure to deliver on its election pledges. Even Starmer’s sympathetic biographer Tom Baldwin likened him to someone trying to navigate a minefield who “takes one step forward, two steps to the side, one step back, two more steps to the side.” Despite the fact that it had been obvious for at least a year before the 2024 election that Labour would likely win big, Starmer’s government appeared to have no appetite—let alone a plan—to deploy its huge majority to reverse the cumulative effects of thirty-two years of Tory austerity punctuated by the thirteen-year New Labour interregnum that had greased the skids of neoliberal reform.11

In Europe, Angela Merkel had led the charge to double down on austerity in the wake of the 2008 financial crisis. She began at home with the “debt brake,” which limited Germany’s federal deficits to 0.35 percent of GDP. In 2009 she and her SPD finance minister, Peer Steinbrück, embedded it into the German constitution by winning a 68.6 percent vote in the Bundestag—just above the necessary two-thirds threshold. They were appealing to the backlash that had been building in former West Germany after more than a trillion euros had been poured into the East following reunification. Not content to impose austerity on Germans, Merkel declared her ambition to export balanced budget amendments to Eurozone members whose governments had, in her judgment, been profligate borrowers at Germany’s expense. As Tooze notes, the stance that German taxpayers were tired of paying for other people’s debts ignored the vast benefits German industry had derived from the government’s investments in the former GDR and the intra-European trade financed by southern European borrowing.

Merkel and French President Sarkozy achieved her goal in March 2012 by orchestrating a new fiscal compact that required Eurozone members to reduce public debt to 60 percent of GDP and restrict structural deficits to 0.5 percent of GDP—a formula that amounted to “the German debt brake vision transposed to the European level.”12 And it ensured that, as in the US, austerity would be imposed on those who had borne the brunt of the financial crisis on top of three decades of wage stagnation since the 1970s. When the European Central Bank was finally cajoled in 2010 into behaving more like the US Federal Reserve by intervening in financial markets to stem the Eurozone crisis, Merkel and ECB president Jean-Claude Trichet insisted that ensuring price stability would remain its exclusive mandate—unlike the Fed, which since 1977 has also had an explicit mandate to sustain full employment. As the economist Mark Blyth has pointed out, what Merkel and Trichet billed as long-overdue discipline for decades of profligate social spending by spendthrift governments was accurate, if at all, only for Greece. Elsewhere in Europe, the expansion of public debt after the crisis resulted from backstopping banks that turned out to be even more heavily leveraged than their American counterparts. The difference was that the move to the euro meant that European governments could neither devalue currencies nor print money. Merkel and Trichet could in effect force their populations to internalize the costs of the banking crisis by embracing austerity.13

There had been warning signs as early as 2005 that large numbers of European voters felt abandoned by the social democratic parties, which triangulated their way rightward in line with the neoliberal consensus euphemistically labeled “modernization.” That year had widely been expected to mark a giant leap forward in the project of creating an “Ever Closer Union” with the ratification of a European constitution. Designed by a convention led by former French President Giscard d’Estaing, it was approved by the European Parliament in a vote of 500 to 137, with 40 abstentions, and endorsed not only by Europe’s center-right parties but also across the mainstream left. The European Trade Union Confederation (ETUC) endorsed it, as did major trade unions, such as France’s Confédération française démocratique du travail and the Union nationale des syndicats autonomes. The proposed constitution would have strengthened the European Commission and reduced the veto power of national governments by expanding the use of qualified majority voting in the service of creating “a highly competitive social market economy aiming at full employment and social progress.” Yet in ratification referendums, first French and then Dutch voters rejected the draft constitution by decisive margins, sending shockwaves through Europe’s political establishments. Panicked governments in Britain, Ireland, Portugal, Denmark, and Poland canceled scheduled referendums, and ratification procedures elsewhere were abandoned.14

European elites scrambled to find another way to adopt the core provisions of the draft constitution. Angela Merkel declared that she would lay out a vision to accomplish it during Germany’s six-month presidency of the European Council in 2007. Her foreign minister, Frank-Walter Steinmeier, a member of the SPD, agreed, declaring that “if it is to be saved, and we urgently need it, everyone has to move their position.”15 They achieved the resuscitation by reconstituting the main provisions of the constitution as an intergovernmental treaty. It was signed in Lisbon later that year. But this Band-Aid approach failed to come to grips with the message that farmers, the unemployed, and disadvantaged workers—mostly in the service sector, often unprotected by unions—had sent them in the failed referendums. In France, decisive majorities of “no” voters came from households with incomes below €3,000 per month, whereas 63 percent of households voting “yes” earned above that threshold. Dutch “no” voters also came predominantly from economically vulnerable groups: the less well educated and the lowest paid.16

A decade earlier, the historian Tony Judt had warned that significant populations within EU countries were being left behind by the “modernizing” project that was the darling of European elites, and that they would eventually be mobilized in a nationalist backlash against that project. Judt’s prescient warning was not about whether the EU would be governed by a single constitution or an intergovernmental agreement enshrined in the Lisbon Treaty, but about the populations whose stagnating circumstances had been ignored since the 1970s. The same parties that had abandoned these voters in national politics were now champions of transferring more control to European institutions whose well-known insularity had spawned the term “democratic deficit” decades earlier. It is perhaps understandable that the elite champions of “modernization” would ignore their constituents’ defiant foot-stamping in the giddy years before 2008, despite the warnings of commentators like Judt. That they would keep doing so once the financial crisis and its aftermath had shattered their reputations for competence is more striking.17

Yet that is exactly what they did. European government after European government continued capitulating to the Franco-German consensus on supply-side budgeting and fiscal austerity. Even when François Hollande replaced Sarkozy in 2012 as the first Socialist to win the French presidency since Mitterrand’s departure in 1995, little changed. Hollande had campaigned on a progressive socialist platform, but—like Mitterrand before him and despite the decisive Socialist victory over the center-right Gaullists in the June 2012 legislative elections—he was soon cleaving to Berlin’s mantra. Before his first hundred days were up, he had infuriated the French left by enacting only modest increases in the minimum wage, deferring his proposed tax increases on high-income earners, and reneging on his popular campaign commitment to renegotiate the EU fiscal compact—which, unsurprisingly, he declared would not be put to a referendum. This meant buying into the compact’s austerity mandate by committing to raise €7.2 billion in new revenue to meet its deficit targets, while proposing no significant investments in the economy. In case there was any doubt about where he stood, Hollande went out of his way to warn Greek voters that electing the antiausterity coalition led by the progressive Syriza party in their upcoming elections could get them banished from the Eurozone.18

Hollande’s neoliberal turn failed to ignite significant economic growth in France, but it succeeded in making him so unpopular that he became the first sitting first-term president in the Fifth Republic not to seek reelection. Nor could his badly fractured party get behind any other plausible candidate. In effect, Hollande’s about-turn did for the French left what Gerhard Schröder’s and Peer Steinbrück’s embrace of the Hartz reforms and Project 2010 had done for Germany’s left a decade earlier. Hollande underscored this in a keynote speech at the 150th-anniversary celebration of Germany’s SPD in Leipzig in 2013, when he lauded Schröder’s courage for having adopted the reforms while a beaming Angela Merkel looked on from the front row of the audience. Similar patterns prevailed across many older democracies as industrial jobs disappeared and voters abandoned the center-left parties they traditionally had supported.19

Also as in Germany, fragmentation on the left was mirrored by fragmentation on the right. This isn’t surprising in view of the broad consensus among mainstream parties on the policies that had been leaving so many people behind for decades. If voters were fleeing the left-of-center parties as they scrambled to embrace neoliberal orthodoxies that had been set by the center right, there was little reason to think that they would gravitate to those parties either. In Germany’s four elections between 1990 and 2002, the CDU, together with its affiliated Bavarian Christian Social Union (CSU), and the SPD had won more than three-quarters of the German electorate between them. By 2017, their combined vote share had plummeted to just 53 percent. In 2021 it fell below 50 percent, requiring a three-party government for the first time in decades, and in 2025 their combined share of the vote dropped to a new low of 44.9 percent. This fragmentation of mainstream parties reflects a broader pattern across twenty-six OECD democracies. Whereas in 1960 their legislatures had fewer than six parties on average, by 2020 they had more than eight.20

The remarkable thing was how few leaders of mainstream parties showed any sign of grasping that the financial crisis and its aftermath had obliterated their credibility. In the years after 2008, as the fortunes of elites recovered along with equity and other financial markets, orthodox political leaders continued insisting—echoing Margaret Thatcher from the 1980s—that There Is No Alternative to their supply-side policies and austerity mandates. But at what would become a bellwether meeting in Bad Nauheim in the German state of Hesse in September of 2012, a group of journalists and intellectuals demurred. They declared that there was indeed an Alternative für Deutschland—the name they gave their new party. The following year, the party fell just short of Germany’s 5 percent threshold to win seats in the Bundestag, but in 2017 the AfD exploded onto the scene with 12.6 percent of the vote, winning 94 seats. Its share of the vote did not drop below double digits thereafter, even as mainstream parties rejected its participation in governing coalitions due to its members’ neo-Nazi sympathies—a pattern later repeated in Austria, Italy, and the Netherlands as similar parties emerged and quickly grew.

This shunning strategy turned out to be little more than a holding pattern. In 2022, Giorgia Meloni became Italy’s prime minister after her Brothers of Italy party came first in its parliamentary elections. In May 2024, Geert Wilders’s Party for Freedom joined a governing coalition in the Netherlands following six months of tortured negotiations after it had more than doubled its vote to become the largest party in the Dutch parliament. The far-right Freedom Party of Austria also placed first in the 2024 elections. It was kept out of power only after four months of wrangling yielded a fragile coalition of Christian democrats, liberals, and social democrats who agreed on little besides their antipathy for the far right. It was as if they saw themselves as the sensible chaps who were waiting for angry voters to calm down and realize how unreasonable they were being. But as Germany’s traffic-light coalition of Social Democrats, Greens, and libertarian Free Democrats, cobbled together in 2021, discovered, coalition governments that don’t agree on anything can’t govern—further antagonizing voters. Support for all the governing parties fell precipitously in the February 2025 Bundestag election, while the AfD doubled its vote to 20 percent. By October, it was polling at 26 percent, ahead of all Germany’s other parties.21

What establishment politicians seemed incapable of grasping was that support for right-wing populist parties had little to do with the policies they propounded or whether the policies were likely to address the problems they identified. Their blood-and-soil nativism, hostility to immigration and globalism, and virulent anti-elitism made them potent conduits for voter rage directed at the consensus the establishment had embraced for more than four decades—a consensus that had left those voters behind. As television host Tucker Carlson, one of Donald Trump’s earliest and most vocal champions, put it in the wake of his presidential victory in 2016, “Trump’s election wasn’t about Trump. It was a throbbing middle finger in the face of America’s ruling class. It was a gesture of contempt, a howl of rage, the end result of decades of selfish and unwise decisions made by selfish and unwise leaders.” “Happy countries,” he insisted, “don’t elect Donald Trump, desperate ones do.”22

Dismissing these parties wouldn’t make them go away. Yet establishment political leaders displayed surprisingly little interest in coming to grips with why their fragmenting parties were hemorrhaging voter support, or why populist figures like Trump, Farage, Meloni, and Wilders were gaining so much political traction.

Macron’s Blown Opportunity

Nowhere was this more dramatically evident than in France. Marine Le Pen, daughter of the openly anti-Semitic and Islamophobic Jean-Marie Le Pen, who had led France’s right-wing National Front from 1972 to 2011, took over the party that year and began rebranding it as a working-class nationalist party in what would become a model for Europe’s emerging right-wing populist parties. In addition to its racism and xenophobia, her father’s National Front had taken a hard-right stance on economics. Channeling Ronald Reagan by saying he was determined to “get the state off my back and take its hand out of my pocket,” Jean-Marie had called for rolling back the welfare state and greater protection of shareholder interests, and he’d endorsed the large-scale privatization pushed by Jacques Chirac’s government in the 1980s. He also pushed for corporate tax cuts, greater labor market flexibility for employers, and abolition of the wealth tax and even the income tax—policies the National Front continued advocating throughout the early 2000s. It combined supply-side neoliberalism with nativist xenophobia, limiting its electoral appeal in an era when that brand of identity politics appealed only to fringe populations.23

But Marine Le Pen reoriented the party. In stark contrast to the blinkered leaders of mainstream parties, who kept right on keeping right on with supply-side austerity policies, she realized that their response to the financial crisis was creating new constituencies of alienated voters that she potentially could mobilize. Soon after taking the helm, she began calling for more steeply progressive taxes on the rich to “rebuild” the state as “the first condition of justice,” railing against “the dogmas of ultra liberalism” and the “unleashed rein of King money,” and denouncing the “proliferation of unchosen part-time work and the untamed spread of short-term contracts” that threw sectors of the workforce “into precarious financial straits.” “Shock precarity,” she insisted in a press release in December 2012, “did not have to happen!” Most important, she started forging links between class politics and French ethnic identity by attacking “the super-rich who sell our work, our heritage.” She also shed her father’s anti-Semitism and the extreme biological racism that antagonized many on the left. As Cécile Alduy put it, Le Pen devised “a clever balance of triangulation toward the Left on economic and republican questions and securing voter loyalty on questions of culture and identity.”24

Le Pen’s strategy soon began paying dividends by broadening the National Front’s appeal. An early sign was that in the run-up to the first-round regional elections in 2015, polls showed the party winning 46 percent support from blue-collar workers as compared to 41 percent from white-collar employees, 35 percent among the self-employed, and 33 percent among farmers. It even garnered 30 percent support among public-sector workers. Support from economic elites, by contrast, remained low, with only 18 percent of managers, 15 percent of voters with a college degree, and 19 percent of voters with a monthly income above €6,000 supporting the party. The National Front’s growing popularity first became manifest in presidential elections. In 2012 Le Pen had been eliminated after the first round, having placed third behind Hollande and Sarkozy with 18 percent of the vote. Five years later she finished second with over 21 percent, rising to over a third of the vote in round two. She lost to Hollande’s former minister of the economy Emmanuel Macron, who had reinvented himself as an independent once the Socialists’ electoral prospects dwindled.25

Le Pen was by then obviously ascendent, and the fact that her party—soon to be renamed National Rally—had yet to gain much traction in the National Assembly was no measure of voter confidence in France’s mainstream parties. They were utterly decimated in 2017. The center-right Republicans and their allies lost over 40 percent of their seats, and the center left was hammered even harder—winning just 45 seats as compared with 331 five years earlier. But instead of hemorrhaging disaffected voters to fringe parties, as was happening elsewhere in Europe’s multiparty systems, the quirks of France’s two-round system enabled Macron to create an ersatz party—En Marche! (“On the move!”)—that capitalized on this tidal wave of voter discontent. En Marche! won a stunning majority: 350 out of 577 seats. It was the most far-reaching repudiation of establishment parties in any Western democracy since the 1930s.

The 2017 election results created an unparalleled opportunity for Macron. No French politician had been handed a carte blanche of this magnitude since 1958, when the Algerian War was tearing the country apart and the National Assembly recalled Charles de Gaulle from retirement to take the helm. De Gaulle ended the Algerian crisis, founded the Fifth Republic, which he led for the next decade, and bequeathed a political mantle that French conservatives continue vying over to this day. Macron was analogously placed. He had run a maverick—almost oxymoronic—campaign as a kind of populist centrist, creating widespread expectations that he would address the crisis in voter confidence and restore voters’ shattered faith in French institutions. This made him the envy of mainstream politicians across the democratic world, many of whom found themselves fighting rearguard actions against the antiestablishment and even antisystem extremists who were hijacking their voters. Macron was beholden to no one. The left’s traditional constituencies had deserted the Socialists en masse, but while Jean-Luc Mélenchon’s new La France Insoumise (“France Unbowed”)—inspired by Spain’s far-left Podemos (“We Can”)—picked up 5 percent of the vote and 17 seats, the vast majority of traditional Socialist supporters either stayed home (turnout overall was less than 50 percent) or bet on Macron and En Marche! At the same time, the right found itself split between Gaullists and Le Pen’s resurgent National Rally, which took almost 9 percent of the second-round vote, further strengthening Macron’s hand. No politician in recent decades—except, perhaps, for Donald Trump in 2016—has had as much freedom to reset the political agenda.26

Even more unusual in view of his role as a principal architect of Hollande’s economic policies, voters gave Macron a second chance. After all, the economy had floundered throughout the Hollande years, with wages stagnant, GDP growth hovering stubbornly between 0.2 percent and 1.1 percent, unemployment close to 10 percent, and youth unemployment at 25 percent. Macron probably wouldn’t have made it at all but for the scandal that enveloped the center-right candidate François Fillon. Fillon had been the front-runner until he was placed under formal investigation for embezzlement a month before the election, leading to his elimination after he came in third in the first round. This left supporting Macron as the only way to stop Le Pen, which most supporters of the center right, as well as many on the left, did, giving Macron his easy victory. It would have taken staggering hubris for the beneficiary of this political windfall to believe that voters loved him or the policies that had destroyed Hollande’s presidency.27

At a minimum it should have been imperative for Macron to engage in a searching analysis of why France’s establishment parties were in such serious trouble, and in particular why the Socialists had suffered their worst defeat in the party’s history. It was more devastating even than in 1993, when—in a result that could have been instructive for Macron—they lost 209 seats to win only 53 seats in the National Assembly. That implosion had been fallout from Prime Minister Michel Rocard’s decision in 1988 to appoint four cabinet members from the center-right Union for French Democracy in an effort to reduce the Socialists’ dependence on the left. His triangulating gambit blew up in his face three years later, when they all resigned to form an alliance with the Gaullist Rally for the Republic. The magnitude of the Socialists’ collapse was amplified by the political ineptitude of Rocard’s successors, Édith Cresson and Pierre Bérégovoy, but there was ample evidence at the time that his love affair with the center right had infuriated the Socialists’ traditional base, which deserted them in droves in the 1992 regional elections. As with so many efforts at triangulation by center-left parties, Rocard’s strategy had backfired.

In fact, Macron appeared to have learned nothing from this precedent or from the realities behind Fillon’s inadvertent gift to him in 2017. This was even more striking because by then mounds of evidence were accumulating that voters who had been left behind by supply-side policies were deserting “modernizing” center-left parties and their agendas. Germany’s SPD had lost more than a third of its supporters in the elections since getting behind the Hartz reforms and Project 2010 and was projected to do even worse in the upcoming September elections. Britain’s Labour Party, which had been turfed out in 2010 following Gordon Brown’s response to the financial crisis, was even more badly defeated five years later. The Labour leadership and most Labour supporters voted to remain in the EU in the Brexit referendum the following year, but these were predominantly high earners in London and in the so-called home counties, which border London. Voters earning less than £20,000, low-skilled and manual workers, the unemployed, and those whose believed they had been left behind were most likely to vote to leave the EU.28 The American Democrats’ shedding of low-income and less well-educated voters that had been underway since the 1990s went into overdrive in 2016, giving Donald Trump his shocking victory. In the Netherlands, Wilders’s populist Party for Freedom was on a similar trajectory to Le Pen’s National Rally, having taken second place and twenty seats in the March elections. Austria’s Freedom Party was on track to make comparable gains in October. Everywhere anyone cared to look, populist political entrepreneurs were capturing economically vulnerable voters and those who believed that they had been left behind. It was obvious that for mainstream politicians to have any chance of winning back these voters, they would have to come up with policies to address their vulnerability and alienation.

Yet Macron kept right on just keeping right on. He picked a center-right prime minister in Édouard Philippe, who quickly announced a raft of supply-side reforms that included a flat tax on capital income, elimination of the wealth tax on financial assets, and a phased reduction in corporate taxes from 33 percent to 25 percent. Philippe announced major cuts in public spending to meet the EU’s fiscal compact rules at the same time as he promised to spend €50 billion on infrastructure. His government cut back on worker protections to make it easier to fire employees and weakened unions by shifting wage bargaining to individual firms, ensuring greater labor market flexibility.29

The Macron-Philippe “Go for growth” strategy garnered applause from French business and international organizations such as the OECD, the World Bank, and the World Economic Forum. Corporate profits were restored to levels that had not been seen in over a decade. Ernst and Young declared in a report that by 2018 France had become the most attractive European destination for foreign investment. The macroeconomic numbers seemed to support the cacophony of applause. GDP growth climbed to 2.4 percent before the COVID pandemic hit, outperforming Germany’s and in line with that of the overall euro area. Ditto with unemployment, which was whittled down to 7.7 percent. France, long lambasted as the sick man of the major European economies, had a credible claim to indeed being on the march.30

But the reforms did little for France’s most vulnerable workers. The fall in unemployment made minimal inroads with the long-term unemployed and unemployed older workers. Moreover, the new jobs were low paying and more precarious, reflecting greater use of short-term (often less than one week) labor contracts and increased reliance on “independent contractors” in the new gig economy. Real wages fell. Six months into his presidency, Macron was being lampooned as the “president of the rich,” not just in predictable media outlets and by figures on the left like François Ruffin and Thomas Piketty. Even Emmanuelle Ménard, a far-right politician affiliated with Le Pen’s National Rally, complained that creating more rich people would do nothing to reduce poverty. The distress they were tapping into was well captured in a 2019 study by the European Council on Foreign Relations, which found that more than three-quarters of French workers reported having no money for discretionary spending at the end of each month—a percentage that was exceeded in Europe only in Romania, Hungary, and Greece.31 Twenty-one percent of the population remained in poverty, the same as in the mid-2000s. By the fall of 2018 consumer confidence was falling, growth was slowing, and street protests were erupting against the reforms. Amid collapsing approval ratings and after three ministers resigned in six weeks, Macron added €6 billion in tax breaks for middle- and low-income voters, but he also doubled down on his supply-side reforms. He sent ministers on a media blitz to sell his variant of There Is No Alternative. Emblematic was his finance minister Bruno Le Maire, who conceded they had to do a better job at explaining “that this new model will be successful,” while insisting that the alternatives to their reforms would lead to “a dead end.”32

But they had more than a messaging problem. Six weeks after Macron insisted to Le Journal du Dimanche that “je ne changerai pas de politique” (“I will not change my policy”), the Yellow Jacket protests erupted. Triggered by a planned increase in fuel taxes—and named after the yellow vests that motorists are required by law to carry—tens of thousands of protesters began occupying roundabouts and other access points to cities and towns, demanding the abandonment of the fuel tax, restoration of the wealth tax, minimum wage increases, tax concessions for overtime and retirees, and Macron’s resignation. The weekly protests quickly began snowballing, sometimes morphing into violent confrontations with police that were decried—sometimes plausibly—as having been instigated by the authorities. The heavy-handed response boosted the already high levels of public support for the protesters while a defiant Macron hunkered down in the Palais de l’Élysée. Comparisons to 1968 abounded, though as a diverse movement that included workers, farmers, truck drivers, and commuters who were united by their economic distress, the protests unleashed by the Yellow Jackets were potentially more destabilizing than the student-centered ones of half a century earlier.33

As the size and intensity of the protests grew, it became obvious that waiting for them to peter out was not going to work. The government balked. In a rambling speech to the nation on December 10, a visibly shaken Macron waxed contrite, acknowledging that the anger motivating the protests had been building for decades, that it was “deep and in many ways legitimate,” and that he had been cavalier in ignoring it. He declared that the government was rescinding the fuel levy and a proposed tax on low-income retirees, abolishing taxes on overtime and bonuses (which he urged private employers to award before Christmas), and implementing an immediate €100-per-month increase in the minimum wage—to be borne by the state rather than businesses. But he also went out of his way to reaffirm his supply-side philosophy, declining to reimpose the wealth tax on the grounds that doing so would be inimical to job creation. Pointedly, he did not signal any additional measures beyond these reactive changes, asking instead for patience and reaffirming that improvements would materialize in due course.

Like the Occupy Wall Street protests that had erupted in American cities seven years earlier, the Yellow Jackets had neither leaders nor an identifiable organizational structure. As a result, there was no one for the government to negotiate with. But if Macron hoped that his measures would extinguish the protests or restore his popularity, he was wrong on both counts. His plea to businesses to award bonuses to their workers was widely lambasted as comical wishful thinking, and the protesters dismissed his concessions as crumbs, a charade, smoke and mirrors, a drop in the ocean. Polls revealed that while the French public strongly supported Macron’s individual measures and half wanted the protests to stop, 66 percent said they continued to support the Yellow Jacket movement. The protests continued for much of 2019 and into 2020, often marked by violent clashes with police. They finally ended with the COVID lockdown.34

Macron would never regain the popularity that had swept him to power in 2017. France’s two-round voting system ensured his reelection in 2022 (though Le Pen increased her second-round vote to over 41 percent), but his party—renamed La République En Marche! and then Renaissance—lost 101 seats and its majority, while National Rally picked up 82 seats and Mélenchon’s La France Insoumise picked up 74. The precipitous collapse came two years later. National Rally cleaned up in the European elections, winning 31 percent of the vote and 30 seats, while Macron’s coalition garnered a mere 22 percent and 13 seats, with left-wing parties and the Greens picking up 29 percent of the vote and 27 seats between them. Devastated, Macron tried to regain the initiative by calling a snap election for the National Assembly, but his coalition lost 86 seats—winning less than a quarter of the second-round vote. They were left with 159 seats, barely more than the far right’s 20 percent and 142 seats. This left Macron scrambling to form a government. After months of tortured negotiations with a broad alliance of left-wing parties whose only common ground was their hatred of the far right, he eventually endorsed a minority government led by the Gaullist Michel Barnier, whose party had also taken a massive hit in the election. Unsurprisingly, it collapsed less than three months later after a successful no-confidence vote. Barnier had tried to ram an austerity budget—with more than €40 billion in spending cuts and €20 billion in tax increases—through the National Assembly by means of a procedural gimmick, sidestepping a vote that everyone knew would have failed.35

Macron and Barnier were trapped in the straitjacket that Angela Merkel and Jean-Claude Trichet had created twelve years earlier. The budget cuts and tax increases were mandatory because, at 6.1 percent, France’s budget deficit was well in excess of its EU fiscal compact requirement. But Barnier’s policies scarcely boded well for an economy that had eked out only 1.1 percent GDP growth in 2024, after narrowly avoiding recession the previous year. Forecasts pointed to growth of just 0.8 percent in 2025 and 1.4 percent in 2026, with inflation projected below 2 percent and unemployment stuck at 7.5 percent. As Mark Blyth had pointed out at the height of the Eurozone crisis more than a decade earlier, countries that bought a one-way ticket to the euro were doing something akin to rejoining the gold standard. With devaluation and control of their own money supply off the table, European governments are forced to adopt austerity levels that verge on internal deflation. These policies will lead to growth only under the extravagant assumptions built into the “rational expectations” economic models championed by Alberto Alesina and others.36

We can leave it to the economists to debate the merits of the heroic assumptions behind these models (Blyth provides an excellent review of that literature). Politically, it is hard to escape the conclusion that they are disastrous invitations to return to the distributive conflicts not seen in Europe since the 1930s because, when they do promote growth, its benefits don’t reach most of the population. Barnier’s three-month debacle left Macron an emasculated lame duck: prohibited from calling another election for at least six months, unable to work with a divided left, and dependent on fellow centrist François René Bayrou to manage what was essentially a caretaker minority government that was as hamstrung as Barnier’s had been. Unsurprisingly, Bayrou’s government fell apart less than nine months later when his proposed austerity budget became a no-confidence motion that he lost by 364 to 194. Macron responded by appointing yet another center-right prime minister who lacked parliamentary support, this time the former Gaullist Sébastien Lecornu. Lecornu managed to avoid becoming the shortest-serving prime minister in more than seven decades only by agreeing to suspend Macron’s planned increase in the retirement age until after the 2027 presidential elections. By then the moratorium on calling new parliamentary elections had passed, but with National Rally polling at its highest level yet, 34 percent—ten points ahead of the alliance of left parties, more than double Macron’s Ensemble, and almost three times the support for the center-right Republicans—Macron found himself reeling from makeshift solution to makeshift solution to avoid calling the elections that Marine Le Pen was insistently demanding.37

Trump Without Trumpism?

The forces that fostered populism in the United States were far from unique, as we have seen, but they played out distinctively because of America’s weak parties. Low-turnout primaries in safe seats gave organized congressional expression to the Tea Party via the Freedom Caucus in 2015, and the primary and caucus systems made Trump’s hostile takeover of the Republicans against sixteen other presidential candidates possible despite trenchant opposition from the entire party establishment. Once nominated, he squeaked to victory by 80,000 votes spread across three swing states, while losing by more than 2.8 million votes nationwide. This perfect storm was helped along by an opponent in Hilary Clinton who was compromised by her elite connections, her wooden persona, and FBI Director James Comey’s damaging last-minute investigation of her use of a personal email server while secretary of state. The improbable outcome left Trump, once elected, in an unprecedented spot: He had triumphed over implacable opposition from Republican leaders inside and outside Congress, as well as many major donors and business leaders who routinely supported Republican candidates.38

House and Senate Republican leaders were shell-shocked. Trump’s brand of scorched-earth campaigning had taken the politics of personal destruction to levels not seen in the living memory of anyone in Congress. Yet every prediction that “this time he has gone too far!” in shattering norms and disparaging iconic Republican figures as fools, corrupt, suckers, and worse was belied by his relentless upward trajectory. Likewise with the stream of shocking revelations about his personal conduct that would have destroyed any other politician, culminating in the lurid Access Hollywood tape released by The Washington Post a week before the election. His opponents had been convinced that he would never secure the nomination and, when he did so against all expectations, that he would lose the general election. Trump’s response to all criticism was to unleash outrageous ad hominem assaults on his critics and refuse to back down, a tactic that never failed him. The result was that when he finally won, he owed them nothing—as he never tired of repeating. The spectacle of figures like Mitt Romney, Chris Christie, Marco Rubio, and Ted Cruz—all of whom he had repeatedly denigrated and belittled—prostrating themselves before the president-elect in search of positions in his administration made it clear that they agreed. He had hijacked their party. They had to fall in line or leave.

Trump’s win gave him a huge opportunity. His terrifying effectiveness left Republican leaders on Capitol Hill—who controlled both houses of Congress—so far back on their heels that it would have been unthinkable for them to oppose him. As a result, he had more freedom to set the congressional agenda than any American president in at least a century, with the possible exceptions of FDR in 1932 and Lyndon Johnson after his landslide win in 1964. Roosevelt had used his political capital to enact the New Deal. Johnson had deployed his to enact voting rights and the Great Society. Having redefined electoral politics, Trump was now free to reshape public policy with comparably far-reaching implications. Despite the polarized political environment that he had done more than anyone to create, the fact that Republican leaders were in no position to oppose him meant that he was in a unique position to legislate across the aisle.

What might he have done? The obvious way forward was to announce a legislative agenda that would have appealed to Democratic leaders on Capitol Hill and many moderate Republicans. This would have given House Speaker Paul Ryan a powerful incentive to get behind it and enabled him to garner enough Democratic support to face down the Freedom Caucus. The caucus’s power would in any case have been diminished, because the main instrument of that power, the threat of primary challenges, would have been blunted if it involved opposing Trump’s agenda. It is difficult to achieve legislative successes in the American system without bipartisan support. Trump was in an unusually strong position to cultivate that support and build on it to achieve a legislative legacy that might indeed have rivaled the New Deal and the Great Society. This would have meant rejecting the supply-side policies that had produced four decades of wage stagnation and economic distress for the tens of millions of Americans he had mobilized, and investing instead in an agenda designed to foster the type of growth whose benefits are widely shared. The fact that he had been a Democrat for most of his life—and one who famously lacked political convictions—would have helped. It was his ticket to the greatness that he craved.

The distinctive thrust for the New Trump Deal could have been public-private partnerships. In 2016 the US federal deficit was running at $587 billion, or 3.2 percent of GDP, with the debt closing in on $20 trillion.39 Trump and the Republicans would soon escalate these numbers dramatically, so that by 2019—before COVID hit and without a recession—the debt would top $22.7 trillion, with the deficit closing in on $1 trillion and running at 4.6 percent of GDP. They did so behind the usual smoke and mirrors, insisting—against mountains of evidence accumulated since the Reagan era—that the 2017 tax cuts would pay for themselves by increasing government revenue. Still, it stretches credulity to suppose that even moderate Republicans could have supported large outlays on federal initiatives unless there was substantial private-sector involvement, not least because large sectors of organized business would have opposed them. The answer was to create incentives for business to participate in fostering economic growth whose benefits would extend to those who had been excluded from it for decades. This would have had to look more like an industrial strategy than supply-side breaks for business, the benefits of which had so manifestly failed to trickle down for so long.

One way to do this would have been aggressive and targeted expansion of the Earned Income Tax Credit (EITC). First floated by Richard Nixon as a negative income tax and then enacted by the Ford administration in 1975, the EITC is a refundable tax credit that was initially a modest wage subsidy aimed at low-income workers with children who were living in or close to poverty. It paid $400 ($2,400 in 2025) to workers earning less than $4,000 ($24,000 in 2025) per year and then phased out as income grew, disappearing at an annual income of $8,000 ($48,000 in 2025). It has since grown into a major expenditure program paid to some twenty-seven million workers that costs the Treasury between $65 billion and $75 billion a year. It begins phasing out at $21,560 and disappears at between $46,560 and $56,838, depending on the number of children, providing a maximum credit of between $4,328 and $8,046 a year. Because this is a credit (deducted from taxes owed) rather than a deduction (taken off income before taxes owed are computed), the full amount of the credit is paid to the worker. Some thirty states now have state EITCs as well.40

The EITC has enjoyed bipartisan support since its inception. Originally proposed by Louisiana Democratic Senator Russell Long (who shepherded much of Johnson’s Great Society and War on Poverty legislation through the Senate), it was expanded during the Reagan, Clinton, George W. Bush, Obama, and Biden administrations. Republicans support it because it promotes work, is pro-business, and requires no new bureaucracy (it is administered by the IRS). Democrats like it because it is a progressive antipoverty program and, though a subsidy to business, is paid directly by the government to the worker. Unlike corporate tax cuts, which can easily vanish into executive bonuses or stock buybacks, the business doesn’t get the EITC subsidy unless it actually hires the worker whose income is subsidized by the government. Economists, who typically object to all subsidies as distorting markets, support the EITC in surprisingly large numbers. A 2020 survey of American Economic Association members found some 90 percent agreeing that it should be expanded.41 Even such conservative economists as Gary Becker and Robert Barro like it. This broad support might reflect the fact that, unlike a minimum wage, the EITC does not decrease employment or invite a race to the bottom. On the contrary, by reducing labor costs to firms, it operates as a capital magnet.

Expanding the EITC had figured in every significant tax reform since its inception—until Trump. Republicans writing his 2017 tax bill rejected numerous proposals to expand it. The White House made no effort to move them, despite the fact that by then some 14 percent of employed Americans were living in poverty—a percentage exceeded only in Spain, Colombia, and Mexico among the OECD countries. In fact, the new law reduced the EITC’s value by adjusting the way in which the inflation adjustment was calculated. This was a major missed opportunity. Trump could have owned the EITC and run with it to fund significant parts of his agenda that never got off the ground—most obviously infrastructure. His “infrastructure weeks” became a running joke in Washington because of the frequency with which he announced them without ever producing any concrete proposal, let alone enacting anything. A big part of the reason was Republican hostility to funding a major infrastructure bill.42

As Trump’s tax cuts subsequently revealed, plenty of offshore capital was available for repatriation to the US. The reduction in the corporate tax rates from 35 to 21 percent in the 2017 tax bill was predicted to produce about a trillion dollars in repatriated profits held abroad, and unlike the predictions about the impact of the tax cuts on federal revenue, they were largely accurate. In 2018 alone, the Federal Reserve estimated that some $777 billion was repatriated, roughly 80 percent of the estimated offshore stock of cash holdings at the end of the previous year. This arguably led to a modest increase in investment by the repatriating firms—the ratio of assets to investment for the top fifteen cash holders rose from 2.3 percent in 2017 to 2.8 percent in 2018, while it remained flat at 1.5 percent for other nonfinancial S&P 500 firms. However, this was dwarfed by stock buybacks, which almost tripled among those firms, rising from $86 billion in 2017 to $231 billion in 2018, while dividend payments to shareholders remained flat. The increase in buybacks was two to three times greater than for other nonfinancial S&P 500 companies. The top fifteen cash holders also paid down debt at higher rates, cutting their aggregate debt by $84 billion, while other nonfinancial S&P 500 cash holders increased theirs by $157 billion. One study of the 2017 tax cuts found that for every $1 reduction in corporate tax receipts, there was a modest $0.44 gain in output, 80 percent of which flowed to the richest 10 percent of earners and 20 percent to the bottom 90 percent. Within firms, the tax cuts produced substantial increases in executive compensation and benefits for the highest-paid 10 percent of employees, but had no impact on workers in the bottom 90 percent.43

This repatriable capital was low-hanging fruit for generating infrastructure investment by conditioning all or some of it on taking advantage of an expanded and targeted EITC.44 Trump could have announced an ambitious plan not only to rebuild America’s airports, bridges, and highways but also to begin meeting the infrastructure requirements of the new tech economy—telecommunications, networking, and high-speed internet access for all—by including the sorts of projects the Biden administration would fund through its CHIPS program in 2022. He could then have conditioned the benefits of the reduced corporate tax cuts on spending a portion on hiring workers for those projects, with wages subsidized through a significantly expanded EITC targeted at the designated infrastructure projects. It would have been a variant of schemes in Peru and Colombia, where corporations receive tax breaks in return for building infrastructure projects they have bid on, with the added incentive of doing so with subsidized labor. The Treasury Department could have modeled different mixes of EITC subsidies and corporate tax breaks to produce the optimal return. The infrastructure program could have created employment in every state, deployed to projects that are widely recognized as necessary, like rebuilding America’s thousands of dilapidated roads and corroding bridges and replacing obsolete airports. Funding it this way would have been a vastly more effective use of tax breaks to create employment than Trump’s approach. It would have provided a way to spend a trillion dollars on infrastructure that could appeal to centrists in both parties, business, and organized labor.45

Trump could have announced a thoroughly revamped system of retraining and unemployment support to replace America’s dysfunctional Trade Adjustment Assistance program and its outmoded patchwork of state unemployment programs, which rely on ad hoc federal add-ons during times of crisis. Administrations since FDR’s have been tinkering ineffectually with this legislative and administrative mess. This was Trump’s chance. America’s TAA program—for workers whose jobs have gone offshore—has never been well funded or well run since its creation by the Kennedy administration. It is in any case obsolete, now that technology is replacing trade as the main source of long-term job loss. Rather than seeing young and middle-aged workers leave the labor market entirely, it would be much better to retrain them for new roles in the knowledge economy, perhaps funded by a tax on windfall gains from automation, as Bill Gates and others have proposed. Workers who leave the labor market are not counted in employment statistics, but they are a major drag on the economy—whether they rely on Social Security Disability Insurance, as growing numbers of dependent adult children do, or worse. This is to say nothing of the lost productivity and political alienation that make them easy to mobilize for virulent, extremist politics. Rather than continue threatening businesses with tariffs for producing offshore, Trump could have led the charge to create an American workforce that American businesses would want to hire.46

Trump could also have proposed a replacement for Obamacare that expanded coverage, rather than following the Republican approach of trying to repeal it and, when that failed, chipping away at it through the courts and the tax system. Like Obama, Trump had campaigned on renegotiating drug prices for Medicare Part D. This multibillion-dollar giveaway to Big Pharma originated in 2006, when the George W. Bush administration instituted free prescription drugs for seniors. Obama’s efforts to change the program came to naught when it became clear that the drug companies would lobby the Affordable Care Act to death unless he backed off. Trump could have joined the battle, as he had promised to do on the stump and as the Biden administration eventually did for drugs like insulin, but as with so many of his other commitments, he punted. And instead of trying to destroy Obamacare, Trump could have used his political capital to enact universal health insurance by expanding Medicare to younger Americans. The big obstacle is the multitrillion-dollar sticker shock of introducing Medicare for All overnight—a tough political sell in a country where most people already have employer-based coverage. But there are creative solutions. Begin by including twenty-six- to thirty-five-year-olds, who are cheap to insure because they are generally healthy. Allow others to buy into Medicare voluntarily when they lose their jobs or when the falling quality and rising cost of their employer-based plans make them unattractive enough to opt out. These numbers will surely grow as rapid improvements in AI continue hollowing out the middle-class workforce.47

Instead of seizing the moment in these ways, immediately on taking office Trump embraced the standard Republican congressional diet. True, he kept up his attacks on the North American Free Trade Agreement (NAFTA), China, and NATO, but unlike the trade policies he would pursue in his second term, much of this was bluster. On the domestic front he quickly signaled conformity. Goldman Sachs had been his poster child for elite villainy during the campaign, yet he appointed three former Goldman executives to his first cabinet and reached for the standard Republican governing playbook: Cut taxes for the wealthy, appoint ultraconservative judges to the federal bench, eviscerate Obamacare, Dodd-Frank, and other regulation, attack green energy in all its forms, and wage relentless war on House and Senate Democratic leaders. These moves obliterated his opportunity to achieve the status he craved: that of a great president for the history books.

Nothing is guaranteed in politics, but it is hard to imagine a political and policy agenda that would have made reelection likelier for Trump in 2020. As the country emerged from COVID, he could have capitalized on his windfall 2016 win by starting to entrench a centrist policy agenda that would have forced both parties to keep converging on the middle. Instead, he boosted the terrifying polarization he has fueled with dishonest claims about winning in 2020 and with his even more divisive 2024 campaign and the presidency that began in 2025. This was the most consequential missed opportunity by an American president since Lyndon Johnson reversed John Kennedy’s decision to ramp down the US’s fledgling military commitment in Vietnam in late 1963 and instead scaled up the disastrous war, despite strong advice not to do so from major figures on the left and the right.48 Johnson’s Vietnam debacle thwarted the possibility of a second term in which he might well have expanded the Great Society, creating the possibility of holding the traditional Democratic coalition together and perhaps even growing it. That would have been the best bet for heading off what eventually became Richard Nixon’s Southern strategy—a deliberate effort to wean political support from Democrats in the South by appealing to racial resentment—and the corrosive politics that followed. Trump’s missed opportunity became an accelerant of divisive politics in a comparable—though even more destructive—way. How costly that choice will prove remains to be seen.

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