Gerald F. Seib

A few days after George H.W. Bush lost his bid for re-election as president in 1992, one of his aides, Ed Rogers, mused: "There wasn't anything wrong with this campaign that 4% economic growth wouldn't have fixed."

Mr. Rogers's lament then is one that leaders across the industrialized world can appreciate now. In country after country, the political establishment is under sustained attack from disgruntled voters. In the face of this assault, the governing class is missing the one reliable line of defense: the kind of robust economic growth that would calm nerves and soothe passions.

Instead, political leaders find themselves struggling to survive in an era of sustained low economic growth. Though there are other causes forthe ferment that has produced Donald Trump in the U.S., a vote to exit from the European Union in Britain and the demise of the ruling party in Italy in recent months, the dissatisfaction flowing from unsatisfying long-term economic performance is a root cause.

"Low growth, the resulting lack of economic activity, and therefore the missing money is what fueled politics in 2016," Mr. Rogers says now.

In fact, the industrialized world has been without sustained high growth for so long that the weakness has started to appear normal. The U.S. provides a compelling illustration.

Starting in 1983, when Ronald Reagan was in the middle of his first presidential term, the American economy reeled off three straight years of 4% growth. The economy went on to hit that politically important target in nine of the next 17 years. In fact, even as Mr. Bush ran for re-election, the economy actually was revving up after a two-year lull, though the surge came too late for voters to realize it.

Then, at the turn into a new millennium, that streak stopped. In the last 15 years, the American economy hasn't grown at a 4% annual rate even once.

But it isn't just the U.S. In the last 15 years, according to International Monetary Fund data, exactly one of the traditional seven major industrialized nations achieved annual economic growth of 4%, one time: Japan in 2010.

In sum, the kind of economic growth that used to be relatively routine in the industrialized world has become virtually extinct.

This low-growth era leaves political leaders facing two unsavory tasks. The first is to explain to unhappy voters why growth is so anemic, and the second is to convince them that they know what to do about it.

Voters in industrialized economies "are used to reaping most of the benefits" of economic globalization, said Tony Fratto, an assistant Treasury secretary in the George W. Bush administration. Now, though, many are concluding globalization and technological advances, once seen as benefits, have become liabilities, or at least causes for concern and anxiety.

In fact, voters came to that conclusion before their political leaders did.

"For years, people in communities that depended on high-value-added manufacturing were telling us, in so many words, that globalization was hurting them and yet no one was really listening," said Jared Bernstein, who served as Vice President Joe Biden's top economic adviser. "If anything, elites promised the next trade deal would be the one that renewed their opportunities."

Now, some political leaders have begun to succeed by telling voters they are right to conclude the political and financial elites aren't working in their best interest. Mr. Trump is one example; another is Nigel Farage, a leader of the Brexit movement in the U.K. Leaders of nationalist partieselsewhere in Europe are trying to follow suit.

The question, of course, is whether such leaders can actually provide solutions to the low-growth problem. Mr. Trump is calculating that a combination of tax cuts, regulatory relief, tougher trade policies and controls on immigration will do the trick.

Others, though, worry that the proposals may not match up to the real problem. Douglas Holtz-Eakin, who was the chief economic adviser to Sen. John McCain's 2008 Republican presidential campaign, says the global economy suffers from a mismatch: The industrialized nations have the capital, but developing countries have the labor.

Economists' belief that capital would move to meet labor hasn't been borne out, he says, so now labor is seeking, through immigration, to move to capital. But nationalist political movements actually seek to stop that from happening.

"There's no way to get to 4% [growth] without more people," Mr. Holtz-Eakin said.

Write to Gerald F. Seib at jerry.seib@wsj.com

(END) Dow Jones Newswires

January 16, 2017 05:15 ET (10:15 GMT)

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