Pendulum Politics Driving Economic Risk

27/10/2026

To borrow from a quotation variously attributed to Otto von Bismarck and John Godfrey Saxe, nobody much likes watching laws or sausages being made.

Watching political developments in Brazil, Serbia and the increasingly turbulent protests in France, I was reminded of an observation by Lee Kuan Yew, Singapore's founding prime minister, that recently appeared on one of my social media feeds (my algorithm is a complicated beast).

Speaking in 1984, Lee argued that for a two-party democratic system to function effectively, the principal parties needed to share fundamental beliefs about the national interest. They could disagree over how to achieve their objectives, but there needed to be agreement about what those objectives were.

The principle is both simple and attractive, and although belonging to a different political era, it offers an interesting lens through which to consider today's political dissatisfaction, including the destructive unrest accompanying some of the protests in France.

Perhaps we place too much emphasis on the direction of political change and too little on the magnitude of the swings themselves. The electorate may be rather more consistent in its objectives than the political parties competing to represent it. Prosperity, opportunity and economic security remain broadly shared aspirations, even as successive governments offer increasingly different prescriptions for achieving them. There is nothing particularly new about that, although the scale of the political swings may be another matter.

Yet whatever their economic philosophy, governments eventually confront many of the same underlying constraints. If these prevent them from delivering what they promise, the electorate may simply continue searching for an alternative.

To extend the kitchen analogy for a final time, the electorate may be increasingly willing to tolerate the breaking of eggs without necessarily having much confidence in the omelette being produced.

A less obvious divide

The familiar explanation for political dissatisfaction is growing inequality, concentrated wealth and the erosion of the middle class, but the evidence is more complicated.

According to the World Bank, average real income or consumption per person among the bottom 40% grew by approximately 4.8% annually in Brazil between 2019 and 2024, and 8.7% in Serbia between 2018 and 2023. France, by contrast, recorded a decline of approximately 0.8% annually between 2018 and 2023.

These figures neither establish a common trend nor disprove the inequality argument. They merely raise a question about whether current economic circumstances fully explain political dissatisfaction.

An improvement in income does not necessarily translate into an equivalent improvement in economic security.

A household may earn more while finding homeownership increasingly inaccessible. Employment may remain strong while technological change undermines confidence in the future value of qualifications and experience. GDP may grow while concerns about the affordability of essential resources persist.

For much of the postwar period, expanding prosperity was expected to deliver greater individual security. That relationship may be becoming less predictable.

The fragmentation of security

Households face a similar calculation, although their ability to respond varies considerably. Those with accumulated wealth can diversify investments, acquire productive assets or absorb disruption. Those dependent primarily on employment income have fewer options.

The emerging divide may be less about who has wealth today than who has the resources and flexibility to protect themselves against what tomorrow might bring.

Borrow against tomorrow

The pursuit of economic security presents governments with an increasingly difficult set of choices.

While public expenditure is well documented, its underlying economic purpose is not always so easily distinguished. Alongside investment in future productive capacity, governments face demands to protect their economies against disruption and preserve existing social and institutional arrangements.

Perhaps public expenditure is increasingly being shaped by three competing, if overlapping, priorities: Productive, Protective and Preservative.

Productive expenditure expands future economic capacity. Protective expenditure reduces exposure to disruption. Preservative expenditure sustains existing economic, social and institutional arrangements.

All three may be legitimate and frequently overlap, but the distinction becomes increasingly relevant alongside rising sovereign indebtedness.

Governments are borrowing against future prosperity to provide security today, while the obligations they accumulate may themselves become a source of tomorrow's insecurity.

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