This US midterms ushered in a sweeping rejection of the Republican Party, with exit polls demonstrating passionate voter anger towards issues including affordability, foreign policy, and general political corruption. While many of these issues reflect self-inflicted damage from the administration, it is notable that voter anger ran so deep that it successfully flipped not only federal seats but entire statewide governments not directly connected to issues such as the Iran War. Additionally, the slate of issues elevating Democrats, the same frustrations that brought together diverse voting coalitions which swept Donald Trump into the White House in 2016 and 2024.
As Connor O’Keefe has noted, the 2020’s can already be defined as “a crazy decade in American politics,” fueled by an “inflation hot potato,” driven by the disastrous government responses to the covid pandemic. This has been further inflamed by the inherent incentives of Washington, where no partisan makeup of Congress results in the political will to address systemic issues such as deficit spending. National politics succeeds at making political consultants rich, but outside of foreign policy and the weaponization of the Justice Department, the default mode of federal governance fits the meme of “nothing ever happens.” Of course, given the ideological deficiencies of the average member of Congress, this is likely a preferred setting, one which could quickly be adjusted if Democrats follow through on campaign promises to abolish the Senate filibuster.
Of course, eroding the existing checks on Senate action will almost certainly result in making the existing economic pressures greater. The Democrat agenda is explicitly to increase both taxes and spending, in stark contrast to the Republican desire to cut taxes and increase spending. Meanwhile, federal debt levels climb, trust in the American dollar and US debt declines, and deficit financing becomes an ever-growing black hole on the federal balance sheet.
This is, however, not a uniquely American problem. France is several weeks into riots resulting from a general strike over rising inflation and proposed spending cuts. While rioting is a proud French tradition, Germany has been in the midst of its own form of political rebellion as the Alternative For Deutschland Party continues to win elections despite the complete weaponization of the nation’s political establishment unifying against them. Inflation—mixed with the immigration policies of its left-wing government—has similarly resulted in broad protests in Spain. Meanwhile, the UK is on its seventh prime minister in 10 years as its traditional political parties are being cannibalized by rising populist upstarts.
One of the few heads of a Western state that enjoys popular support is Mark Carney, who has personally benefited from a rally-around-the-flag dynamic given President Trump’s Cold War with Canada. His country, however, is itself dealing with similar economic inflation pressures.
In the specter of all of these political pressures are two consistencies: one, the broad Western embrace of open immigration policy has resulted in a political dynamic increasingly defined by race, both in the form of downplaying broad criminal trends, direct economic subsidies to particular demographic groups, and open discrimination against native populations. Further inflaming these tensions, however, is declining economic growth and painful inflation pressures that disproportionately impact younger residents over older generations who already hold assets—be they real estate or financial investments.
While immigration pressures are the byproduct of deliberate (and often multi-partisan) policy choices, further inflamed by destabilizing conditions in their home countries (including Western-led military conflicts in the Middle East), the economic pressures can be directly connected to both the global response to the 2008 financial crisis and covid. In the aftermath of the Great Recession, central bank groupthink resulted in historically low interest rates. One of the many byproducts of this radical policy regime was the emergence of a government-debt bubble, as national governments could finance their debt at record-low costs. This playbook was used and escalated during covid, with central banks returning to QE to help support massive fiscal stimulus policies pursued by Western governments.
Given the incentive structure of popular democracy, what could have been an era of structural reforms to prevent a repeat of 2008 instead became a time of government binging. In 2024, US government spending per capita increased by over 20 percent in inflation-adjusted dollars since 2008. In Germany, that number was over 50 percent, and in France, over 45 percent, both adjusted for inflation. Europe has additionally been plagued with a stagnating economy, with EU GDP per capita falling to 50 percent of the US in 2023, down from 76.5 percent in 2008.
The results are governments saturated with debt and growing inflationary pressures, without viable political means to tackle spending. While European countries do face additional restraints not felt in Washington, such as EU fiscal rules, propelling the current French political debate over spending cuts, the short-term pain that would be born by past state-subsidized groups are certain to be weaponized by populist movements, particularly among the European Left. Additionally, the debate over what should be cut will undoubtedly further escalate social tensions related to immigration given the direct subsidies and public services enjoyed by these privileged groups.
Until the West deals with a radical and serious reckoning with the broken structure of their modern national governments, supported by compliant central bankers, we should continue to expect the 2020’s to not only be a crazy decade for American politics—but politics throughout the West. Meaningful change will not come simply by changing the political parties in governing bodies, but meaningful and systemic changes to modern nation-states and their financing.
For populists on the Left, that will predictably mean the growth of government power. For the right, it will ultimately require a more Rothbardian flavor of populism.
