When Emmanuel Macron beat Marine Le Pen handsomely to reclaim the French presidency in 2022, the liberal establishment was in ecstasy. Their verdict that the centre was holding was as understandable as it was unfounded. In reality, Macron’s second term helped the ultra-Right become France’s strongest political force. Last week, Mark Carney and Anthony Albanese defeated their Trumpish opponents to retain the prime ministerships of Canada and Australia, respectively. Once again, news of the revival of the political centre may prove a centrist delusion.
Long ago, it was reasonable to hope that voters thinking of voting for a scary ultra-Rightist in order to annoy the centrists whose policies kept them down might come to their senses the moment that scary ultra-Rightist looked likely to win government. Something like that happened in France in 2002. Back then, middle-class socialists, young ecologists and working-class communists lined up at the polling stations alongside conservatives to give 82% of the national vote to Rightist Jacques Chirac so as to keep ultra-Rightist Jean-Marie Le Pen — the father of the French ultra-Right’s current leader — out of the Elysée. But this is not what happened in France 25 years later, or in Canada or Australia last week.
In 2002, six years before Western capitalism’s near-death experience, Chirac defeated Le Pen because the socialist and the communist parties directed their voters to him. Under the slogan: “We vote for you today, we oppose you tomorrow morning!”, voters who were at odds with the establishment voted for an establishment figure in order to keep a neofascist out. All the while, they retained their allegiance to parties of the Left. In contrast, Emmanuel Macron won by annihilating the parties of the Left.
Working-class voters, who were suffering the consequences of the centrists’ austerity policies, were incensed with Macron, a former banker determined to impose “green” taxes on them while giving tax breaks to his haute bourgeois mates. With nowhere else to go, these voters drifted en masse to Le Pen. Then something startling happened: Macron and Le Pen grew co-dependent, their mutual antipathy notwithstanding. The more austerity he imposed on the many, the deeper their discontent and the higher her support. And the higher her support, the better able he was to appeal to anti-fascists to hold their noses and vote for him in order to keep her out.
As this dynamic co-dependency grew, the ultra-Right won a staggering 40% of the national vote in the June 2024 parliamentary elections. There is nothing on the horizon to suggest that this trend is unravelling. In this light, history may well remember Macron more as the liberal centre’s gravedigger than its redeemer.
Cut to last week and the decisive defeat of the Rightist Canadian and Australian parties that tried, and failed, to ride the Trumpian wave. Mark Carney and Anthony Albanese won because President Trump made it impossible for them to lose. By threatening to annex Canada, and by slapping tariffs on an Australia that not only has never missed an opportunity to bend over backwards to accommodate Washington’s every whim but also runs a trade deficit with the United States, it is as if Trump was determined that his Canadian and Australian copycats lose last week’s elections. Nevertheless, under the surface of Carney’s and Albanese’s victories, it is not difficult to discern social trends similar to those that rendered Macron’s victory decidedly Pyrrhic.
In Canada, after 11 years of ruling, the Liberals failed to appeal to the large sections of the working-class who either abstained or voted for the conservatives. When the Liberals nevertheless secured a razor-thin majority, they did so by cannibalising, Macron-style, the Left-of-centre (the NDP and the Parti Québécois). In Australia, Labor’s landslide victory obscured the fact that it won with a historically low percentage of the primary vote. Although it won most seats in the working-class suburbs of Sydney and Melbourne, Labor did so on second preferences, while continuing to bleed first preferences — especially amongst the immigrant communities which used to be the party’s most reliable vote reservoir. As in Canada, Australia’s centrists won by feeding off the only Left-of-centre force, the Greens, but had no luck in unseating a significant number of Right-leaning independents (the so-called Teals).
So far, so very similar to the political dynamics in France. What makes these similarities so fascinating is that they have taken place in such different countries. France’s economy is joined at the hip to that of Germany and the rest of the European Union. Australia and Canada, on the other hand, are resource-based economies integrated into the energy-industrial-military complex of the United States.
Because of its location, Canada sells 75% of its exports to America, while also directly investing more of its capital in the US than the US invests in Canada. As for geographically isolated Australia, its economy is also deeply intertwined with US conglomerates, albeit indirectly. While Australian mining companies have long been in the business of extracting fossil fuels and digging up gargantuan volumes of the country’s red earth before shipping it all to Japan and China, this roaring trade with Asia’s two superpowers is predicated on the US sourcing two crucial resources from China and Japan: manufactured goods and savings.
This is why the political trends in Canada and Australia are similar to those in France. Despite their vast differences, the three economies are hooked into the same US-centric global surplus-recycling mechanism, whose deep crisis is steering their politics in a direction inimical to the centrists’ medium-term prospects. Politicians like Macron, Carney and Albanese may score impressive victories, but they have no plan for stemming the secular decline of their influence over their increasingly restive electorates. For years now, these electorates have been pummelled by the undercurrents of the global recycling mechanism — a mechanism that once drove their countries’ growth and stability.
The essence of this global mechanism (which I once labelled the Global Minotaur) is simple. Since the Seventies, America’s deficits have provided East Asia (first Japan, then China) and Europe (primarily Germany) the demand for their factories’ manufactures. In return, the European Union, Japan and later China sent their accumulated profits to Wall Street to be recycled into US private and public debt, some equities, and real estate. A Chinese official once described this mechanism to me as a “dark deal”. “Our Dark Deal with the Americans,” the official explained, “turns on the US trade deficit, which keeps demand for our manufactures high. In return, our capitalists invest the bulk of their dollar superprofits into America’s FIRE”. (The acronym stands for “Finance, Insurance, and Real Estate.”) “Once this process got underway, America shifted much of its industrial production to our shores.”
The problem with this global recycling mechanism was that, to function smoothly, it had to generate larger and larger imbalances: greater trade deficits for the US and more accumulated savings for Northern Europe and East Asia. But there are limits to how large imbalances can grow. Ruptures are inevitable. The longer they are delayed, the greater the pain they inflict — a truth that centrists never acknowledged, not even when it was tearing down their houses.
Trump’s greatest strength comes from asking the pressing question that the centrists refuse to countenance: what comes after the Dark Deal? What comes after the imbalances built on the US trade deficit have proven unsustainably massive? Scott Bessent, Trump’s Treasury Secretary, put it succinctly in a recent speech at the IMF: “Everywhere we look across the international economic system today, we see imbalance… This status quo of large and persistent imbalances is not sustainable… The persistent over-reliance on the United States for demand is resulting in an evermore unbalanced global economy.”
Their proposed solutions may be wrongheaded, half-baked, even crazy, but at least Trump’s team has identified the problem. Voters may not understand that these unsustainable imbalances are at the root of their plight, but enough of them have the sixth sense to intuit that Trump’s people are on to something, unlike the centrists who act like King Canute ordering the tides of discontent to reverse course.
“Their proposed solutions may be wrongheaded, half-baked, even crazy, but at least Trump’s team has identified the problem.”
Inexcusably, centrists treat Bessent and the rest of Trump’s economic team as Neanderthals. They forget that the people they celebrate as the architects of the globalised capitalist order, an order which they now mourn, had warned them in good time. On 10 April 2005, when no one was interested in bad news stories, Paul Volcker, the man who had helped design the devastating Nixon Shock and later headed the Federal Reserve during the formative years of the Dark Deal, foreshadowed everything Bessent is now saying:
“What holds [the US economic success story] all together is a massive and growing flow of capital from abroad, running to more than $2 billion every working day, and growing… As a nation we don’t consciously borrow or beg. We aren’t even offering attractive interest rates, nor do we have to offer our creditors protection against the risk of a declining dollar… We fill our shops and our garages with goods from abroad, and the competition has been a powerful restraint on our internal prices. It’s surely helped keep interest rates exceptionally low despite our vanishing savings and rapid growth. And it’s comfortable for our trading partners and for those supplying the capital. Some, such as China, depend heavily on our expanding domestic markets. And for the most part, the central banks of the emerging world have been willing to hold more and more dollars, which are, after all, the closest thing the world has to a truly international currency… The difficulty is that this seemingly comfortable pattern can’t go on indefinitely.”
Three years later, Wall Street crashed. Two decades of centrist denial followed, bought at the price of gigantic money printing for the few and harsh austerity for the many. With Volcker and his ilk sidelined by the governing centrists, the political centre began to fragment across the West — with deficit countries like France, Canada, Australia and the United Kingdom (not to mention my country, Greece) closer to the eye of the storm. It was only a matter of time before someone like Trump would rise up, the inevitable outcome of the centrists’ refusal to acknowledge that the global surplus recycling mechanism, the Dark Deal, was dead in the water — just as its predecessor, the Bretton Woods system, was before President Nixon killed it in 1971.
Sure enough, Trump’s policies are unlikely to rebalance the world economy. While some manufacturing will return to America, automation will render this a jobless growth surge. Big Tech’s burgeoning cloud rents will further undermine any actual rebalancing. China will probably move on, gradually transforming the Brics into a Bretton Woods-style system anchored by the yuan. The European Union will fail to rebalance its internal macroeconomy, sinking deeper into stagnation. The planet’s climate will go haywire.
But, though Trump’s policies may not work in the US, France, Australia, Canada or anywhere else, his willingness to upend a broken global system is enough to garner political support for, at home, unprecedented authoritarianism; and abroad, a confrontation with China that casts doubt on our species’ long-term prospects. Meanwhile, centrists stuck in their delusion that the Dark Deal can be sustained are condemned to keep losing even when they win.
