As The Primary Season Begins US Voters Are Rejecting The Status Quo

The 2016 US presidential campaign moves into higher gear on 1 February as the Iowa caucuses mark the opening of the state primaries season.  Casual observers of the US political scene could be forgiven for thinking that the process of choosing a successor to Mr Obama is well under way already; potential candidates have been on the stump since last summer.  But the serious business of collecting delegates to the party conventions will only begin next week. So far, the political debate has revolved not, as in some previous elections, around the specifics of competing policies but more around values, ideologies and personal qualities (or the lack of them). What has emerged in the course of the campaign is that US voters are disenchanted with Washington politics - nothing new there - but also feel a deeper malaise, a sense that the USA is heading in the wrong directions politically, economically and, above all, socially. This sentiment is favouring non-standard candidates, on the Republican side, Mr Trump and, earlier, Mr Carson, and on the Democratic side, Mr Sanders. A few months ago, the GOP mainstream feared the nomination of Mr Trump as their candidate, thinking that he would be too extreme for most US voters. Now, many Republican leaders seem to regard the maverick billionaire as offering the best chance of winning the White House, so well does he appear to capture and express the public mood.

Popular rejection of the status quo is not a phenomenon evident only in the USA, of course. Over the past two or three years, it has been a potent element in the politics of many European states also.  Its causes are not too difficult to fathom.  For years there has been a widening gap in the advanced economies between the real value of median earnings and the incomes and wealth of the top percentiles of the population.  This growing chasm reflects the shift in the balance of returns, as between labour and capital, since around 1990.  The process of globalisation of production has tended to depress returns to labour in the advanced economies. At the same time, technological developments have benefited disproportionately those with the capital to exploit them and have displaced labour. The humanist secular ideology that leading political circles in these economies have peddled has not been sufficiently appealing to the masses, on an emotional level, to compensate them for the material losses they feel they are suffering. But, at least until 2008, the new economic and political order appeared to work smoothly. The global financial crisis and its aftermath have raised doubts about not only its social justice but also its sustainability.  At a time of accelerating change, politically, economically, technologically and, above all, in social values, the financial markets, fixated as they are on the day-to-day actions of the central banks, are not paying much attention to the investment implications of these broader historical forces.


This is why the US election campaign is important for the markets. It is likely to focus attention on how far and how rapidly the world is changing. If Mr Trump continues to set the pace, investors may well have to take seriously a scenario in which he enters the White House. A much longer shot would be Mr Sanders, with his ‘socialist’ agenda, emerging victorious at the end. The best hope for those who would like the world to revolve much as it has for years past is an ultimate Clinton victory. The chance of such an outcome is far from negligible but is certainly not assured. Ms Clinton has headed other Democratic candidates by wide margins in opinion polls, until very recently. Latterly, there seems to have been a swing in support behind Mr Sanders. It now seems that Ms Clinton may well lose in both Iowa and New Hampshire, the two states in which voters’ views will first be tested. The danger for her is that her campaign, after such initial setbacks, would splutter and fade, as it did in similar circumstances in 2008. The next few weeks could, therefore, be decisive from a world-historical viewpoint.

Following the state-by-state progress of the primaries will be testing for the non-specialist. The first point to note is that there are no general rules governing the selection of state delegates to the two parties’ national conventions, at which their respective presidential candidates will eventually be chosen. Each state party sets its own rules, sometimes within overall guidelines established centrally.  Some state parties hold caucuses while others stage primaries.  The difference lies in the method of selection.  In a primary, voters register their preference at polling-places, as in an election. With a caucus, delegates are chosen at meetings held in each precinct within a state. Consequently, the caucus process is open to stronger influence from the state party organisation than a primary would be. There are also differences in the rules regarding who is eligible to take part in the selection of delegates.  Some state parties restrict the process to those who are affiliated to the party.  Others hold completely open votes, in which any registered voter may participate, regardless of his (or her) own party affiliation. Yet others opt for semi-open voting in which both party affiliates and independent registered voters may take part but from which supporters of the opposing party are excluded. Any individual, though, may only cast a vote in one party’s primary or caucus. There are a few states where voting is not for the presidential contenders themselves but for delegates to attend a state convention; such delegates are not always bound to vote for any particular candidate.

On the Republican side, states have their own rules on whether delegates are chosen and bound to presidential contenders in proportion to the votes cast in caucuses or primaries, or whether the winner of the popular vote takes all the delegates. There are also complicated hybrid rules for allocating delegates to contenders, whereby some are chosen by one method while others are selected on a different criterion. Where proportional selection is involved, there are differences between states on whether or not a minimum proportion of votes cast is needed to qualify for an allocation of delegates and, where a minimum is specified, what that proportion is. On the Democratic side, the rules are rather simpler.  All allocations of delegates, either on the basis of votes in congressional districts or state-wide, are proportionally-based, with a 15% cut-off to qualify. For both the Republicans and the Democrats the rules governing the number of delegates each state sends to the respective national conventions are complex but are related, among other factors, to the number of votes cast in each state at the preceding presidential election (or elections) for that party’s candidate.

The rules governing Iowa’s Republican caucuses, historically, have been so arcane as to have prompted calls from some party leaders to deprive that state of the honour of standing first in the calendar. In response, the state party has simplified the procedure for the 2016 voting. Since, previously, delegates elected at the caucuses in the precincts did not need to declare which candidate they preferred, it was not always clear what the outcome had been. Indeed, in 2012, of the votes cast at precinct level, Mr Romney was initially declared to have won the largest proportion though, on subsequent recount, the result was reversed in Mr Santorum’s favour.  The results from eight precincts went missing. In the event, though this result had some influence on the national campaign, it had no bearing on the delegates Iowa sent to the national convention. Because the delegates chosen at the caucuses were not pledged to any candidate, the subsequent state convention was free to vote heavily in favour of a third candidate, Mr Ron Paul, who received 22 of Iowa’s allocation of 28 delegates to the national convention. It was because this outcome was not regarded as an entirely fair reflection of the opinion of Republicans in Iowa that the rules were changed for this year’s election.  Now, delegates chosen in the precincts will be bound to support specific candidates.  For the Republicans, the caucuses are ‘closed’, that is, restricted to party affiliates. Voting will be proportional with no lower threshold. The rules relating to the Democratic caucuses in Iowa are even more complicated than those of the Republicans. There is no voting but rather intensive debate at precinct meetings between supporters of the various candidates, from which delegates to county conventions are then selected.

The peculiarities of Iowa’s caucuses will probably result in attention shifting quickly to the New Hampshire primaries, which are scheduled for 9 February. For the Republicans, delegates will be elected on a proportional basis, with a 10% minimum in order to qualify. For both parties, eligibility to vote is semi-closed, that is, registered voters of the opposing party are excluded.  New Hampshire is a far from typical state, though. While a poor showing in the primaries there would be a setback for a candidate, it would be unlikely to extinguish hopes of ultimate victory. For that reason, these primaries are unlikely to winnow the field of contenders. Most will probably press on, funds permitting, at least a little further into the primaries season.


The next important events will be the primaries in South Carolina, a mid-sized state, (20 February for the Republicans and 27 February for the Democrats) and the caucuses in Nevada (20 February for the Democrats and 23 February for the Republicans). The Nevada caucuses are ‘closed’; the Republicans will award delegates on a proportional basis with no lower threshold.  The South Carolina primaries are both ‘open’ and may therefore provide a pointer to the strength of Mr Trump’s cross-party support.  The Republican vote is conducted on a winner-takes-all basis, giving a successful candidate a chance to take a small lead in the race to the nominating convention. Much more significant, however, will be the 1 March primaries and caucuses, the so-called ‘Super Tuesday’, when Republicans in fourteen states and Democrats in eleven (both including Texas) will establish their preferences.

The ‘Super Tuesday’ results are very likely to whittle down the Republican candidates to three or four from the twelve who are currently still in contention. For the Democrats, Ms Clinton will be looking for a strong showing, seeing that several of the states in this round of primaries are in the South, where she enjoys relatively solid support.  Even after ‘Super Tuesday’, only 25% of pledged delegates to attend the Democratic National Convention and 33% of those to the Republican National Convention (to be held respectively during the week of 25 July and on 18-21 July) will have been chosen. Also attending the conventions will be ‘unpledged’ delegates or so-called ‘superdelegates’.  These are, in large part, elected office-holders and party officials. For the Republicans, there are generally three ‘unpledged’ delegates for each state, comprising the party’s state chairman and two committee-members. Though ‘unpledged’, they are supposed to reflect opinion in their states.  They make up less than 7% of the total number of delegates to the convention. On the Democratic side, the ‘superdelegates’ are rather more significant, since they include members of the Democratic National Committee and Democratic members of Congress and state governors. They make up about 15% of the convention delegates. Surveys suggest that almost half of these have already decided they favour Ms Clinton, which is a source of encouragement to her campaign, though allegiances could shift before July.

The signs are that politics will be a dominant influence on financial markets as 2016 progresses. At the moment, the spotlight is on Ms Merkel’s problems and the fate of the EU. However, markets could well be distracted in the months ahead as the US primaries focus attention on the historic challenges confronting the world’s largest economy. The issues at stake are more fundamental, perhaps, than in any presidential election since 1932.

More about the author

About the author

Stephen’s career spanning five decades has made him one of the most respected and unique voices in the City of London. Disclaimer regularly publishes a selection of his elegant and thoughtful essays on the global economy, which he has been writing regularly since he founded Fifth Horseman Publications in the late 1980s. As well as an economist, Stephen serves as Treasurer of the Forum for European Philosophy and was elected to the Royal Institute of Philosophy.

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