Martin Wolf on the US midterms: What’s at stake for the world?

0:00This episode is brought to you by Hard Lessons, a Morgan Stanley podcast. Iconic investors like Stan Druckenmiller, John Gray, and Rick Reeder break down calls that worked. I knew that this stock would go up for at least two or three years and go up a lot. Ones that didn't. I quite frankly thought the company could have reversed course. They didn't. And what they learned in between. When you buy everything and it goes up, it doesn't train you to be a great investor. It's these hard lessons that make all the difference. Listen to Hard Lessons wherever you get your podcasts. A Republican victory, or I think even a kind of 50-50 result, will be encouraging to the European far right and weirdly the European far left as well, who will assume that the strategy of being the most outrageous person in the room at all times is the way to win.

0:47So what we've really successfully globalized is extreme, indeed crazy politics. Yep. I mean, you know, that's one way to put it. I'm Martin Wolf, Chief Economics Commentator at the Financial Times. Americans head to the polls for the midterms on November the 3rd. And I'm worried. Worried about what the result will tell us about the future of democracy. Can the United States continue to be the leader of the free world? My family's history taught me what happens when democracy fails. My mother was a Dutch Jewish refugee who fled the Nazis in 1940. My father was Austrian, also a Jewish refugee, who fled to the safety of Britain in 1937.

1:33Which is why I'm talking to leading thinkers about what's at stake in these midterms. For Donald Trump, for American democracy, and for the rest of the world.

1:50My guest for this episode is the Pulitzer Prize-winning historian Anne Applebaum, and she's the perfect guest to follow on from my discussion in the last episode about what's at stake in the upcoming U.S. midterms. Anne is the author of several books, including Autocracy, Inc., The Dictators Who Want to Run the World, and a leading scholar on totalitarianism. Anne, welcome. Thanks for having me. So I was particularly keen to speak to you because I want to look beyond the immediate question of who wins and loses these midterms and focus on what these elections will or could tell us about the health of American democracy and also, even more so, what they might mean for the rest of the world, which is slowly and painfully adjusting to the idea that the United States may no longer be a dependable ally.

2:50In fact, probably isn't. So what, in your view, is at stake in these elections in the U.S. and for the rest of the world? It's important, I think, to begin by looking at how this administration understands America's role in the world and how different that is from anything that we've known previously. So this is an administration composed of people who do not see the United States as the leader of the democratic world and are not especially interested in their old democratic allies. Their arguments about American power are different, that the United States should act in a quasi-imperial or maybe even fully imperial way in its own hemisphere, that it has the right to demand mineral rights or demand government changes in Latin America.

3:40Canada, Greenland, and that elsewhere in the world it will act again in the interests both of the ruling ideological clan and also of some of the business groups around the administration and around the president. And that's a very, very different way of thinking and behaving. And it's not one that either America's allies or really even its enemies are used to and everybody's readjusting. And one of the questions at stake for American voters is, is this the kind of world they want? Is this the kind of United States of America they want? I should also say, though, of course, as in all elections everywhere, the primary questions are really about the United States itself.

4:23And again, the attitude of this administration to the American government and the American political system is also radical. So they've made the argument that American government needs to be dismantled, that American regulatory agencies need to be politicized. The significance of this campaign is also that if the Democrats are not able to win and are not able, maybe in conjunction with some part of the Republican Party, to have majorities in the next Congress, then it will be even more difficult, if not impossible, both to stop this cannibalization of the government and it will be very hard to ensure that there are free elections in 2028.

5:05So you're right, it's a very significant election. So when we look at these elections, very simple question, will they be conducted fairly? What are you looking out for to judge whether they are? So one of the great advantages and disadvantages of the American electoral system is that it's really 50 separate systems. And even within particular states, sometimes voting, there are different voting systems inside a single state. And this makes it, you know, unlike, say, Venezuela, where Maduro was able to just not recognize the vote because he controlled a national electoral commission. You don't have anything like that in the United States.

5:40You don't have a single button that the president could press. But there have been, for the past year, multiple attempts to manipulate the results. So we have in America a process of gerrymandering, again, very old in American history, but it's never before been instigated by the federal government, where the federal government tried to get states to redraw their electoral boundaries to benefit the Republican Party. And there were lawsuits about it and so on. In many places, they did this successfully. There have been attempts to nationalize voting data. So voter data, rather. So voters are registered by the states and the federal government demanded that the states turn over the voter rolls to the Department of Justice.

6:24And there were also multiple lawsuits about that, most of which the states won. And so the states haven't had to turn over their voter rolls. There have been attempts to pretend that there are mass numbers of illegal immigrants voting for which there is no evidence and never has been any evidence. This is a narrative that the Trump administration is using. And some people fear that that will be used, first of all, as an excuse to put maybe ICE or maybe other maybe there's been some talk of the FBI or some kind of federal forces on the streets during on Election Day, maybe in an attempt to threaten or persuade some people not to vote.

7:02People who are legally able to vote but who are frightened of police or people in uniforms. There may also be, after the vote, challenges if votes are close. So if there's, I'm making this up, but, you know, if there's a close Senate vote in North Carolina or South Carolina, there may be an attempt to argue that it's illegitimate because so many illegal immigrants voted and therefore it has to be rerun. I have heard stories about different political tactics being used to try to annul the election or stop the election based on the declaration of some kind of emergency. I can't tell you right now whether that's true.

7:39The only thing I can say is that, remember, this is a political formation that did try to overthrow an election in January of 2021, January the 6th, and did try to block that electoral result. And so you can't dismiss the idea offhand that they will try something again. So there have been challenges already. There could be challenges on Election Day and there could be challenges after the election. So we'll see. I mean, it may be that it all falls apart. And I think a big factor will be the numbers of voters and the scale of the victory, if there is a victory. So they have to lose big, as it were.

8:17Now, historically, at least in the post-Second World War period, America has spent decades telling other countries what free and fair elections should look like. Given what might be happening, but also what has already happened, has that argument basically collapsed, that nobody looks to the U.S. and thinks this is the model? I don't think anybody looks to the U.S. and says that's a really great political system and we'd like to have it. There are far right or kind of Trump identified political movements in both Europe and Latin America who do imitate Trump's tactics and who are looking for similar kinds of victory.

9:01And the most spectacular one is in Brazil, where you had a previous president, Jair Bolsonaro, who also tried to overthrow the result of an election. His son is now the main candidate in the next Brazilian election, which is the second round of which is coming up very soon. Somebody who's imitated Trump's tactics in many ways. You have Trump-like parties, again, elsewhere in Europe as well. So you see, you certainly see people imitating that form of politics. But, you know, if you took a step back and ask, you know, is the United States a model of democracy and is it producing the economic outcomes or political outcomes that are the, you know, that other people envy?

9:42I don't think so. I mean, Americans sometimes still, and actually the Trump people tell this story about the United States being the envy of the world, but it's true that America has these big and powerful companies. If you go a little bit farther down into the American economy, it's not so admirable. It's a country where people don't have health care. It's a people where people die younger than they do in Europe or Japan. It's not a model most people want to follow. Who benefits most from this loss of American authority? Russia, China, or actually, and since you mentioned the Bolsonaro movement in Brazil, is it a liberal movements within democracies?

10:21The AFD, Marine Le Pen, people like this who can say, well, this is the way we're supposed to do things. Look, America's shown us. I mean, I think Russia is a direct beneficiary of the change from Biden to Trump. The Biden administration for, you know, which was criticized at the time for being an insufficient ally to Ukraine was at least an ally, and Trump is not an ally. And so, and that's made a big difference both in the way the people think about the war and the way that Russian propaganda works towards Ukraine. I mean, it's a war that will end when the Russians are convinced they can't win, and Trump has gone quite a long way to convincing the Russians that they can win.

11:05And that's been, And, you know, that's a pretty it's pretty shattering both for Ukraine and for Europeans who understand that some kind of collapse of Ukraine would be a catastrophe for them, too. China, I would say, is a different kind of beneficiary. They benefit from the perception of weakening, the perception of weakening American alliances, weakening American influence. As the appeal of American democracy goes down, then the Chinese step in and talk about themselves as rule abiding leaders. by comparison to the chaos that Trump projects. You know, they seem calm and there may be other countries who find that more appealing.

11:45And then, as you say, illiberal movements inside democracies also find something to admire. We should say some of this may backfire. You know, sometimes Trump's support for one movement or another has the opposite effect. I mean, Trump's attempts to attack and undermine Mark Carney in Canada have made Mark Carney the most popular Canadian. prime minister, I don't know in how long, but in a very long, in very recent history, it doesn't always work the way that you imagine. And there's a backlash. But certainly the impression that America's unreliable, that America's weaker, that America's unpredictable, this is a benefit, at the very least, to the propaganda of the autocratic world who've been saying that democracy doesn't work for a long time and Trump is kind of giving them evidence to prove What you're basically saying is that Europe should view, at least the sort of Europe you and I believe in, democratic, liberal Europe, should view the U.S.

12:44as it is now, as an enemy. I don't want to use the word enemy because there are large parts of the very broad and complicated American political and security system that remain pro-European, including the American military, which continues to exercise with European allies and continues to work with Asian democracies and so on. And there's a big community of people in the business community, the financial world, ordinary travelers who love and admire European Europeans. But it is true that for their own sovereignty, for the protection, it's not just about democracy. It's about whether European countries get to decide what kind of country they want to be, who their leaders are.

13:31then Europe does need to have some its own technologies. It certainly needs its own information technology. It needs some of its own military technologies. And it needs to make the transition from the older military platforms of the 20th century to the future very quickly, you know, to drones and unmanned warfare, which I think is going to dominate the next several decades. And it needs to begin thinking about new alliances and relationships. There is already a new European Union-Canadian relationship. There's already an EU relationship with India that's been enhanced. Nobody really cared about an EU-India trade agreement five years ago, and now suddenly there was this big rush to complete it.

14:17Both this technological shift where Europeans develop their own cloud computing systems and other systems to make sure that they can't be suddenly and abruptly undermined by an American company working in concert with the American state. All these things are kind of, it's almost like basic hygiene needs to be done to make sure that Europeans are immune from the worst part of the American system. But that doesn't mean that we need to stop speaking to each other. I mean, there will be an American-European relationship that goes on for a long time. So in sum, basically, at the very least, strategic hedging.

14:51Now, you've written about MAGA and its ambition to become an international political movement. Indeed, it's been somewhat on the way to that. We're at the beginning of an intense election super cycle in Europe, which we haven't seen in a generation. In the space of 12 months, four of the five biggest EU member states by population will go to the ballot box, as will four smaller ones, with presidential and parliamentary elections in France, arguably the most consequential. These European polls are happening amid a broad electoral shift to the right, not so different from America, and a growing readiness among center-right parties to share power with far-right rivals.

15:36What effect might the outcome of these midterms have on these movements? So, first of all, a democratic wave election would, I think, affect Europeans in the sense that it would show centrist and I should say center right parties as well as center left parties. It would it would show them it would give them some sense of how to win. There are many, many conversations about how to win in a media environment that favors extremism and favors the loudest people and favors the people who get the most attention, which is often the far left and the far right. How can centrist and again, that's center right Reaganites plus, I don't know, center left, you know, conservative social Democrats.

16:21I mean, all of them have the same problem, which is how do they win in this media environment? And you will see, you're seeing it now actually already in the election campaign, you're seeing people try different strategies. And that will be watched really carefully. And so that kind of outcome will mean that we'll show some social possibilities. Obviously, a Republican victory or I think even a kind of 50-50 result will be encouraging to the European far right and other and I honestly weirdly the European far left as well who will assume that the strategy of being the most outrageous person in the room at all times is the way to win.

17:04One of the strange things about the modern world is that, you know, even at this moment, everybody's against globalization and we don't want to internationalize and, you know, we're isolationists and we want to bring everything home. I don't think we've ever lived in a world where elections are more international, where the themes are more similar, where the political arguments are more similar. that, I mean, I have a strange personal experience was that I lived part of the time in Poland and part of the time in the United States. And these are not countries that should have anything in common about anything.

17:36They have no common history. They have no common social structure. Poland is 100 % Polish Catholic and America's all kinds of things and the history is totally different. And yet they have amazingly similar politics. In other words, amazingly similar polarization, amazingly similar political arguments. I mean, the facts on the ground are different and the economy is different and so on. But the structure of politics is quite similar. And I think that must reflect the structure, again, of the media environment, which is the same in both places, because everybody uses the same apps and the same, you know, TikTok and Twitter and Facebook.

18:13You know, so everybody will be watching the result because they know that the techniques that work in one place can be applied in another. So what we've really successfully globalized is extreme, indeed, crazy politics. Yep. I mean, you know, that's one way to put it. Slightly depressing way. Look, if, you know, on YouTube or on Twitter, you are paid for gathering more attention, and the way to gather more attention is to be more extreme. It's a business model. It's not just politics. Now, one analyst has told the FT that right-wing victories in these polls across Europe could spell the end of the European Union itself as we know it.

18:56After all, it's a liberal internationalist, at the very least, scheme plan to overcome the consequences of extreme nationalism in earlier times before the Second World War. That's what it's about. If the Europeans elect basically the far right, which is nationalist, if nothing else, then does the European Union survive? So certainly it's now the intention of the United States, as well as the intention of the Russians, to undermine the European Union. And so one of the reasons why the United States supports far-right European parties is because of that, because the European Union is the only entity really on the planet that's capable of regulating American companies.

19:42And they don't want to be regulated for any reason, not even to conform to the local laws of the countries where they do business. There's another reason that Europe needs its own technology. And the Russians want to undermine the European Union because it disrupts their attempts to dominate politics, especially in the eastern half of the continent. Although not only, you know, they want a world that's safer for corruption. They want to be able to do their deals with whoever they want. And the European Union sometimes limits them. And so the support for the far right, which is coming now from the U.S.

20:12and Russia, is for those reasons. You know, there are some elements that run contrary to this. One of them is that for a big country like France, for example, to leave the euro, which Marine Le Pen no longer says she would, would be a catastrophic change and would have a catastrophic effect on the economy. Just the example of Brexit, which weakened and impoverished Britain, has really come home to a lot of European leaders. And so the economic consequences of destroying it, especially destroying the single market, are so great that I wonder whether that will ever happen. I mean, you could get them trying to change elements of it or change the way the budget works or something like that.

20:57But I don't see the incentive to destroy the whole thing. And the other thing that's different about Europe and America, France being a kind of exception, is that in most European countries, you have parliamentary systems where there's more than one party and political parties have to have coalitions to be in power. And having the far right in a coalition with several other parties, you know, or having it work in a parliamentary system where their compromises have to be done, I'm not sure that that's necessarily catastrophic. You know, we've got several examples now of countries where you've had far right parties in leading roles or in important roles in the parliament and that hasn't destroyed democracy.

21:37I also think this is a really important point that it's very important to separate the question of immigration from the question of democracy. So you can be legitimately against your country's immigration policy for whatever reasons you want. You can argue that it doesn't work or it's too high or it's too low or it's inefficient or whatever. However, you can make that argument and not be opposed to democracy. So you can be anti-immigration and yet part of the political system. And so parties who have anti-immigration platforms, which could include, for example, the Social Democrats in Denmark or the central right in Poland, you know, aren't necessarily opposed to liberal democracy.

22:18So the problem is not that. That is not the central issue. The central issue is political parties who seem to have an aim or an ambition to transform the political system and to undermine democratic checks and balances and capture them for themselves. And so it's really important that everybody make that distinction. Let's suppose the midterms happen. Trump, of course, remains president, assuming he remains. Well, do the midterms really affect what he can do in foreign policy? Because as far as I can see, looking at the Iran war, for example, and many other areas, there are a few exceptions. Tariffs is an obvious one where the Supreme Court intervened.

22:58But basically, the American president, under the current constitutional understanding of recent rulings of the Supreme Court, can do basically whatever it wants in foreign policy. So will it be any different? So Congress does have controls. Congress does control the budget. Congress can block funding for things it doesn't like and doesn't approve of. Congress can investigate wrongdoing. There are things that Congress can do. I mean, I know that right now there's a really lively argument, you know, in Washington among Democrats about what their strategy should be going forward and how, for example, they can repair their alliances and block the president's worst instincts around the world.

23:47And they will be looking for creative solutions. So this is a – I can't tell you right now exactly how it will be done. And again, a lot will depend on the numbers. You know, a Democratic-controlled Senate would be a big difference. You know, a Democratic-controlled Senate and House, you know, could, for example, begin to influence appointments. It could influence budgets. It could influence even policies. And I mean, you know, Congress does have the ability to pass laws and to enforce them. So there would be a different atmosphere. And the second thing that will be very different, and this applies to both foreign and domestic policy, is this atmosphere of impunity around the president will begin to disappear and people will begin to behave differently.

24:31So the kind of obeying in advance, the, you know, the fear of crossing the president or of speaking out that you've seen in some U.S. government institutions, but also in some companies and law firms and so on. I mean, I think that will change and that will make a big difference in how the president is able to act in the world as well as in the United States. But the president will retain, almost certainly, unless there's an absolutely astonishing result, it seems to be impossible, and the numbers, the veto power. And there's this strange rule I've never fully understood about the size of majority you need in the Senate to actually pass something.

25:10So yes, it would make a difference, but the presidency would remain very, very powerful, wouldn't it? So, yes, of course, the president remains very powerful. And if you're watching Donald Trump's trajectory over the last 18 months and the way his behavior has changed, yes, we should all be prepared for some very extreme policy shifts, radical statements. You know, we don't really know what kind of a presidency, a lame duck Trump second half would be. So looking at all this and the possible futures, what should European governments be doing to strengthen the security of Europe, strengthen their resilience, sustaining Ukraine?

25:56This is a really nightmare situation. So what should they be doing? For European governments, really the most important central task of the next year is to help the Ukrainians win the war, because it's really only a Ukrainian victory that ensures stability in Europe. It can end on the current contact line, but it ends in a way that the Ukrainian state is preserved. It has defensible borders and it has, you know, and there's some kind of negotiation with process with Russia of what happens to, you know, to occupied territories in the future. But that has that is an absolute it's a kind of bottom line piece of European security.

26:39Think about the alternative. You know, what happens if Ukraine collapses, which is, I should say, not likely. Right now, as we speak, it doesn't look possible, but who knows? Okay, so imagine that. What you would have would be a massive inflow of millions of refugees. You would have a collapse of Ukraine into a kind of Afghanistan-like guerrilla war state, because, of course, the Ukrainian army wouldn't stop fighting. It would just, you know, it would just change its behavior. You would have Russian troops moving to the West, maybe preparing to go farther. You know, you now have a Russian economy, which is predicated on the idea that there'll be eternal war.

27:18Russian education system has been shifted to create new warriors rather than anything else. And you would have an immediate challenge to Europe on a scale that we haven't seen yet. And, you know, there's a mistake that some people make, and you hear it from politicians, but you hear it from commentators as well, that somehow, you know, if the war ended and I don't know, maybe Ukraine lost, then we could, you know, then we could stop, we could all stop worrying about it. And no, the answer is that if Russia were to win the war, European defense funding would have to triple and quadruple because the threat would be much greater.

27:53And so to avoid that, what Europe needs to do is reinforce Ukraine, give Ukraine the defenses that it needs and give it the offensive weapons it needs to attack enough Russian targets so that the Russians finally conclude that the wars can't be won. And so it's really important that, especially over the next year and before all these elections happen, that European governments focus and concentrate on what it will take to win the war and end the war and have a real ceasefire. Let's suppose the Democrats did take control of both houses, at least had majorities. Do you think that would be a really important signal to the rest of the world, and particularly since we're focusing on Europe, rightly so, I think, would it be a signal to the Europeans that, well, nothing is certain, but maybe the US will come back, that it isn't completely lost to this very, very strange cult, which has this equally strange view, that it supports Western civilization, by which, listening to Marco Rubio recently, it seems to mean white Christian imperialism.

29:04So that's not a U.S. we much want, and very few Europeans, I think, want to go back to that, whatever they think about immigration. But would it at least signal, if we have the Democrats back, that the U.S. isn't actually fully on board with that? Yeah, I mean, I think it would signal, it would remind everybody that there's a different part of American politics. And I think it would remind everybody that the MAGA movement is not inevitable and it hasn't won some kind of victory that will last forever, which I think is what they thought at the beginning of this administration. It'll be important to remember that these ideas will remain inside US politics.

29:43There will be a part of Congress that continues to support them. There will be a part of the voting public that continues to support them. And so you can't, I don't think we go back to where we were before. You know, the U.S. is also, by the end of the next two years, I am afraid, and I say this with real sorrow and kind of horror, I think the U.S. will be a lot weaker. It's weakened itself by its performance in the Middle East. This strange alignment with Putin doesn't do America any good anywhere, actually. It doesn't demonstrate power or strength. It looks weak. And so I would think a Europe that is totally dependent on this much weaker United States would also be endangering itself.

30:28So beginning to think about what a sovereign Europe looks like and how to maintain European sovereignty over the coming decades, I still think that's going to be an important project for European leaders and the European public. So finally, after Viktor Orban's defeat, an immensely pleasant surprise, you wrote that illiberalism is not inevitable. So what will you be looking for? How big an outcome will you need to see in terms of democratic success, success of the Democrats, to tell you, well, that's actually not only true, but it might actually be true quite soon? So I don't do electoral predictions because I don't believe any opinion polls.

31:10And I don't know, to be clear, I don't know who will win in November and I can't predict any specific Senate seats for you or anything like that. But yes, I do think at the very least winning both houses, winning the house with enough of a margin to really run, you'd need, I think the number is 15 seats, 20 seats that you would need to have a really solid majority. I think those are that's a kind of basic prerequisite for the beginning of change. And if we don't get that, people will keep fighting for in 2028. Well, thank you very, very much. And I think we've had a pretty comprehensive conversation about where we are.

31:56And let's see what happens. And then let's hope we can be more cheerful after that result. Thank you very much. Thank you.

32:23We'll see you next time.

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