Jeremy Warner: The year that almost everyone got wrong

Donald Trump.

Opinion

This has been a year for confounding mainstream prediction, my own feeble efforts at it included.

As everyone knows, economic forecasting is a mug's game; almost by definition, nearly all forecasts will turn out to be wrong to some degree. But it becomes doubly so when the models are battered by unexpected political events; this year it was the political shocks, not the economic ones, which provided the main source of surprise.

We can all see, with the benefit of hindsight, how easy it should have been to anticipate these shocks.

The long economic hiatus that began with the financial crisis in 2008 was bound at some stage to find its conclusion in repudiation of established political institutions and the liberal political centre ground they have come to stand for.

You cannot have economic failure on such a scale without eventual insurrection against those thought responsible for it. Historically, that's always been the way of things.

At the time, it was not at all obvious that people would vote in such numbers for either Brexit or for Donald Trump. We had come to assume a status quo bias in politics - that when push comes to shove, people will always vote for the devil they know, rather than the deep blue sea.

Or worse, we had become too metropolitan in our outlook to appreciate the reality of life in the great hinterland of our countries. For this complacency alone, the political/business/institutional establishment deserves its humiliation.

What made both these votes doubly surprising, at least to mainstream opinion, was that they happened in economies that are basically on the mend, with close to full employment and comparatively robust growth. Had something similar occurred in any of the troubled economies of the eurozone, or even in France, where political fragmentation is already well established, nobody would have been in the least bit surprised.

Even so, both events confirm an old historical truism; that revolutions tend to happen not in the depths of the economic contraction, but afterwards, when things are starting to get better again. This is the point at which resignation turns to frustration and anger, and citizens demand change.

The pundits also failed to forecast the economic reaction. There was no collapse in the growth rate, as widely forecast for the UK in the event of a vote to leave the EU. After a brief flurry of panic, the stock market fast returned to pre-Brexit levels, the only lasting damage being a sharp devaluation in sterling. Despite IMF warnings of a major shock to international confidence, there was no immediate impact on the wider global economy.

Trump's victory was similarly misread. The panic lasted a matter of hours before investors woke up to the fact that his economic agenda implied a huge fiscal stimulus of tax cuts and spending increases. It ought to be good for growth, and good for share prices, at least for a while.

Mainstream punditry fell prey to wrong-headed group think. There was no conspiracy in these forecasts, yet by making them, the establishment finds itself accused of having cynically misled the public for its own end. Even if eventually vindicated, credibility has suffered another near-fatal blow.

With the crisis in European Monetary Union still essentially unaddressed, it's hard to be optimistic about prospects for continental Europe over the coming 12 months. Elections in the Netherlands, France, Germany and possibly Italy make this a year likely again to be dominated by populist insurrection. The last year may have seemed turbulent enough; the outlook is for many more storms to come.