Stereotypes

Having heard the American Right repeat that it is always the best at handling the economy, some have even come to believe them. However, the facts are stubborn, and the voters are skeptical.

American stock markets were on the rise Thursday. According to analysts, the markets’ good mood could not be attributed to the day’s statistics on employment and manufacturing orders, which were better than expected. No, what they were celebrating, apparently, was the good performance of the Republican candidate in the American presidential election, Mitt Romney, in that evening’s televised debate.

The business world’s bias in favor of the Republican camp seems like a fact of nature. Isn’t the American Right the champion of free enterprise, economic development and the responsible management of public finances? Isn’t the Democratic camp dedicated, above all, to defending grand social causes, redistributing the wealth created by others and trying to counterbalance the markets’ “law of the jungle”?

Wall Street is supposed to be good at math and to form its opinions only after cold and rational evaluation of the facts. Barclays Capital, the investment bank, wanted to help these evaluations by calculating the change in the value of stocks in the United States since 1929, reports the Economist this week. Contrary to what may be expected, this value grew on average by 10.8 percent per year during the years Americans were led by Democratic presidents and by only 2.7 percent when they were “lucky” enough to have a Republican president. The results were not much different even when they excluded the four dark years under the control of the Republican president, Herbert Hoover, at the beginning of the analyzed period.

Perhaps, wonders The Economist, Wall Street likes the Republicans because they better serve the wealthiest citizens? The problem is that another study, looking this time at 1952 to 2004, has established that the after-tax income of the richest 20 percent also grew more during Democratic years (1.37 percent of real growth per year) than under Republican presidents (0.92 percent). The comparison becomes downright embarrassing when one looks into the fate of the poorest 20 percent, with an average growth in income of 1.56 percent under the Democrats and a decrease of 0.32 percent during Republican years.

The funny thing is that these tendencies have also been observed in Canada. Here too, we are led to believe that a president from the Republican party is economically preferable on this side of the border, notably because of its reputation for budgetary rigor and free trade bias. But we are mistaken yet again, argued Pierre Martin, a specialist in political economy at the University of Montreal, in Saturday’s edition of Le Devoir. Since the 1950s, Canadian manufacturing saw an average annual growth of 5.7 percent during Democratic years, as compared to only 1.7 percent during Republican years.

The comparison is even more striking when one looks at the performance of the Toronto Stock Exchange. A sum of $1000, invested in 1953 and only allowed to mature during the 36 years of Republican presidency, would be worth $2,200 today. The same $1000 after a little less than 24 years of Democratic presidency would be worth nearly $16,000!

From the Expert to the Voter

Even if these historical facts seem to have eluded our rational market actors, this is not the case for everyone.

The Economist publication asked a little more than 350 reputable American economists what they thought of the two candidates competing in the presidential election. Barack Obama received a better grade than Mitt Romney in eight of the nine economic issues seen as important. One cannot fault the president either for navigating (as he is) out of the bad state of the American economy. It is also readily recognizable that it is always more difficult to recover from a recession caused by a financial crisis and that the country continues to be subjected to all sorts of external shocks, such as the European crisis.

Yet more interesting still, the population also seems to have a different vision of the markets when it comes to the respective capacities of the two main parties in economic matters. The most recent poll from Pew Research Center which addresses this question, reported in July that 48 percent of Americans thought that Barack Obama was most likely to improve the country’s economic condition, as compared to 42 percent for Mitt Romney, which was exactly the opposite of the figures the month before.

This score was 53 percent for Barack Obama and 32 percent for John McCain on the eve of the 2008 elections; 47 percent for the Democrat John Kerry and 40 percent for the Republican George Bush in 2004; 49 percent for the Democrat Al Gore and 37 percent for George Bush in 2000; 49 percent for the Democrat Bill Clinton and 35 percent for the Republican Bob Dole in 1996; and once again, 41 percent for the Democrat Bill Clinton and only 26 percent for the Republican George Bush, Sr. in the famous 1992 elections.

This just goes to show that it is not economic competence that decides the results of an election and that this image of competence is not often where one might believe.