Dr. Adam Pilarski

There are two reasons for the farcical situation we are facing. One is related to the peculiar political system we have in the U.S. and the other represents developments across the globe. Starting with the U.S., we have a de facto two party system. This has some positive aspects in that it promotes stability. Witness the difficulties of putting coalitions together in countries blessed with many relevant political parties. But the negative aspect of such a system is that it masks the vastly different constituencies each party represents. Since very few people vote in the preliminaries, often relatively fringe but highly motivated groups get to select their favourite. In the case of the Republican Party, it is easy to imagine that were it to be a party in Europe it would be represented by at least four distinct and different parties.

One could be a traditional party supporting low tax, pro trade and a limited role of government at least in social issues. Another party could be one of religious fundamentalist Christians opposing abortions and gay rights and protecting their own definition of family values. Another could be a British liberal type party emphasizing laissez faire ideas with a stress on individual freedom. Still another could be a nationalistic party devoted to the uniqueness of its respective home country and its role in the world: anti trade, anti foreigners, restricted immigration and strong defense. In the U.S. system all those voters are expected to support just one candidate which causes havoc right now. Aside, the U.S. Democratic Party in Europe would also be represented by different parties stressing a stronger role of government, more activist social policies, protection of minorities and so on.

The political realities fitting some of the popular reality shows in the U.S. are matched by unanticipated and sometimes hard to believe developments in other parts of the world. Very few people predicted Brexit, as one example. The President of the Philippines, as another example, uses totally unprecedented non-diplomatic language to insult the E.U. and the U.S. President. His appeal is to the part of the populace striving for simplicity and power. Not listening to experts but relying on blunt proclamations of a strong leader is the vogue right now whether in the Philippines, Russia or from various candidates for top positions in Europe or the U.S. In Europe populist parties both on the left and right are making big advances with approximately a fifth of the total European population voting for them. Election results in Austria, Poland, Greece, Spain, France and other places put candidates that some time ago would have been considered too extreme in a position where their chances of eventually ruling their country becomes a reality. While some of these candidates express opinions usually associated with dictators, they are definitely pursuing their goals in a democratic fashion.

Those new populist leaders aspiring for power all represent a voice of those who feel wronged by globalization. Tremendous advances in trade and globalization brought prosperity to hundreds of millions of people in the world with a heavy concentration in Asia. It was also a major factor in controlling inflation across the globe providing consumers everywhere access to cheap products. But every advancement may have some who lose. The famous Austrian economist Joseph Schumpeter called this development “creative destruction”. For the society to progress economically, new industries must be introduced and old ones must whither away. When cars were introduced, horse and buggy drivers became redundant. This is part of progress but not a convenient part for those drivers. Now they can vote for people who proclaim they can protect them and their livelihood.

How is all this related to aviation? Let us look at the growth of freight and passenger traffic. Historically the rule of thumb was that you forecast the rate of passenger growth and add one percentage point to get the freight growth forecast. Using IATA statistics we can see that in the first decade of this century both passenger and freight growth was quite similar. On the other hand, since around 2010 freight grew by a total of only 8 percent while passenger traffic grew at around 42 percent. In other words, passenger trends continued their previous trajectory while freight basically stopped growing. This development correlates perfectly with trade statistics provided by IATA which show continuous trade growth from around 1980 with a plateau reached in the last few years. Hence, a worldwide globalization pause led to a pause in trade which in turn led to a pause in freight growth. Such developments are not good for the demand for aircraft. If some of the populists come to power we may also expect less movement of people, further slowing growth of passenger traffic and demand for aircraft.