Sir Keir Starmer met Indian prime minister Narendra Modi at the G20 summit of global economic leaders.

In 2022, pollsters and political analysts predicted a red wave in the midterms that didn’t materialize. Last night, polls anticipated a whisker-thin election, and instead we got a red wave that carried Donald Trump to victory.

The breadth of Trump’s improvement over 2020 is astonishing. In the previous two elections, we saw narrow demographic shifts—for example, non-college-educated white people moved toward Trump in 2016, and high-income suburban voters raced toward Biden in 2020. But last night’s election apparently featured a more uniform shift toward Trump, according to a county-by-county analysis shared with me by Thomas Wood, a political scientist at Ohio State University. The “really simple story,” he said, “is that secular dissatisfaction with Biden’s economic stewardship affected most demographic groups in a fairly homogeneous way.”

Trump improved his margins not only in swing states but also in once comfortable Democratic strongholds. In 2020, Biden won New Jersey by 16 points. In 2024, Harris seems poised to win by just five points. Harris ran behind Biden in rural Texas border towns, where many Hispanic people live, and in rural Kentucky, where very few Hispanic people live. She ran behind Biden in high-income suburbs, such as Loudoun County, Virginia, and in counties with college towns, including Dane County (home to the University of Wisconsin) and Centre County (home to Penn State).

Perhaps most surprising, Trump improved his margins in some of America’s largest metro areas. In the past two cycles, Democrats could comfort themselves by counting on urban counties to continue moving left even as rural areas shifted right. That comfort was dashed last night, at least among counties with more than 90 percent of their results reported. In the New York City metro area, New York County (Manhattan) shifted nine points right, Kings County (Brooklyn) shifted 12 points right, Queens County shifted 21 points right, and Bronx County shifted 22 points right. In Florida, Orange County (Orlando) shifted 10 points right and Miami-Dade shifted 19 points right. In Texas, Harris County (Houston) and Bexar County (San Antonio) both shifted eight points right and Dallas County shifted 10 points right. In and around the “Blue Wall” states, Pennsylvania’s Philadelphia County shifted five points right, Michigan’s Wayne County (Detroit) shifted nine points right, and Illinois’ Cook County (Chicago) shifted 11 points right.

[David Frum: Trump won. Now what?]

Other than Atlanta, which moved left, many of the largest U.S. metros moved right even more than many rural areas. You cannot explain this shift by criticizing specific campaign decisions (If only she had named Pennsylvania Governor Josh Shapiro her vice president…). You can’t pin this shift exclusively on, say, Arab Americans in Michigan who voted for Jill Stein, or Russian trolls who called in bomb threats to Georgia.

A better, more comprehensive way to explain the outcome is to conceptualize 2024 as the second pandemic election. Trump’s victory is a reverberation of trends set in motion in 2020. In politics, as in nature, the largest tsunami generated by an earthquake is often not the first wave but the next one.

The pandemic was a health emergency, followed by an economic emergency. Both trends were global. But only the former was widely seen as international and directly caused by the pandemic. Although Americans understood that millions of people were dying in Europe and Asia and South America, they did not have an equally clear sense that supply-chain disruptions, combined with an increase in spending, sent prices surging around the world. As I reported earlier this year, inflation at its peak exceeded 6 percent in France, 7 percent in Canada, 8 percent in Germany, 9 percent in the United Kingdom, 10 percent in Italy, and 20 percent in Argentina, Turkey, and Ethiopia.

Inflation proved as contagious as a coronavirus. Many voters didn’t directly blame their leaders for a biological nemesis that seemed like an act of god, but they did blame their leaders for an economic nemesis that seemed all too human in its origin. And the global rise in prices has created a nightmare for incumbent parties around the world. The ruling parties of several major countries, including the U.K., Germany, and South Africa, suffered historic defeats this year. Even strongmen, such as Indian Prime Minister Narendra Modi, lost ground in an election that many experts assumed would be a rousing coronation.

This has been a year of global anti-incumbency within a century of American anti-incumbency. Since 2000, every midterm and presidential election has seen a change in control of the House, Senate, or White House except for 2004 (when George W. Bush eked out a win) and 2012 (when Barack Obama won reelection while Republicans held the House). The U.S. appears to be in an age of unusually close elections that swing back and forth, in which every sitting president spends the majority of his term with an underwater approval rating.

There will be a rush to blame Kamala Harris—the candidate, her campaign, and her messaging. But there is no escaping the circumstances that Harris herself could never outrun. She is the vice president of a profoundly unpopular president, whose approval was laid low by the same factors—such as inflation and anti-incumbency bias—that have waylaid ruling parties everywhere. An analysis by the political scientist John Sides predicted that a sitting president with Biden’s approval rating should be expected to win no more than 48 percent of the two-party vote. As of Wednesday afternoon, Kamala Harris is currently projected to win about 47.5 percent of the popular vote. Her result does not scream underperformance. In context, it seems more like a normal performance.

[Annie Lowrey: Voters wanted lower prices at any cost]

A national wave of this magnitude should, and likely will, inspire some soul searching among Democrats. Preliminary CNN exit polls show that Trump is poised to be the first GOP candidate to win Hispanic men in at least 50 years; other recent surveys have pointed to a dramatic shift right among young and nonwhite men. One interpretation of this shift is that progressives need to find a cultural message that connects with young men. Perhaps. Another possibility is that Democrats need a fresh way to talk about economic issues that make all Americans, including young men, believe that they are more concerned about a growth agenda that increases prosperity for all.

If there is cold comfort for Democrats, it is this: We are in an age of politics when every victory is Pyrrhic, because to gain office is to become the very thing—the establishment, the incumbent—that a part of your citizenry will inevitably want to replace. Democrats have been temporarily banished to the wilderness by a counterrevolution, but if the trends of the 21st century hold, then the very anti-incumbent mechanisms that brought them defeat this year will eventually bring them back to power.

Last month, the 2024 Nobel Prize in economics was awarded to three scholars, Daron Acemoglu, Simon Johnson, and James Robinson, for “studies of how institutions are formed and affect prosperity.” Don’t let the dry language fool you: The award generated more controversy than any other in recent memory. One critic wrote that “it exposes how the economics discipline fails to ask critical questions.” Another called the trio’s work “historically inaccurate, if not ideologized.” I confess to emailing a long rant to colleagues in my department.

Why so much drama? In the work that won the Nobel, Acemoglu, Johnson, and Robinson—three highly respected economists almost universally referred to as “AJR” by their peers—argue that nations with democratic institutions have the most economic growth. It’s an appealing thesis that reaffirms the political systems of Western democracies. The problem—not just for the theory, but for the resilience of those political systems—is that it simply isn’t true.

According to AJR, certain kinds of economic institutions—private property, freedom of contract, a strong and impartial legal system, the freedom to form new businesses—are “inclusive,” meaning they allow most people to freely participate in the economy in a way that makes the best use of their skills. These institutions create modern, wealthy economies that are driven forward by technological innovation, not merely propped up by having won the natural-resources lottery.

Economic institutions do not just drop out of the sky. The laws and systems that make an economy run, such as market regulations, must be created and maintained by governments. AJR therefore argue that political institutions dictate economic outcomes. A nation’s political institutions are what determine who can rule, how these rulers are chosen, and how power is distributed across government. The institutions are enshrined in constitutions, electoral rules, and even traditions. In a dictatorship or monarchy, political power is narrowly distributed and relatively unconstrained. In such cases, AJR argue, a small ruling class will tend to use its power to restrict competition and extract wealth for itself. By contrast, if political power is widely distributed across diverse groups in a society, then their common interest in doing business, and competition among them, will result in prosperity-generating economic institutions.

In the United States, for instance, the oil industry would prefer not to have to compete with alternative energy. Old-stock citizens don’t want to compete with recent immigrants. But if the government is given the power to exclude my rivals, that same power could potentially be used against me. So, according to AJR’s thesis, our common desire to maximize our individual liberties and protect our property prevents us from ceding such power to the government. We’d rather keep the competition than risk getting shut out of the game. And that competition forces us to be ever more efficient.

In the end, AJR claim, decentralized democratic systems such as those found in the U.S., Germany, and Switzerland foster economic prosperity by improving a nation’s ability to innovate. Democracies with more centralized power are less productive. (Think of countries such as France, Portugal, and Greece, which have less separation of powers, fewer checks and balances, and relatively weak state and local governments.) Finally, one-party states and authoritarian regimes—those with even more centralized and less competitive political systems—breed stagnation.

[Gisela Salim-Peyer: Why does anyone care about the Nobel Prize?]

The most common critique of the AJR thesis hinges on methodological objections to the way in which they collected and analyzed the data. But you do not need a degree in economics or statistics to be skeptical of their argument. The real world simply provides too many counterexamples.

On the one hand, there are the nondemocratic systems whose economies have done quite well. To take the most obvious, China’s economy has grown fantastically since the late 1970s even as its political system has remained autocratic and repressive. It is now a global competitor or leader in electric vehicles, solar panels, quantum computing, biotechnology, mobile payment systems, artificial intelligence, 5G cellular, and nuclear-fusion research. South Korea and Taiwan are democracies now, but each grew from an agricultural backwater into a technological powerhouse from the ’60s to the ’90s, while they were relatively authoritarian states. The same goes for Japan. After World War II, Japan’s wealth grew dramatically as the country became a world leader in technology and manufacturing. At the time, it was a one-party state, with heavy government intervention in the economy. Elections were held regularly, but only the Liberal Democratic Party won. The party therefore controlled almost every major political institution throughout the country for nearly four decades, resulting in infamous, widespread corruption. Still, the economy flourished.

On the other hand, examples abound of decentralized democracies that don’t experience the kind of knowledge- and technology-driven growth that AJR celebrate. Canada is a relatively wealthy nation, but over the past several decades, without any change to its institutions, it has fallen into a prolonged productivity slump. AJR consider Australia, another decentralized democracy, to be an example of their theory in action, but its wealth comes overwhelmingly from natural resources; it is not particularly good at cutting-edge science and technology. Nor has decentralized democracy propelled Argentina, Brazil, Mexico, and India into the economic stratosphere. Great Britain was the world’s wealthiest and most technologically advanced high-tech superpower during the 18th and 19th centuries, but it lost that position even as its political institutions became more democratic and distributed.

A particularly revealing example is Spain. Spain has been institutionally transformed since 1975. It went from 40 years of military dictatorship to a market-oriented, decentralized democracy. Despite this revolution, there has been little relative change in Spain’s national innovation rate. Its economic growth per capita has averaged less than 1.5 percent per year since the dictatorship ended. That’s far worse than Ireland (a unitary democracy), Singapore (a “partly free” one-party democracy, according to Freedom House), and Vietnam (a communist dictatorship), each of which leveled up its economic competitiveness during the same time period.

AJR have responded to these critiques, often in point-by-point fashion. They have argued, for example, that China’s growth will be unsustainable in the long term if its political institutions don’t change. India, meanwhile, might be a decentralized democracy, but it is “highly patrimonial,” which “militates against the provision of public goods.” Arguments such as these are unfalsifiable: One can always explain away seemingly inconsistent results by pointing to some overlooked characteristic of a given country. And if a culture of patrimony has defeated otherwise-healthy institutions in India, then maybe institutions aren’t so fundamental after all.

If political institutions don’t explain economic outcomes, what does? My colleagues who study innovation and economic growth point to many possible answers, including culture, ideology, individual leadership, and geography. In my own research, I have found that countries with technology-driven, high-growth economies share one thing in common: a powerful sense of external threat. Some fear invasion; others worry about being cut off from a vital economic input, such as energy, food, and investment capital. Taiwan’s very existence is threatened by China, as was Israel’s after the Arab states began to unite around it. These two countries needed to build high-tech defense industries at home and earn money to purchase advanced weapons systems produced abroad.

Stagnant economies, by contrast, tend to be more focused on internal divisions. They are less concerned about military attacks or imports of essential goods and suffer more from deep conflicts over class, race, geography, or religion. If a nation’s internal threats are perceived to outweigh its external threats, then its people will fear the costs, risks, and redistribution of building a competitive economy. The pie is safe, so they fight over the relative size of their slice. (If I’m right, then Donald Trump’s focus on persecuting “the enemy from within” bodes ill for America’s economic prospects should he be reelected this week.) But if a nation’s sense of external threat is greater than its sense of internal threat, then it tends to invest in innovation. The costs and risks are worth it. The pie is in danger, so people cooperate to defend it.The question of why some countries thrive and others stagnate isn’t just an academic one. In the late 1980s and early ’90s, under pressure from the West, Russia created a parliament and privatized state assets; the West declared victory. The U.S. invaded Iraq in 2003, set up a parliament and a stock market, and then announced “Mission accomplished.” The promised economic miracles never materialized.

[Brian Klaas: The dictator myth that refuses to die]

Western democracies too often assume that setting up the right institutions will bring about the desired outcomes. It doesn’t. A society uses institutions to accomplish its goals. But the goals come first, and they are determined by fights over wealth, power, resources, ideas, identities, culture, history, race, religion, and status.

How did such a demonstrably incorrect thesis win the Nobel Prize? In part, I suspect, because it tells the story that many educated Westerners want to hear about democracy. We want to live in a world where democracy cures all. But if democratic nations overpromise what democracy can achieve, they risk delegitimizing it. In Russia, China, and much of the Middle East, democracy is widely seen as dysfunctional, partly because it has not delivered the promised economic prosperity.

Ambitious politicians recognize that institutions are tools, not causal forces. In different hands, the same tools will achieve different ends. Men such as Hitler and Mussolini understood this. They exploited fundamental political divides to undermine both democracy and markets. These lessons are not lost on modern leaders such as Xi Jinping, Vladimir Putin, Recep Tayyip Erdoğan, Viktor Orbán, Narendra Modi, and even some here in the United States. We therefore ignore the more fundamental political forces at our peril. So do Nobel Prize winners.