Crypto News: The upsets to come

Welcome to the final installment of the Year of the Elections newsletter. Going forward, you'll receive our Balance of Power newsletter, bringing you the latest in global politics. You can adjust your preferences anytime here.

If there is one thing that 2024 taught us, it's that elections will be more frequent and unpredictable, easier to tamper with, and much less easy to classify.

Democracies, as the postwar order understands them, are in trouble.

Take Germany and South Korea, exemplars of a liberal democratic model that finds itself at a crossroads.

Both Germany (which underwent reunification) and South Korea (which didn't) built economic miracles now being exposed to political failings that crested last year and which will reach their denouement in this one.

Workers carry a banner reading "Ready To Strike" during a walkout at the VW factory in Zwickau, on Dec. 2. Photographer: Iona Dutz/Bloomberg

Germany, the world's third-biggest economy and Europe's supposed lodestar, is at the mercy of disaffected voters in snap elections on Feb. 23 that will turn on its stagnating output. The incumbent coalition collapsed in November amid persistent in-fighting.

No wonder the likes of Italy, typically scoffed at for having governments that last little more than a year, feel a degree of Schadenfreude.

Until recently, Germany was Europe's economic motor; now it's Europe's sick man, and the establishment parties are struggling to fight off an insurgent far right that counts the world's richest man among its supporters.

Elon Musk's political clout has risen after helping to get Donald Trump elected US president, and while he's yet to throw around money in Europe, he's used his X megaphone to bash incumbents there. Germany, with its export-dependent economy, looks especially exposed.

Few saw the return of massive political instability to South Korea — nor that the president arrested for trying to impose martial law would be the same person who charmed Joe Biden with his rendition of "American Pie" at the White House 18 months previously.

South Korean President Yoon Suk Yeol sings during a state dinner with Joe Biden, on April 26, 2023. Photographer: Chip Somodevilla/Getty Images North America

South Korea has run technological and cultural circles around just about everyone. It boasts one of the world's fastest Internet speeds and one of the most advanced chipmakers in Samsung Electronics; it's made K-Pop a global phenomenon, and unleashed "Squid Game" onto a captivated world.

But that cutting-edge of the zeitgeist sits alongside being neighbors with one of the most aggressive countries in the world: North Korea. Already an international pariah, Pyongyang is sending soldiers to help Russian President Vladimir Putin in his war on Ukraine, while upping the pressure on a hobbled Seoul.

Those twin challenges put South Korea on the front line of 2025's geopolitical challenges, whoever ends up in charge. Indeed, a recent global poll for the European Council on Foreign Relations found South Koreans more pessimistic about their country's prospects during Trump's second term than any other nation surveyed.

Demonstrators with an effigy of the president in Seoul on Dec. 21. Photographer: Jean Chung/Bloomberg

Trump, though, is a symptom of the changing electoral dynamics rather than the cause, even if he is the thread that connects many developments.

In the current ultra-charged environment, the old labels of "left" and "right" are losing their meaning, whether on free trade or freedom of choice on issues like abortion and sexuality. Even the terms "fascist" and "communist" are banded around so freely that they have lost their power to sting.

A new terminology is called for to understand a world that no longer plays by the old rules.

It's a world in which the likes of El Salvador's President Nayib Bukele flourishes: an authoritarian populist who's bought into Bitcoin, he called himself the world's coolest dictator, then a "philosopher king" — and is wildly popular with voters who've embraced his security crackdown.

Many countries once held up as models are now in decline and some of those that were derided are now oddly stable. This year may show whether it's a temporary convulsion or a lasting shift. — Flavia Krause-Jackson

Nayib Bukele. Photographer: Camilo Freedman/Bloomberg

Q&A with Tom Orlik, chief economist for Bloomberg Economics, on his conclusions from the past year.

2024 was a year of elections – who won?

We looked at 38 democracies that held competitive elections in 2024. Incumbents lost power in nearly half and saw their share of the vote decline in almost three quarters. In many cases, defeated incumbents were establishment parties — like President Joe Biden's Democrats in the US. Victorious challengers were populists — like President Donald Trump's Republicans, promising a shake up of not just policies, but also the way government works.

Why did the challengers do so well?

Political scientists – and exit polls – point to two overlapping explanations: economic grievance and cultural backlash. On the economics, the combination of free trade, immigration and small-state policies pursued by establishment parties on the left and right since the 1980s has not been kind to working class incomes. On top of that, post-Covid inflation pushing close to 10% in the US and Europe hammered spending power.

On the cultural backlash, starting in the 1960s generational change has triggered a silent revolution toward liberal values on sex, race, religion and national identity. Pippa Norris — a Harvard political scientist — argues that has triggered a noisy counter-revolution. Fearful of finding themselves in a minority, social conservatives have organized, mobilized and voted to advocate for their views. A higher propensity to vote for older conservatives adds to their impact.

That combination of economic grievance and cultural backlash handed the keys to power to populist challengers.

What happens next?

Some 43% of G-20 GDP is now being run by parties Norris's Global Party Survey classifies as populist. With authoritarian leaders like Russia's Putin running another 35% that means establishment parties are not going to be calling the shots on how the world economy is run. On the economics, doors that are already creaking closed to trade and immigrants are set to slam shut. On governance, brace for challenges to institutions from regulatory agencies to independent central banks.

Wild cards?

Let's focus on the US. Arguably the worst thing to happen to the Democrats in 2020 was their surprise win in the race for Georgia's Senate seats. That handed them control of Congress, opening the door to overdone fiscal stimulus, amped-up inflation, and a crushing defeat in 2024. Now the shoe is on the other foot, with the Republicans controlling Congress and the White House. Let's see if Trump can resist the temptation to overreach.