THERE will be many explanations for the outcome of the US midterm elections. Some will focus on the Iran war, personalities, inflation, tariffs or the divide between Republicans and Democrats.
The explanation that interests me most is more fundamental.
The US economy was hardly in collapse. The stock market had recently reached unprecedented highs, economic growth remained respectable, unemployment was not a major concern, and overall household wealth had reached high levels by mid-2026.
Yet consumer sentiment remained close to record lows, and economic pressure and the cost of living were among the strongest motivations in the election.
Growth is no longer enough as a political argument.
There is an important message in that contrast. An economy can generate great wealth without large numbers of people feeling that they are becoming better off.
This does not mean American voters have rejected capitalism. But it may represent another challenge to an idea that has influenced economic policy for decades; create favourable conditions for business, and the benefits will eventually spread through investment, jobs and higher incomes.
We call this trickle-down economics.
There is logic behind part of it. Businesses must make profits. Profitable companies can invest and create employment. What I question is the assumption that business prosperity will automatically become broader prosperity.
It may. But it does not have to. Profits can finance new factories and jobs. Technology can raise productivity without producing equivalent growth in employment.
This helps explain the apparent contradiction in the US. The stock market can create vast amounts of wealth for those who own financial assets while a worker whose income depends primarily on wages struggles.
Many citizens may ask very different questions; am I becoming more economically secure? Can my income keep pace with the cost of living? When enough people become doubtful about those answers, growth begins to lose its political legitimacy.
And this is where democracy enters the story.
Markets can allocate capital, determine prices and reward economic activity. They cannot decide whether the resulting distribution of wealth, opportunity and security remains acceptable to society.
Democracy provides that feedback. When people conclude that the economic bargain no longer works for them, elections provide a peaceful mechanism through which they can demand change.
That is the lesson Pakistan should pay attention to. We spend a great deal of time discussing economic stabilisation and growth. Forex reserves improve. Inflation falls. The current account looks better. The stock market rises.
All these matter. No economy can prosper for long without macroeconomic stability. But stabilisation and growth are not prosperity.
Pakistan has repeatedly gone through cycles in which macroeconomic stabilisation is achieved through adjustment of higher taxes, energy prices, reduced subsidies, tighter spending and slower demand.
Some of these measures may be unavoidable. But adjustment is never neutral. Higher taxes reduce disposable income and higher energy prices raise household and business costs. Subsidy cuts hurt those who relied on them, and tighter spending can weaken demand and employment.
A society can tolerate considerable inequality and difficult adjustment if people continue to believe that opportunity is open, and the system offers a route towards greater security.
It becomes harder when growth appears to occur somewhere else, for somebody else. The lesson from the US midterms is not that capitalism has been rejected. It is that growth is no longer enough as a political argument.
The US economy showed that it is possible to have strong growth, low unemployment and extraordinary levels of financial wealth and still have voters deeply dissatisfied with their economic circumstances. Pakistan should take that seriously. Macroeconomic stability is necessary.
But Pakistan should be conscious of the timing of the economic model it is now pursuing. Privatisation, deregulation, reducing the state’s commercial footprint and relying more on private enterprise are central to the reform programme.
But these are also elements of the market-led economic model that has dominated much of the West for several decades and whose outcomes are now being questioned by voters there. The lesson is not that Pakistan should reject markets. It is that we should not assume that markets, privatisation and growth will by themselves produce broadly shared prosperity.
None of them is sufficient if ordinary citizens cannot see a meaningful connection between national economic progress and their own lives. And in a real democracy, eventually they will say so.
The writer advises boards and CEOs on strategy, leadership and organisational transformation.
Published in Dawn, November 13th, 2026
