As unprecedentedly awful as America’s politics are right now, in one way, we’re perfectly normal, because we’re just like everyone else. The monumental disarray of our Republican and Democratic parties is perfectly mirrored in the UK by the Conservatives and Laborites. Donald Trump and Boris Johnson could be twins. The specter haunting Europe these days is not communism but xenophobic authoritarianism, hovering at the wings of power in Western and Central Europe and in power to the East and the South, with Turkey the newest and most distressing convert.
It was only a decade ago that “everyone” believed that the rewards of economic and political transparency were so great as to be irresistible around the globe. Why be poor when you can be rich? Embrace free-market capitalism and “bourgeois parliamentarianism” and all will be well!
Well, I still believe that, but millions don’t, on both the left and right. It’s perhaps most remarkable in the U.S., because in the U.S. free-market capitalism and bourgeois parliamentarianism weathered the storm of the Great Contraction more effectively than any other nation in the world, despite the best efforts of the bourgeois parliamentarians who call themselves Republicans, who labored unceasingly during the Great Contraction to make it worse. Yet the countercyclical spending, necessary as it was, infuriated the middle class, because it all went to the rich or the poor.1 Shockingly, free-market economics is not a morality play, but few people are willing to understand that.
The right wanted the poor to be punished, via “austerity”, precisely the wrong policy, but the hunger for it was so great that President Obama himself, whose administration correctly pursued an expansionary policy, ended up talking, quite stupidly, about “belt tightening” and was forced by the Republicans’ big win in 2010 to actually engage in it.
At the same time, the left also wanted someone to suffer, the fabled “1 Percent”. First Elizabeth Warren and then Bernie Sanders were the spokesfolks for the school teachers, college professors, and other knowledge workers who believe that their virtue entitles them to the leadership of society. In fact, President Obama was far too taken with Wall Street’s agenda, particularly the need to “rein in” entitlements,2 but the populist left’s longing for “revenge” was nothing but folly.
But the fate of the Obama Administration, to be disgraced for being in power, was the same for other governments as well. In the UK, it seems quite possible that the Labour Party will never recover from the strains it endured for being in power from the very start of the recession. In fact, it’s all too likely that the UK itself will never recover from the strains of the Contraction, that both Scotland and Northern Ireland will depart from what was once an “Empire”.
It is “curious” that in the U.S., with the largest and healthiest economy in the world, there is such a great sense of powerlessness on both the left and right, all of it culminating in remarkably bad ideas, and all of them involving a withdrawal from the global economy into a sort of economic autarky, which would, of course, be an economic disaster.
On the right, millions are longing for something they cannot have, “the America I grew up in”. This emotion is very largely racist. On the left, it is largely the rage of the paleo-liberals, who were pushed from power in the early days of the Clinton Administration.3 The paleo-libs cried in the wilderness for a good twenty years, but now at last they have what had always lacked: followers. Bernie Sanders spoke nonsense, but it was nonsense that struck home to millions of young people, “knowledge workers,” most of them, who find themselves looking at the knowledge economy from the outside in. Sanders’ absurd economic isolationism and endless attacks on Wall Street energized the “Old Left”, the union between the intellectuals and the working class that both the Clintons and Obama had let lapse in their confidence that a Democrat with Wall Street cash simply couldn’t lose.4
Part of the problem is that neither the Republicans nor the Democrats have been able to form effective majorities. If Obama had had a Democratic Congress for more than two years, he could have passed “effective” climate change legislation,5 which, however it actually affected the environment (and the economy), would have blunted some of Bernie’s appeal. The Republicans, of course, are even further from a majority.
It’s not surprising that both parties are seeking for scapegoats for their inability to win consistent majorities. Democrats bemoan the influence of “Big Money”6—and, often, free speech—while Republicans, more “honest”, simply try to figure out ways to keep blacks and Hispanics away from the polls. They can’t beat us if they can’t vote, gosh darn it!
The “lessons” of the Great Contraction is that markets not that markets don’t work, but that they are not self-policing, nor are they necessarily rational or “efficient”. It is often quite “natural” for them to be irrational and inefficient, to the point of disaster. Disaster was averted, but the cure now bears the stigma of the disease, and the longing for safety, for a guaranteed “everything,” is paramount.
My heart, and my money, are still on freer borders, free markets, and free speech. But I wish I had more company.
Afterwords
Much of the shock of the global economy as it’s felt in the U.S. and Western Europe derives from the fact that “we” are no longer the only developed economies in the world.7 We no longer enjoy the “natural” advantages we have possessed since the dawning of the Industrial Revolution. I’ve mused here and here on what can be done, and why it’s so hard to do it.Neil Irwin of the New York Times does some chin-stroking here.
- The Obama Administration was consistently too favorable to Wall Street, starting with President Obama’s decision to appoint Tim Geithner as secretary of the treasury. Geithner was determined not to turn back the clock to the days when banks effectively functioned as public utilities, enjoying guaranteed but limited returns. Geithner was a passionate devotee of the notion of bankers as supermen, whose genius drove the economy to unprecedented heights and whose genius therefore merited unprecedented compensation. And Obama backed him to the hilt. Fortunately, policy moved away from Geithner’s vision, and, according to what I read at Bloomberg, at least, Wall Street is reluctantly coming to grips with the notion that Silicon Valley, rather than the Street, should be the preferred destination of the most driven. ↩︎
- At his best, Obama talked about the need, not to rein in entitlements but rather to rein in the increases in health care costs. But he was all too willing to make Tim Geithner, and Wall Street, happy. ↩︎
- Robert Reich, Clinton’s first secretary of labor, was effectively the last paleo-lib. The reception given to Reich’s bitter memoir, Locked in the Cabinet, which effectively got him laughed out of Washington for portraying himself as the last honest man in DC, the last man who cared, demonstrated how much the ground had shifted. Labor unions were out; venture capital was in. ↩︎
- This “union” was noticeably, and embarrassingly, white, but Bernie, coming as he did from snow-white Vermont, did not notice. ↩︎
- That is to say, “counterproductive” climate change legislation, in the eyes of skeptical environmentalists like myself. ↩︎
- Campaign finance “reform” is, in my mind, a fruitless exercise in Whack-a-Mole, which, to be “effective”, requires first of all whacking the First Amendment, which I am very loath to do. My only concrete recommendation for “reform” would be to abolish those neither fish nor fowl non-profit corporations that allow individuals and corporations to anonymously channel unlimited sums of money to be spent on explicitly political activities. For profit corporations are fine; non-profit corporations are fine. But we ought to be able to know where the money is coming from. Of course, Republicans, who hate the IRS anyway, will never allow a change. ↩︎
- Bernie Sanders’ entire economic “plan” is to go back to the days when we were the only developed economy in the world. ↩︎
