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ОглавлениеIntroduction: from economics to angrynomics
Strong societies can bounce back from a punch in the face. Consider Iceland. If the run up to the financial crisis of 2008 was a party, Iceland was party central. Four Icelandic banks went on a frenzied international expansion and grew their balance sheets (they bought stuff in the hope that it would go up in value) to ten times the size of the economy. When those banks went bust, they took the whole of Iceland’s economy down with them. An epic punch in the face if ever there was one.
They may have been reckless, but Icelandic bankers and their co-workers had brains. When everything crashed, a lot of those brains went home and played video games – it’s dark much of the time in Iceland. And then they hit on something. Online gaming is a global industry that requires a lot of computing power. Computing power makes heat. Heat needs to be cooled. So why not stick the servers for online gaming, Bitcoin mining, and a host of other things, in the ground in Iceland (the clue is in the name), and run the show from there? Which is what they did. Iceland had supportive institutions that didn’t throw unemployed people under a bus, which allowed them to rethink their options and redeploy their capital.
The financial crisis hurt, to be sure, but given those institutions it also encouraged the growth of a whole new set of ideas and innovations that brought the country “most screwed” by the 2008 crisis back to its feet faster than almost all the others. By 2016, Iceland had fully recovered. Wages were higher than before the crisis, unemployment was low, and consumer confidence was high. Tourism was booming, in part because the crisis a decade earlier had crashed their currency, so it was a cheaper place to visit. Ten years later and the crisis seemed like a bad dream. Icelanders had never had it so good.
It was a different kind of punch in the face when in 2017 waves of angry protests broke out, and in greater numbers and with greater voice than any that had happened in 2008. That anger was triggered by revelations in the so-called “Panama Papers”, which revealed tax dodging on an epic scale by Iceland’s political and economic elites. The country that had suffered together through the crisis, had united for an improbably successful football run in the 2016 European Championships, had stuck by each other, and had come out ahead . . . suddenly got angry. “People came [to the protest] because they were so furious” said Jonas Haukdal, a Reykjavík ice-cream maker. “We thought we were over all that . . . we thought the scandals were behind us, that we knew what was ethical again. And then we find our prime minister has money offshore, and kept it quiet . . . It was like a betrayal.”1
A similar story unfolded in France in 2018–19. Despite the weakening of austerity policies across Europe and growth returning to France, out of seemingly nowhere hundreds of thousands of WhatsApp-enabled “yellow jackets” took to the streets in protest. Ostensibly energized by a rise in the tax on diesel fuel, which hits poorer commuters especially hard, their demands expanded, and their networks spread beyond France, all based around a rejection of the cosy consensus engineered by their political elites. In 2019, the citizens of Hong Kong also rose in protest, as did the citizens of Chile, and for many of the same reasons – a disconnected elite, rising inequality and skewed advantage.
But this comes as no surprise. Neither that politicians lie, nor that ordinary people get angry at the disconnect between their lives and those of their elites. Indeed, we simply take it for granted that we live in an angry world. This is now the most conventional of all conventional wisdoms, the explanation for events the world over. “Oh, well people are very angry over in Germany, Austria, France, the United States, the UK, Indonesia, Hong Kong . . .”. Not only is seemingly everyone angry, but everyone assumes that we understand why – that anger is obvious. But is it? Is all anger the same? Why anger, and not passion, or fear, energy, or optimism? In Angrynomics we are seeking to make sense of what appears at first sight to be an incoherent outpouring of a primitive emotion.
When economics becomes angrynomics
To understand what “angrynomics” is, let’s first start with economics. Economics is a set of ideas, a map, that tells us how the world of markets and exchange works. It is also a description of the world in which we live. If the world of economic theory, the map, accurately describes the terrain in which we live, then it’s a good map. Are these economic maps any good? That’s an open question. In the very few bits of the world where economic theory is directly applied, for example in central bank forecasting departments, highly complex models of the economy called dynamic stochastic general equilibrium (DSGE) models are populated by what are called “representative agents”. These “agents” are supposed to be people, but they are strangely ageless, sexless, tasteless, non-ideological, and they live forever.
In this emotionless and timeless world, “the economy” is nothing more than the number of workers, multiplied by the number of hours worked, plus the amount of capital (machines, technology, etc.) that they work with. That’s it. There’s no politics, no concern over who gets what and why. As these fictitious economies mature, they accumulate more capital and all the agents get richer, and as they do, they work less. This is a very comforting world, but is it the world in which most of us actually live? Does the map mirror the territory?
In the world we inhabit, it appears both true that society as a whole has never been richer, and yet most of us seem to be working more. As for the distribution of income, the Federal Reserve Bank of St. Louis describes how in its model “the last workers to be hired by a business should receive pay that is equal to their contribution to the output of that business”.2 This sounds pretty reasonable. But this doesn’t seem to mirror reality, either. CEO pay has rocketed to hundreds of times that of employees, many of whom have not had a pay increase for decades, when you adjust for inflation. Clearly power matters here, but power is nowhere to be found in our modeled world. Indeed, the distribution of wealth has not just become extreme, but politics has become the playground of those with vast wealth. Billionaires spend millions protecting their interests, or supporting their personal, often eccentric, agendas – such as secretive hedge fund managers bankrolling the Brexit campaign.3
Economics is a powerful map of the world. But the map that we have been working with for the past 30 plus years – what the economist Dani Rodrik calls “the neoliberal map” – works in theory, in models, but increasingly fails to describe what most of us experience and care about. That is, a world of seemingly ever-tighter budgets, ever-rising costs (despite being constantly told that there is no inflation), and ever-increasing stresses in and beyond the work place. At some point, the disconnect between our experience of the world and the model used to explain it has to come to a head.
Economics as it stands can’t seem to explain why the pressures of life appear to be intensifying, at the same time as income per capita is rising. Nor can it explain why pensioners, whose incomes depend upon the number of workers in work paying taxes, reject immigration more than any other group, when they forgot to have enough kids to keep it all going? Why do we see the rise of nationalism everywhere when we hear that globalization, on average, has made us all richer? One part of that answer lies in this disconnect between what is assumed to be going on in our models and what is actually happening in the world as it is. A second part lies in another disconnect, which is the inauthenticity of the elites pursuing steady progress in “GDP per capita” to the rest of us who witness dramatic and disconcerting societal change.
Elites are nothing new. It used to be the case that political elites were defined by who they represented. Labour and social democratic parties represented the interests of workers while conservative and liberal parties represented the interests of business. By the 1990s those relationships began to breakdown and a new politics emerged throughout the developed world where such “left” and “right” divisions were increasingly thought to be arcane and irrelevant relics of the Cold War. In its place emerged a new politics where politicians ceased to represent core constituencies and instead sought to capture a so-called “median voter” who acted like the representative agent in our economic models.
These voters cared not for economic conflict, but supposedly cared for post-materialist values and good governance, which parties duly agreed to supply. The big policy stuff was best left to experts in international organizations and independent central banks. Politicians supplied less policy and yet pretended to represent everyone’s interests while doing so.4 This was the world of the 1990s and 2000s, wonderfully described as “the Great Moderation” in 2004 by then Federal Reserve Chair Ben Bernanke, whereby the elimination of politics at the hands of technocrats had delivered prosperity for all.5 There were, as we know now, rather large flaws with this view of the world.
Chief among them was that material concerns never went away. Parties simply stopped admitting that they existed. The UK economy doubled in size from 1980 to 2017. Over the same period use of food banks increased 1000 per cent. In much of the developed world, inequality rose throughout the 1980s and 1990s, dipped for a decade, and shot up again after the financial crisis. Over the same period global corporations simply stopped paying taxes. The same elites that confused the real world for the world in their economic models lost their credibility with the voters that they portrayed themselves as representing.
Then came Iraq, dodgy-dossiers, 45 minutes claims, and Afghanistan – the war without end. Followed by the celebration of finance as the engine of growth, which blew up in our faces and which was swiftly followed by state funded bailouts to save the assets of the already rich. A bailout paid for by the already squeezed with the shift to austerity policies that in some cases saw 30 per cent cuts in local services.6 Meanwhile in the metropoles, banks went back to earning billions and house prices worked like magic ATMs.
When politicians really needed to motivate electorates, they stopped making the case for deep-rooted economic change, and reverted to fear. In the euro crisis, populations were held in check by threats of renewed financial panic. In both the Scottish independence and Brexit referendums, the threat of losing what you have was used as a weapon to defend the status quo. Across central and eastern Europe, fear of migrants destroying “our” culture became the motivating meme.
You can’t expect real people – neither synthetic representative agents nor imaginary median voters – to put up with these disconnects forever. Eventually the gap between how we experience the world and the economic model used by elites to explain and justify it becomes too large to ignore and self-serving elites get called out. Welcome to that calling, the world of “angrynomics”, where real people are angry and have every reason to be.
Thinking and living in an angrynomics world
Anger, the most powerful human emotion, has become the arc that connects the dry, statistical world described by technocrats, policy wonks and politicians with the world as we experience it. Economics becomes angrynomics when on a macro level the system crashes and exposes the faultlines that have been covered up for so long.
This book explores how our political economy has given rise to anger: public anger, both moral outrage and tribal rage, and private anger. Together these forms of anger help us to understand the themes in this book. If economics describes the way the economy is supposed to work, angrynomics reveals what we actually experience, and why it matters to us. It helps us to make sense of global politics, tells us what to listen to, what to be beware of, and how we might seek to fix a broken economy.
The first distinction that we make is between public and private anger. Much research treats the two as equivalent, but in fact they are opposites. Public anger is often worn like a badge of honour. Icelanders protesting against a corrupt political class are emboldened by virtue. They railed against corruption and sought moral redress. Extinction Rebellion is fueled by the anger of righteousness. When people are publicly angry, because they are wronged, or they witness wrong-doing, they want it to be recognized and addressed. This is moral outrage.
Private anger resembles its opposite. It is often characterized by shame. People who are angry in their private lives, often seek counseling, rather than retribution. An angry colleague, a stressed parent, or an enraged driver – these are people in need of help, not deserving of redress.
But public anger itself is also two-sided. If moral outrage is its positive form, reinforcing and generating tribal identity is its opposite. Tribal rage is a primitive emotion, one that puts aside our moral compass in the name of action and to close ranks for protection against some other group. Think of a local derby match between fierce rivals. Chances are you’ll see an angry minority. Why are they there? Because they are the truest of fans. They wear their badge of loyalty aggressively. Indeed not only do they threaten the opposition fans or players, they can as easily turn on their own, demanding greater loyalty and commitment. Angry fans regulate their own tribe.
Moral outrage, the positive face of public anger, seeks redress. It is a call to be listened to, that enough is enough, and a wrong must be righted. But in its contrasting form, tribal anger seeks to threaten in order to dominate, suppress, and at its most violent, to destroy. Seen this way, the different types of public anger serve different functions: to enforce ethical norms and to regulate tribal identity. This is how anger and the economy become combined. Today, cynical politicians effortlessly play on both forms of anger to garner support. By using these notions of public and private anger, of moral outrage and tribal energy, we can better understand the actions of politicians and identify what to resist. The challenge for politics today is to listen carefully to, and redress, the legitimate anger of moral outrage while exposing and not inciting, the violent anger of tribes.
Whereas public forms of anger often take the form of a proud expression of moral legitimacy or tribal allegiance, private anger is associated with internal struggle. The root causes of private anger – increased personal anxiety, stress, insecurity, and our feelings of powerlessness in the face of apparently inevitable external change – are tied to the micro- and macroeconomic trends and economic outcomes that we discuss in this book. Specifically, we argue that while rapid economic and technological change may be necessary to deliver growth in productivity and output to address environmental, social and demographic needs, the transition and disruption to get there creates stress, anxiety, and something that humans are particularly bad at dealing with: uncertainty.
We don’t like living with uncertainty and try as much as possible to minimize it. But the economy that we have built over the past 30 years demands that we embrace it, at the same time as governments have progressively abandoned their commitments to provide their citizens with protection from it. Combine that with a world where the maps guiding our actions seem to be both less accurate and decidedly skewed to the interests of an entrenched elite, and we shift from economics as imagined to angrynomics in practice.
The threat we feel from rapid and seemingly ever-accelerating economic change means that listening to private and public anger is critical to a deeper understanding of what we actually experience in our daily lives, and how to address those anxieties. A fundamental tension is clear. Aging societies such as ours need more technology, not less. It is not to be feared. It is to be embraced. Prosperity is increased by innovation which augments productivity. Innovation is the root cause of material advancement and it increases our collective resources. Unfortunately, it also gives us Instagram. Change can be exciting, particularly for the immediate beneficiaries, or those with little to lose. But for most people it is disconcerting if not frightening. Most of us crave security, stability and certainty. When rapid changes are accompanied by real income losses, or we perceive that one person’s gain is another’s loss, quite reasonably, we get angry. This expresses itself in both moral outrage – that the wrong be righted – and in tribalism – as we seek to blame the “other” that must be responsible.
Recognizing this core dilemma – how to profit from uncertainty while hating it – is a precondition for progress in making us all less angry so that we can seriously address the social, economic and environmental challenges of our time. We think that with the right approach to this simple fact of life we can live longer, be healthier, and perhaps even be happier. But to do that we need to shift our perspective from economics to understanding angrynomics: an economy of heightened uncertainty and anger, where faith in the workings of markets and politics has been undermined. We explain why this has happened and what to do about it.
Why read this book and what’s unusual about it?
This book is written not for our academic and professional colleagues. They will find the lack of footnotes and the lack of “rigour” unsettling. Moreover, it is written as a dialogue between the two authors, which is decidedly unscholarly. We also think the system is broken. We do not think that the current order can be “nudged” back into stability. And simply going back to the politics of the early 2000s is not, and should not, be an option. Neither is a return to the 1970s.
As we elaborate later in the book, we think of capitalism as a computer that has just had a massive crash. However, only a small software patch was installed to get it up and running again when what it really needs is a whole new operating system. Populism – of the left and right – is a recognition of that. Populists are the rogue code-writers of politics that thrive on anger. Unfortunately, they are shitty programmers. We hope to motivate the search for a better operating system.
Angrynomics is here and now. It is determining elections. It is recasting party politics across the world – not just Trump and Brexit, but in countries as diverse as Germany, Brazil and Ukraine, and in the revival of nationalism in Hungary and Poland, Russia’s foreign policy, Turkey’s growing anti-Europeanism, and in the collapse of traditional centre parties everywhere. We see anger at the stressors we are all exposed to being hijacked by the media and political classes to detrimental ends. Tribalism – and its regulating energy, anger – is a natural reflex, but it is always based upon myths and is ultimately self-defeating.
Our job here is to help understand the anger that is driving this moment, while exposing and disarming its cynical manipulation which drives so much of our politics today. This book is an attempt to see why the world is acting the way it is, and to suggest what we might do about it. Yet we don’t want to stop at diagnosis. We want to reduce the anger. And we think that the key to doing so is to advocate for radical new policies, and indeed a new politics, that cuts across tired political lines and addresses the huge economic and political challenges directly.
We have tried to write a book that has some of the force and dynamic of anger itself, so what follows is a series of Dialogues, not Chapters. Conversation allows us to engage and disagree, rather than lecture. An open exchange is not a settled debate. Rather, we are inviting the reader to be a part of our conversation and to be free to make up their own mind about what we are saying. Discussion, we feel, better allows us to explain in as accessible way as possible what we think are the issues and what we think can be done about them. Each dialogue begins with a “parable” that we hope illuminates the problem and suggests where we are going with it.
This book is also short, and it is intended to be. Indeed, it doesn’t need to be read from cover to cover. Dialogue 3, for example, leaves the present and puts our current angry world into historical context – it is a whirlwind tour of 70 years of political economy. You can jump straight there if you want to know how the global economy works – all explained in 30 minutes reading! Or you can skip it if you’re not too keen on economics and prefer to stay with the politics. But we hope that you do stick with the economics. Just as war is too important to be left to the generals, so economics is too important to be left to just economists, especially when it has morphed into angrynomics. What we hope to show through these dialogues is that much of what we think about the future, and why we are angry, is misplaced. People have every right to be pissed off – as the British say – but please, be pissed off about the right things. To get us to that point our conversation moves through four themes.
The first is to understand anger itself. What it is and why it matters. In the first two dialogues we explore two distinct types of anger: tribal energy and moral outrage. We examine what constitutes a legitimate grievance versus an “identity regulator”, and in doing so we uncover the underlying economic causes driving public anger. This provides us with a lens through which to make sense of the rise of populist politics. Populism is incoherent, but the energy of tribes and the moral mob are clearly identifiable. Those most angry are often motivated minorities – those most likely to vote – and street-smart intuitive politicians know how to exploit them. We should know when we’re being duped and manipulated.
Once we know what we’re dealing with, we want to understand “why?” and “why now?” To get there, in Dialogue 3, we try to give the best political economy story we can about how we got here. Political economy is where politics and economics come together to determine who gets what, where, when and why. To that end, Dialogue 3 gives a crash course in the long-run political and economic history of the world and explains why we periodically fall from economics into angrynomics. The bottom line is that we have been here before – angrynomics is recurrent – and large-scale macroeconomic crashes discrediting conventional models of thinking are its root cause.
If Dialogue 3 gives the bigger picture, the fourth dialogue discusses a distinct form of private anger – the anxiety and stress that can ruin our private lives. We identify the everyday or micro-level generators of angrynomics. We focus on two in particular: technology and aging. The first is super-hard to think about (because innovation and its effects are inherently unpredictable), and yet there are hundreds of books on how technology, especially artificial intelligence and robotics, is changing everything – even if it hasn’t happened yet.
We hope to show that technology is changing some things, but not everything. And that a lot of what people say is really techno-babble and a bunch of fantasy-hawkers selling bits of the sky to each other and gullible investors. Entertaining, but not serious. We argue that just because a technology exists, it does not follow that it will be adopted. Technologists, especially those selling blockchain technology and cryptocurrencies, tend to forget that. What economists term the “rate of diffusion” – the length of time it takes us to absorb technology in our work practices and lives – is often far more important than the innovation itself. New technologies are rarely adopted overnight. They are constrained by institutions, social norms and costs, and they are always resisted and modified.
To investigate the second main source of our everyday anxiety, we focus on demography – the fact that the populations of the world’s developed countries are getting older. Return for a moment to our synthetic economic world of representative agents, devoid of sex, age and ideology. Imagine if we populated that modeled world solely with old people? How would consumption change given that the old save more than the young and have already bought all that they need? What would happen to investment given that the old spend less? What would happen to policy given that old people vote twice as much as young people – almost everywhere? That’s more like the world we live in. Aging has consequences for the economy that we hardly ever examine, but we really should, and those consequences create a lot of our stress.7
Dialogue 5 turns our own moral outrage to posit some creative solutions. A key point we want to make is that individual-level solutions to such problems simply don’t work. Like a libertarian who is rich enough to have his own fire brigade, it’s really not going to help if the whole town is on fire. The solution to an angry world is not to individually insure against it, but to collectively embrace it. And that requires effective forms of collective insurance and distribution that are fundamentally different from the ones that we have in our minds, and in our politics, today. The good news is that the acceptance of a new set of innovative policies that takes politics beyond its traditional left and right boundaries is emerging.
Our proposals include the creation of national wealth funds to align the interests of business and labour, and to provide assets to those who have none. We propose an overhaul of how central banks work in order to provide new forms of social insurance and to shorten and reduce the likelihood of recessions. Zero or negative interest rates are often viewed as a cause for panic – far from it. Cooperation between fiscal and monetary authorities using a system of dual interest rates can supercharge the finance of alternative energy and regional development. We also propose a new fiscal rule, which is not just prudent, but consigns austerity to history, and provides ample scope to finance various forms of a “Green New Deal”. We want to tackle wealth inequality without stifling genuine innovation. We want to encourage technological change and higher productivity, while securing decent, stable livelihoods for all in society. We demand that the planet thrive for our children.
Contrary to a great deal of populist pessimism, these objectives are complimentary and require neither new borders nor economic regression. One undeniable fact is that we have greater resources than at any other time in human history. We present radical proposals that disrupt traditional political divisions – they have advocates on both the left and the right – which directly tackle legitimate sources of fear and insecurity, seek to restore the lost credibility of politics and restore the faith of populations in democratic governments. This is what makes us optimists. Our aim is not to make the world quieter or calmer just so that the rich can sleep sounder in their beds. Angrynomics is real and needs to be taken seriously. The point is not to quieten the anger because it’s uncomfortable for those of us with the most comfort, but to listen to its legitimate expression, learn from it, and build a less angry world. This is how anger becomes opportunity.
