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ОглавлениеThe moral mobs and their handlers
“I am your voice”
DONALD TRUMP
The parable of the Spanish family who played by the rules
Pedro Garcia graduated in economics from the University of Cadiz in 1998. The Spanish economy was booming, and it didn’t take him long to get a job working for a local bank in the mortgage approval department. Soon after graduating, he married his university girlfriend, Valeria. After a year of teacher-training, Valeria got her first job as a schoolteacher in a local school. In 2001, their first child, Anna Maria, was born.
Unsurprisingly, the Spanish housing market was much debated in Pedro’s office. Young families like his were struggling to afford to buy properties like those of their parents. Prices had been booming for almost ten years. Some economists were saying there was a bubble. Pedro wasn’t sure. He worried about the coastal property boom, but in towns and cities where he and Valeria wanted to live there would always be demand for good properties. Spain was in the European Union and had just joined the euro. Interest rates were lower than ever before, and the euro represented stability relative to Spain’s past.
Pedro wanted to take out a big mortgage and buy a three-bedroom apartment in Cadiz, which they could just about afford. Valeria wasn’t sure. Wouldn’t it be wise to save more and perhaps wait for property prices to calm down? Pedro, and her parents, convinced her otherwise. “He has a good job in the bank, and you are a public employee, with high job security. Take out the mortgage and make a nice home for Anna Maria.” They signed the deal in 2002.
Over the course of the next ten years, their plans fell apart. Pedro and Valeria saw the value of their house collapse. Initially, Pedro held on to his job, protected by Spanish labour laws, but his salary was cut. Despite working in the public sector, Valeria first saw her salary reduced by 30 per cent, and was then made redundant in another round of budget cuts.
Pedro and Valeria had never been interested in politics. They had open-minded attitudes about most things in life. They liked modern Spain and Europe. But Pedro also knew enough economics to know that you are not supposed to respond to a recession by making even more people unemployed in order to restore investor confidence – a policy called “austerity”. When unemployment is high, high school economics says to cut taxes and increase spending. This “punishment” coming from the EU, was motivated by some perverse desire for retribution and was a dishonest attempt to deflect blame.
In reality, his bank, like all other banks, had miscalculated. They had assumed that property prices would always rise like they had in the past. He also knew that German banks had been encouraging banks like his to borrow from them and finance the property boom. The story being peddled by European politicians and central bankers of prudent Germans and spendthrift Spaniards was a lie. The German banks were bailed out by the European Central Bank, but it was public-sector workers in Spain, like his wife, who paid the price through budget cuts.
This wasn’t the rational, liberal, open-minded European Union he believed in. This wasn’t even capitalism as he had been taught it. It was socialism for the rich and bankruptcy for the poor.
Pedro was eventually fired after the rules protecting workers in the labour market were changed. His family could no longer meet their mortgage payments, and the bank repossessed their house. They moved in with Valeria’s parents, and they never had the brother or sister they had planned for Anna Maria. The story of Pedro, Valeria and Anna Maria was repeated across Spain, Greece, Portugal and Italy. Is it any wonder Europeans are angry?
MARK: In our first conversation, we described the role of tribes and the hijacking of tribal energy by the political classes. That is the pernicious and manipulative side of angrynomics. The parable of Pedro, in contrast, suggests claims of moral outrage and legitimate grievance. Pedro and his family did nothing wrong, their elites did, and yet they had to pay for it. If that is the anger that we need to listen to, what are we listening for?
ERIC: To tune in to that, we need to get a bit philosophical. Luckily, the American philosopher Martha Nussbaum has a brilliant book on the subject entitled Anger and Forgiveness: Resentment, Generosity and Justice. At the heart of her analysis is the identification of anger as a response to perceived wrong-doing. This is increasingly supported by empirical research, both in social psychology and neuroscience.12 Alongside “angry fans” moral outrage emerged as the most significant correlate in the big data exercise I referred to earlier, which analyzed the many thousands of news stories relating to public expressions of anger.
Public expressions of moral outrage take a very specific form. Private anger is typically seen as a weakness, reflecting the fact that something is wrong within us. But public expressions of moral outrage are defended by justifying the anger itself. Typically, moral outrage appeals to unfairness, a failure to listen to those who are affected, and a failure to recognize the interests of those most affected. For example, expressions of anger against the imposition of austerity policies in Europe, as our parable highlights, follow this structure. The democratic process was frequently hijacked by technocrats enforcing “reforms” when there was no economic logic to support austerity.
Angry people who rejected this narrative were right to do so. Their anger is rational and legitimate. In contrast to tribal rage, people motivated by moral outrage can often very clearly articulate why they are angry – that their interests, or those they care about, are not being taken into account, and that the perpetrators of wrong-doing are not being sanctioned. This is very different to tribal rage, which seeks not justice, but to destroy anything in its way.
Nussbaum, very perceptively, identifies specific triggers for moral anger, such as “status-injury”. She quotes the psychologist Carol Tavris’ study of anger in America, and “finds ubiquitous reference to ‘insults,’ ‘slights,’ ‘condescension,’ ‘being treated as if I were of no account’”.13 I think this response resonates with our observation that anger is a demand to be heard, a demand for representation. But it is also an expression of intent and significance – I matter and you better listen to me. In the political context, this is very pertinent.
MARK: Given that, let’s start with voice, because this is something that is central to understanding why people vote in ways that are often, patronizingly, described as “against their interests”. People are not just angered by discredited and unjust policies. They’re also quite-rightly upset because no one has listened to them, no one represents them, and because other people they perceive as part of this same elite are busy telling them what their interests “should” be.
We described the era of neoliberalism as fostering a loss of political identity – creating a vacuum that tribal anger has filled. But an unintended consequence of the post-Cold War political convergence between parties in the 1990s and 2000s was the emergence of a lifeless and largely self-serving technocratic centre, which caused large segments of the electorate to feel voiceless and unrepresented, which was steadily reflected in declining electoral turnouts.
Think back to Matteo Renzi, elected prime minister of Italy in 2014. This youthful new politician takes the reins of power and is ready to reform Italy, post-euro crisis. His first significant attempt at policy-making is to call a referendum on constitutional reform, which by most accounts seems like a sensible way to improve decision-making in the Italian legislature. But as Brexit showed us, if you offer people a referendum, and that’s the only chance they have had to express their voice, they’ll aim to be heard. And if it’s Tweedledum and Tweedledee in every election – you can have whatever variety of economic neoliberalism you want, but it’s always the same set of policies – then they will use that as a chance to vent their anger and frustration. The rejection of Renzi’s referendum proposal was nothing to do with constitutional reform. Similarly, Brexit to many people had little to do with the European Union. This is really more about the demand to be heard.
ERIC: You might almost say that had there been an alternative ideology for people to express their frustration they would’ve done so – it just didn’t exist. Indeed, if communism hadn’t already been tried and shown to fail, the post-financial crisis period might have been its coming of age. Consequently, there has been nothing in successive elections that allowed people to express their discontent with the status quo. The option for non-nationalistic identity-based political change simply does not exist. Alternative visions to neoliberalism have not been offered by the established elite. So Brexit and voting for Trump becomes your chance to have a “f**k you! I want my voice heard” moment. From this perspective, public anger is a response to a lack of representation, to a real sense of being ignored and not listened to. It is also a failure to present a compelling and motivating alternative to the centrist consensus.
What has happened over the past ten years in Europe and America is similar. The political centre was totally blindsided by a crisis that they thought could never happen. And they had no response to it except to pile misery on the very people who didn’t cause it. Unsurprisingly, those people got very angry about that, and that anger has been amplified and hijacked in multiple ways.
From the American Midwest to the North of England, from Italy and Spain to Greece and Portugal, all these countries have experienced serious economic trauma over the past decade, and the political classes not only offered no alternative, but told their citizens that it was their fault: “You borrowed for a house you could not afford”, “There has been an orgy of spending that we need to stop”, etc. So when there was a chance to vote for an alternative vision, as for example in Greece in 2015, or in the UK in 2016, or Germany in 2018, it should come as no surprise that that is what happens.
But this story has deeper roots than the 2008 crisis and its economic legacy. Specifically, a lack of voice is related to the sense that the nation state has been neutered by globalization. At some level, it is not just that the population at large feel unheard, and the empirical research shows that they are not listened to, but that their traditional representatives also seem resigned to their situation: “Globalization made us do it”, “There is no alternative”, etc. This certainly seems to be a major concern, and the rise of nationalist politicians seems to be the result. The lack of voice paired with a perception of futility is a toxic mix. It’s like voting for populists in Italy and then figuring out that they can’t do very much either. The result undermines democracy itself.
MARK: As I try to think about it, you have markets, whose reach is global, or at least as far as the division of labour, technology and finance allows them to go, and then you have democracy, which is inherently local, bound by this thing called the nation state and the people, the citizens, that constitute it. This generates an inherent tension between the openness of the global economy and the responsiveness of the state to the democratic wishes of the public. The more open you are, the less control you have. The less control you have, the less you can respond to what the global economy demands that you do. The economist Dani Rodrik usefully calls this the “political trilemma” of the global economy, where globalization, democracy and sovereignty are mutually incompatible in such a way that you can only ever have two out of the three.14 And once you have accepted globalization, you can either have democracy or sovereignty, but not both.
To preview what we will discuss in the next dialogue, we have been through two big iterations of this tussle between states and markets, between openness and democratic responsiveness, in modern times. The first set of rules was established in the aftermath of the Second World War and the Great Depression. The new rules were about limiting the reach of the market through controls on finance – making sure that capital is invested at home – targeting full employment to prevent the 1930s returning, and imposing high taxes and transfers across the economy in order to build a welfare state.
This system, as we shall see, functioned quite well for about 25 years. But the flaw was that it generated inflation, and labour’s bargaining power eroded profits causing declining investment spending. The response to the stagflation of the 1970s – falling growth and rising inflation – was to “disinflate” by opening-up financial markets, privatizing state assets, deregulating businesses, thereby “freeing” capital from the constraints of the nation state to find its highest return. This was construction of what we call today the neoliberal order – what Rodrik calls “hyper-globalization”.
If you were an investor in the years after the Second World War, you were bound to the territorial nation state, which meant that local labour could quite effectively exercise its voice through strikes to claim its share of productivity gains. But what happens if capital can go global? What happens if capital can exit the nation state but labour stays local? Or if they can move your job abroad, which is the same thing really? They take away the ability of labour to demand their share, along with their voice. And since the 1980s this is what has increasingly happened.
Labour’s ability to demand their share of national income declined dramatically, and business entered a new golden age – as did inequality. The numbers are now so well-known as to be commonplace. According to the World Income and Wealth Database – the source with the most complete picture at a global level – the top one per cent globally captured as much income growth as the bottom 50 per cent of the entire world economy since the end of the 1980s. Across Europe the top 10 per cent have 37 per cent of national income. In the US the figure is 47 per cent, which is higher than in Russia. In the US in particular the rise of the one per cent has been accompanied by the collapse in the income share of the bottom 50 per cent from 22 per cent to 13 per cent of national income. The poor really have gotten poorer as the rich have gotten richer.
In the UK after the crisis real (inflation adjusted) government spending fell by 16 per cent per person. At the local level it fell by nearly a quarter, with some areas losing nearly half, yes half, of their budgets.15
You will not be shocked to know that the areas with the deepest cuts swung most heavily nationalist (to UKIP) at the time of the Brexit referendum.
Given this, when we talk about the rise of tribal political parties emerging under angrynomics, we need to stress that this is absolutely not about reigniting a latent tribal political identity that is somehow genetically inherited. England, after all, has only been around in its modern form for a few hundred years. And yet here is a genuine sense in which much of the political class, everywhere, at a national level, feels both neutered and powerless in the face of globalization while nonetheless profiting from this skewing of incomes. Regardless of whether it’s left-wing or right-wing nationalism, the re-emergence of so-called “populism” then becomes phrased as the struggle to protect the nation and the national economy against “outside” forces that produce these inequalities. The Brexit campaign slogan of “Take back control” resonates for a reason.
I think we can also see this very clearly in the 2016 US presidential election. It is very telling that the five states that were supposedly solidly blue-collar Democrat, but turned out for Trump, were the ones that suffered the most in terms of de-industrialization and the export of jobs. One of those states, Wisconsin, lost one third of its industry, not to Mexico or China, but to Southern “right to work” (union-free) states in the 1970s and 1980s as business migrated south. Wisconsin has been in relative decline for a very long time. NAFTA in 1994 and then China joining the WTO in 2001 accelerated that feeling of decline and actual job losses, and over time the Democratic Party coalition that tried to embrace unions, free-up trade, and profit from global finance all at once fractured. After all, these policies of trade openness and global capital were championed by Democratic administrations, but mainly hurt Democratic Party loyalists.
These dynamics, and not just in Wisconsin, have been 30 years in the making. As I noted earlier, back in the 1970s, we had a world where labour unions were strong and because capital was local rather than global, they had real bargaining power against capital if they went on strike. In such a world workers could get a better deal in terms of how profits were shared, and we saw this in the data. Labour’s share of national income in the US peaked in 1973 and has been in decline ever since. That decline parallels the rise of a world where unions are all but extinct in the US and are much weaker than they were in Europe. Even German unions know that globalization starts 60 km outside of Berlin with the threat to move jobs to Poland should German workers ask for more than whatever their employers are willing to give.
Similarly, in politics, parliaments are increasingly impotent with the important stuff given out to technocrats – to independent central banks, to the WTO, to the EU. The elected politicians are effectively governing over less and less at the same time as the stresses on their constituents, macro and micro, are increasing. We went from a world that was very labour friendly, relatively closed, and that provided a social safety net, to a set of institutions that generates a massive skew in the returns going to the very top of the income distribution while uncertainty for the majority increases – all while the media tells them that it’s their fault.
ERIC: Okay, so the first clear source of legitimate anger is a loss of voice – anger as a response to being ignored, or having your voice taken away from you via an empty “democratic” ritual. Representative politics, through the emergence of a post-Cold War technocratic centrist consensus, stopped listening. This was compounded by globalization – particularly the free movement of capital and the inability of labour to negotiate its share – and in Europe, by the power grab of a centrist technocracy.
You argue that these concerns pre-date the financial crisis and need to be seen in the context of 30 years of political and economic change dating back to the 1980s. At the same time, something manifestly went wrong in 2008, which you describe as “super-charging” these latent trends. The parable of the Garcia family, which started this dialogue, gave us a sense of this. Voice matters most if we have something important to say. Why did our political and economic elites have so little to say in response to the 2008 financial crisis?
MARK: For me, the primary problem was who they listened to rather than what they had to say, and it wasn’t the Garcia families of this world who caught their ears. Rather, the failure of policy-makers to deal effectively with the recession following the 2008 financial crisis, and subsequently the 2010–15 euro crisis suggests that like income, listening skews to the very top. The euro crisis, much more than the crisis in the US, showed beyond any doubt that a policy of cutting spending in a recession only ever makes things worse. But they knew that already and went ahead and did it anyway. And then they doubled down on it, even when they saw it wasn’t working.
The severe recession that began in 2009 triggered legitimate anger. In the United States, joblessness rose to the highest level of any postwar recession, and the recovery was tortuously slow. Recessions of this severity and duration impose terrible economic and social costs on the public. In Europe matters were even worse. Despite being the supposed home of ample welfare states, which have in reality been dying a death by a thousand cuts for the past 20 years in many cases, we haven’t seen economic devastation of this order of magnitude since the Great Depression. Greece instigated more spending cuts than any country and unsurprisingly they lost 25 per cent of GDP and a third of all jobs in doing so.
ERIC: The most extreme case is Greece, but Portugal, Spain, and to a lesser extent Italy, saw similar economic and social damage. Much of southern Europe has experienced persistent youth unemployment rates of 30 or more per cent for almost ten years. Yet, this is completely unnecessary and is the result of grotesque policy errors. If we know one thing in macroeconomics, it is that mass unemployment is a terrible blight on society with long-term consequences, but it can be eliminated relatively quickly with two simple policies of demand management: by governments cutting taxes and spending more money, and by central banks printing money.
But those countries in the eurozone who have no currency of their own can neither devalue their currencies to grow through exports, nor can they inflate their way out of trouble by bailing out their banks directly. As such, their elites appeared to have neither the vocabulary, nor the means politically, to meaningfully address these policy errors. After all, having signed up to the euro project, they can hardly then disavow it.
Given this, the Italian, Spanish and Greek political systems can offer nothing to their populations to convincingly address their concerns, even now, when the immediate crisis is over. It is abundantly clear that the Italian unemployment problem is cyclical. It has nothing to do with changing the laws in Italy. It has to do with aggregate demand management in the eurozone. The same is true of Spain and Greece, and if you accept this, there is a major problem.
In such a world the domestic political process becomes seen as a sham. You can have an election, but you can’t change anything. The local political elites may know this – and they may not even like it – but when you don’t have your own currency and central bank, what can they do? You can neither devalue nor inflate nor default, so you have to cut your way to prosperity, which doesn’t work. It is entirely logical under such conditions that electorates will get angry and seek alternative solutions. Indeed, you don’t even have to be in the eurozone to end up in the same situation. Look at British politics and the Remain campaign’s fear-mongering message “there is no alternative” after several years of similarly destructive policies.
