The only thing surprising about Trump, is the surprise
Yesterday morning the world woke to the news that Donald Trump was to be the 45th president of the United States of America. Many were surprised at this result, as indeed they had been by his nomination; others the more savvy, had forecast a Trump victory. However, as we will see, a victory by Trump or, if not in 2016, in 2020 by a Trump-like candidate was more inevitable than unthinkable.
The change in the political climate
Ten years ago, the Stern Review on the economics of climate change warned that, if we failed to overcome our short-term thinking on how we exploit the environment, catastrophic climate change would result. The costs of failing to address the causes of ecological change will be far greater than the costs of addressing the causes.
Similarly, in 2005 the economist Ben Friedman identified a change in the socio-political climate resulting from the application of short-term economic policies. In The Moral Consequences of Economic Growth, Friedman argued that the progress of society, and the legitimacy of liberal values (for example, tolerance) would decline unless the benefits of economic growth are shared by all. However, over the last four decades, the so-called ‘American Dream’ had become impossible for most people to accomplish.
Likewise, in the UK, there are many regions which never recovered from the industrial ‘reforms’ of the last five decades. People of those regions feel disenfranchised by the traditional political process and blamed by society at large for the impact of globalisation on their lives. Globally, the evidence of increasing inequality has also been established, for example, by French economist Thomas Picketty in Capital in the 21st Century. The negative impacts of inequality on social wellbeing are also well established.
As with ecological change, persistent failure to address the causes of socio-economic change is proving very costly. And, like climate change, it is not as if we do not know how; what is missing is the will.
The warning of history
In 1989, the political scientist Francis Fukuyama interpreted the end of the Cold War as The End of History? Fukuyama felt “the century that began full of self-confidence in the ultimate triumph of Western liberal democracy seems at its close to be returning full circle to where it started” and “Western liberal democracy [is] the final form of human government”.
The evidence trends to indicate Fukuyama was correct, in the 1990s the political economic debate was indeed returning to that of the late Victorian era; however, this is not necessarily a good thing. As we have noted before on this blog, in 1906, Winston Churchill wrote about his concerns over “unregulated casual employment” and that “we see the riddles of employment and under-employment quite unsolved”.
In the 1930s liberal economists warned (sadly, too late) of the social unrest which follows adherence of laissez-faire – the free-market doctrine. In The Good Society, Walter Lippmann (the original neo-liberal), for example, wrote
The latter-day liberals became mired in status quo by the political dogma of laissez-faire which held them to the idea that nothing should be done [about social injustice], by the confusion of the classical economics which held them to the idea that nothing needed to be done. … It was foolish to tell the victims that no relief or reform could be given and that none was needed; that the system was just even though it seemed unjust to them.”
As populations in the 1930s turned away from the exploitation inherent in the free-market globalised economy of the day, they looked to nationalist leaders to protect them. Those who recognised this cry for help, and responded by at least promising reform eventually came to power. It would appear, the first step along the Road to Serfdom, was not, as Hayek argued, the call for a planned economy, it was rather the failure of the unplanned economy. Mass social exclusion appears to lead to nationalism.
Can we return to progress?
This year in the UK and the USA we have seen once again the practical outworking of the establishment’s failure (refusal?) to consider the best interests of the economically vulnerable. As forecast by Ben Friedman in 2005 we have seen liberal values decline and western economies stall as a result.
As the implications of climate change become more obvious, world governments are beginning to take the first faltering steps towards ecological sustainability. It remains to be seen whether western governments will begin to address the implications of socio-economic change: not simply with warm words, but with appropriate policy.
In the meantime, perhaps Walter Lippmann’s (1938) analysis of the problems of the 1930s seems equally appropriate for today:
In a rich society the psychology of the rentier tends in some measure to supplant the psychology of the entrepreneur. … unless the excess savings are publicly invested they will be hoarded and wasted. … they represent wealth withheld from use, and this withholding, … is accompanied by the unemployment.
And his solution:
To divert excess savings from the hoards of the rich and to plough them back into the improvement of the quality of the people and of their estate is, therefore, required not only by the long view of the imponderable national interest, not only as an expedient to allay discontent, not only as a matter of social justice, but as a requisite for preserving the equilibrium of the exchange economy itself.
Kevin Albertson is a Professor of Economics at Manchester Metropolitan University and co-author of the Haynes Manual, How to Run the Country.
Please note that blog posts do not necessarily represent the views of other authors on the blog or of the Manchester Metropolitan University