Populism Trumps Reason

by Forgot About Keynes

There’s a moment when people just began to figure out that for the past thirty years going from 1985 until now, huge amounts of money have been generated in the global economy and most of it’s gone up to a tiny fraction of the population. There’s been a huge amount of growth but hardly anyone’s benefited from it … That’s the reality for people, not just here [but] in many, many countries … So, they’re fed up of this and they’ve decided that at any possible opportunity, whether it’s Brexit [or] the Italian constitutional referendum … to basically give their elites notice that we’ve had enough of this … and that’s what this is. (Blyth, 2016)

As Mark Blyth and Robert Reich have argued, it is in fact fairly easy to understand Brexit and Trump’s victory. While it may have seemed for the best part of the 1990s and the 2000s that the neoliberal hegemony had been successful, that’s no longer the case; now almost everyone understands that the relentless push for a market society has failed. Though they resulted in narrow victories, the vehemence of the support for the Leave and Trump campaigns reflect the conviction of ordinary people that markets now need reining in. As John Kay argues:

The hubris that legitimised greed and proclaimed the primacy of shareholder value led to the global financial crisis of 2008 and, more generally, undermined the legitimacy of capitalist organisation.

Today Europe’s traditional social democratic parties are led by a metropolitan elite whose preoccupation with the environment and discrimination has little resonance with the traditional working-class base. (Kay, 2016)

Some commentators, such as Thomas Frank, have suggested that the left is to blame for Brexit and for Trump’s victory and to some extent they are right – however the left did not actively create this, rather it was passive while the right seized the moment.

For a brief period, lasting no longer than a couple of years after the onset of the global financial crisis, there was a consensus that governments must step in to bail out their banks and to sustain aggregate demand in the face of a weakened private sector. Some hailed the Return of the Master. It was probably during the 2010 Toronto summit of the G20 that the most decisive shift in contemporary British economic policy occurred. It was agreed that surplus countries should work towards increasing their expenditure and deficit countries should work towards reducing theirs. This was catastrophic for the left, though many may not have realised it at the time. This was the period in which the right argued, successfully enough, that it was due to excesses of the state, not the private sector, that government debt had grown to the levels it had and that what was needed was not a vigilant state but a diminished and more fiscally responsible government.

The truth it seemed, did not matter and despite Gordon Brown’s initial protestations, the Overton window has shifted decisively rightwards; from 2010 onwards not even the Labour Party opposed the drive for austerity, it only pleaded that cuts were not too deep or front-loaded.

It’s worth recalling as well that in 2009 it emerged that MPs had been systematically and brazenly abusing their expenses system. This, along with British acquiescence on the Iraq War and the popular concern of an indefinite national debt overhang, are probably the three biggest factors in the disintegration of public support in the Labour Party, which to widespread surprise lost the 2015 general election, its first such defeat since 1992. The British people were convinced by Cameron’s Conservatives that Labour had been reckless and profligate and that reputation, though it is unwarranted, has stuck.

It’s ironic that some are now complaining that the left has focused too much effort on civil rights when it has traditionally done the most to oppose the neoliberal agenda of the right. It is, however, still the case that New Labour took its policy lead from Thatcherism and while regrettable, this remains the conduit by which the left returned to power. This was also essentially the case with the Clinton administration in the US. It’s rich of the right to berate the left for going along with the neoliberal agenda when it was Raegan and Thatcher that led it … and it’s downright tragic when you consider how Cameron, Osborne and Clegg  lied about Labour’s fiscal discipline to wrest power back.

In any case, the diagnoses of many are right – the political establishment on both sides of the Atlantic grew increasingly out of touch with ordinary people. So out of touch, in fact, that while it engineered cuts in public spending for the most vulnerable in society by demonising benefits claimants, the coalition government took the EU to court over a cap against bankers’ bonuses.

In the 1970s, the economic and political right, led by Friedrich Hayek, Milton Friedman, Ronald Raegan and Margaret Thatcher, convinced the US and the UK that in order to be prosperous, we needed to forget about others, that there was no such thing as society, that ultimately, it was each of us that mattered. It was every man for themselves and the state had to be gutted and discredited in order to empower the rich to create jobs and wealth, first for themselves but which would then trickle down to the little people. Now, forty-odd years on, the verdict is in: neoliberalism has failed.

What’s remarkable at first, is that it was the right-wing that led this revolution against the hegemony of the market. It was Nigel Farage, a former city trader and Tory backbenchers that clamoured for a referendum on membership of the EU and as in the US, it was a canny slogan that enthused and energised often shy and long dormant voters to vote for change. However, looking at it from another perspective, it seems unavoidable that the left has been caught napping.

The global financial crisis and the Great Recession marked an epochal shift in Anglo-American history. The Occupy movement and the Sanders for President, Yes, Leave and Trump 2016 campaigns all understood this on a visceral level. While Hillary Clinton and David Cameron were cognizant of this, they didn’t fully appreciate just how endangered they were. It remains to be seen whether or not Trump and Theresa May can deliver on their respective mandates but if they do, they may well be the first among a new generation of public servants who for the first time in decades, work in the interests of their people instead of a narrow elite.

What’s unsettling and deeply regrettable is the way in which Trump and May have both come to power against a backdrop of thinly-veiled racism and unbridled nationalism. This is dangerous because it risks energising the far-right in European elections to come. In the worst case scenario it may lead to the disintegration of the EU and the isolationism of the US and European powers at a time when the Baltic and Middle East nations need them the most.

In the grandest of ironies, the right-wing in the US and the UK have engineered insurrections against the policy consensuses they themselves created a generation ago. The liberalisation of capital, the push for globalisation, the systematic destruction of trade unions and workers’ rights and freedom of movement brought with it, the greatest financial crisis since the 1930s aside, steady growth but it also destroyed its very own life force. The often incoherent, long insecure working and middle classes of the  US and the UK have plunged a stake through the heart of neoliberalism. Though they are not solely or even primarily to blame, immigrants, refugees and Muslims are all now unwelcome in the west. The right, which told us the state wasn’t important, gave us Public Choice Theory and told us that the rich and the sovereign individual would lead us all to mutual prosperity managed somehow to convince a majority that almost everyone but they themselves were to blame for our current predicament.

It’s poetic, in a way that, having disenfranchised its own core voter base that neoliberalism is being shown the door by conservatives everywhere but simultaneously perverse that the right maintains its conviction that it alone can save us, since its great victories have resulted in the coming to power of Donald Trump and Theresa May. As Gillian Tett puts it:

the problem with having a non-professional in office is not just that they lack experience; it is that it is also hard to predict how they might behave in the future. Nobody can assume that the regular rules of politics will apply; nor the rules that journalists, lobbyists, investors and business leaders have relied upon. We cannot even assume that the sketchy policy platforms that Mr Trump has already revealed will transpire. We are heading for a world where policymaking is likely to feel as improvised as the victory party in the Hilton Hotel.

While this type of disruption is terrifying for the establishment, the message from voters is clear: many of them want change at almost any cost. Hold on to your seats for a potentially wild ride. We have embarked on an era of political improvisation. (Tett, 2016)