The EC President, Jean- Claude Juncker, is believed to have said some years ago that: “We all know what we need to do, we just don’t know how to get re-elected after we do it.”
Whenever there is discussion of ‘reform’ or the current economic problems the phrase gets trotted out with the sub-text – the masses don’t know what’s good for them. But the problem may be different altogether as the author, James Crabtree, said in the Weekend FT (17-18 September 2016). “What if the rich world’s political class no longer know what to do?” he wrote.
It is obviously a bit rich for the former political leader of one of the world’s leading tax havens, Luxembourg, to talk about what needs to be done and what won’t be understood by voters but then so are many of the assertions about what’s wrong with the world and what could be done about it.
It seems that there are three dimensions to the problem. First, the ‘angry white men’ phenomenon is real. They have been left behind as the dominant economic paradigm has deprived them of jobs and denied them active labour market policies and dignity. Much of their anger has been channelled towards anyone but the causes of the problems – blacks, immigrants, gays etc etc. It is easy to think this reaction has been created by conscious political strategy from Reagan to Howard and others through wedge politics designed to prise them away from loyalty to the worker/union parties they used to support. John Howard admitted privately many times that he had adopted the US strategy which came to complete fruition with the fortuitous arrival of boat people.
But the second dimension is that the policies followed by most Anglo-Saxon societies for the last few decades have created a few major winners and lots of losers – in particular what the Americans call their middle-class. The angry white men have a reason to be angry whatever we think of how they displace that anger. And we ought not be surprised by fear of the other – it has been with us always. Elizabeth I, always seen as a magnificent monarch, was as her latest biographer John Guy points out, inciting hatred and distrust of immigrants at a time when she was “entirely out of touch with the horrendous conditions experienced by the overwhelming majority of her people.” Many Australian commentators have pointed out that Hanson’s recent maiden speech echoed similar speeches about the Irish, the Chinese, the post-WWII immigrants, the Asians again and now Muslims.
The irony of this situation is that a similar malaise is facing the left. In the UK Corbyn supporters are confident that the great day will come when the UK becomes socialist as conditions invoke a revolution. In the US Hillary haters on the left and among the young may well cast enough votes for third party candidates to replicate the Bush-Gore outcome. The Supreme Court may have handed the election to Bush but they would never have been involved if not for Ralph Nader. This time the 2016 version of the left just may – more than the angry white men – make Trump President and ensure a decade of Tory power in the UK.
In the 1930s the German Communist Party, under Stalin’s instructions, refused in the same spirit as the die-hard Bernie supporters and Corbynistas, to cooperate with the social democrats against the Nazis – dubbing them ‘social fascists’. Sadly something similar, if not so horrendously catastrophic, could be repeated in many places and may already be being repeated in parts of Central Europe.
The third dimension is that there are alternative policies. Alan Greenspan has done a mea culpa for his belief that unfettered markets solve all our problems. Australia’s Reserve Bank Governors – immediate past and present – have pointed out that the policies pursued in the past decade or so are not working and are storing up bigger problems. Stripped of their measured tones they are actually advocating a return to Keynesian policies – policies which the current Australian government, George Osborne and our Treasury head, John Fraser, see as anathemas. This third dimension is a manifestation of ideological blindness in which people, irregardless of the evidence, keep trotting out mantras about debt, deficits, industrial relations reform and tax cuts with the insight and originality of a religious person parroting a catechism.
Ironically, theoretical templates for alternative policies have been laid out in that bastion of free markets and liberalism (the best sort of the latter), The Economist, in a six part series on important economic ideas many of which won their originators Nobel Prizes.
The six ideas are: Akerlof’s Market for Lemons Theory about information asymmetry; Minsky’s work on financial booms seeding busts; the Stolper-Samuelson Theory on tariffs and wages; the Keynesian multiplier; the Nash equilibrium; and the Mundell-Fleming trilemma on fixed exchange rates, the free flow of capital and monetary autonomy.
Minsky is now terribly fashionable – although sadly after the crash his theories predicted. Our PM, fresh from preaching the virtues of free trade to the world, ought to be innovative and agile enough to look at Stolper-Samuelson, and get a sense of how those angry white men got angry. And perhaps the ALP’s Andrew Leigh, who is probably the only Federal MP familiar with all six, might organise some instant briefings on them for his colleagues with some simple explanations of the policy implications. It would be a waste of time with the other side of politics whose religious passion for their beliefs – both religious and economic – might continue to either blind them to alternatives or double down on the social conservatism and attacks on the other.