Politics

Pour un meilleur populisme

Feb 27, 2019 Raghuram G. Rajan

CHICAGO – La réussite économique des démocraties libérales dans l’après-guerre n’est pas seulement le fruit d’une démarche ayant consisté à laisser les marchés s’épanouir. Les États-Unis et les pays européens ont également intégré les marchés dans une structure permettant aux individus d’en tirer pleinement parti. Cette structure s’effondre aujourd’hui, faisant le jeu des dirigeants populistes de gauche comme de droite. Bien que ces acteurs soulèvent les bonnes questions, ils proposent rarement les réponses adaptées. Peut-être devraient-ils davantage permettre plus facilement aux citoyens d’élaborer leurs propres solutions.

Pourquoi la structure d’après-guerre s’effondre-t-elle ? Au lendemain immédiat de la Seconde Guerre mondiale, un formidable système d’éducation secondaire aux États-Unis prépare les étudiants à travailler ou à étudier plus longuement au sein des meilleures universités de la planète. Les étudiants entrent sur le marché du travail fort des qualifications leur permettant de décrocher de bons emplois. Croissance économique rapide et réglementations relativement souples encouragent bon nombre d’entre eux à lancer leur propre entreprise. Une politique du marché du travail flexible permet aux travailleurs licenciés de retrouver rapidement un emploi ailleurs. Les récessions, lorsqu’elles surviennent, restent brèves et modérées.

Cette excellente préparation des Américains au marché via le système éducatif, ainsi que de nombreuses opportunités économiques disponibles, vont permettre aux États-Unis de fonctionner sans la présence de véritables protections sociales contre la volatilité du marché. L’assurance chômage est à l’époque limitée, et de nombreux citoyens ne disposent d’aucune couverture santé – même après l’introduction des régimes d’assurance fédéraux mis en place pour les personnes âgées et les plus défavorisées dans les années 1960.

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0 Comments on this paragraph, 15 Comments on this article

Robert Subbaraman Mar 10, 2019

A thought-provoking article. I wonder though that if policy decision making is decentralised to such an extent that it will work at cross purposes and it could turn out to be a worse outcome at the macro level.
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William Allan Mar 9, 2019

A curious article. Raghuram Rajan explains key elements of the evolution of the world economy following the second world war, and then offers a solution to our current populist quandary by putting trust in local communities without giving any detail on how it can be done. This prescription, he claims, is equally applicable to both sides of politics. The historical treatment, as one would expect, is broadly fine, but with respect to post-1970 developments says too little about the continuing impact of neoliberal policies established in the US, UK and many liberal democracies in the period from the mid-80’s through to the 2008 Global Financial Crisis. Populist politics has acquired momentum in large part because of the way in which the internet, social media, and political campaigns can identify and target social groups and their concerns. These complex issues require urgent local, national, and global attention. But simply decentralizing these problems to local communities, with vaguely defined support from “national governments with funding and light oversight where necessary,” is wholly unconvincing.
The term ‘populism,’ as Joseph Nye recently observed in PS, is itself ambiguous. It is a long-standing phenomenon, and its prominence in modern times is a result of the growing sense of cultural or economic disadvantage among a range of subgroups of the population. Professor Rajan argues that left-wing politicians will cater to their constituency by calling for government provision of collective goods, right-wing politicians will attempt to blame, immigrants, other minorities, and trade. Personally, I feel quite comfortable with the ‘left-wing’ option, which is after-all the old-fashioned view of what governments do. I agree that higher-level governments should encourage local governance vigorously.
In the ‘80s, many economists, including me, broadly accepted the proposal that many government activities could be carried out more efficiently by the private sector. That neoliberal dream has proved illusory; the market is driven by commercial profit not by delivery of worthy or necessary social objectives. Addressing the real disadvantages being experienced by a wide variety of social groups will require major governmental efforts to identify and measure the nature of disadvantage, and then to design appropriate steps to overcome these. Of course, it will require active pressure and participation by local groups, but too many lack the organization and resources to drive the process for their own communities. Such an objective is only likely to be achieved as part of a general national and global effort.
Populism in any of its current forms (or in Rajan’s fledgling proposal) leads us nowhere. Authoritarian regimes (of various shades of governance competence) are equally doomed to fail their people. The challenge that all nations must eventually face is to rebuild the capacities of all levels of government to understand and support the multiple needs and aspirations of the people that they represent. All should initiate programs to engage both public and market entities in integrated and accountable reporting on their use of all forms of capital— commercial, environmental, human, and social. Our human future depends on active recognition of our responsibilities both to the fragile environment and to each other. ‘Grand centralized policies’ certainly must be critically examined, but the task of moving beyond such policies depends on much more than putting trust in local communities.

On Nye and populism see https://www.project-syndicate.org/commentary/populist-wave-in-retreat-by-joseph-s--nye-2019-02
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Janos Nagy Mar 5, 2019

It is not protectionist policies but the tax favoritism of the imports are the real problem.
Any proof just looked at the debt level increase in the USA or Canada.
You can't have products (imports)without tax components and expect to generate tax revenues sufficient for the population wage levels.
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Jimm Roberts Mar 4, 2019

I had to read a long, erudite epistle before I found a few sentences explaining how communities can resuscitate their sagging economies. All in all, not much there there. However, I did enjoy the malarky implying a student's achievements in life are predetermined by their family's wealth rather than by their famiy's values.
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Procyon Mukherjee Mar 3, 2019

Rise of the first two pillars, the political and the financial, happened through collaboration, the third pillar got left behind. The communities thrive far better in countries where the first two are held in check, rightfully. Think of Switzerland, very few would even know the names of their ministers or President, but the cantons would be far more powerful to act.

In some countries you see such powerful politicians but so weak populace, with almost no voice, the conditions of the really lowest rung leaves a sobering thought that almost nothing changed for them in the last century. These communities are truly left out, those living on agriculture, forestry, they live marginal lives with no security. To take them out of poverty would need more than all of this we are debating.
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Hans Van Oosterhout Mar 3, 2019

Interesting analysis of what is wrong. But it stops short of proposing viable solutions. Just shifting everything to local communties is way too general and is no magic bullit without explaining how local communities could matter in this regard. It is the dearth of viable solutions to the dark side of globalization for the working class majorities of Western societies that fuels populism and it will continue to do so until credible and feasible solutions are developed and explained. To be frank, I expected something more substantial from such an eminent economist....
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Robert Bruce Mar 3, 2019

Mr Rajan is right to highlight the decline of marginal communities, but his two solutions of investment in education and light regulation will not bring the results needed on their own. Declining communities face a double hit : Global arbitration of labour rates, combined with technology and automation, which eliminate the need for local employment in Global supply chains. Indeed within the next decade it is likely that major corporations will be able to run their operations with almost no local employment at all. ( Take the example of Tesla moving to on-line sales only. This should be a canary in the mine as more Americans are employed in local car dealerships, than in car manufacture. But their role is now becoming a non-value added cost in the new age of online automated sales ).

The real solution is to develop new models for a local "circular economy" which is no longer focused on maximum labour productivity, but on optomising local production and use of energy and materials. Basic Income is a fundamental step on this path as it is the only way to make community based enterprise competitive with the scale of economy in linear Global supply chains. In the long run basic income, funded by taxes on pollution and material waste, becomes the key shift in economic costs from labour (which is now in surplus almost everywhere in the World) to non-renewable resources, which are the true constraint on Global output in the 21st century.

These changes can and should be encouraged by community wealth programs including new recycling start-ups, local cooperative community farms, local generation of renewable energy to replace imports of gas/petrol/diesel, and other programs that keep a higher proportion of money circulating within the local economy. But for this to work there has to be a flow of money into the community to start with. Without basic income, disadvantaged local communities will simply fall further behind in The Global Race.
- Y. K. Mar 4, 2019
  
  Your intended 'solution' is to tax the actual Global Supply chain in order to fund a local competitor, however your methods are incredibly inefficient:
  
  First, there's no reason for Global production to be that much more polluting than a local one. Switching to electric and solar/wind would take out most relative pollution problems and than the local production would be taxed almost as much as the global production - but the global chain can easily recoup the difference via scale savings. Ultimately, if you want to apply protectionism, you might as well apply it directly since the indirect environmental method won't work.
  
  Second, Basic Income cannot fund the local production chain due to obvious coordination issues: the Basic Income is given to many individuals who are not likely to pool their funds or to choose wisely where and when to do so, while the Global chains have centralized managements.
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John Merryman Mar 3, 2019

The primary economic fallacy is that money is the social contract, enabling mass communities to function, but we treat it as a commodity to mine from society.
As a contract, with one side an asset and the other a debt, it is an effective medium, for the efficient flow of value. Though we experience it as quantified hope and try to save and store it, but it is a lousy store, as every asset requires a debt.
Medium and store are distinct functions. In the body, blood is the medium and fat is the store, or for cars, roads are the medium and parking lots are the store. Mix them up and the system ceases to function.
We store much of this excess money as government debt. When Roosevelt started the New Deal, he was not only putting unemployed labor to work, but unemployed capital, as well. Then WW2 required much of this borrowing to flow to the military and Reaganomics accelerated this flow. The reason we start wars and never finish them is because the actual function of the military is to spend this excess wealth. Ha Ha. Where would that 20 trillion go otherwise? Derivatives? Apple stock?
We will shortly discover spending money on investments with little return, only to put responsibility for storing private wealth on the public, is not sustainable. The likely conclusion of this process with be disaster capitalism/predatory lending coming home to roost, as those with large piles of treasuries trade them for public assets, such as highways, water and mineral rights, parks, etc. Then we will have a true oligarchy.
We all save for the same basic reasons, raising children, housing, healthcare, retirement, etc. If we learned to store value in these, as community assets, with money as the surface voucher system it best functions as, then we wouldn't have such atomized cultures, with our bank accounts as our economic umbilical cord.
As the executive and regulatory function of society, government is its central nervous system. As the value circulation system, banking and finance are the heart and arteries.
As government evolved from chieftains and elders, to kings and nobles, it functioned as private property, but it evolved into a public utility when monarchs lost sight of the fact they served a function to society, not just served by it. It is a two way street.
Finance is currently having its Marie Antionette moment. It is as if the heart is telling the rest of the body to go suck dirt, the money belongs to the banks.
Not that control over the money should be under the control of government, as politicians live and die on the hope they provide, so printing more money is a cheap high. Look at the pressure Trump is putting on the Fed. Like the head and heart, they are separate functions, with separate purposes.
We own money like we own the section of road we are using, as its functionality is in its fungibility. What if the government were to tax what it currently borrows? People would freak, but they would learn not to try storing value as abstractions.
We are linear, goal oriented creatures, but nature is cyclical and reciprocal tension and balance between opposites. More thermodynamics, than time.
I suspect new thinking will only start to happen when the current system truly breaks down.
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Mauricio Duran-Loriga Mar 3, 2019

When growth stalled in the late 1970's for Europe and the US, China started its epic economic rise. Based on better education? No. Based on global arbitrage of labor costs, exclusively. Even assuming the transition costs and the learning curve costs, China was dirt cheap. Still cheap today. Be wary when China exports inflation...

The West (US and Europe) have shifted manufacturing jobs to Asia. Yet the West complains its youth is unemployed and totally hopeless. You can't have your cake and it eat it (too).

Politicians take the protectionist lane once all other policies have failed. It buys them personally some extra time in power. Nothing else.
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Derrick Baragwanath Mar 3, 2019

Anyone versed in the basic economic principles of absolute and comparative advantage must agree that global trade expands economic growth. That point cannot be in dispute. But if that growth is not more evenly shared then the economic argument for global trade, where only a few benefit, is hollow. Political leaders committed to global trade must work for a more equitable distribution for all, or expect their model to be rejected.
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Mike Robinson Feb 28, 2019

I respectfully dissent with the author's premise that "trade protectionism" will "make the world(!) poorer."

Consider this: "If, anywhere else on Planet Earth, there exists any person 'who considers price alone' (to, of course, quote John Ruskin)," am I condemned to stand helpless against that person, with no -government- to fight on my behalf? And, am I truly "alone?"

Historically, the answer was "no." Workers were recognized to be "workers among many thousands," and the industries in which they worked were recognized to be important among the "sovereign nations" which they populated. These nations, in turn, protected(!) their nations' industries, and in so doing also protected their workers.

Were these "protective instincts," somehow, "inherently 'bad,'" such that they were somehow so utterly misguided that they made 'the world(!)' ... poorer?

I feel obliged to challenge and to reject these notions, and to insist that they now be re-examined. Generations of our ancestors surely could not have been wrong. Instead, I would argue, "they were prescient." Let us now take a closer and more-sober look at the principles which they advanced.
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