Time for some merry thoughts and uplifting ideas, amid the general squalor of the latest news. Consider:
- The probability of Geert Wilders winning the Dutch elections now stands close to 50%. They were as high as 80% in February, but latest polls give him about 22 seats in a 151 seats parliament, coming in 2nd or 3rd. Even if he wins, no other party has declared they would be willing to consider a coalition with him, so his chances of becoming prime minister and enacting any of his proposed policies (from a Muslim ban to leaving the European Union) seem basically zilch. According to the (mostly liberal) press Wilders is a bigot, a xenophobe, an anti-muslim candidate whose PVV party is the Netherlands version of the old German NSDAP, and whose election would usher in an age of darkness and turmoil in which his country would leave the EU, expel its foreign population and impose an ethno-state based on racial discrimination and exclusion. If you hear him without that filter, he is a mediocre candidate with a peculiar hair saying things that were non-controversial (and pretty commonplace) twenty years ago but which our politically correct times have turned unimaginable. As the vote is being conducted today, we will have a clearer picture in a few hours, but my hunch is that this first attempt at electing a “European Trump” will fizzle and turn out to be the proverbial storm in a teapot. Not so sure about what may happen in a month in France, though.
- It’s been eight years since the last recession, and we don’t seem to see any major crises in the horizon, at least in the USA. So we may be on our way to beat the longest expanse of time ever recorded without a recession (10 years, achieved both between 1961-1971 and 1991-2001). Admittedly, like in so many periods of “great moderation” before things doesn’t seem so great for significant numbers. Even with technically full employment, labor force participation rate is the lowest ever, salaries have been mostly stagnant since the 70’s, median income has barely budged and there is an opioid epidemic (again, talking just about the USA here) that has contributed to life expectancy to decrease, a historical first in absence of major war or epidemic.
- Although Theresa May announced last year that she would invoke Article 50 of the EU treaty on March, and thus effectively trigger the exit of the UK from the Union, she hasn’t taken the step yet, although she has just received the explicit authorization of parliament (with a majority of the MPs being less than enthusiast about such vote, one has to applaud the ability of the prime minster to strong-arm them and bend their will). With an unexpected gain for the Republican party in Northern Ireland and the Scots threatening with a new independence vote (fueled this time by their desire to remain in Europe, regardless of what the English have decided, and apparently unconcerned by the barriers that countries with independent-favoring minorities of their own would oppose to any newborn state) it seems this would be the time for extra caution and circumspection. But after botching so badly the whole voting process and what has come afterwards I don’t expect this particular piece of cheerful news to last long…
- After more than two months in the Trump presidency, no major war has broken out, no twitter feud has absurdly escalated in a nuclear exchange, and no sector of the economy has imploded. Furthermore, every major initiative of the president has either stagnated or quietly fizzled. No wall is being built in the southern border. No commercial treaty has been repudiated. Obamacare repeal is growing more unpopular by the day (more markedly since the Republicans actually spelled what they would replace it with). There seems to be a “kinda” ban on immigration from seven (six according to last count) mostly Muslim countries more or less in place after a disastrous first attempt at implementation, but one has to wonder what percentage of Muslims traveling to the USA it has actually deterred (shocking piece of news for liberals -or Trump follower that believe their man is delivering on his campaign promises: there are many, many more Muslims living outside those countries than inside, and all of them are free to enter the USA without impediments). I know relaxing after so short a time, for lack of such astoundingly bad outcomes is setting the bar absurdly low, but remember we are trying to work up our spirits here… on the big order of things, what the 45th president has done so far seems to confirm that inexpediency, ineptitude and stupidity will be the defining marks of his administration, and although an occasional nuisance such trifecta is likely to have limited effects on the global economy, which so far seems to be coasting along just fine.
I’m still uncertain about the effect it will have on the impending American (second) Civil War, as it doesn’t seem to be doing anything at all to ameliorate the venomous partisanship that has taken hold of the public. So far, his supporters seem to be very pleased of how well things are going, with his man keeping his promises (easy to do when you have promised every thing and its contrary) and showing the middle finger to the despised “establishment” with a new outrage every day (as long as you don’t include in such establishment, that is, the half dozen ex-Goldman Sachs Directors he has appointed to different positions in his administration), and the only remaining hope is that after a few more months of inaction and economic decline of the majority of whites without college education that gave him the crucial mid-Western states they will turn again him and his enablers, feeling betrayed (or duped, or manipulated) and stop watching Fox and hearing Rush Limbaugh and the like. Although that narrative is presented as highly likely by liberal sources, I’m somewhat sceptic about it, and can very well imagine Trump followers maintaining a Republican majority in both Houses in the midterms of 2018, and even giving him a second term.
- China continues to grow at a reasonable pace, slowly converging to a rate more in line with that of an already advanced (medium income) economy, but still overperforming them all:
Although you have to (always, and the same applies to the national accounting of any developed world country) take the figures cautiously, it seems that the World’s most populous country (yet, soon to be surpassed by India, more on which in a moment) is advancing in the transformation of its economic structures from an export-driven model to one more supported by internal consumption, in both cases hugely dependent on a tremendous capital investment which will be more and more difficult to sustain (and that more and more exceeds its internal savings capacity, which in absence of a trade surplus explains its growing resource to borrowing, and hence increasing debt).
More interesting for the world’s poor, that other huge economy that in previous decades seemed condemned to eternal stagnation is for some years now showing signs of activity, and is slowly (but sure-footedly) in the path to growth, having the “advantage” of starting from a substantially lower level, and thus having more room to play catch up:
You may have noted that many of the reasons to be cheerful are things that have NOT come to pass yet, but will surely do, sooner or later. If not Wilders in the Netherlands, some populist will come to power in a European country (Marine Le Pen will have a good shot soon, Viktor Orban is already in power in Hungary, as is Jaroslaw Kaczynski in Poland -I know, the prime minister is nominally Beata Szydlo, recently injured in a car crash, but my Polish friends assure me it is Kaczynski who calls the shots). May will invoke article 50 and the UK will be gone, gone, gone, into international irrelevance and economic oblivion (more or less, not that Europe will be doing so much better), with or without Northern Ireland and Scotland. We will have another recession at some point. Trump, of course, may cause a catastrophe in any moment. China is building the World’s biggest credit bubble, and it will burst, and it will be pretty ugly (all the irrational investments made in the last decades to keep things going will be revealed, and forestall any possibility of state-led aggregate demand growth for many years, believe me, I know how it works).
And we don’t have a clue of when any of those may happen, and how to prepare for them. What we do know is that economic growth will be disappointing and technological advance will be more hype than reality: no “general purpose” artificial intelligence in our lifetime, most likely no self-driving cars, for sure no commercially viable fusion energy, no human in Mars, no permanent base on the moon. Regardless of what wealthy investors and consultants with much to gain from causing “technological anxiety” in gullible CEOs will keep on parroting. Just wonder, who has more to gain from people fearing an ever-accelerating mysterious technology that, although somehow failing to materialize in any measurable metric like TFP growth or life expectancy improvement, continuously threatens every employee of boss with becoming obsolete if they do not pay the dues of the technologically savvy priests of progress that are always knowledgeable about the latest trends (maybe because they themselves conjured them from thin air, regardless of their actual existence)?
If the economy and technology are more likely to disappoint us than not, in the political realm is where things look positively grim. Remember, the dominant reason that allowed Western societies to surge forward since the middle of the XVIII century and that in its latest incarnation became global (desiderative reason) is broken beyond repair, and is not doing the work that a dominant reason is supposed to do: allowing people to coordinate their collective efforts towards a goal universally acknowledged as worthy, through the medium of satisfying socially sanctioned desires and the immediate feedback mechanism of a widely accepted criterion for determining each member’s position in the social hierarchy.
In its absence, what we have is increasing anomia, a proliferation of both self-destructive and society-destructive behaviors in expanding pockets of fundamentalism and nihilism, growing in the margins, fed by the many disaffected that perceive they have nothing to loose, whose attacks on the mainstream foster in response a growing tribalism and nationalism. And remember, economics without technological advance is entirely unable to make the economy grow, you need productivity to substantially improve for that (and such improvement is entirely exogenous in any model).
But as for how the benefits of what society produces are shared it is not economics, but politics who holds the key. And politics require a common understanding of what constitutes a reason for its arguments and conclusions to be accepted as legitimate by the majority. When such understanding is lacking, what we have is a ruling minority keeping most of the gains of whatever lackluster technological advances there still are for themselves, and a ruled majority disconnected from the values and worldview of such minority turning in what Toynbee called a proletariat (Those pesky rebelling proles). Hhmmmm… sounds like a pretty darn accurate description of what has been happening in most of the developed world since 1970, a small fraction of society (the infamous “1%”) hoarding all the gains, and hectoring the other 99% to be more industrious, more frugal, to invest more in their own development, as they bore in the end the sole responsibility for their ultimate failure: failure to cultivate themselves, failure to acquire the needed skills for the jobs of the “new economy”, failure to earn more than their parents, failure to ascend the economic ladder, failure to lead traditional lives with ever more hectic schedules, both parents working for longer hours and less benefits.
And, guess what? People get tired of being told once and again that it is all their fault, but that if they somehow try even harder (or teach their few kids, with unbelievable sacrifices, to work even more) they will reach the promised land of consumerist bliss, when they will all have a bigger house and a more expensive car than their neighbors and their in-laws (something, I almost don’t need to clarify, statistically impossible; that’s the downside of hierarchically ordered groups). Haranguing only works for so long, and people may accept their elder’s judgment at first and internalize their shortcomings for some time, but it is very hard to sustain such belief indefinitely. Sooner or later someone will find how irresistible it is to point to “someone else” as being the real culprit of people dissatisfaction, of them not living up to what is continuously being shown as proper and deserved. As I mentioned in the previously linked post, until now we’ve seen people have protested in a mostly peaceful way, simply voting for the most obnoxious candidate on offer (so expect many more of those to pop up like mushrooms). But, again, that will solve nothing, and will ultimately lead to the discredit of the electoral system itself.
And the prospect of the disaffected masses, having rejected the until now prevalent mechanism for aggregating their will (democratically elected representatives) and sniffing for those “other people” they think are to blame for the thwarting of their ambitions, the frustration of their expectations, the abandonment of their youthful dreams, is truly terrifying. Think in torches and pitchforks. Think in riot police and secret prisons. Think in 1789 France or 1917 Russia. But in the meantime, cheer up, as things are just fine and dandy and everything seems to be going OK!