Tag Archives: Dani Rodrik

The lessons the left should (and shouldn’t) take from the victory of Macron

Anna Berezovskaya, Abduction of Europa (2015)

In 2016 populism burst upon liberal democracies like a whirlwind. Yet, since Trump’s election in November of last year the storm appears to have passed. There was the defeat of the far right presidential candidate Norbert Hofer in Austria (of all places) in December of last year followed by the loss of the boldly pompadoured (which seems to be a thing now on the right) Geert Wilders in parliamentary elections in the Netherlands a few months back, followed by the seeming victory of the Kutcher faction over the Bannon faction in the Trump administration, and now, the loss of Le Pen in France. Whew- glad that’s over.

Of course, it’s not over, for it leaves us with the same unaddressed problems that gave rise to popular discontent in the first place. The one and only danger of the populist fever peaking too soon is that it will feed the very complacency among elites that gave us this wave of destructive popular anger in the first place. The fever will just come back, and perhaps next time, in a form much worse should manage to sweep 2016’s craziness under the rug.

As of yet this wave of anger, despite its ugliness or the views of its more vicious fans, hasn’t been so much fascists as populists. This distinction, as distinctions often are, is important. John B. Judis, one of the first to see the populist wave coming in his book The Populist Explosion: How the Great Recession Transformed American and European Politics.

I’ll get to fascism in a moment, for now, let me note that the distrust of elites driving the populist explosion makes perfect sense given the almost two decades of failure of the power elite from  9-11, to the Iraq war, to the 2008 financial crisis, to the Euro crisis, to the implosion of Syria and the refugee crisis. These acute crises are combined with more structural ones, such as the fact that elites have either twiddled their thumbs, turned the other way, or themselves enabled the erosion of the middle class and the flat-lining of that class’ income growth despite economic gains, in developed countries since the 1970’s. At the same time the political system has grown increasingly sycophantic and corrupt.

As Mark Leibovich pointed out in his book This Town, elites in Washington enact the play of hyper-partisanship even as both Republicans and Democrats engage in an incestious government-coporate revolving door. A problem that since the Global Financial Crisis became even worse to the extent that the former head of the IMF compared what happened in the US to a Third World coup. 

Trump twisted his way into the White House on the claim that “he alone” was able to overturn this system. Instead, what his election seems to mean is that the US is now fully and completely free to join other countries such as China where the distinction between the interest of the rich and the common weal do not exist. Wealthy classes in China and elsewhere understand the new American way of politics very well.

Macron who Trump-like staged his own coup against the declining French political parties was himself an investment banker and his candidacy was as much a desperate by the French elites as a move towards real and democratic reforms.

The fact that Trump’s populism has proven as artificial as the man’s skin tone, along with the fact that other populists, most especially the dangerous figure of Marine Le Pen, have lost in recent elections presents the left with an unprecedented opportunity. But it’s an opportunity that can be seized only if the left can come to understand that not all, or even most, of the supporters of Trump or Le Pen are fascists- a prospect that would require massive and likely violent political resistance in order to ensure the survival of our political and social freedoms.

It’s here where Judis’ book becomes so helpful. In The Populist Explosion Judis identifies the defining feature of populism as anti-elitism. He explains that the early 21st century populism which grew out of the financial crisis hasn’t just come from the right, but also from the left. The left-wing Podemos in Spain is a populist party, as is Syriza in Greece. Both left-wing and right-wing share a disdain for elites they believe have failed us.

For Judis what distinguished right leaning from left leaning populism is that the former adds the category of an enemy minority – Muslims, Mexicans etc that elites supposedly coddle to the detriment of the larger population. (The first step right-wing populism takes towards becoming fascist.)

To step away from Judis for a moment, one of the ideas now becoming dangerously popular among liberals is that populists’ distrust of experts is equal to ignorance and a disdain for science and even rudimentary facts. What liberals don’t acknowledge is their own role in the growth of such mistrust. Elites have promoted the idea that economics is akin to science when it’s closer to astrology. The scientists perhaps best known to the public are those who have made careers out of attacking widely held beliefs by making claims beyond science’s purview.

The mainstream media, the bane of populists everywhere, has indeed been guilty of colossal failures- such as the run up to the war in Iraq, and continues to have a disturbing fetish for American bombs and power.  The last few years have revealed an intelligence apparatus not only frequently incompetent- having missed 9-11, and the Arab Spring to name just two recent failures, but a bureaucratic machine seemingly uninterested in preserving our constitutionally guaranteed rights. In conditions as they stand, mistrust of elites is no vice.

As Judis explains it, populism was invented in the US in the 1890’s in the revolt of mid-western farmers against their economic strangulation by financial powers in the East. The drama even gave America what is perhaps its most outstanding fairy-tale- The Wizard of OZ.  

Since then, the US has had a whole series of populist movements and figures- most from the right. In the 1930’s there was Huey Long and Father Coughlin, in the 1960’s there was George Wallace, in the 1990’s Ross Perot (perhaps) and Pat Buchanan. Now we have Trump- the first populist to actually break his way into the White House- a fact that is surely a symptom of just how decayed our political system has become. Judis points out how, since the 1970’s this formerly uniquely American form of politics became a global affair. So here we are.

Judis, in my view rightly, is at pains to distinguish right-wing populism from its ugly cousin fascism. What made fascism of the 1930’s variety, which remains our template, distinct from populism and so incredibly dangerous was that it used the full powers of the state to hunt down and destroy its internal enemies- fascism was born in states that were in conditions of revolution and civil war. Fascism, also unlike populism, was characterized by an openly expansionist foreign policy that aimed to overturn the geopolitical order rather than merely withdraw from it. Populism isn’t fascism so much as it points ” to tears in the fabric of accepted political wisdom” as Judis so sharply puts it.

This is not to say that right-wing populism cannot morph into fascism, or that left-wing populism can’t evolve into communism (more on that another time) it is that a perhaps greater danger that the system can not be shocked into fundamental change at all- that we seem incapable of freeing ourselves from the ultimate logic of the economic and political artifice in which we are embedded- despite the fact that we are acutely aware of the depth of its unsustainable contradictions.

Judis was among the first to see 2016’s wave of populism coming, yet I think his much needed attempt at drawing a line of historical continuity between populism in the last two centuries and our own perhaps obscures what makes populism in its current manifestation unique. For that we can turn to another recent book on the subject, David Goodhart’s Road to Somewhere: The Populist Revolt and the Future of Politics. In that book Goodhart makes the case that what is perhaps today’s primary political cleavage is between those who have thrived in, benefited from, and identify with, globalization and those who define themselves in terms of place. He calls the former group “Anywheres” because they seem to have fully embraced global mobility in the search for success as individuals, which does not mean they have abandoned all collective identities such as culture or religion and especially family, only that they see their range of action encompassing the whole earth.

Somewheres by contrast are communitarian rather than individualistic in their identities. They remain deeply connected emotionally to their homeland, their culture, and sometimes, their ethnicity and derive their self worth primarily through this collective identity rather than their own personal accomplishments.

Obviously these are ideal types and all of us in the modern world have some of each about us. Yet Goodhart’s two types does seem to capture something essential about politics not just in the US or the UK but globally. We have these great global cities interconnected with one another and more diverse in their populations than ever before while at the same time possessing neglected hinterlands where the growth engendered by globalization largely does not flow.

It’s quite clear that the Anywheres have the moral high ground over the Somewheres when it comes to their embrace of diversity. What is much less clear is if Anywheres can actually be the basis of a functioning social democracy for they seem to lack the kinds of communitarian virtues a thriving democracy requires as they remain focused on their own material and social advancement. It might be the case that the type of political order that best fits a world of globally mobile self-seeking individuals happens to be something other than a democratic one.

The economists Dani Rodrik actually has a name for this- he calls it the globalization trilemma, which goes like this:

…countries cannot have national sovereignty, hyper-globalisation and democracy; they can only ever choose two out of the three.

Given the huge global economic disparities between regions and cultural differences and disputes we could have hyper-globalization with open markets and the free movement of peoples under either a system of empire and enlightened/liberal despotism or under a democracy that was truly global in scope. From where I sit the former seems much more likely than the latter.

For whereas the latter would require peoples embedded in democracies to willingly surrender their control over their own affairs to other people’s who did not share in their history- a transformation of politics that would probably require something like a global civil war- the former can emerge from mere inertia as the power of democratic and other states is slowly eroded away making global actors and individuals the de-facto if not dejure seat of sovereignty.

If the European Union is our best current, if geographically limited, experiment in what hyper-globalization might ultimately look like, then Macron’s defeat of Le Pen offers us a second chance to test whether such integration can also be made truly democratic in the way we currently have with nation-states. Should the EU not embrace democratic reforms in light of his victory and learn to create a new home for the Somewheres this chance might just be its last.

 

The Roots of Rage

Perhaps the main problem with the case made by Pankaj Mishra in his Age of Anger is that it gives an outsized place to intellectuals and the ideas that inspire them, people and their works like Mishra and his books, and as consequence fails to bring to light the material forces that are such idea’s true source.

It’s one thing to be aware that today’s neo-liberalism, and the current populist revolt against them have roots stretching back to the Enlightenment and Rousseau’s revolt against it and to be made aware that there’s a contradiction at the heart of the Enlightenment project that has yet to be resolved. It’s quite another thing to puzzle out why even a likely doomed revolt against this project is taking place right now as opposed to a decade or even decades ago. To do that one needs to turn to insights from sociology and political economy, for if the crisis we are in is truly global- how is it so, and is it the same everywhere, or does it vary across regions?

The big trend that defines our age as much as any other is the growing littoralisation of human populations, and capital. In the developing world this means the creation of mega-cities. By 2050, 75  percent of humanity will be urbanized. India alone might have 6 cities with a population of over 10 million.     

What’s driving littoralisation in the developing world? I won’t deny that part of mass migration to the cities can be explained by people seeking more opportunities for themselves and especially for their children. It’s also the case that globalization has compelled regions to specialize in the face of cheap food and goods from elsewhere and thus reduced the opportunities for employment. Yet perhaps one of the biggest, and least discussed, reasons for littoralization in the developing world is that huge tracts of land are being bought by often outside capitalists to set up massive plantations, industrial farms and mines.

It’s a process the urban sociologist Saskia Sassen describes in great detail in her book: Expulsions: Brutality and Complexity in the Global Economy where she writes:

A recent report from the Oakland Institute suggest that during 2009 alone, foreign investors acquired nearly 60 million hectares of land in Africa.

Further, Oxfam estimates that between 2008 and 2009, deals by foreign investors for agricultural land increased by 200 percent. (94-95)

I assume the spread of military grade satellite imaging will only make these kinds of massive purchases easier as companies and wealthy individuals are able to spot heretofore obscured investment opportunities in countries whose politicians can easily be bought, where the ability of the public to resist such purchases and minimal, and in an environment where developed world governments no longer administer any oversight on such activities.  

For developing world states strong enough to constrain foreign capital these processes are often more internally than externally driven.  Regardless, much of littoralization is driven the expulsion of the poor as the owning classes use their political influence to chase greater returns on capital often oblivious to the social consequences. In that sense it’s little different than the capitalism we’ve had since that system’s very beginnings, which, after all, began with the conquest of the New World, slavery,  the dissolutions of the monasteries, and the enclosure movement.

What makes this current iteration of capitalism’s perennial features somewhat different is the role played by automation. I’ll get to that in a moment, but first it’s important to see how the same trend towards littoralisation seen in the developing world is playing out much differently in advanced economies.

Whereas the developing world is seeing the mass movement of people to the cities what the developing world is primarily experiencing is the movement of capital. Oddly, this has not meant that percentage of overall wealth has shifted to the coasts because at the same time capital is becoming concentrated in a few major cities those same cities are actually declining in their overall share of the population.

The biggest reason for this discrepancy appears to be the increasing price of real estate on the coast. Here’s what the US would look like if it was mapped by land values rather than area:

US land area by wealth

 

As in the case with the developing world much of the change in land values appears to be driven by investments by capital not located in the city, and in many instances located abroad.

In the developed world littoralisation has almost all been about capital. Though an increasing amount of wealth is becoming located in a few great cities, structural reasons are preventing people from being able to move there. Foreign money, much of it of nefarious origins has been pouring into global cities such as New York and London and driving up the cost of rent let alone property ownership. Often such properties are left empty while, as Tim Wu has pointed out, inflated property values have turned the most valuable real estate into something resembling ghost towns.

This is a world that in a strange way was anticipated by William Gibson in his novel The Peripheral where Gibson leveraged his knowledge of shady Russian real estate deals in London to imagine a future in which the rich actively interfere in the past of an Appalachian society in a state of collapse.

The evidence I have for this is merely anecdotal, but many of Dominicans who are newly arrived to small Pennsylvania cities such as Bethlehem and Lancaster are recent refugees from the skyrocketing rent of New York. If this observation is correct ethnic communities are being driven from large cities where wealth is increasing to interior regions with declining job prospects, which have not experienced mass immigration since the 1920’s. In other words we’ve set the stage for the rise of political nativist.

I said automation plays a role here that might make our capitalist era distinct from prior ones. The developed world has witnessed the hollowing out of the interior through automation before when farm machinery replaced the number of farmers required as a percentage of the population from 64 percent in 1850, to around 15 percent in 1950, to just two percent today. The difference is the decline of employment in agriculture occurred at the same time manufacturing employment was increasing and this manufacturing was much less concentrated, supporting a plethora of small and mid-sized cities in the nation’s interior, and much less dependent on high skills, than the capitalism built around the global city and high-end services we have today.

Automation in manufacturing has been decimating employment in that sector even after it was initially pummeled by globalization. Indeed, the Washington Post has charted how districts that went for Trump in the last election map almost perfectly where the per capita use of robots has increased.

Again speaking merely anecdotally, a number of the immigrants I know are employed in one of Amazon’s “fulfillment centers” (warehouses) in Pennsylvania. Such warehouses are among the most hyper-automated an AI directed businesses currently running at scale. It’s isn’t hard to see why the native middle class feels it is being crushed in a vice, and it’s been far too easy to mobilize human against human hate and deny- as Steven Mnuchin Trump’s Treasury Secretary recently did- that automation is even a problem.

These conditions are not limited to the US but likely played a role in the Brexit vote in the UK and are even more pronounced in France where a declining industrial interior is the source of the far-right Marine Le Pen’s base of support.  

The decline of industrial employment has meant that employees have been pushed into much less remunerative (on account of being much less unionized) services, that is, if the dislocated are employed at all.  This relocation to non-productive services might be one of the reasons why, despite the thrust of technology, overall labor productivity remains so anemic.

Yet, should the AI revolution live up to the hype we should witness the flood of robots into the services a move that will place yet larger downward pressure on wages in the developed world.

The situation for developing economies is even worse. If the economist Dani Rodrik is right developing economies are already suffering what he calls “premature de-industrialization” . The widespread application of robots threatens to make manufacturing in developed countries- sans workers– as cheap as products made by cheap labor in the developing world. Countries that have yet to industrialize will be barred from the development path followed by all societies since the industrial revolution, though perhaps labor in services will remain so cheap there that service sector automation does not take hold. My fear there is that instead of humans being replaced by robots central direction via directing and monitoring “apps” will turn human beings into something all too robot-like.

A world where employment opportunities are decreasing everywhere, but where population continues to grow in places where wealth has never, and now cannot accumulate, means a world of increased illegal migration and refugee flows- the very forces that enabled Brexit, propelled Trump to the White House, and might just leave Le Pen in charge of France.

The apparent victory of the Kushner over the Bannon faction in the Trump White House luckily saves us from the most vicious ways to respond to these trends. It also means that one of the largest forces behind these dislocations- namely the moguls (like Kushner himself) who run the international real estate market are now in charge of the country. My guess is that their “nationalism” will consist in gaining a level playing field for wealthy US institutions and individuals to invest abroad in the same way foreign players now do here. That, and that the US investors will no longer have their “hands-tied” by ethical standards investors from countries like China do not face, so that weak countries are even further prevented from erecting barriers against capital.

Still, should the Bannon faction really have fallen apart it will present an opportunity for the left to address these problems while avoiding the alt-right’s hyper-nationalistic solutions. Progressive solutions (at least in developed economies) might entail providing affordable housing for our cities, preventing shadow money from buying up real estate, unionizing services, recognizing and offsetting the cost to workers of automation. UBI should be part of that mix.

The situation is much more difficult for developing countries and there they will need to find their own, and quite country specific solutions. Advanced countries will need to help them as much (including helping them restore barriers against ravenous capital) as they can to manage their way into new forms of society, for the model of development that has run nearly two centuries now appears to be irrevocably broken.