KIRIL SOKOLOFF: Well, coming back to David Hume’s famous paper, and you’ve referred to me a number of times. His conclusion was that governments should essentially run surpluses because there’s always a crisis or problematic. If you look at corporations coming into this with the worst balance sheets in history, with profits having been flat since 2012, 40% of Americans barely able to get $500 in an emergency, it seems to me that as we come out of this, one of the implications is going to be we need to be better prepared for the future. Do you think that that’s the way we’re going to go, that we will be, look, we got a real wakeup call here, we need to have money for a rainy day?
LACY HUNT: I think that’s the case for the private sector, but I don’t feel that that’s the case for the government sector. Remember, net national saving has the private sector and the private sector saving was fine. 8.50%, not bad. The problem was that we had a 6.50% government dissaving and so we only ended up with two. The real problem is that you have to have a net saving from the private, the government, the net foreign sector, and if the government, even though maybe well-intended, maybe the actions are very popular.
All of these measures that were taken to deal with the pandemic, they were very popular. The measures– and they were essential. They were humane, they had to be done. It would have been far better if we’ve been following Hume’s advice, which is you run surpluses so when you have an emergency, you have– and by the way, Adam Smith in the Wealth of Nations followed Hume, made the same recommendation. Of course, no one remembers that anymore. No one reads Hume and Smith.
KIRIL SOKOLOFF: To get to a positive net national savings, presumably that’s– I’m not saying it’s a governmental objective, but it should be a national objective in some form based on your point that in order to have money to invest, you’ve got to be able to save out of income. If government is going to keep on running deficits, at pick the number, 15 plus percent GDP, in order to have a positive net savings rate, that implies very significant private savings rate.
LACY HUNT: Unachievable, and let’s say that we bring back a lot of our operations, in other words. If that happens, then the current account deficit will start to shrink, but the current account deficit is always the opposite of the capital account. When you have a current account deficit, you have a capital account surplus, but the capital account surplus is net foreign saving. This is one of the problems. If you repatriate businesses, and you shrink the current account deficit, then you’re going to shrink net foreign saving. It’s quite possible that we will have two of saving movements. One for the increased level of government dissaving and also less positive foreign saving. We import a lot of saving from the rest of the world.
KIRIL SOKOLOFF: Given the output cap, not having the savings to invest, is that better than it might otherwise have been? Because we got five, six, seven years to fill that output gap, or is the transformative event that is the easiest way out, if that’s the right word. Is that dependent on having the capital and savings to invest? Does that mean that in order to have that transformative, new economy, we’re going to have to have a net national savings? Am I taking that–
LACY HUNT: The thing about those transformative events is that they often create a surge in income, and thus in saving that they finance themselves, but that’s why I use the term transformative. It cannot be evolutionary. Let’s think about the situation that we were in the late 1920s, early 1930s. We take on a great deal of debt in the ’20s and ’30s. We struggle throughout the 1930s. When Germany invades Poland, we still have an unemployment rate of 17% or 18%. We’ve come off the peak levels, but we still have a very high unemployment rate and we have a substantial number of people underemployed.
In other words, we really made very little progress to turning the economy. We stabilized things, and we ended the worst aspects of the Great Depression. Then World War II comes along. A lot of folks including the great JM Keynes believe that it was the deficit spending of World War II that shored the problems of the Great Depression. That’s not my reading. It is true that on a national income accounts basis, we ran deficits of 14%, 15% which is what we’re now running again by my calculation, national product account basis.
However, we had two other events that occurred simultaneously. Number one,
- we had a surge in our exports, and
- we had mandatory rationing.
If you wanted to buy 10 pounds of sugar, you couldn’t. You could buy one maybe, you had a ration, and so people were paid to produce exports and to produce military goods. The private saving rate went up to 25% of net national income. We were able to cover the federal budget dissaving and we paid off the debts of the 1920s and 1930s. When World War II ended, Keynes suggested if we didn’t continue running the budget deficits of World War II, we would go back into the Great Depression, but that didn’t happen.
The budget was basically balanced all the way through and to the early 1960s. We ran small deficits, but we ran small surpluses on balance. It was close to balance. We opened up our export market, we opened up markets to the US, we financed the reconstruction in Europe and Japan, we had a tremendous resurgence. If you look at McKinsey’s 24 cases of overindebted economies and how they got out of it by austerity, one of their cases is the US during World War II. They labeled it a fortuitous circumstance. We didn’t go into World War II to get rid of the debt problem of the 1920s and ’30s.
It was something that happened as a result of the policy mixes but the folks in America were okay with the austerity because it was a great national endeavor. I don’t think that they would be willing to do that today. Everyone is relying on more government activity to solve the problem, not realizing that that’s the source of our deteriorating rate of economic performance.
KIRIL SOKOLOFF: Well, on that note, it’s been a really instructive ending [?].
60:42thank you what is the most persistent60:45zombie idea on the left and is there one60:47is there an idea to what you have60:50subscribed in the past which you now60:51kind of put into that category oh boy I60:55mean the trend the left is not nearly as60:58good at maintaining zombie ideas partly61:03because there there are in fact not that61:07many leftist billionaires and and61:09billionaires there are some but not very61:12leftist and so I mean well let me put61:20this way we were talking about climate61:22and environment and and climate change61:25and economic growth I’m running to a lot61:27of people still who are now this is61:30telling you that there I don’t think61:31there are a large part of the electorate61:33but there are61:34but the circles I move in I run into61:36people who are sure that to fight61:39climate change we have to stop living61:41the way we’re living and a much more61:43austere back-to-nature lifestyle is the61:47only way to deal with climate and that’s61:49an idea that it’s just clearly wrong if61:53we actually asked by we know enough61:55about the technological and economic61:57solution to climate change that ASUS a62:00green society that does not burden the62:02planet would almost certainly be a62:04society that looks a whole lot like what62:06we have now in people with the driving62:08cars they’d be using electricity but the62:10cars with the electric and the62:12electricity would be generated by solar62:13and wind and it but the actual rhythm of62:16daily life could look very much like62:18what we we have we don’t have to go back62:20to to an agrarian pastoral Eden to to to62:25deal with the issue but it’s it’s62:26something that sounds again it sounds62:29serious from a different point of view62:30it sounds like if you’re serious about62:31climate change you must be serious and62:34believing that we have to give up on62:35this consumer oriented society and and62:38all of these these comforts that we take62:40for granted but in fact it’s not true so62:43that would here that would be an example62:44of a kind of a left-wing zombie in other62:46countries in the belief that you can62:49just dictate all prices and you know you62:53can put price controls on everything and62:54not and never face shortages that’s not62:58something we see in the US but they62:59Venezuela clearly there’s some refusal63:02to face reality going on but that would63:05be these house but again zombies mostly63:08flourished because their big money63:10behind them not all of them but mostly63:12and and and the no.4 for every George63:17Soros there are 50 quiet billionaires63:21supporting extremely reactionary causes63:23and what about the question the question63:25of an idea you’ve changed your mind oh63:27so most of my changes have been in the63:33in the other direction look at minimum63:36wages no no a piece of economic research63:41has has shaken my views as much63:46actually I’m gonna give you two and and63:50me at this this is a great risk of63:52turning into a Monty Python routine63:54amongst the issues three okay so64:00actually so I’ll give you two one64:01minimum wages up until sometime in the64:05mid 1990s I believe that clearly64:09increases in minimum wages would cost64:11jobs they might be desirable otherwise64:13but econ 101 said that that’s what64:15happened and then we got this amazing64:17body of empirical research because we64:19get in the United States we get a lot of64:21natural experiments when one state64:22raises its minimum wage and the64:24neighboring state does not and the64:26overwhelming evidence says that minimum64:28wage increases at least within the range64:30we see in the US do not cost jobs and64:33that changed my view has said labor64:34markets are very different from where I64:35thought it actually moved me towards64:38emphasizing the role of power and in64:40labor relations and so on another one I64:43used to think that it was always64:44possible just by printing money to get64:47full employment and and the experience64:50of Japan in the late 1990s when despite64:54a very easy monetary policy they slid64:56into deflation changed my views totally65:00I there was a there was a group of us65:03actually of when I when I arrived at65:05Princeton in 2000 was a bunch of Japan65:07warriors who were really very shaken by65:10the Japanese experience because we we65:12looked at it said you know this could65:13happen to us so with me people you65:16wouldn’t have heard of but very65:17influential in the professional arts65:18Vince and Mike Woodford and the fourth65:21was Bernanke Ben Bernanke don’t know65:24what happened to him he disappeared I65:26think yeah so we so that but no the the65:31Japanese Japan’s Lost Decade65:33changed my view and basically made me65:36much more Keynesian much more believer65:38that there are times when you really65:40need to have the government do the65:41spending yes how do you successfully65:45regulate the financial markets while not65:50scaring the business community in sort65:53of trying to65:55in the middle of a class that any form65:58of common sense reform or tax is not66:01Marxist Leninist and it’s not going to66:03take away all their assets and money66:05okay you know we’ve done this before66:10right we imposed extensive bank66:14regulation in the 30s which didn’t66:17obviously cripple the economy we the66:19post-war generation was was the best66:22generation in in in certainly in US66:24economic history the the the only I66:29would say the problem is not scaring66:31people not looking Marxist the problem66:33with regulating financial markets is66:35first of all they’re the financiers have66:39a lot of clout but but beyond that it is66:45hard to keep up with financial66:49innovation which very often is not66:53innovating in the sense of you know66:55doing things better but as is innovating66:58a way of finding ways to set things up67:01that evade the regulations so you67:04regulate banks and then people create67:06something that is functionally a bank67:07but doesn’t technically meet the67:09definition of a bank and evades the67:11regulations it’s hard to keep up with67:13that and and if it’s not a well solved67:16problem in the we had a significant67:21financial reform in the US under Obama67:24not everything you I would have wanted67:26but it was significant but on many of67:29the issues it depends upon this67:31Financial Stability Council which has to67:34define systemic lis important67:37institutions that they’re mean and67:40there’s no clear definition it’s kind of67:43like pornography you know when you see67:44it which is not a stupid way to do it67:47but it depends upon having honest people67:51of goodwill in charge and now we have67:55the Trump administration so so the67:58dodd-frank is not a very effective tool68:00and it always depended upon upon good68:04leadership and68:06we have not found I haven’t come up with68:08a way to the thing about doing a regular68:10old-fashioned commercial banks is that68:15that system works the regulations work68:18the the guarantees work without68:21requiring that there be smart leadership68:23or good judgment calls at the top and68:25unfortunately everything we try to do to68:27deal with more modern financial68:29institutions is requires both goodwill68:34and sophistication which are both the68:36now and very short supply question from68:39the balcony please thanks very much so68:41we’ve mostly discussed zombi ideas in68:43the kind of domestic policy context i68:45wanted to ask about zombie ideas in the68:47international context in the sense of68:50the Washington Consensus and trade68:51liberalization and specifically I want68:54to ask what your thoughts are on the68:56extent to which countries can still68:58develop by exporting I has the impact of69:02technology and the scale of China made69:06it essentially impossible for a trade69:07liberalization to facilitate development69:10okay that’s a good question69:13I think empirically it’s just the69:16premise is wrong so we all know about69:19China and we know that China occupies69:21this huge space and China is a unique69:25success story nobody else has matched69:27their rates of growth but it’s not the69:31only success story so when I took I like69:34to talk about the the unfamiliar cases69:39Bangladesh Bangladesh is a desperately69:43poor country and and compared with69:46working conditions and in in the first69:49world it’s it’s is horrible and they69:51have factories that collapse and kill69:53hundreds of workers and all of that but69:56Bangladesh is actually they’ve they’ve69:59tripled their per capita income and70:03there there are very poor country but70:06they were a country that was right on70:07the edge of Malthusian starvation and70:11it’s all because of the ability to70:13export if the the ability basically70:17clothing labor-intensive70:19that they’ve been steadily gaining70:21market share at China’s expense because70:23China has been moving upscale and that’s70:26that’s showing that you can get yeah70:28that’s that’s major development that’s a70:29major change it’s it’s not it’s a long70:32way from from turning into into Western70:35Europe but it’s it’s it’s a very big70:37deal and it’s showing that the70:39globalization can still work for for70:41poor countries so I that’s that’s what70:45the line Bangladesh is not a it’s not a70:48banana republic it’s a pajama republic70:51but but that you know they can make fun70:54of it but in fact their use that’s a70:56very large number of people who are70:57lifted at least some ways above71:00starvation level by globalization and71:03another question from the balcony please71:06looking at it as a economist with a71:08mathematical mind what impact do you71:11think a shift a proportional71:12representation would have over time as71:15you compared to the electoral colleges71:18and first-past-the-post which we have in71:19the UK other British Commonwealth71:22countries which tend to over time have71:24led to two party states so what if we71:26shifted the proportional representation71:28okay I mean firstly the u.s. the the71:33u.s. electoral college system is71:35monstrosity that’s a that’s not about71:38first-past-the-post it’s about a system71:40that at the presidential level gives71:42disproportionate representation to to71:45some states with small populations and71:48at even more important we have the71:50Senate which where half the Senators are71:53elected by 16 percent of the population71:55so this is a that that’s crazy71:58that’s a deeply basically we’ve we’ve72:00evolved into a rotten borough system for72:03half of the US government and that’s72:05that’s a clear monstrosity as for the72:08rest I mean I don’t know I mean this is72:13not I’m not a political scientist I talk72:16to political scientists which by the way72:18is rare for economists we actually talk72:20I actually talk to these goods to other72:21social sciences and take them seriously72:24and but what I would say is that the the72:29there are places with proportional72:31representation72:32that also managed to be very72:34dysfunctional so you know Israel I72:38believe has proportional representation72:39and I would not say that Israeli72:44politics these past 15 years have been a72:47model of good ideas and wisdom72:50prevailing in fact they I mean every72:52system has its problems and one of the72:54problems with proportional72:55representation is it sometimes causes72:57small factional parties with with very73:01antisocial goals to to be kingmakers so73:06that’s not an easy solution either I73:08don’t really know what the answer is73:10except to say that that you know people73:13people are both generally clever and73:19often nasty and they can find a way to73:21screw up any system question trip down73:24here hi73:25you said earlier that the American73:26economy is in a pretty strong position73:28so I was wondering how much he thought73:30Trump could legitimately claim73:32responsibility for that and then73:33alongside that what are the strong II73:35cannot strongest economic arguments to73:37voters for voting against him okay the73:41reason that we’re in a relatively strong73:43economic position is that it’s basically73:47deficit spending after years and years73:49of saying no debt this is an existential73:52threat then we must have austerity which73:54really hobbled the US recovery under73:58Obama as soon as Trump was in office for74:00Republicans said oh we don’t care about74:02that I mean the last two State of the74:04Union speeches have not so much as74:06mentioned the deficit and that even74:09though it’s badly done it does give a74:13boost to demand so I guess you could say74:16the Trump has gets some credit in the74:19sense that by getting elected he caused74:22congressional Republicans to stop74:24sabotaging the economy that’s not a you74:27know vote Republican and and and and the74:29and the economy won’t be undermined by74:31by our sabotage efforts so that’s not a74:34great electoral slogan but it might win74:36in the election I have to say and I lost74:40the room what the rest of that was but74:42the74:44was one of the strong strongest economic74:46arguments to voters to vote against him74:48oh the thing about Trump is that he’s74:50managed to preside over a economy that74:55by sort of aggregate measures74:58unemployment rate is low GDP growth has75:02been pretty good not spectacular but75:04pretty good but which is is showing75:08increased hardship for many people75:11despite that I mean we were making huge75:13progress in reducing the number of75:15people without health insurance that has75:17now gone into reverse the number of75:19people who say that their that they are75:23that they are postponing or not75:27undertaking necessary medical treatment75:29because of expense has skyrocketed75:32and the America like the UK there’s75:38tremendous regional divergence we have a75:43large part of the large parts of the the75:47heartland which are in severe economic75:50decline as social collapse and that has75:53just accelerated you know despite the75:55low overall unemployment rate the state75:58of affairs in Eastern Kentucky is76:01terrible and life expectancy I guess it76:06rose slightly this past year but you76:07know mortality rates are rising and it’s76:11as in case an Angus Deaton say deaths of76:14despair people dying from from opioids76:19alcohol and suicide have been rising76:22despite the strong economy so this is76:25actually that earlier question about GDP76:27you know the GDP growth not saying that76:31the that it’s false but under under the76:34surface of that good GDP growth is76:36actually a substantial increase in76:38misery just a one final question from76:43thanks bull great to see you here my76:48question is about the u.s. minimum wage76:50obviously it’s very very low compared76:53it should be you know from visiting the76:55US for last 25 years it seems P and76:57getting no three jobs to make ends meet77:00what do you think the minimum wage77:02should be and one of the reasons other77:05than you know losing jobs that perhaps77:07people have been keeping it down the77:09minimum wage suppressed oh so I asked77:12that in Reverse I mean the reason the77:14minimum wage has been held down is77:15because employers want chief labor and77:20they have a lot of clout the question of77:24how high to go is an interesting one77:26and it’s the so even the the big move in77:34the u.s. is for $15 and that’s a I’d say77:39even $15 an hour even Alan Krueger who77:43was one of the key researchers on that77:45revelatory work was a little nervous77:48about 15 and that the problem is77:52regional the the state of New York the77:55state of California no problem you have77:58a $15 minimum wage and and there’s78:00absolutely no reason to think that78:02that’s economic difficulty we’re talking78:05about Mississippi or Alabama places with78:08much lower productivity you might start78:10to have some job loss at that level I78:12think that the preponderance of the78:14evidence says that $15 is okay that78:18there might be some minor job loss in78:21some of the least productive parts of78:22the US but but overall not a big deal I78:26think 20 I would start to make me really78:28nervous78:29that then you start to really be a78:30problem in in potentially problematic78:33territory but it’s it’s why they see78:36actually in this case I think a federal78:38minimum wage of 15 and then higher wages78:40and in in in appropriate States it makes78:44sense this is one of these cases where78:45federalism works to our advantage and78:47and it’s interesting by the way Alan78:49Krueger did do at one point he he went78:52to to Puerto Rico which part of the u.s.78:55is subject to the u.s. minimum wage and78:57much lower productivity and said there78:59we should be able to see clear evidence79:01that the minimum wage cost jobs and he79:03couldn’t find it he said I don’t really79:05believe this by79:06I can’t find the evidence so so for the79:09moment I say let’s let’s go for 15 and79:11see what happens and then maybe maybe79:15look for the high productivity states to79:20to go beyond that great I’m so sorry to79:24have to draw it to a conclusion but you79:27will have the opportunity to meet ball79:29and and get the book signed for now79:32please join me in thanking him for79:34really fascinating today all right
The transformation of the Tory party leaves surviving MPs feeling uneasy
IMAGINE A CONSERVATIVE MP and your mind’s eye might conjure up Philip Hammond. The former chancellor is tall, grey and with a sense of humour that matches his fiscal policy: extra-dry. If not Mr Hammond, then perhaps a figure in the mould of Kenneth Clarke. The rotund, cigar-chomping jazz enthusiast has served in practically every senior government job bar prime minister in a 49-year stint as a Tory MP. Failing that, consider Sir Nicholas Soames, a former defence minister. He has a Churchillian manner, largely because Winston Churchill was his grandfather. The three embody the parliamentary Conservative Party in different ways. Yet they are no longer in it.
The trio were among 21 Conservative MPs to have the whip withdrawn and be barred from standing for the party again after they supported a plan to make Boris Johnson, the prime minister, seek a delay to Britain’s scheduled departure from the European Union on October 31st (see next story). The purge was only the most visible part of a revolution that is transforming the world’s oldest political party. Those who advocate
- fiscal prudence,
- social liberalism and an
- orderly departure from the EU have been routed.
Those who demand free-spending authoritarianism and a “do-or-die” escape from the yoke of Brussels are ascendant. ConservativeHome, a blog for party activists, described this week as “the end of the Conservative Party as we have known it”.
The revolution has required ideological flexibility from those who wish to survive it. The cabinet is full of MPs who are historically small-state Conservatives. Four of the five authors of “Britannia Unchained”, a paean to small government published by ambitious young Tory MPs in 2012, when fiscal austerity was in fashion, now sit in a cabinet intent on opening the public-spending taps. A spending review on September 4th included measures that will increase the size of the state as a percentage of GDP for the first time since 2010. Sajid Javid, the chancellor, is a fan of Ayn Rand and hangs pictures of Margaret Thatcher in his office. Yet on Mr Johnson’s instructions he announced an extra £13.8bn ($16.9bn) in election-friendly giveaways, paid for with extra borrowing.
There is also new thinking on law and order. Another 20,000 police officers are to be hired, and a review of whether prison sentences are too soft is expected. Priti Patel, who has called for a clampdown on immigration and once supported the return of capital punishment, is home secretary. It is a far cry from what some in the party thought Mr Johnson had in store. “Expect a liberal centrist,” advised one MP, who now sits in the cabinet, before Mr Johnson became prime minister. Wags have dubbed the new Tory domestic agenda: “Fund the NHS, hang the paedos.”
But the hardest line is on Brexit. Conservative MPs appreciate that they must get Britain out of the EU if they are to keep their seats. Yet Mr Johnson’s approach, which seems most likely to end in no-deal, leaves a quiet majority of the parliamentary party uneasy. And it is not just former Remainers who fret. A member of the cabinet who enthusiastically campaigned for Brexit admits that no-deal would be a catastrophe. But MPs are willing to serve, partly because Mr Johnson seems determined to move things forward one way or another. “They may not agree, but they are happy for the direction,” says one cabinet minister.
Setting the route is Dominic Cummings, the prime minister’s chief adviser, who will not even say whether he is a member of the Conservatives. When running for office, Mr Johnson promised an inclusive, “one nation” style of government. Instead, he has set about shaking the country’s institutions, suspending Parliament for the longest period since 1945 in order to reduce the time MPs have to debate Brexit. Hitherto unimaginable tactics, such as asking the queen to veto anti-no-deal legislation, are now openly discussed. “This Conservative government…seems to not be very conservative, fiscally or institutionally,” noted Ryan Shorthouse of Bright Blue, a liberal Tory think-tank.
The strong-arm techniques are in stark contrast to the days when David Cameron ran the party, and rebels ran amok. Mr Cameron was unwilling to crack down on an increasingly daring Eurosceptic fringe, which eventually bullied him into holding the referendum. Under Mr Johnson, such sedition is not acceptable, as this week’s purge was intended to show. Figures from Vote Leave, the main campaigning group behind the Brexit vote, call the shots in Downing Street, causing long-serving Tory MPs to shake their jowls at the state of affairs. Sir Roger Gale, an MP since 1983, declared: “You have, at the heart of Number 10, as the prime minister’s senior adviser, an unelected, foul-mouthed oaf.” Mr Johnson was reportedly given a rough ride at a meeting of the 1922 Committee of Tory backbenchers on September 4th.
Yet for all the fury over the deselections, Mr Cummings’s strategy remains just about intact. The prime minister and his aides want an election in which Mr Johnson is portrayed as the champion of a people defied by wily politicians, with the promise of a cash tsunami about to break over Britain’s public services if people vote Tory. “He gets the election he wanted and the framing he wanted,” says one former Downing Street aide. Nor will the revolution necessarily be permanent. A socially conservative offer to voters tempted by Nigel Farage’s Brexit Party may last only until the next general election, says Tim Bale of Queen Mary University of London.
“What this country needs is sensible, moderate, progressive Conservative government,” declared Mr Johnson during a stilted performance in prime minister’s questions on September 4th. Yet with the Tory party in its current state, Britain will have to wait.
He’s crisscrossing Europe because he believes it’s a bellwether for the United States. The scary thing is he could be right.
MILAN — Italy is a political laboratory. During the Cold War, the question was whether the United States could keep the Communists from power. Then Italy produced Silvio Berlusconi and scandal-ridden showman politics long before the United States elected Donald Trump. Now, on the eve of European Parliament elections likely to result in a rightist lurch, it has an anti-immigrant, populist government whose strongman, Matteo Salvini, known to his followers as “the Captain,” is the Continent’s most seductive exponent of the new illiberalism.
Steve Bannon, Trump’s former chief strategist, has been close to Salvini for a while. That’s no surprise. Bannon is the foremost theorist and propagator of the global nationalist, anti-establishment backlash. He’s Trotsky to the Populist International. He sensed the disease eating at Western democracies — a globalized elite’s abandonment of the working class and the hinterland — before anyone. He spurred a revolt to make the invisible citizen visible and to save Western manufacturing jobs from what he calls the Chinese “totalitarian economic hegemon.”
Now Bannon is crisscrossing Europe ahead of the elections, held Thursday through next Sunday. He’s in Berlin one day, Paris the next. As he explained during several recent conversations and a meeting in New York, he believes that “Europe is six months to a year ahead of the United States on everything.” As with Brexit’s foreshadowing of Trump’s election, a victory for the right in Europe “will energize our base for 2020.” The notion of Wisconsin galvanized by Brussels may seem far-fetched, but then so did a President Trump.
Polls indicate that Salvini’s League party, transformed from a northern secessionist movement into the national face of the xenophobic right, will get over 30 percent of the Italian vote, up from 6.2 percent in 2014. Anti-immigrant and Euroskeptic parties look set to make the greatest gains, taking as many as 35 percent of the seats in Parliament, which influences European Union policy for more than a half-billion people. In France, Marine Le Pen’s nationalists are running neck-and-neck with President Emmanuel Macron’s pro-Europe party. In Britain, Nigel Farage’s new Brexit Party has leapt ahead of the center-right and center-left.
Salvini, whose party formed a government a year ago with the out-with-the-old-order Five Star Movement, is a central figure in this shift. The coalition buried mainstream parties. He is, Bannon told me, “the most important guy on the stage right now — he’s charismatic, plain-spoken, and he understands the machinery of government. His rallies are as intense as Trump’s. Italy is the center of politics — a country that has embraced nationalism against globalism, shattered the stereotypes, blown past the old paradigm of left and right.”
For all the upheaval, I found Italy intact, still tempering transactional modernity with humanity, still finding in beauty consolation for dysfunction. The new right has learned from the past. It does not disappear people. It does not do mass militarization. It’s subtler.
- It scapegoats migrants,
- instills fear,
- glorifies an illusory past (what the Polish sociologist Zygmunt Bauman called “retrotopia”),
- exalts machismo,
- mocks do-gooder liberalism and
- turns the angry drumbeat of social media into its hypnotic minute-by-minute mass rally.
Salvini, the suave savior, is everywhere other than in his interior minister’s office at Rome’s Viminale Palace. He’s out at rallies or at the local cafe in his trademark blue “Italia” sweatshirt. He’s at village fairs and conventions. He’s posting on Facebook up to 30 times a day to his 3.7 million followers, more than any other European politician. (Macron has 2.6 million followers.) He’s burnishing the profile of the tough young pol (he’s 46) who
- keeps migrants out,
- loosens gun laws,
- brandishes a sniper rifle and
- winks at Fascism —
all leavened with Mr.-Nice-Guy images of him sipping espresso or a Barolo.
His domination of the headlines is relentless. When, during my visit, a woman was gang raped near Viterbo, his call for “chemical castration” of the perpetrators led the news cycle for 24 hours. Like Trump, he’s a master of saying the unsayable to drown out the rest.
“I find Salvini repugnant, but he seems to have an incredible grip on society,” Nathalie Tocci, the director of Italy’s Institute of International Relations, told me. No wonder then that the European far-right has chosen Milan for its big pre-election rally, bringing together Salvini, Le Pen, Jörg Meuthen of the Alternative for Germany party and many other rightist figures.
A nationalist tide is still rising. “We need to mobilize,” Bannon told me. “This is not an era of persuasion, it’s an era of mobilization. People now move in tribes. Persuasion is highly overrated.”
Bannon gives the impression of a man trying vainly to keep up with the intergalactic speed of his thoughts. Ideas cascade. He offered me a snap dissection of American politics: blue-collar families were suckers: their sons and daughters went off to die in unwon wars; their equity evaporated with the 2008 meltdown, destroyed by “financial weapons of mass destruction”; their jobs migrated to China. All that was needed was somebody to adopt a new vernacular, say to heck with all that, and promise to stop “unlimited illegal immigration” and restore American greatness. His name was Trump. The rest is history.
In Europe, Bannon said, the backlash brew included several of these same factors. The “centralized government of Europe” and its austerity measures, uncontrolled immigration and the sense of people in the provinces that they were “disposable” produced the Salvini phenomenon and its look-alikes across the Continent.
“In Macron’s vision of a United States of Europe, Italy is South Carolina to France’s North Carolina,” Bannon told me. “But Italy wants to be Italy. It does not want to be South Carolina. The European Union has to be a union of nations.”
The fact is Italy is Italy, unmistakably so, with its high unemployment, stagnation, archaic public administration and chasm between the prosperous north (which Salvini’s League once wanted to turn into a secessionist state called Padania) and the southern Mezzogiorno. Salvini’s coalition has done nothing to solve these problems even as it has
- demonized immigrants,
- attacked an independent judiciary and
- extolled an “Italians first” nation.
A federal Europe remains a chimera, even if the euro crisis revealed the need for budgetary integration. Bannon’s vision of Brussels bureaucrats devouring national identity for breakfast is largely a straw-man argument, useful for making the European Union the focus of all 21st-century angst.
The union has delivered peace and stability. It’s the great miracle of the second half of the 20th century; no miracle ever marketed itself so badly. It has also suffered from ideological exhaustion, remoteness, division and the failure to agree on an effective shared immigration policy — opening the way for Salvini’s salvos to hit home in a country that is the first stop for many African migrants.
Salvini grew up in Milan in a middle-class family, dropped out of university, joined the League in its early days in the 1990s and was shaped by years working at Radio Padania where he would listen to Italians’ gripes. “What he heard was complaints about immigrants, Europe, the rich,” Emanuele Fiano, a center-left parliamentarian, told me. “He’s run with that and is now borderline dangerous.”
The danger is not exit from the European Union — the government has come to its senses over that — or some Fascist reincarnation. It’s what Fabrizio Barca, a former minister for territorial cohesion, called the “Orbanization of the country,” in a reference to Viktor Orban, the right-wing Hungarian leader. In other words, insidious domination through the evisceration of independent checks and balances, leading Salvini to the kind of stranglehold on power enjoyed by Orban (with a pat on the back from Trump) or by Vladimir Putin. “The European Union has been ineffective against Orban,” Barca noted. Worse, it has been feckless.
Another threat, as in Trump’s United States, is of moral collapse. “I am not a Fascist but. …” is a phrase increasingly heard in Italy, with some positive judgment on Mussolini to round off the sentence. Salvini, in the judgment of Claudio Gatti, whose book “The Demons of Salvini” was just published in Italian, is “post-Fascist” — he refines many of its methods for a 21st-century audience.
Barca told me the abandonment of rural areas — the closing of small hospitals, marginal train lines, high schools — lay behind Salvini’s rise. Almost 65 percent of Italian land and perhaps 25 percent of its population have been affected by these cuts. “Rural areas and the peripheries, the places where people feel like nobody, are home to the League and Five Star,” he said. To the people there, Salvini declares: I will defend you. He does not offer a dream. He offers protection — mainly against the concocted threat of migrants, whose numbers were in fact plummeting before he took office because of an agreement reached with Libya.
The great task before the parties of the center-left and center-right that will most likely be battered in this election is to reconnect. They must restore a sense of recognition to the forgotten of globalization. Pedro Sánchez, the socialist Spanish prime minister, just won an important electoral victory after pushing through a 22 percent rise in the minimum wage, the largest in Spain in 40 years. There’s a lesson there. The nationalist backlash is powerful, but pro-European liberal sentiment is still stronger. If European elections feel more important, it’s also because European identity is growing.
As for the curiously prescient Italian political laboratory, Bannon is investing in it. He’s established an “Academy for the Judeo-Christian West” in a 13th-century monastery outside Rome. Its courses, he told me, will include “history, aesthetics and just plain instruction in how to get stuff done, including facing up to pressure, mock TV interviews with someone from CNN or The Guardian ripping your face off.”
Bannon described himself as an admirer of George Soros — “his methods, not his ideology” — and the way Soros had built up “cadres” throughout Europe. The monastery is the nationalist response to Soros’s liberalism. There’s a war of ideas going on in Italy and the United States. To shun the fight is to lose it. I am firmly in the liberal camp, but to win it helps to know and strive to understand one’s adversary.
the 20 most prosperous districts are now held by Democrats, while Republicans represent 16 of the 20 least prosperous, measured by share of G.D.P. The accompanying chart illustrates their analysis.
.. The authors’ calculation of the contribution to the G.D.P. of every congressional district showed that Democratic districts produce $10.2 trillion of the nation’s goods and services and Republican districts $6.2 trillion.
This trend creates a significant dilemma for Trump and the Republican Party. Candidates on the right do best during hard times and in recent elections, they have gained the most politically in regions experiencing the sharpest downturn. Electorally speaking, in other words, Republicans profit from economic stagnation and decline.
Let’s return to John Austin of the Michigan Economic Center. In an email he describes this unusual situation succinctly: “A rising economic tide tends to sink the Trump tugboat,” adding
“Certainly more people and communities that are feeling abandoned, not part of a vibrant economy means more fertile ground for the resentment politics and ‘blaming others’ for people’s woes (like immigrants and people of color) that fuel Trump’s supporters.”
The small- and medium-sized factory towns that dot the highways and byways of Michigan, Indiana, Ohio and Wisconsin have lost their anchor employers and are struggling to fill the void. Many of these communities, including once solidly Democratic-voting, union-heavy, blue collar strongholds, flipped to Trump in 2016.
This pattern is not limited to the United States. There are numerous studies demonstrating that European and British voters who are falling behind in the global economy, and who were hurt by the 2008 recession and the subsequent cuts to the welfare state, drove Brexit as well as the rise of right-wing populist parties.
..In a July 2018 paper, “Did Austerity Cause Brexit?” Thiemo Fetzer, an economist at the University of Warwick in Coventry, England, argues that austerity policies adopted in the wake of the 2008 financial collapse were crucial both to voter support for the right-wing populist party UKIP in Britain and to voter approval of Brexit.
the EU referendum (Brexit) could have resulted in a Remain victory had it not been for a range of austerity-induced welfare reforms. These reforms activated existing economic grievances. Further, auxiliary results suggest that the underlying economic grievances have broader origins than what the current literature on Brexit suggests. Up until 2010, the UK’s welfare state evened out growing income differences across the skill divide through transfer payments. This pattern markedly stops from 2010 onward as austerity started to bite
.. The results here and in England reinforce the conclusion that the worse things get, the better the right does.
As a rule, as economic conditions improve and voters begin to feel more secure, they become more generous and more liberal. In the United States, this means that voters move to the left; in Britain, it means voters are stronger in their support for staying in the European Union.
All around the world, strongmen are seizing power and subverting liberal norms.
fascism came out of particular historical circumstances that do not obtain today—
- a devastating world war,
- drastic economic upheaval, the
- fear of Bolshevism.
.. When Naomi Wolf and others insisted that George W. Bush was taking us down the path of 1930s Germany, I thought they were being histrionic. The essence of fascism after all was the obliteration of democracy. Did anyone seriously believe that Bush would cancel elections and refuse to exit the White House?
.. So maybe fascism isn’t the right term for where we are heading. Fascism, after all, was all about big government—grandiose public works, jobs jobs jobs, state benefits of all kinds, government control of every area of life. It wasn’t just about looting the state on behalf of yourself and your cronies, although there was plenty of that too. Seeing Vladimir Putin and Donald Trump at the press conference following their private meeting in Helsinki, though, I think maybe I’ve been a bit pedantic. Watching those two thuggish, immensely wealthy, corrupt bullies, I felt as if I was glimpsing a new world order—not even at its birth but already in its toddler phase. The two men are different versions of an increasingly common type of leader:
- elected strongmen ‘who exploit weak spots in procedural democracy to come to power, and
- once ensconced do everything they can to weaken democracy further,
- while inflaming powerful popular currents of
- reactionary religion,
- homophobia, and
- resentments of all kinds.
.. At the press conference Putin said that associates of the billionaire businessman Bill Browder gave Hillary Clinton’s campaign $400 million, a claim Politifact rates “pants on fire” and about which The New York Times’ Kenneth Vogel tweeted, “it was so completely without evidence that there were no pants to light on fire, so I hereby deem it ‘WITHOUT PANTS.’”
.. A Freudian might say that his obsession with the imaginary sins of Clinton suggests he’s hiding something. Why else, almost two years later, is he still trying to prove he deserved to win? At no point in the press conference did he say or do anything incompatible with the popular theory that he is Putin’s tool and fool.
.. These pantsless overlords are not alone. All over the world, antidemocratic forces are winning elections—sometimes fairly, sometimes not—and then using their power to subvert democratic procedures.
There’s Recep Tayyip Erdoğan in Turkey—remember how when he first took office, back in 2014, he was seen as a harmless moderate, his Justice and Development Party the Muslim equivalent of Germany’s Christian Democrats? Now he’s shackling the press, imprisoning his opponents, trashing the universities, and trying to take away women’s rights and push them into having at least three, and possibly even five, kids because there just aren’t enough Turks.
.. Then there’s Hungary’s Viktor Orbán, who coined the term “illiberal democracy” to describe these elected authoritarian regimes, now busily shaping the government to his own xenophobic ends, and
.. Poland’s Andrzej Duda, doing much the same—packing the courts, banning abortion, promoting the interests of the Catholic church.
Before World War II Poland was a multiethnic country, with large minorities of Jews, Roma, Ukrainians, and other peoples. Now it boasts of its (fictional) ethnic purity and, like Hungary and the Czech Republic, bars the door to Muslim refugees in the name of Christian nationalism.
One could mention
- Philippine President Rodrigo Duterte,
- Egyptian President Abdel Fattah el-Sisi,
- Israel’s Benjamin Netanyahu, and
- India’s Narendra Modi as well.
Pushed by anti-immigrant feeling, which is promoted by
- unemployment and
right-wing “populist” parties are surging in
- the Netherlands,
- Austria, and even
- Sweden and
And don’t forget Brexit—boosted by pie-in-the-sky lies about the bounty that would flow from leaving the European Union but emotionally fueled by racism, nativism, and sheer stupidity.
.. At home, Donald Trump energizes similarly antidemocratic and nativist forces. Last year, outright neo-Nazis marched in Charlottesville, and Trump called them “very fine people.” This year, Nazis and Holocaust deniers are running in elections as Republicans, and far-right misogynist hate groups like the Proud Boys are meeting in ordinary bars and cafés.
.. The worst of it is that once the leaders get into power, they create their own reality, just as Karl Rove said they would:
- They control the media,
- pack the courts
- .. lay waste to regulatory agencies,
- “reform” education,
- abolish long-standing precedents, and
- use outright cruelty—of which the family separations on the border are just one example—to create fear.
While everybody was fixated on the spectacle in Helsinki, Trump’s IRS announced new rules that let dark-money groups like the National Rifle Association and the Koch brothers’ Americans for Prosperity keep their donors secret.
.. American democracy might not be in its death throes yet, but every week brings a thousand paper cuts.
.. There’s nothing inevitable about liberal democracy, religious pluralism, acceptance of ethnic diversity, gender and racial equality, and the other elements of what we think of as contemporary progress.
.. He has consolidated a bloc of voters united in their grievances and their fantasies of redress. The
- fundamentalist stay-home moms, the
- MAGA-hat wearing toughs, the
- Fox-addicted retirees, the
- hedge-fund multimillionaires and the
- gun nuts have found one another.
.. Why would they retreat and go their separate ways just because they lost an election or even two? Around the world it may be the same story: Democracy is easy to destroy and hard to repair, even if people want to do so, and it’s not so clear that enough of them do.
the supposed rebellion of “common people” against elites has not been much in evidence. Billionaires have taken over US politics under President Donald Trump; unelected professors run the “populist” Italian government; and all over the world, taxes have been slashed on the ever-rising incomes of financiers, technologists, and corporate managers.
.. Meanwhile, ordinary workers have resigned themselves to the reality that high-quality housing, education, and even health care are hopelessly beyond their reach.
.. What, then, explains the sudden dominance of nationalism? There is not much positively patriotic about the new nationalism in Italy, Britain, or even the US. Instead, the upsurge of national feeling seems largely a xenophobic phenomenon, as famously defined by the Czech-American sociologist Karl Deutsch: “A nation is a group of people linked together by a common error about their ancestry and a common dislike of their neighbors.”
- .. Hard times –
- low wages,
- regional deprivation, and
- post-crisis austerity
– provoke a hunt for scapegoats, and foreigners are always a tempting target.
.. There is nothing patriotic about Trump’s belligerence against Mexican immigrants and Canadian imports, or the nativist policies of the new Italian government, or Theresa May’s most famous statement after becoming UK Prime Minister: “If you believe you are a citizen of the world, you are a citizen of nowhere. You don’t understand what citizenship means.”
.. The xenophobic effort to blame economic hardship on foreigners is doomed to failure.
.. Consider the post-crisis effort to divert popular anger about the collapse of market fundamentalist economics onto “greedy bankers.” This ultimately failed, in part because bankers have huge resources to defend themselves, which foreigners generally do not.
.. banker-bashing failed to assuage public anger mainly because attacking finance did nothing to boost wages, diminish inequality, or reverse social neglect. The same will be true of the current attacks on foreign influence, whether through immigration or trade.
.. European issues have nothing to do with the genuine political grievances that motivated a large part of the “Leave” vote. Instead, the Brexit negotiations will now dominate and distract British politics for many years, or even decades. And Britain’s nationalist confrontation with the rest of Europe will offer politicians of all parties endless excuses for failing to improve everyday life.
.. scapegoating foreign influences, whether through trade or immigration, will do nothing to lift living standards or address the sources of political discontent.
.. Successive Italian governments since the financial crisis have gradually laid the foundations for pension, labor market, and banking reforms. These changes have created the conditions for economic recovery .. but they have been politically unpopular and are now being denounced as symbols of elitist foreign oppression.
.. If the new government abandons all three reform projects, Italians can also abandon hope of economic recovery, perhaps for another decade.
.. Trump thinks his measures against imports from China, Germany, and Canada will hurt these trading partners and create American jobs. This might have been true when the US economy was suffering weak growth and deflation. But in a world of strong demand and rising inflation, German and Chinese exporters will find new markets for their products, whereas US manufacturers will struggle to replace foreign suppliers.
.. tariffs will act as a tax on American consumers, through higher prices, and on American workers, businesses, and homeowners, through rising interest rates.