Since the world’s major central banks came to the global economy’s rescue in 2008, they have had more and more tasks foisted upon them, even as some politicians question their expanded role and others seek to undermine their policymaking autonomy. To escape this dilemma, monetary authorities must get back to doing what they do best.
CAMBRIDGE – With the global rise of populism and autocracy, central-bank independence is under threat, even in advanced economies. Since the 2008 financial crisis, the public has come to expect central banks to shoulder responsibilities far beyond their power and remit. At the same time, populist leaders have been pressing for more direct oversight and control over monetary policy. And while central banks have long been under assault from the right for expanding their balance sheets after the crisis, now they are under attack from the left for not expanding their balance sheets enough.
This is a remarkable shift. Not too long ago, central-bank independence was celebrated as one of the most effective policy innovations of the past four decades, owing to the dramatic fall in inflation worldwide. Recently, however, an increasing number of politicians believe that it is high time to subordinate central banks to the prerogatives of elected officials. On the right, US President Donald Trump and his advisers routinely bash the US Federal Reserve for keeping interest rates too high. On the left, British Labour leader Jeremy Corbyn has famously called for “people’s quantitative easing” to provide central-bank financing for government investment initiatives. “Modern Monetary Theory” is an idea in the same vein.
There are perfectly healthy and legitimate discussions to be had about circumscribing the role of central banks, particularly when it comes to the large-scale balance sheet operations (such as post-crisis quantitative easing) that arguably trespass into fiscal policy. However, if governments undercut central banks’ ability to set interest rates to stabilize inflation and growth, the results could be dangerous and far-reaching. If anti-inflation credibility is lost, governments may find it very difficult – if not impossible – to put the genie back in the bottle.
How our president and our mass shooters are connected to the same dark psychic forces.
What links Donald Trump to the men who massacred innocents in El Paso and Dayton this past weekend? Note that I said both men: the one with the white-nationalist manifesto and the one with some kind of atheist-socialist politics; the one whose ranting about a “Hispanic invasion” echoed Trump’s own rhetoric and the one who was anti-Trump and also apparently the lead singer in a “pornogrind” band.
Bringing up their differing worldviews can be a way for Trump-supporting or anti-anti-Trump conservatives to diminish or dismiss the president’s connection to these shootings. That’s not what I’m doing. I think Trump is deeply connected to what happened last weekend, deeply connected to both massacres. Not because his immigration rhetoric drove the El Paso shooter to mass murder in some direct and simple way; life and radicalism and violence are all more complicated than that. But because Trump participates in the general cultural miasma that generates mass shooters, and having a participant as president makes the problem worse.
The president’s bigoted rhetoric is obviously part of this. Marianne Williamson put it best, in the last Democratic debate: There really is a dark psychic force generated by Trump’s political approach, which from its birther beginnings has consistently encouraged and fed on a fevered and paranoid form of right-wing politics, and dissolved quarantines around toxic and dehumanizing ideas. And the possibility that Trump’s zest for demonization can feed a demonic element in the wider culture is something the many religious people who voted for the president should be especially willing to consider.
But the connection between the president and the young men with guns extends beyond Trump’s race-baiting to encompass a more essential feature of his public self — which is not the rhetoric or ideology that he deploys, but the obvious moral vacuum, the profound spiritual black hole, that lies beneath his persona and career.
Here I would dissent, mildly, from the desire to tell a mostly ideological story in the aftermath of El Paso, and declare war on “white nationalism” — a war the left wants because it has decided that all conservatism can be reduced to white supremacy, and the right wants as a way of rebutting and rejecting that reductionism.
By all means disable 8Chan and give the F.B.I. new marching orders; by all means condemn racism more vigorously than this compromised president can do. But recognize we’re dealing with a pattern of mass shootings, encompassing both the weekend’s horrors, where the personal commonalities between the shooters are clearly more important than the political ones. Which suggests that the white nationalism of internet failsons is like the allegiance to an imaginary caliphate that motivated the terrorists whose depredations helped get Trump elected in the first place. It’s often just a carapace, a flag of convenience, a performance for the vast TV-and-online audience that now attends these grisly spectacles, with a malignant narcissism and nihilism underneath.
And this is what really links Trump to all these empty male killers, white nationalists and pornogrind singers alike. Like them he is a creature of our late-modern anti-culture, our internet-accelerated dissolution of normal human bonds. Like them he plainly believes in nothing but his ego, his vanity, his sense of spite and grievance, and the self he sees reflected in the mirror of television, mass media, online.
Because he is rich and famous and powerful, he can get that attention with a tweet about his enemies, and then experience the rush of a cable-news segment about him. He doesn’t need to plot some great crime to lead the news; he just has to run for president. But having him as president — having him as a political exemplar for his party, and a cultural exemplar of manhood for his supporters and opponents both — is a constant ratification of the idea that we exist as celebrities or influencers or we don’t exist at all, and that our common life is essentially a form of reality television where it doesn’t matter if you’re the heel or hero so long as you’re the star.
One recurring question taken up in this column is whether something good might come out of the Trump era. I keep returning to this issue because unlike many conservatives who opposed him in 2016, I actually agree with, or am sympathetic toward, versions of ideas that Trump has championed — the idea of a
- more populist and worker-friendly conservative economics, the idea of a
- foreign policy with a more realpolitik and anti-interventionist spirit, the idea that
- decelerating low-skilled immigration would benefit the common good, the idea that
- our meritocratic, faux-cosmopolitan elite has badly misgoverned the republic.
But to take this view, and to reject the liberal claim that any adaptation to populism only does the devil’s work, imposes a special obligation to recognize the profound emptiness at the heart of Trump himself. It’s not as if you could carve away his race-baiting and discover a healthier populism instead, or analyze him the way you might analyze his more complex antecedents, a Richard Nixon or a Ross Perot. To analyze Trump is to discover only bottomless appetite and need, and to carve at him is like carving at an online troll: The only thing to discover is the void.
So in trying to construct a new conservatism on the ideological outline of Trumpism, you have to be aware that you’re building around a sinkhole and that your building might fall in.
The same goes for any conservative response to the specific riddle of mass shootings. Cultural conservatives get a lot of grief when they respond to these massacres by citing moral and spiritual issues, rather than leaping straight to gun policy (or in this case, racist ideology). But to look at the trend in these massacres, the spikes of narcissistic acting-out in a time of generally-declining violence, the shared bravado and nihilism driving shooters of many different ideological persuasions, is to necessarily encounter a moral and spiritual problem, not just a technocratic one.
But the dilemma that conservatives have to confront is that you can chase this cultural problem all the way down to its source in lonely egomania and alienated narcissism, and you’ll still find Donald Trump’s face staring back to you.
it’s useful to understand how the systemworks and the key turning point is avery remarkable period it’s WilliamJennings Bryan William Jennings Bryan in1896 was a fairly young 36 year oldNebraskan who got up in the middle ofthat particular I guess you could sayAssociation of then the Democratic Partyand it was the one of thoseextraordinary events which turnspolitics around the Democratic Party wasa highly conservative party prior tothem and essentially it’s characterizedby presidents who thought that the leastgovernment the best it was essentiallylazy fair he got up Bryan got up andmade this extraordinary speech which isnow historical and then cross of goldspeech about the American worker and theAmerican farmer of being crucified on across of gold called being the goldstandard and that propelled himstrangely enough into the head of theparty he got nominated he never becamepresident because he kept losingyou think he went three times and failedeach time but left a very majorindelible stamp which led to WoodrowWilson and all the way through toFranklin Roosevelt and I you know Ilooked at Bryan as the root of FranklinRoosevelt’s New Dealthat’s fascinating cause I think mostpeople that part of it’s often beingobscured in history it’s again one ofthe reasons why this book is sointeresting is it throws up thesecreating the existing tax pattern [M]yview is that that’s the right thing todo provided you funded the result ofthat is a bit of variance is going to bea very large federal budget deficit andfederal budget deficits invariably downthe road out qualification in genderinflation at the moment we have thetightest labor market I have ever seenthat is the number of job openings issignificantly greater than the number ofpeople looking for work and that mustinevitably begin to push on wages italways has and always will but it’salways delayedand my told you that is something hasgot to give and that’s I don’t knowwhere it all comes out well your blyatcomes out with inflation well theproblem basically is if we do nothingwe’re going to end up with probablystagflation which is an inflation rate Ishould say it’s partly stagnation whichas mentioned was very significantlyslowed output per our output per hournow which used to be 3/4 percent peryearback in the early post-world war iiperiod it’s now well under 1% whichbrings me very nicely on to the nextquestion from the audience which issomeone has asked for you to share yourthoughts about president Trump’s recentcriticism of Jay Powell and the Fed Ilike him to answer that with all theanswers I think it’s very short-sightedthe issue of the Federal Reserve isrequired by the Congress to maintain astable currency which means no inflationno deflation and the policy they’reembarked upon at the moment seems verysense it will be caused as I mentionedbefore the wage rates are beginning toshow signs of moving and you cannot havereal wages rising without it ultimatelythink if they continue on the road wouldthat we willgoing Pretlow I should say that thepresident wants to go we’re gonna end upwith a very significant budget deficitand very significant inflationultimately not not in the short termthat it takes a whilepolitical system doesn’t care aboutdeficits what they do care about isinflation when the inflation rate was 4%in the 1970sPresident Nixon imposed wage and pricecontrols were nowhere near there yet butit’s wrong our wayif we are though heading towards apotential rise in inflation rise in debtat a time of growing populism do youthink there’s a chance that the FederalReserve will lose independence I’mtrying to follow you which I mean wellcheating is a chance at Congress or thepresident will try to control theFederal Reserve or take away some of itsindependence I really don’t know one ofthose forecasting aspects which isdifficult another question from theaudience as the Federal Reserve’s reachgrows do you think that leged ofoversight will become necessary againthat’s above my pay gradeor do you think that Congress shouldexert more control or oversight of theFed I think the Federal Reserve is bystatuteremember the Federal Reserve Act of 1913which essentially did something veryunusual we had a long period wediscussed this in the book in whichfinancial crises kept surging up andthen collapsing which is a typical cyclewithwhich went on to a decade upon decadeand the populism that evolved as aconsequence of this looked atever-increasing lead to find a way tosolve the problem of why the crisesoccur and the general solution was ifthe economy is accelerating and it’srunning out of gold species and you’regoing to get into a situation in whichthey are always going to be crises sowhat the Federal Reserve Act actuallydid was very very interesting itsubstituted the sovereign credit of theUnited States for gold and then if no westayed on the gold standard technicallythat was a major change in Americanfinancial history and debate the basicconsequence of that is that FederalReserve determines what in effect is asensible level of money supply expansionand one of the reasons the FederalReserve Act was actually passed was toprevent the political system whenbecoming so very dominant in determiningmonetary policy which is exactly whatyou don’t want to happen and I mean Iwas you know eighteen and a half yearsas you mentioned getting letters fromeverybody who won very littlecongressmen or otherwise who wants it’sa the issue of and don’t worry about theissue of inflationand nobody was well when I would begetting people who say we want lowerinterest rates I got tons of that mail Inever got a single letter saying pleaseraise them and it tells you that thereare some views which go against realityand reality always wins but if you lookat that the history of populism some ofthe worst populism you got was in the1970s some of the work that the angerthat was generated by inflation in thenineteen seventies were roiled right theway through the political systemeventually leads to the rise of ofRonald Reagan because and who comes inand then you know crushes crushesinflation so inflation is is not asolution to populism it drivers it makespeople very angry do you think thecurrent populism is going to get worsechairman Greenspan well let’s rememberwhere populism comes from it’s I don’tknow whether this is a generalproposition but I find it’s difficult toget around the answer that when theinflation rate or that must theinflation ratings as much as the levelsof income slow down when you getproductivity for example which is thatthe major determinant of income and youget productivity slowing down you get amuch lower increase in JD GDP and grossdomestic income and wages and salariesalike and there’s a great deal of uneasein the population which is saying thingsare not good somebody come help us andsomebody necessarily on the white horsebecause comes up and says I’ve got a wayto handle this and if you look at LatinAmerica the history ofgoodly part of Latin America is aremarkable amount of people like Peroncoming in and all the subsequent postWorld War two governments in LatinAmerica and it’s really quiteunfortunate and surprising it’s not thatthey try it and it fails which it doesalways it always fails but it doesn’teliminate the desire to do it in otherwords of Peru Brazil and like they’veall undergone very significant periodsof huge inflation and collapsing andnobody wears a lessonyeah well we’re almost out of time butthere’s one other question from theaudience which I think cuts to the heartof a lot of what we’re talking aboutright now which is this does the successof capitalism come at the cost ofenormous wealth disparity is it possibleto have this vision of creativedestruction of capitalism of dynamismwithout having massive income inequalityI doubt it and I doubt it for the reasonI said earlier namely that we’ve got theproblem that human beings don’t changebut technology as it advances and it’sembodied in the growth of an economy isalways growing and when you havesomething that’s growing and the otherthing that’s flat you get obviouslyinequality and the politicalconsequences of that can I qualify thatjust a little bit I mean there – thereare different sorts of inequalitythere’s a there’s the inequality thatyou get from suddenly like Bill Gates orSteve Jobs producing a fantastic newinnovation and idea which means thatthey reap a lot of rewardfor that but which means that society asa whole gets richer and better off andthere’s the inequality that comes fromcrony capitalism from people usingpolitical influence blocking innovationand and sucking out and do rewards forthemselves so I think we need to beabsolutely very very sensitive to thewrong source of inequality whilecelebrating the right sort of inequalityand also had that Joseph Schumpeter thatgreat man once said that the the natureof capitalist progress doesn’t consistof Queens having a million or twomillion pairs of silk stockings itconsists of what used to be theprerogative of a queen being spreadthroughout the whole of society silkstockings you know that become somethingthat go from being very rare and onlyworn by Queens to being worn by allsorts of people all over the place soit’s the nature of capitalism is tocreate new innovations which are atfirst rare but spread throughout thewhole of society and everybody uses soif you think think of the the iPhone orsomething like that some that wassomething that was incredibly rare and afew people had those sort ofcommunications vais now everybodycarries them around all the time and thegreat capitalists the Bill Gates theSteve Jobs don’t get rich by selling onereally really good iPhone to one purposeand they get into selling their productsto all sorts of people so there’s asense in which there is no realtrade-off between very rich peoplegetting very rich and the rest ofsociety getting getting better off youknow they only get rich because theycreate things which everybody mostpeople want to have and buy you knowit’s it’s it’s it’s the Silk Stockingquestion really I you know I accept thatqualifications let me just say one thingyou going back to his mentioning hereWalter Isaacson’s book on innovation hewrote that book and I remember readingit and my final conclusion was and Iasked him why is it that most innovationis in the United Statesit’s American and he said you know I’venever thought of that I don’t think hewas aware of the fact that he here andall these innovationto developers and they all turned out tobe American which leads me to concludethat there’s something fundamental inthe psyche of American history in theAmerican public which creates it it’snot an accident which is why I won in itwho too often so which is what you ofcourse you sought to explain the book soif you had a chance to take this bookinto the Oval Office today or into theTreasury and give it to the Presidentand say this is a history of Americahere are the key lessons what is a topbit of advice that you would give to theadministration today to keep capitalismgrowing in America well you know we dohave we haven’t mentioned that there’san underlying financial problem which wehaven’t addressed in the best way todiscuss it as when I first became awareof itI would haven’t been looking at data andaccidentally created a chart whichshowed the relationship betweenentitlements spending which is socialbenefits in the rest of the world andgross domestic savings and I’m from 1965to the current period the ratio ofentitlements to the sum of those two isflat as a percent of gross domesticproduct which means or at least impliesthat one is crowding out the other andwhen you look at the individuals theyare actually looking different andenable one goes up the other goes downand so forth and I think that’ssuggestively the fact that there issomething in the sense of when we saythat entitlements by which a rising andthe baby boom generation is essentiallycrowding out gross domestic savingswhich in turn coupled withthe borrowing from abroad is how wefinance our gross domestic investmentwhich is the key factor in productivityright so entitlement reform well I lookforward to a tweet about entitlementreform I look forward to this veryimportant book being part of thediscussion about how to keep AmericaAmerica’s economy great and growing butin the meantime thank you both very muchindeed for sharing your thoughts it isindeed a fascinating book and quite anachievement and best of luck in gettingthis very important message out so thankyou both very much indeed[Applause]
At first blush, a populist message of “us vs. them” might seem less effective than a message of “all of us together,” given that elections are won with broad coalitions. But under conditions of widespread alienation and distrust, the political gamble of an exclusionary, anti-pluralist message can pay off big.CHICAGO – In the Middle Ages, Italian city-states led the European “commercial revolution” with innovations in finance, trade, and technology. Then something strange happened. In 1264, to take one example, the people of Ferrara decreed that, “The magnificent and illustrious Lord Obizzo … is to be Governor and Ruler and General and permanent Lord of the City.” Suddenly, a democratic republic had voted itself out of existence.In fact, this was not an uncommon occurrence in Northern Italy at the time. As Niccolo Machiavelli explains in The Prince, the people, seeing that they cannot resist the nobility, give their support to one man, in order to be defended by his authority. The lesson is that people will abandon democracy if they are worried that an elite has captured its institutions.Medieval Italy’s democratic institutions succumbed to what we might now call populism: an anti-elitist, anti-pluralistic, and exclusionary strategy for building a coalition of the discontented. The method is exclusionary because it relies on a specific definition of “the people,” whose interests must be defended against not just elites, but all others. Hence, in the United Kingdom, the Brexit leader Nigel Farage promised that a vote for “Leave” in 2016 would be a victory for the “real people.” As Donald Trump told a campaign rally the same year, “the other people don’t mean anything.” Likewise, former Colombian President Álvaro Uribe often speaks of the “gente de bien” (the “good people”).
There are two obvious reasons why such populism is bad.
- First, its anti-pluralistic and exclusionary elements undermine basic democratic institutions and rights;
- second, it favors an excessive concentration of political power and de-institutionalization, leading to poor provision of public goods and subpar economic performance.
Nonetheless, populism can become an attractive political strategy when three conditions obtain.
- First, claims about elite dominance must be plausible enough that people believe them.
- Second, in order for people to support radical alternatives, existing institutions need to have lost their legitimacy or failed to cope with some new challenge. And
- third, a populist strategy must seem feasible, despite its exclusionary nature.
All three conditions can be found in today’s world. The increase in inequality over the past 30 years means that economic growth has disproportionately benefited a small elite. But the problem is not just inequality of income and wealth: there is also a growing suspicion that the social distance between the elite and everyone else has widened.
These economic and social disparities have profound implications for political representation. In the US, political scientist Larry M. Bartels has shown that while legislators have increasingly defended the interests of the rich, gerrymandering has spared them from political competition. In Europe, Jean-Claude Juncker, while serving as prime minister of Luxembourg, once described the European Council’s decision-making as follows: “We decree something, then float it and wait some time to see what happens. If no clamor occurs … because most people do not grasp what had been decided, we continue – step by step, until the point of no return is reached.” Such elitist logic is intrinsically vulnerable to populism.
In addition to managing new challenges poorly, institutions and policymakers have also failed to look beyond their own dominant narratives. For example, in the run-up to the Brexit referendum, the “Remain” campaign focused entirely on the economic costs of leaving the European Union, even though opinion polls showed that migration and other issues were of much greater concern to voters.
Finally, for populism to get a foothold, politicians themselves must see it as a viable strategy. Generally speaking, declaring that the “other people don’t mean anything” isn’t the best way to garner broad support. So, even when structural factors favor it, populism can succeed only in certain circumstances. In Trump’s case, the intense
partisan polarization in the US means that he can appeal to marginal or swing voters, because he knows that Republicans will vote for him no matter what. And, more generally, populism can win when the “other people” are narrowly defined or simply small in number, provided that they can still be depicted as posing a threat.
To defeat populism, then, one must address all the factors that make it a viable strategy. That starts with recognizing that populism can emerge only when there are real social and economic problems to give it electoral traction. It also means being honest about the fact that there are competing and contested visions of citizenship, which should be debated, not ignored.
As a de-institutionalizing strategy, populism appeals to the growing cohort of those who are disillusioned with existing arrangements. In the US, the widespread perception that institutions have failed to address issues such as inequality has been eroding public trust in major institutions since the 1970s. After failing to anticipate the 2008 financial crisis, US policymakers are now struggling to regulate (and tax) new “mega-firms” like Amazon and Facebook. They are also seen as having dropped the ball with respect to globalization and the effects of the “China Shock” on local labor markets. Similarly, in Europe, increased labor mobility and rolling refugee crises are widely seen as having surpassed EU institutions’ carrying capacity.
Finally, we need more democracy and representation – including, possibly, referenda – so that voters feel as though their concerns are being taken seriously. The political class should be exploring new ways to make government more representative of society. India, for example, has caste-based quotas for parliamentary seats and other positions, and many other countries do the same with respect to gender. There is no reason why the US and Europe couldn’t pursue similar measures.