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Friday, September 23, 2016
Economics/Business ... Politics ...

Have you heard anything lately or read much about “political economics”? If you attended college, you may have taken a Political Economy course, or you might have heard the term used in a high school civics class. But then you got out into the real world, and you almost never hear these two words used together. You heard a LOT about politics, and almost as much about the economy. But political economy?

Nevertheless, politics and the economy have a whole lot to do with one another. In reality, they are just about tied at the hip. President Clinton the First realized this and had a saying about it . . . remember “it’s the economy, stupid”? (This somewhat irritating motto was coined in 1992 by Clinton campaign strategist James Carville). So, what can we take from the “political economy” viewpoint to help understand what’s going on today on the political scene? The biggest happening over the past two years has obviously been Donald Trump. But following not too far behind in black swan-dom was Bernie Sanders. Can we relate Trump and Bernie to what’s going on in the American economy today?

A senior and very well respected American political journalist named John Judis recently published a good article that did just that. The article is called “All the Rage“, and is available on the New Republic web site. It’s a long read, but worth every word. There have been a whole stack of articles over the past few months attempting to explain why Trump and Sanders came out of nowhere and surprised everyone on the political scene. For now, we’re through with Bernie Sanders, but the Trump drama obviously continues to build. Hillary Clinton recently asked why she isn’t 50 points ahead of Trump in the presidential election polls, why is Trump running such a competitive race (although I personally still think that Hillary retains a small advantage and will win in November, albeit in a squeaker).

The theories being put forth by the pundits and analysts go all over the place (including the notion that Ms. Clinton’s progressivism has become so orthodox and so mainstream amidst the media and entertainment industry today that supporting Trump is acquiring something of a counter-cultural “punk rock” coolness; Ross Douthat at the NY Times recently had a column on this entitled “Clinton’s Samantha Bee Problem”). However, the two major streams of thought seem to focus either on the generally unfavorable economic trends that affect those who support Trump (e.g. static earnings and high unemployment among the white working class), or of the alleged social and psychological motivations of Trump supporters (the “dog whistle” racism and sexism argument summed up succinctly by Hillary Clinton in her “basket of deplorables” description). I personally feel that the latter approach has been getting too much attention relative to the former. That’s why I found Judis’s article so edifying; it’s not that Trump and his followers are entirely innocent of what Ms. Clinton describes; but the political economy aspect of the Trump movement is less sensationalistic and is harder to understand, and thus it hasn’t received the exposure that it deserves. However, after reviewing what Judis had to say, and considering what he left unsaid about the African-American response to today’s hard-cash realities, I will try to reconcile the socio-psychological theories with the political economic factors that have propelled Trump (and Sanders) into the klieg lights over the past 16 months.

Judis starts by giving us a quick course in American political economy over the past 150 years or so. In a nutshell, populist leaders like Trump and Sanders tend to herald a big shift in the kind of economic system that the “body politic” endorses. The US, like every nation, has an economy, and has rules by which that economic system works. Those rules, and thus the overall design of the economy, are largely set by the leaders and the political forces that inspire those leaders, be it democracy, dictatorship, and all flavors in between. Through some means of political governance, each nation decides whether it will have a socialist economy, a capitalist economy, a regulated economy, a free economy, a government-managed economy, a laissez-faire economy, an international economy, a closed-border economy . . . or some mixture thereof. (Case in point regarding the power of blending politics and economics: consider the Chavez era in Venezuela, which now seems to be coming to an end.)

According to Judis, America has gone through several historical phases regarding what kind of economy it wants and supports. During the Great Depression of the 1930’s, the US government became much more involved with our otherwise capitalist and open-market economy, and that trend continued for several decades. However, in 1980, with the election of Ronald Reagan, the political system decided in its usual messy way that it was time for a change, a time to replace the “New Deal” and the “Great Society”. America had experienced a wondrous streak of economic growth from the late 40’s through the late 60’s, but the good times seemed to come to an end in the 70s.

The American public seemed ready to be talked into something different. Reagan’s magnetic personality thus won the day for those favoring a return to “economic liberalism”, with greatly reduced government intervention and regulation of the economy coupled with significant tax cuts (along with huge deficits as government spending was not reduced but re-directed to the military). The Reaganomics era had begun. It was clear to all that the new regime favored the wealthy; but the argument was made that the restored growth of the economy would help everyone to improve their lot. Recall the old saying “all boats are lifted by a rising tide”.

According to Judis, today the signs in the wind point to the end of Reaganomics. As with the New Deal era, the new economic liberalism had several good decades. America had once again experienced vigorous economic growth in the 1980s and 1990s, fueled by technology revolutions such as the Internet boom. The federal government no longer had to borrow to stay in business.

However, after the year 2000, something changed. The terror attacks in September 2001 triggered a major effort to secure the nation from further attacks, which pushed us into deficit spending once again. The attacks triggered a small recession, from which our economy soon recovered. George W. Bush tried to jump-start the economic engines with another major tax cut akin to Reagan’s, and for a few years in the mid-00’s, things started to look better. But then came the collapse of the housing value bubble in 2007, which triggered a cascade of financial failures that threatened to cease up the economy. Our leaders in the Treasury and Federal Reserve Bank managed to avoid an all-out crash akin to the 1930’s, but they could not prevent the coming of a 5-year “Great Recession” followed by a time of disappointing growth (before the Great Recession, growth rates typically jumped above 3% in the years immediately following a downturn; however, our economy now struggles to maintain a 2% rate).

Since the 2008 financial crash, many families have regained what they lost economically. But the slow, non-typical rate of growth has left a lot of other people with inferior circumstances and little hope for improvement. Trump and Sanders are perhaps the vanguard of the political response to this. Through foresight or accident, both men found a message that resonated with the “new depressed” class. As in the late 1970s, certain politicians are starting to realize that power can be achieved by selling a vision of radical economic change. There seems to be a lot more dissatisfaction out there with the economic legacy of Ronald Reagan (and Bill Clinton) than the mainstream politicos had believed. Thus the surprising defeat of Jeb Bush, and the continuing struggles of Hillary Clinton.

As Mr. Judis points out, Trump and Sanders are populists. They both found a wide vein of economic discontent in the nation, and are offering popular visions on how to relieve that discontent. Trump and Sanders are not policy wonks, like Mr. Bush and Ms. Clinton. They don’t worry very much about being right, about whether their theories and proposals would actually help. Their talents lie in convincing the disgruntled that it’s worth a shot — what have you got to lose? And they have done quite a commendable job at this!

Furthermore, as Mr. Judis points out, even if Mr. Trump loses in November (and that’s where my money is right now — though not by much), the new populism is SO not over. Ms. Clinton will work vigorously to enact reforms meant to keep the current economic system afloat, with adjustments here and there to better assist those who haven’t fully recovered from the 2008 crash. But Hillary Clinton is not an economic revolutionary. Her base of support, ironically, consists increasingly of well-off families who not so long ago would have automatically enrolled in the local country-club Republican caucus. One interesting exercise is to rank our 50 states according to median income, and see how many in the top and bottom 50% voted Democrat or Republican in the 2012 Presidential election. Turns out that 76% of the top 25 states voted Democrat, and 72% of the bottom 25 went Republican. Another interesting sign of these changing times: former President George H.W. Bush intends to vote for Hillary Clinton in November. It’s getting harder and harder for the Democrats to claim to be the party of the downtrodden.

Mr. Judis’s point, however, is that even if Ms. Clinton manages to keep the Reagan-Clinton1 political economy afloat, its best days are behind it. Barring a major technology breakthrough providing clean energy at very low costs (e.g., imagine that the dream of cold nuclear fusion turns out not to be a sham), the American economy will continue to be burdened for many years with the effects of globalism, decaying infrastructure, Chinese and Russian military assertiveness, terrorism, climate change, technology-driven job losses, etc. A return to growth rates in the 3 to 5 percent range (which are necessary in order to satisfy the capitalist class while leaving enough left over for the non-rich to remain optimistic) is not in sight. Political pressure for economic change will continue to grow.

What would a new American economy look like, and would it improve things or turn out to be another Bolshevik or Chavez Revolution? As to the first question, the details of a Trump-Sanders political economy are not clear; at present, some are potentially contradictory. Nonetheless, Judis envisions less immigration, more trade restrictions, stricter financial regulation, and (most positively of all) more spending on infrastructure. Where would the money for such spending come from? A Trump-Sanders compromise might cut taxes for the poor and middle class while increasing taxes for the rich; that arrangement could not pay for an infrastructure revival program, and even more borrowing would be required. However, if properly done, better infrastructure might stir enough economic growth to eventually pay off most of the bonds. To me, that’s about the only hope that the second question can be answered positively — or at least “it wasn’t a disaster”.

This is all very insightful. However, as I noted above, Mr. Judis does not really address the “deplorables” argument behind Trump’s popularity (and recall that most of Senator Sanders’ support was white, even though he vigorously promoted notions of racial and progressive justice). As such, Mr. Judis’ ideas reflect the white population’s political stirrings and populist temptations (largely amidst the non-professional, non-college educated ranks of white adults; as noted above, those who have done well under the current economy increasingly support Ms. Clinton). But what about the black response to the failings of the Reagan-Clinton1 political economy?

In my next post, we will take a look at some income data over time by race; we will see that on average, African Americans have suffered the most from the post-2000 failings of Reaganomics. What has been the black political response to this? And, given that nothing happens politically (or economically) in isolation, what have the effects of the black response been on the new white populism that Judis has outlined? Is it possible that the economic factors that lie behind the rise of Trump have also indirectly fueled some of the “deplorable” social and racial inspirations that have allegedly motivated many of his supporters? Can we merge James Carville and Hillary Clinton so as to say “hey stupid, it’s ultimately the economy that’s behind the deplorable basket thing”? Stay tuned!

◊   posted by Jim G @ 10:44 pm      
 
 


  1. Jim, I’m not sure where to take hold of this post; or if I do try to comment what to say. I definitely do NOT belong in the “intellectually elite” group who seem to understand this kind of “stuff”; so I’m going to presume I am one of the many who do not understand it completely and/or well. But I think I’ve got some of the general ideas involved.

    I’m not sure why John Judis is combining Trump and Sanders. It seems to me that “Sanders” (as much as this man deserves respect for his seriousness about the country and his efforts to get elected; he himself might have been good for this country, except for his age­­and this coming from someone who’s been his age and knows that Mr. Sanders may be just a tad past the age of being president. However, I digress, to say nothing of the awful sentence!) I still do not understand combining these 2 men, Trump and Sanders.

    Sanders seems to me a man who thinks and has sincere concern for the country. Trump is a “not” when it comes to those things. Trump cares about Trump and that’s about it. Sanders may have an economic theory and/or a political/economic theory; but I doubt Trump has one or even wants one or would take one were he handed one by someone; I doubt he’d put any effort into understanding the concept. If pressed, he likely would hire someone to be responsible for understanding and implementing it; should it then fail, he could “fire” him summarily and not take the blame for anything.

    Thus, I find it strange that Mr. Judis should combine Trump and Sanders as a sort of “bundle”, BOTH of whom understand these concepts and for the same reasons are concerned about these concepts.

    Another reason I find it strange that Mr. Judis combined both of these men is that for all his obviously generous good will in wanting to help our country, Mr. Sanders is for all intents and purposes most likely OUT of anything to do with campaigning and/or having much say in what the next president will do when it comes to the country and economics. Thus, I find this a strange combination.

    When it comes to Donald Trump: I find it hard to believe that he has any interest whatsoever in “political economics”. “The Atlantic” recently had a couple of articles on the current political campaign. In one of the articles (I think it was in this magazine) Trump is noted as being well aware of an audience and how to control an audience. He knows instinctively when he’s losing the audience. He is quoted as saying (when he feels the audience slipping away): “‘Build a wall and keep ‘em out’”! and they ‘go nuts’”! (So much for what Mr. Trump thinks of his followers and how much he/they care about political economics.)

    I doubt we will hear one word from Trump about “political economics” or even “Reaganomics”. The main thing Mr. Trump seems to be interested in is that everyone KNOWS and appreciates that he’s “rich”! In fact, that seems to be pointed out as his weak spot in any discussion/talk/debate of any kind.

    So, once again, I find that the concept of “political economics” and Mr. Trump do not really belong together.

    Maybe it’s just me and my inability to understand economic theories, but I kept thinking, as I read Mr. Judis’ theory (as you explained it very well) that it was an idealistic theory that would be wonderful if it could be implemented. However, the country has so long been on another “road” so to say that Mr. Judis’ concept of how the economy should work is somewhat in the realm of a “fairy tale”. I admit, maybe it’s me and something I’m missing.

    I remember only too well the days of Reaganomics, listening to “Hollywood stars” promote Reagan as one who would implement “trickle down economics”; yet the “trickle down” didn’t get very far at all. What it seemed very much more to do was put the country in a position where everything (and here I DO mean “everything”: As in, [no particular order]: food, pharmaceuticals, health care­­doctors and hospitals, etc.,­­big box stores, clothing, investments, banks; name it, it’s become “corporatized” and become “big”.

    Small business so fondly talked about as a result of Reaganomics is a thing of the past when it comes right down to it. For example: Just watch one episode of “Shark Tank” and it easily becomes clear that “small” business wants to quickly become “big” business.

    I find that since the collapse of the “housing bubble” even that has become “big” business in a sense. It’s almost as if the days of “owning one’s own home” are long gone. I live in a subdivision that was put up in the late 1990s. Many condos in this subdivision were foreclosed on during the collapse of the housing bubble. It turns out that now someone identified only as “a lawyer” (no offense to lawyers, but that’s how the person has been identified to the owners in this area) has bought up quite a few condos that were foreclosed on. The “lawyer” is now renting them out (went to court to get the Rules and Regs of the Homeowners’ Assn. changed in order to rent them). Soon after this became known the Homeowners’ Assn. fee went up by 1/3, which was a very large increase for the group of people who owned homes in this subdivision. A meeting was held for discussion on this topic. Seems that this “lawyer” owns so many condos that his vote ruled. The “renters” in the subdivision are not worried about the fee as its part of their rent. Thus even home ownership is likely soon to be a thing of the past with ONE company (of sorts, one might say) owning huge areas of housing (under various names likely).

    It’s difficult to see that these “corporate-sized everythings” would have any interest in maintaining infrastructure. I can see them interested in globalism, the military assertiveness of China and Russia, terrorism, climate, change, job loss due to technology, etc.; these things would affect THEM.

    I’m also not sure I concur with the idea of a “new white populism” that Mr. Judis outlined. It seems to me that Trump is the one who has a “handle” on “new white populism” and that “populism” is based on a fear of becoming quickly “a minority”! (God help us! White people become like the rest of the world, the Browns and the Blacks: a MINORITY!!) Up until now white males have held all the power in this country; the power from the lower levels up to the top. For the first time in history white may lose this power to: Mexicans/Hispanics, (Trump’s upset and call for a judge to recuse himself because he was of Hispanic heritage), Muslim (from one nation or another), to say nothing of the “Black” people who’ve lived in this country as long as White have but who were counted only as less than human and therefore only ¾ a person for centuries.

    This comment is obviously a rambling on of this and that when it comes to our current political(/economic) situation. I think that’s because Mr. Judis’ concept seems strange to me, a kind of (as I said earlier) “fairy tale” that would be nice should it be able to be implemented but the probability (not possibility) of it being implemented is unlikely to say the least.

    It may be that “Hey, Stupid, it’s the economy” is correct; however, with all due respect I doubt sincerely that many people will be voting based on economics. MCS

    Comment by Mary S. — September 24, 2016 @ 3:03 pm

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