Brexit and austerity

In the hours following Brexit I wrote on social media:

Dear Britain,

I have no standing on this issue and fully respect your democratic process, which is certainly more transparent than what we’ve got going on here right now. Furthermore, I will likely be visiting you to take advantage of the most enticing exchange rate since my childhood, and whilst there may apply for a job for which EU citizens are no longer prioritized.

But holy sh*t, what the f*ck did you just do?!? Did you vote on the basis of most toupée-like hair of the best known proponent? That may bode ill for our presidential contest if we follow suit. Perhaps you can now blow up the Chunnel and charge the French for demolition costs, Trump-style.

But truth, yo, once you’ve recovered from your hangover, we need to talk. Basically all pluralistic societies need to have a few deep-and-meaningfuls.

In the wake of the vote, the following observations seemed so banal, so simple, so utterly self-evident, that I had not bothered posting them anywhere — they didn’t seem so deep or meaningful. However, considering that well-educated, fairly intelligent, and even arguably well-meaning people like David Cameron can so dramatically fail to grasp the situation, I’ll have a go anyway.

Economic globalization involves the movement across national borders of any or all production factors – capital, goods, and, yes, people. Even though there are almost always overall societal gains from trade, the lower and middle classes of many countries suffer from economic globalization. That is because their particular local combination of production factors produces goods and services that may be more expensive than those produced by other local combinations of production factors plus ever-dropping transportation costs.

Okay, so when people are put out of work, they need to gain the skills they will need for a new line of work that promises to be more competitive, or which is naturally less vulnerable to international competition. They will need to go back to school. In the meanwhile, will need to have a place to live and study, food to eat, and decent healthcare so that they don’t, you know, suffer mental breakdowns, get stuck in healthcare debt-spirals, resort to self-medication, fail to raise their kids to be decent people, etc. This has led to the long-established observation, perhaps most famously made by Dani Rodrik back in 1998, that increasing openness to trade requires increased government spending as a percentage of GDP. Here is a bad copy of his original graph. (Note, by the way, fellow Americans, that the US is the least open economy in his sample. Small countries in Europe, by contrast, are extremely open, and thus require more spending.)

Rodrik

A country whose lower and middle classes are suffering from the effects of globalization may in turn suffer fiscally. That is because the bulk of their tax payers are, well, not billionaires. At this point, they have two basic options: First, they can spend more money on retraining and education, healthcare, nutrition, and affordable housing programs in the hopes of boosting long-term competitiveness. But that will require either raising taxes on the rich (eek!) or borrowing.

Second, they can claim that, given the fiscal crisis, they need to go into austerity mode and stop social spending. If they choose Door No. 2, to make themselves feel and look less like assholes, politicians will (a) blame the poor and then wind up policing them rather than supporting them; (b) extol the virtues of the rich (“The rich already pay most of the taxes!” – leaving off the part about how the system precludes lower and middle income growth); (c) try to convince themselves and others that the rich will eventually come to the aid of government and make more jobs, perhaps in the yacht-making industry; and if/when the first three approaches wind up sounding insufferably condescending and alienating what is turning out to be a growing segment of the electorate, (d) pretend that the problem is all about the one globalizing factor of production that you can easily put a (dark-skinned) face to: immigrants. (Of course, tactic (d) makes them look more, not less, like assholes.)

The problem in the US, as in Britain, is not about immigrants. At all. It does not come from abroad. It is about economic redistribution within our respective countries so that gains of globalization can be shared.

The uncomfortable compromise between the Left and the Right in America in recent decades has basically involved funding what social programs have been grandfathered in during more generous eras (the Earned Income Tax Credit, Medicaid, SNAP) at least partially via borrowing, whilst lowering taxes on the rich (as in 2007). This is because Democratic politicians intermittently fought rearguard actions against conservatives defending progressive taxes, and then were totally bought off by Wall Street anyway. The Obama Administration has thankfully eschewed talk of austerity, thereby helping the US economy to hobble ever so slowly toward recovery, and now even the Right can’t muster under that banner. In the UK, Osbourne’s austerity package has had a similarly repelling effect on voters, and UKIP has taken up the slack. The fact that Cameron presided simultaneously over an embrace of austerity and the Brexit vote manifests a strange disconnect in his thinking between the two.

So, yes, there are important discussions that we as pluralistic societies need to have about what it means to be humane, respectful, open-minded, tolerant, and life-affirming in the face of diversity. But that conversation needs to extend not just to migrants, but also to *all* those who need tools and support to make the future something to look forward to, rather than fear.

 

Response to the question “how much of it is intentional (e.g. Zinn’s contention that the wealthy interests pit lower classes/races/threats to power against one another to preserve their elite status) or Hanlon’s Razor in action?”:

In some ways, the problem, in the narrow, technical sense, is infinitely more diagnosable than the reasons we are stymied in addressing the problem.

But I don’t think that I can really be binary about the choice you set out: I think it’s defensible to assert that our social, economic, and political systems are fundamentally geared to disfavor minorities, the poor, and migrants (with disproportionate risks at intersectionalities). But I also think nuances abound in this space and worry that it’s too facile to inculpate all beneficiaries of the system as “little Eichmanns” — many politicians on both sides of the aisle (but probably preponderantly Democratic) I would characterize as simply out of touch, and Skinner-conditioned not to bite the hands that feed in our highly monetized electoral system.

I find it generally more difficult to defend Republicans, since their ideology is really founded upon a refusal to acknowledge redistribution as a necessary part of meritocracy. Take their attacks on the estate tax, for instance — in order to concurrently uphold the values of the free market *and* wish to abolish the estate tax, you must believe that the karmic credit of one person’s work ethic should roll-over to their next of kin. That starts to look an awful lot like a tacit assertion that the current economic status quo is indicative of a normative eugenic hierarchy.

Aside: This isn’t to defend the Democratic party, though. The Clintons, in particular, were disastrous in a lot of ways — for developing countries probably to an even greater extent than the US. But perhaps the most pathological part about them was the extent to which they redefined what it meant to be Democratic. I think a lot of people my age who grew up with Clinton as the first Democratic president in their lifetimes thought that must be what progressivism looked like, when it was really just an opportunistic hodgepodge: an unholy matrimony of politics and deregulated financial markets; progressive-ish income tax policy but regressive capital gains taxes; more appointments of women and minorities to cabinet positions than during any previous presidency, but also passed DOMA and the Violent Crime Act. His legacy was in some ways one of moral hazard vis-a-vis the Republicans (they were just rewarded and emboldened by Clinton’s easy centrism) and a tendency toward “rational” accomodationism.

But at the extremes, I think it would be hard to argue that both Farage and Trump aren’t making conscious and explicit attempts at race-baiting. Trump doesn’t even try for plausible deniability any longer — bare bones legal deniability suits him just fine.

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Filed under Culture/ squishy stuff, Politics/ Political Economy, Uncategorized

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