Will the Tea Party GOP Get Even Crazier? The Return of late 1800’s Economics into 21st Century Geopolitics
I am not an economist nor do I play one on the Internet.
With that disclaimer out of the way let’s delve into the future, more specifically, on the future drivers of American politics.
One question many of us who have been viewing the descending public conversation in the US over the past 4 or 5 years may ask is whether the rise of reactionary forces, e.g., the “Tea Party” and the contemporary GOP public figures, can continue. That is, what is stirring the pot of the Americanus populi* and will that continue, or get worse, or abate?
A non-trivial portion of the angst (that in turn drives the ugliness and hate we see so often in blog comments on political sites) arises due to the “Great Recession”, though that is too broad. More specifically, insecurity and fear of the future are known political fuels and this is why politicians are so sensitive to employment of the population.
Well, what of the future, of the US and our place in the world? Will our economy grow strongly enough to employ all the people who need or want to work, and how would that occur? What is the place of the US economy in the world of the near future?
Big questions, all of which are interconnected.
To shed light on the latter one I want to turn your attention to a presentation given a couple of days ago by an “outside” member of the Bank of England’s Monetary Policy Committee, one Mr. Adam Posen, who is also a senior fellow at the Peterson Institute for International Economics (PIIE.) Such a person no doubt is looked upon with great suspicion by all the conspiracists (the JBS, Ron Paul and his followers, OWS, a great portion of the Tea Party-ing GOP, etc.), and for those who are not familiar with PIIE it was (and is) considered a leading conservative economics think tank, with “conservative” meant in the old fashioned mid-twentieth century way - pro economic freedom and private enterprise vs. dictators and communism - and not in the fashion of the current reactionary vitriol of self-destructive hate mongering.
Posen’s thesis is that we are entering a time (economically speaking) that is more similar to the late 19th century (say from 1870 to 1910) than with what we who are alive are familiar. Today most of us only remember the post-WWII structure of the world, Bretton-Woods, and the US hegemony over the global economic system. Posen contends that the next couple of decades will be dominated by increased globalization leading to much greater volatility economically.
The prepared remarks (PDF):
What the return of 19th century economics means for 21st century geopolitics
Some specifics from the presentation that are worth discussing (and the time in the parentheses are roughly the approximate segments of the lecture in which Posen discusses these specifics):
(6: - 13:) It becomes clear that Mr. Posen has American politics in mind, even though he is advising the BoE (and giving the presentation in the UK). This is telling to me, as it means that indeed below the polite and at times stuffy economics topics he and no doubt other “insiders” are well sensitive to the dynamics playing out in politics.
Note that at (12:27) Posen explicitly discusses “keeping in line” the “unskilled … male workers of the west” and explicitly mentions at (12:47) the “tea party” as those most scared of globalization as “the reaction” to the ever increasing globalization. [I agree with him and have long believed this.]
Posen also goes ahead and describes China is “mercantilistic” (and otherwise American economically), a term I’ve used for some time. Not only is it descriptive but the point is that decisions are being made globally without pathos about the individual. Yes, the world is often a cold and heartless place.
And conversely to the rants of Ron Paul and the gold bugs, Posen (25:) stresses that inflation is not desired by him or most central bankers, and he details reasons why.
( 27:- 29:) Posen admits that maintaining price stability will still be the challenge and that central banks will focus on price stability, and contends that deflation will occur more commonly than in the recent past.
(30:30) He projects the US dollar will still be a reserve currency but it will not dominate and that (33:) there will be increased flows of capitol across borders.
“As US hegemony, that is relative economic dominance, recedes into multipolarity, the international economic system will have less strict rule enforcement and be subject to greater economic volatility”.
American exceptionalists - and certainly that describes all the GOP Presidential nominee candidates and a great portion of their “base” - do not want to accept this, but the dominance of the US will recede.
And the result will be an even more dynamic global system.
And Posen concludes (see prepared remarks):
” This is a tale of getting closer to unfettered markets in many ways, which I hasten to say I am solely forecasting, not recommending or endorsing. That being the case, it raises a host of potential parallels with the late 19th century in politics, regarding popular protest from labour, status quo countries coordinating against ‘revolutionary’ and non-state actors, rivalry being moved into imperial competition for markets and resources, and of course the eventual political limit to international integration that contributed to the First World War and what Harold James has called ‘the end of globalization. […]”
He does mention that society has changed much since the late 19th century, and thus there will be differences today. In the audio he admits that “mapping from the economics to the politics” is not clear, and requests “guidance” on this.
Ok, so here is my “guidance”:
What are we to expect of all of this continuing globalization and rise of multipolarity? I for one do not expect the angst that drives the Tea Party type of movement in the US to abate much.
First, there is insufficient growth of employment opportunities in the US to meaningfully employ many people. As Menzie Chinn points out (Wisconsin Employment Hemorrhaging Continues):
Total [Wisconsin] nonfarm payroll employment is now below levels recorded in January 2011, when Governor Walker took office.
Dr. Chinn is in WI (and thus the interest in that state), and I pick WI for a reason - the current governor is one of the darlings of the Tea Party and rode into power in 2010. While very unpopular for some good reasons (and he may be recalled), it is telling that Governor Walker’s “base” which love him still have poor employment prospects. What will they do next, after Governor Walker fails them?
Nationally, while the unemployment rate slowly decreases one must also keep in mind that the participation rate is declining, and while that could be either good or bad (depending upon one’s view of how society ought to be) it nevertheless signals a change in the long term direction of the American economy and society.
I expect the masses to rage (at least politically and in isolated cases phsyically) in the worst of times, and to be directionless in the best of times. Demagogic candidates (think Newt Gingrich) will continue to exploit the ignorant. What is worse, I fear that the intentional arousing of hate towards the other (e.g., China in the current GOP campaigning) will indeed lead to the next World War, in my lifetime (before 2050.) I believe this in part because unlike Mr. Posen I am concerned that limited resources (especially high quality petroleum, and fresh water) will cause sharp discomfort in some nations and that will tear down any cooperative spirit a globally linked economic system brings.
Dark thoughts indeed, but if Posen is correct - and no doubt there will be some who disagree with him - and globalization continues then more of the social fabric of the old US will be torn, and many Americans won’t like that.
* Yeah, the Latin endings may not be correct.