Magazine article Issues in Science and Technology

Economic Policy in the Time of Reactionary Populism: Addressing the Nation's Political Unrest Will Require a Rejection of Some Cherished Economic Dogmas

Magazine article Issues in Science and Technology

Economic Policy in the Time of Reactionary Populism: Addressing the Nation's Political Unrest Will Require a Rejection of Some Cherished Economic Dogmas

Article excerpt

Political developments in the past year--notably the 2016 electoral campaign in the United States, and Brexit in England--have revealed a depth of anxiety and resentment among citizens in many rich nations that go well beyond the economic environment and probably cannot be addressed by economic policy alone. Nonetheless, the economy appears to have been the key to the political upheaval through which we are now living, and though solutions to these problems may no longer be enough to stabilize the political and social environment, it is difficult to imagine how we can restore a sense of order without addressing the economic concerns.

Those concerns are the product of the pressures for structural change and adjustment that have battered the economy over the course of at least the past 30 years. Pressures for structural change and adjustment are of course inherent in any dynamic economy; indeed, they are the engines of economic growth and development. One can argue about whether the recent pressures have been greater than those that the economy has absorbed in the past, but in the United States, at least, there is no question that whatever their absolute magnitude, their costs have been very concentrated in the old industrial heartland of the Midwest, where the communities in which people's identities were embedded have been undermined and to some extent abandoned. These communities were a key constituency of the Democratic Party, and their desertion of the party was the determining factor in the electoral victory of Donald Trump.

The principle forces producing the structural changes against which the Midwest electorate was reacting were globalization and technological change. But they have been aggravated by institutional changes in corporate governance associated with financialization. Most important, in my view, the country has been guided in its response to these pressures by an approach to economic analysis that makes the forces producing these changes seem beyond the control of politics and policy, and thus cripples our ability to anticipate the problems that globalization and technological change have engendered, and to conceive of alternative solutions.

An intellectual vacuum

The analytical approach I single out can be understood in terms of what might be called policy paradigms, the broad frameworks through which policy-makers tend to think about the economy, judge its performance, and attempt to influence its direction. In the post-World War II period, policy has been guided by three such paradigms: a Keynesian paradigm in the immediate postwar decades; the so-called Washington consensus, emerging in the late 1970s and continuing through the 1990s and into the new millennium; and more recently what might be called the Silicon Valley consensus encapsulated by a mantra along the lines of "innovation and entrepreneurship in the knowledge economy." The Silicon Valley and Washington consensuses, in turn, are each linked to globalization in a way that almost amounts to an additional paradigm. In the Silicon Valley consensus, globalization is seen as the product of innovations in communication and transportation. In the Washington consensus, it is promoted by trade treaties and innovations in regional and international governance conceived as an expression of the efficiency of a market economy as understood in terms of standard economic theory.

That such paradigms exist and that they vary over time is difficult to deny. Where they come from and what role they actually play in the evolution of the economy is on the other hand unclear: Do they reflect social and economic reality, or do they actually influence and direct its evolution? Are they, to borrow a phrase from the University of Edinburgh sociologist Donald MacKenzie, a camera or an engine?

The difficulties that conservatives in Britain and Republicans in the United States are having in translating the political reaction that brought them to power into a coherent program bring this question to the fore and suggest the intellectual vacuum in which the political reaction is taking place. …

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