Saturday, November 12, 2016

The meaning of the Trump Triumph

So Donald Trump has become the President of the United States, plunging the US and the rest of the world into deep uncertainty. While his proposals to return the $2.5 trillion corporate reserves held abroad, invest in improving physical infrastructure etc are very progressive, those on trade tariffs and taxation are likely to cause irreparable long-term damage. His acceptance speech was surprisingly graceful, very "un-Trump", and bodes hope. One can only pray that power will chasten the bigot and will prove us wrong.

Much has been written about the surprise element in the outcomes, as has been about Brexit. The predominant explanation of the result has revolved around the disconnect between the elites, the upper middle-class, highly educated, and the intelligentsia and opinion makers on the one side and those belonging to the lower middle class and below on the other side. This divergence has been amplified and made to appear more egregiously unfair given the great convergence between the right and the left on many of the most important social and economic issues of our times.

I can think of a few areas where the divisions have been wide. For many years now, free-trade has reined unquestioned and any effort to question it would have invited sharp condemnation. Its undoubted adverse distributional effects, which inflicted considerable pain and suffering among very concentrated communities, were largely glossed over on ideological grounds. Now, over the past three or four years, the tide has turned and the same distributional consequences, which were always evident to any objective observer, have assumed significance with some vengeance. Much the same sentiments have dictated views on globalisation. 

A similar consensus of opinion currently rules on the debate surrounding automation. Automation is rightly seen as a sign of our progress as a modern society. But, in the mainstream debates, leave aside the rarefied scholarly ones, by corollary, any criticism of or scepticism about that is equivalent to a neo-Luddite response. For people who are the victims of automation and perceptive observers of the unfolding story, the damaging effects of automation are just so obvious. Even its aggregate impact is not as unambiguously positive as being made out. There is nothing different here from the conventional wisdom on free trade which travelled along similar lines to reach the present state of flux and consternation.

The same applies to the reluctance among mainstream opinion makers and intelligentsia to even restrain, leave aside oppose, the ongoing ultra-low monetary policy regime and call the continually inflating bond market bubble, both of which arguably benefit those at the highest end of the income ladder and work to the detriment of those at the lower-half of the ladder. Its consequences in terms of penalising savers, ravaging pensioners and their funds, and widening inequality cannot be overstated.

As to widening inequality, arguably the biggest socio-economic and political challenge of our times, its most disturbing consequence is not so much morality and ethics, important as they are, but its impact on the social and political bargaining. At such extremes of inequality, all the institutional checks and balances, howsoever strong, lose their sting and the political balance of power swings decisively towards those who pay the piper. The rules of the game get written to suit their interests, very often to the detriment of those less fortunate. This is reflected in the tax policies, public investment and expenditure decisions, changes to market regulation and property rights, and trade and external market related policies.

As all these examples illustrate, nowhere has the divergence been more stark than in economics. The lack of mainstream indignation (apart from those at the margins, and among populists) at the huge executive pay differentials, financial market excesses and the unbridled influence of that sector, the grossly unfair system of taxation where capital gains is taxed at less than half of what the middle-class earns and egregious tax evasion gets dignified as "tax avoidance", the on-your-face manifestations of widening inequality on every aspect of social life, and so on.

Similar elite consensus rules on areas like the demand for harmonisation of policies on labor, environment, cross-border financial flows, intellectual property, multinational investments, and so on. While these may not immediately and directly affect the developed countries and are more relevant to the residents of developing countries, its impact on the former, especially those less well-off in these countries, cannot be glossed over for too long. After all the troubling questions about the distributional consequences of free trade was for long considered "their" challenge and not "ours".

On cultural and social values, the genuine demand for individual liberty and empowerment has slowly slipped down the slope to take the shape of an entitlement, even license, to do anything. We forget Mill's caution that "my right to swing arms in any direction ends where your nose begins". At a very fundamental level, this has also had the effect of swinging the balance between individual rights and social responsibilities decisively towards the former. 

Social values have become entrenched around certain narrow conceptions of things like meritocracy and just desserts. This is manifested in our failure to acknowledge the numerous social and economic factors, apart from the sheer good luck of ovarian and other lotteries as well as happenstance events, that contribute to our successes. This narrow-minded conception of meritocracy makes us rationalise the unacceptable level of inequality across different aspects of our lives, even within those in the upper percentiles of the social and income ladders.

The lack of any strong countervailing movement, leave aside popular indignation, among those who hold the economic, social, and political balance of power at these very disturbing trends, despite their obvious adverse effects on those less fortunate, has been self-defeating. Trends like widening inequality and the untrammelled influence and power of the financial sector have reached alarming  enough proportions to demand at least some form of collective introspection and self-correction. In fact, it should have, by now, triggered a movement from among those holding the balance of power, similar to the anti-war movement of late-sixties. In its absence, it is only to be expected that the discontent simmers over and upends the economic and political order, most often with a lot of pain and suffering. That seems to have started and this may only be the beginning. 

No comments: