Angrynomics (2)

In their book called Angrynomics, Eric Lonergan and Mark Blyth explain some of the problems that are caused by globalisation. The main consequence is increasing inequality.

But this story has deeper roots than the 2008 crisis and its economic legacy. Specifically, a lack of voice is related to the sense that the nation-state has been neutered by globalism. At some level, it is not just that the population at large is unheard, and the empirical research shows that they are not listened to, but their traditional representatives also seem resigned to their situation: “Globalization made us do it” “There is no alternative”, etc. This certainly seems to be a major concern and the rise of nationalist politicians seems to be the result. The lack of voice paired with a perception of futility is a toxic mix. It's like voting for populists in Italy and then figuring out that they can’t do very much either. The result undermines democracy itself.

You have markets, whose reach is global, or at least as far as the division of labour, technology and finance allows them to go, and then you have democracy, which is inherently local, bound by this thing called the nation-state and the people, the citizens, that constitute it. This generates an inherent tension between the openness of the global economy and the responsiveness of the state to the democratic wishes of the public. The more open you are, the less control you have. The less control you have, the less you can respond to what the global economy demands that you do. Globalization, democracy and sovereignty are mutually incompatible in such a way that you can only ever have two out of the three. And once you have accepted globalization, you can either have democracy or sovereignty but not both. 39

If you were an investor in the years after the Second World War, you were bound to the territorial nation-state, which meant that local labour could quite effectively exercise its voice through strikes to claim its share of productivity gains. But what happens if capital can go global? What happens if capital can exit the nation-state, but labour stays local? Or if they can move your job abroad, which is the same thing really? They take away the ability of labour to demand their share along with their voice- And since the 1980s this is what has increasingly happened.

The top one per cent globally captured as much income growth as the bottom 50 per cent of the entire world economy since the end of the 1980s… The poor really have gotten poorer as the rich have gotten richer. 40

That decline parallels the rise of a world where unions are all but extinct in the US and are much weaker than they were in Europe. Even German unions know that globalization starts 60 km outside of Berlin with the threat to move jobs to Poland should German workers ask for more than their employers are willing to give.

Similarly, in politics, parliaments are increasingly impotent with the important stuff given out to technocrats to independent central banks, to the WTO, to the EU. The elected politicians are effectively governing over less and less at the same time as the stresses on their constituents, macro and micro, are increasing. We went from a world that was very friendly, relatively closed, and that provided a social safety net, to a set of institutions that generates a massive skew in the returns going to the very top of the income distribution uncertainty for the majority increases – all while the media tells them that it’s their fault. 42

Representative politics, through the emergence of a post-Cold War technocratic centrist consensus, stopped listening. This was compounded by globalization. by globalization- particularly the free movement of capital and the inability of labour to negotiate its share – and in Europe, by the power grab of a centrist technocracy. 43

Rather, the failure of policymakers to deal effectively with the recession following the 2008 financial crisis, and subsequently the 2010-13 euro crisis suggests that like income, listening skews to the very top. The euro crisis, much more than the crisis in the US, showed beyond any doubt that a policy of cutting spending in a recession only ever makes things worse. But they knew that already and went ahead and did it anyway. And then they doubled down on it, even when they saw it wasn’t working. 44