The 2016 election changes everything

In my penultimate three-hour lecture to my college seniors each year, I exhort my students to see how the neoliberal globalization agenda has been disingenuous about the harm that has come to the working class in the US.  Neoclassical economists (among whom I am numbered) have consistently advanced a free trade agenda -- and for compelling reasons -- but we have failed to ensure that policy makers understand that there are losers as well as winners in the globalization game, and the case for free trade includes the requirement that winners compensate losers at the end of the day.

This is not a minor matter. In fact, as has been shown by Dani Rodrik and others, for every one dollar gained in free trade, five dollars are redistributed.  If anything, the true impacts of free trade are primarily about “redistribution” and only secondarily about greater overall efficiency and aggregate economic activity.

I remind my students that there is no honest economic case for free trade without an effective system for ensuring that the so-called Kaldor-Hicks compensations (transfers from winners to losers) are made in some form.  Further, the evidence is clear: those compensations are rarely made.

I have been working in this area for decades, and I show them carefully and extensively how the postwar bargain between the political elite and organized labor was prescient – some, with the help of an elderly Keynes, actually expected this to happen.  Shortly after World War II there emerged a thoughtful social contract, including social safety nets, to compensate labor for those expected gains to multinational businesses and investors.

Globalization would give business increased profit opportunities and political elites some insurance against a third world war (the decline in global integration in the interwar years was thought a contributory factor to WW2), and the post war social bargain would compensate labor for the loss of economic bargaining power and the increased economic risks they would endure over time.  Unemployment insurance, labor union protections (the UN Declaration of Human Rights soon followed, listing the right to organize into unions as a fundamental human right), continued old-age public pension programs (such as social security in the US), and health care programs (such as the National Health Service in the UK) were put in place.

I go on to show my students that from the end of the War until the 1970s, both free trade and the social bargain were largely honored, but since then the plight of the working class in the US has dramatically worsened. As expected, the decreased bargaining power of labor hurt them, but instead of the agreed-upon social bargain supporting them when they needed it most, that social bargain was badly eroded from the OPEC oil crises of 1973-1975 onward, with an escalation of that harm taking place under Reagan and since. (Reagan’s assault on the air traffic controllers was a pivotal moment in this degeneration.)

The business class and their political agents took their vastly improved economic wealth and converted it into increased political power. Citizen's United is just one recent channel for this effect.  It was not the first.

Notably, at just the time the economic plight of the working class became terrible, their political capacity to enforce the social contract was diminished.  This is akin to having your house burn down with your home insurance policy inside it.  At precisely the moment when the working class needed their contract with America to come through for them, they were told that policy would not be honored.

I take the time to offer the solemn argument that as the future economic and power elites of society, my students, economics students all, need to acknowledge that the economics profession has allowed itself to be used by the commercial elite against the working classes. We have taken the benefits and failed to pay a fair price for playing the game, leaving the working class to hold the bag. I exhort them to embrace the critical analytical and ethical tools needed to fight for more justice for the working class in America.

This is an exhausting endeavor. I cover enormous terrain - three centuries of thought and policy, dozens of books, many dozens of analytical papers, twenty-five years of my own work and the scholarship of the leading lights in the field. I construct my argument as carefully as I can, and present it with equal care.  I spent many years as a strategic management consultant, profiting in my own way from the benefits of the international economic system, and I must account for myself. For twenty years or more, I have felt the teaching has been worth it. In fact, I once said this was one of the two lectures that made it worthwhile for me to teach as a long-time visitor in an elite liberal arts college on top of my duties teaching graduate students at a state university and my private consulting obligations.

But last night, my second lecture following the 2016 presidential election, I realized that the message was now different. I was admonishing twenty-one-year old college students to embrace an ethical duty to the working classes only a couple of weeks after they witnessed the potential annihilation of the biosphere, corruption of the Constitution and their rights under it, and an erosion of their future prospects by that same working class and their apparently dangerous hero.

It hit me slowly, late in the process. I am wedded to this message and, as an old war horse, slow to change my cadence, I spent too little time thinking about the implications of what had just happened.  But it slowly dawned on me that my students do not any longer owe the working class very much at all.  In their rage — ignorant by choice, as the influence of fundamentalist Christian ideology in America has taken on the ugly and self-extinguishing form of rejecting expertise and education — the working class, largely white working class men, has deeply compromised the future of my students. For twenty years, I have told young elite college students about to assume their place among the privileged elite that they should not allow market fundamentalists to disguise the power of the system to do grave harm to the most vulnerable; that they should be honest about the pros and the cons of market capitalism.  (The economic case for market capitalism is strong, but there is no case for it at all without a place for a strong government to play a number of critical roles.)  But in the wake of the 2016 presidential election, how can I ask my students to sacrifice for the men and women who did not take the time to figure out that a billionaire with a sordid history of exploiting others was not a working-class hero?  Or that a political party, the GOP, that has engineered and continues to engineer the destruction of the social contract – destroying unions, public schools, transferring up to 90% of labor productivity increases from working people to their employers, and restricting their recourse to defend themselves in court, and now, astonishingly, is threatening to destroy social security and medicare -- is not their ally?  Or that their choice to dine on Jim Crow rather than a real dinner (the insight courtesy of DuBois) made them vastly less worthy of our support?  Or, finally that their decision to ally with their own political and economic enemy because Mr. Trump helped them galvanize their uncontrolled anger – a decision that may well destroy their own and the capacity of many to survive retirement and provide a safe world for our grandchildren – made my students collateral damage in this war?

This lecture -- this critical lecture central to my long-time message about the deficiencies of neoclassical economics -- has been transformed by this presidential election. I am inclined to not teach the course again. The working class has declared war on all of us, and I must take down their flag. De minimus, it cannot be the ethical duty of young college students to sacrifice for those who would choose to do them so much harm.  This is not Schadenfreude — we need not wish upon them the self-inflicted suffering that is likely on its way; there will be suffering enough without our contribution.  Instead, it is time to scramble for economic, political and perhaps our literal survival.  I can no longer ask my students to do much else.

Hate Trumps Love

Hate Trumps Love
Ignorance Trumps Education
Deceit Trumps Truth
Religion Trumps Science

Some said they rejected statist solutions and embraced capitalism, yet they embraced an enemy of capitalism who will destroy trillions of dollars of economic value, despite clear and constant warnings from virtually all professional economists and investors.

Some said they were angry at government, yet they elected in droves the very people who broke government.

Some said they were angry at corruption, yet they elected one of the most corrupt men ever to stand on a public stage in American politics.

Some said they cared about the Constitution, yet they elected a man who has shown through word and deed that he neither understands nor cares at all about democratic Constitutional values, but will instead exercise violent, autocratic, anti-constitutional powers to seek vengeance whenever he pleases. And a man who will appoint to the Supreme Court men who will suppress the voting rights of minorities, the reproductive health rights of women and the civil rights of the LGBTQ community.

Some claimed to care about "reason" (too laughable to write without quotation marks) yet they voted for a candidate who rejects science and threatens to pull the plug on the Paris Accords, humanity's last chance to save the biosphere and ourselves from self-extinction.

What this candidate promised was hate, not love. Ignorance, not education. Deceit, not truth. And his own special brand of myth making (which the religious imagined resonated with their own views of God), not science.

The study of rationality talks about "revealed preference." It says we must discard what people say they want or think, and instead infer their values and desires from their actions.

Today, the American people chose to become an existential threat to the other 7 billion people on the planet and to half of their own citizens at home. No matter what they say of themselves, they chose hate over love, ignorance over education, deceit over truth, and religion over science. They showed us who they are. We must hold their feet to the fire -- they did not choose capitalism, good government, and Constitutionalism, no matter what they say of themselves. They chose an authoritarian populist, a liar, an abuser, a misogynist, a vengeful sociopath to lead them, just as so many foolish mobs have done to their grave discredit and later horror so many times in history.

When Hitler was made Chancellor in 1934 few had in mind Kristallnacht, Dachau or Auschwitz. Few had in mind Jewish ghettos and genocide. You want a Strongman, you take your chances. Be careful what you wish for.

In their defense, the Constitutional experiment that took place here from 1789-2016 has always been flawed, and it was doomed from the start. (The blind hubris of white men who deny the searing hypocrisy of our early history is not worthy of any defense.) A Constitution, notably, provides protections against minorities (its fundamental purpose in replacing a simple majoritarian system) because its founders believe the natural tendency of mankind is to do minorities harm. The price one pays for such protection against evil is that the Constitution, a slow changing document by design, is used by the enemies of progress as a weapon against change, and, notably, used by the enemies of inclusion to exclude those they dislike or fear. No matter how prescient the writers of a Constitution can be, the world will change too much for them to have anticipated its needs, and the Constitution will, like the leeches applied to poor George Washington on his death bed, become the millstone around its citizen's necks that finally drowns them.

Last night, we drowned. Be cheered: it was our fate.

I apologize to all those who were victims of my belief over the years that mankind is fundamentally good. I was a victim of confirmation bias, trying to prop up my youthful delusion that, when I had to chose between Rousseau and Hobbes, my choice of Rousseau and the goodness of man in a state of nature made sense. Hobbes said we needed an absolutist, a sovereign protector who infantilized us with his power, and when push comes to shove, would chose such an ugly figure over democracy.

I also apologize to the rest of the world community for the grave harm that the American experiment, choosing to turn Fascist and denialist, will have on the rest of you.

Soon, Trump's America faces its own RÖHM PURGE. In '34, it took only three days to kill off all the opponents of Nazism and re-create the SS as its arm. (We will soon see increasingly militarized police in our inner cities if history means to repeat itself. The SS became more powerful than the German Army within a few years -- watch for signs of that.) Perhaps there will be some solace in the house cleaning that removes resistance and reason from Trump's path, as there will surely be Republican bodies that fall upon that heap outside the back door. Will Paul Ryan be the first to be hoisted on his own petard?

Those of us who can read and write and remember even an iota of history can see the writing on the wall. If you are young enough, make plans to leave.