After I published this piece on America tearing itself apart in Medium.com this morning, a friend flagged this G-30 lecture by Raghuram Rajan last month.
I thought that the flow was somehow not there in the speech. I can understand that at one level. He is trying to understand the world. It is work in progress for him and for all of us. It is not a facile topic.
Issues he flags are very well documented, by now. For example, I had blogged extensively on the Chairman’s letter of M&T Bank. Not many could have explained the situation better.
On answers, Raghu is very thin. But, that is not his fault. Societies always figure out what not to do. But, what to do is the tricky question. That takes much longer to evolve and involves luck and extreme circumstances.
In a sense, that is what populists-nationalists offer: ‘Extreme Circumstances’. Yes, they would fail to solve the problem. One cannot redistribute without growing the pie.
Populists-nationalists will probably not grow the pie. Of course, it is a different matter that the globalists grew the pie but also grew debt much more than that. So, perhaps, one could argue that they have a worse record!
But, that said, I do agree that eventually populists-nationalists would fail. They would neither succeed in re-distributing nor in growing the pie for THREE reasons: One is what I said earlier. There are no easy answers. Second, they have to face the constant backlash from those who feel threatened and who are losing their privileges. Taking the country and the world back from them is not going to be easy at all. Status quo and incumbency have their advantages.
Third and perhaps most importantly, sometimes it is impossible to undo and ‘restore’. [Even Microsoft Windows 10 does not do that properly despite users having the theoretical option of doing so.] There is no second chance. Once something is lost, it stays lost.
However, they (populists-nationalists) do serve one useful purpose. They serve as a rallying cause. A lightning rod. Humans and nations always need the ‘other’ – an Opposition/opposing force – to survive and focus minds. The ‘others’ impart a sense of urgency to the problems that have festered for long and they help focus minds on the problem.
Once we know that their answers are not the right answers, the rest of us are compelled to come up with solutions that are better than what they offer. Of course, it would involve sacrifices – sacrifices of the privileges that elites have gotten accustomed to and grown to take for granted. But, they will have come to the conclusion by then that they are better off making those sacrifices for the sake of preserving the chance to remain in the game and re-gaining those privileges again.
That is the very useful purpose that populists-nationalists serve. That is why I had argued that populists-nationalists were not only inevitable but that they would well be necessary for the world to arrive at its answers, eventually. For now, we are a long way off from this seemingly happy ending.