Saturday, April 7, 2018

Dani Rodrik on Populism

Forget most of the crap you read about the rise of populism. And please read Dani Rodrik!
There is a wonderful interview with Dani Rodrik on, oddly enough, the Pro-Market blog of the Stigler Center at the University of Chicago. I think Rodrik is right about pretty much everything. Here are some excerpts but read the whole thing:
Q: To what degree is the populist nationalist backlash in Western democracies essentially a backlash against globalization?
A: I think globalization has contributed to tearing societies apart. You can see some of that in terms of greater inequality, but you can also see it in the increase of what one might call “social distance” between different groups in society: those who are globally networked and feel themselves to be part of a cosmopolitan group that don’t recognize or need national borders, who have the assets and the mobility to take advantage of the world economy, and those who think that their fates are tied up with local communities, that don’t have the assets or the resources and networks. It’s a social and cultural cleavage that globalization has deepened by having very asymmetric effects on different groups.
Q: Did this cleavage contribute to the widespread sentiment that financial and political elites are self-interested and not concerned with anyone’s welfare but their own?
A: Yes, I think that’s effectively what has happened and what globalization has fostered. When corporations weren’t as footloose, they felt that the health of their local communities was important—it was important for them. You needed to have a well-trained workforce and you needed to ensure that your local government invested in public services. But if you think of yourself as an entity that can essentially operate in any part of the world and move wherever the circumstances are more advantageous, naturally you build up a very different kind of sensibility where you don’t feel yourself to be part of the local community, and your connections with local stakeholders are weakened.
These elites will not explicitly tell you, “We don’t care about you anymore.” They’ll tell you, “Look, we can’t afford to care about you because we’re competing in a global economy and therefore we have to make these choices, we have to outsource and we have to move, we have to look for low-tax environments because we can’t afford not do.” They’ll complain that they have no choice.
Q: Much of the anti-globalization backlash of the last two years has been xenophobic, racist, authoritarian in nature. What is it about the nature of globalization that led to this kind of response?
A: I think a lot of it has to do with the fact that the left has been missing in action. Twenty years ago, when I was fretting that globalization would create a backlash, I would have guessed that the main beneficiary of this might have been the left, because it would capitalize on the economic and social grievances that these divisions create. Indeed, when we think about the populisms of the late 19th century—in the US or for that matter Latin America, with its long history of populism—they were by and large not racist and xenophobic, ethno-nationalist populisms, but left-wing populisms that focused on financial elites, on corporate elites, and pushed for social reform and more regulation of the economy.
Today, here and in Europe, we’re seeing much more of a right-wing ethnonationalist backlash. I think it’s partly that the left has been missing in action and that the center-left and the social democrats have essentially been complicit in many of these changes since the 1990s. New Democrats in the US and New Labour in the UK were at the very forefront of this push for hyperglobalization, so they couldn’t easily disassociate themselves from this complicity. I think Hillary Clinton’s ill-fated campaign showed that very well.
There were other shocks that made it easier. For example, immigration made it easy for right-wing nativists to provide a much more nativist, ethnonationalist frame for economic and social grievances to which I think one might have responded very differently.
Q: In a recent New York Times piece, you argue that in order to fend off the racist, xenophobic populism that we see on the rise in many advanced economies, what you call “the bad kind of populism,” we need a “good kind of populism.” Is this “good” populism, as the title of your piece suggests, essentially the New Deal?
A: I think it’s like the New Deal in the sense that it requires significant economic and political reforms that will curb the prevailing abuses of the market capitalism that we have now. But I think its specific details are going to take very different forms. I don’t think that the right way forward is to simply enlarge or refine the welfare state that we have, which is based largely on essentially trying to redistribute through the tax and transfer system what the market produces.
I think the challenge today is actually to reform the production stage and the pre-production stage of the market economy, much more so than simply having more progressive income taxation or improved health and employment benefits.
Certainly in the United States, there’s a lot that still can be done in terms of social insurance, and the US has a lot more to learn about improving safety nets from Europe. But I think it would be a mistake to think that’s the main challenge. The real issues are going to be how to rethink property right systems in a way that’s going to make the fruits of innovation and automation much more inclusive, how to make society feel much more [like] an equity participant in technology, closing the gap between this narrow elite that benefits from it and the broad parts of society that are not. How do we increase and democratize our educational system to ensure that the endowments with which workers come into the market seeking jobs diminish this deep cleavage between the technocratic and professional elite and ordinary workers? How do we regulate digital platform monopolies?
These are reforms in education and property rights, in regulation and antitrust policy, that I think are going to necessarily look very different from the challenge that we confronted during the New Deal.
Q: You differentiate between two kinds of populism—political populism, the kind of autocratic populism we see from the likes of Putin in Russia and Erdo─čan in Turkey—and economic populism, which you write is “occasionally necessary” and which you seem to suggest as a potential remedy to our current predicament. What is economic populism, and how is it different from political populism?
A: I think economic populism is a populism that takes aim at the sources of economic inequality and at concentrations of economic power. Today in the US, economic populism would take the form of bringing the financial sector down to size, reducing the influence of Wall Street in political institutions, and having much greater regulation of the financial sector. It would mean taking aim at concentrations of power in high-tech and digital industries. It would mean taking aim at our current pattern of trade agreements, which often privilege particular corporate interests and investors. All of that would be economic populism that tries to reshape the distribution of economic power and tries to reduce the concentration of economic power but does not try to turn the political system into an authoritarian one, does not necessarily concentrate political power or undermine liberal norms of pluralism and tolerance.
In an interview with ProMarket, Harvard economist Dani Rodrik explained where globalization went wrong, how trade agreements serve rent-seeking by politically…

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