Anil Hira
Anil (Andy) Hira is a Professor of Political Science at Simon Fraser University in Vancouver, Canada. He is a specialist in international development, economic competitiveness, and energy policy.
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In this chapter, we examine the results of the latest wave of policy entrepreneurship, resulting from perceived failures of the most recent return to the market under neoliberal policies in the 1980s. Some countries have entered into a post-neoliberal period with bold experiments in both industrial policy and redistribution. However, we find that despite these efforts, the historical patterns appear to hold. The limitations on industrial policy experiments suggest the need for increased attention to the timing of policies, and state autonomy and capacity.
The response of the Republican Party in the US, such as tea party pundits Eric Cantor, and the Cameron Government in the UK, has been to embrace a Milton Friedman view- that government needs to be minimized, particularly drastic cuts in spending, that low interest rates will solve the problem, and that “entrepreneurship” will magically arise from the private sector will magically appear. The response of some Democrats, meanwhile, as reflected in the NYT op-ed pieces of Paul Krugman, is to call for a major fiscal stimulus.
What I argue here is that both sides are grasping at straws. Both ignore the structural problems in the Western economy, and more fundamentally the historical facts about how economies grow. The cluelessness by economists is reflected in the vacuous nature of their methods- based most often on highly mathematical models of an abstract economy that ignore basic facts on the ground, and the interplay of historical and political factors that shape real world economies. A mathematical model can not consider the effect of a successfully democratic Iraq on markets, or the retirement of Steve Jobs. These factors are as important to economic functioning as the macroeconomic data are. We can begin to fashion a new understanding of the types of policies that would be needed to really kick start the economy, and job growth with it, in a new positive direction.
In this brief, I suggest that there are long-term, structural reasons behind Trump’s rise related to economic challenges to all of the world, not just the U.S. The pattern of extremist politics, from the Brexit vote to the rise of far right parties in Europe precedes the migration crisis and the rise of ISIL. Such events may have stoked the fires of fear (see my book on human irrationality and politics), but the wood fuel was already in place. Similarly, the discourse about inequality as reflected in the Sanders campaign and surprising everyone, can be traced, in good part, to the same roots. Consider that one of the leading contenders to be the next President of France, Emmanuel Macron, has started his own movement, En Marche! that promises a new form of politics, and that Jeremy Corbyn, former and contending leader of the Labour Party in the UK, is, like Sanders, a self-avowed Socialist. They seek to confront the anti-immigrant Front National and UKIP (UK Independence Party) that have shown rising strength over the past decade. So, despite media coverage, the Trump phenomenon is far from isolated. Until we more directly confront these challenges to the future of Western economies, we will simply be treating the symptoms.