I don’t know if I’ll have the opportunity to cast a meaningful vote in the Democratic primary; Virginia votes a full month after Iowa. But if I were to have that opportunity, there’s a good chance my vote would go to Elizabeth Warren. Her candidacy is a fascinating one. She inspires pretty strong support from certain progressive-minded, policy-oriented folks—like the ones (some of them anyway) with a say over the awarding of the endorsement of the New York Times. But many economists seem to find her platform highly objectionable. There was my employer’s take on her program, for instance. The Economist’s leader looks quite measured—like an endorsement, practically—next to Tyler Cowen’s scathing assessment: “[S]he has the worst proposed economic policies of any candidate in the adult lifetime of Tyler Cowen”.
That’s quite a statement. An incorrect statement, in my view. But there’s an interesting question here: what explains the vast gap in perceptions between groups of people (like the editorial team at the NYT and the corresponding bunch at The Economist) whose politics are a teeny bit different but who might otherwise be expected to assess policy platforms and candidates in fairly similar ways? The answer, I think, has a lot to do with what Will Wilkinson says here: if you think the underlying political economy situation in the US right now is totally fine, Warren is anathema, because the animating spirit of her campaign is that it isn’t, and that none of America’s big problems can be solved without addressing that.
Let me back up for a moment. I have lived most of my adult life—and certainly the years since I began writing for The Economist—within the sphere of wonky technocrats, the quote-unquote reality-based community, people who live and breathe white papers and cost-benefit analyses and who feel certain that we can engineer our way to a better society if only we listen closely to the experts and the data. But in the years since the onset of the financial crisis, and for a number of reasons, a rift has opened within this world. On the one side stand those whose faith in the wonk worldview was not particularly shaken by the events of the past 13 years or so. Members of this group acknowledge that there are important lessons to be learned from recent history. Depending on the person, they might admit that deregulation of the financial sector was excessive, or that policy-makers were too cavalier in their assumption that the residents of places hurt by trade or technological change would be just fine over the long run, or things of that nature. But they nonetheless tend to believe that despite its flaws, the political-economic system that prevailed from the 1980s on (what you might call the neoliberal world) remains the surest route to long-run peace and prosperity. This group is eager to talk about policy tweaks to improve the system, but deeply skeptical of arguments that a more fundamental change is needed.
On the other side of the rift are those who have begun to suspect that some of the assumptions embedded in neoliberal policies were faulty. Not everyone in this group shares the same set of complaints about the present structure of society. There is a loose consensus that handing so much of the job of allocating society’s resources over to markets and technocrats was a mistake, but less agreement concerning why the experiment has gone wrong. Some trace the failure back to the neglect of community: a disregard for important community institutions and for left-behind places, combined with complacency about the costs of concentrating opportunity in a few high-cost areas. For others, the key problem is the erosion of ethical standards that has occurred as a consequence of the close association between money and social value. Having prioritized the pursuit of profit and the accumulation of wealth, we are losing the ability to talk about and value ethical considerations which act as obstacles to making money. The erosion of our capacity for moral reasoning has bled over from economic spheres of activity into everything else.
Warren’s candidacy represents an argument that the mistake we made was neglecting the importance of power. Market enthusiasts don’t spend much time worrying about power; they think markets are the thing which prevents power from accumulating in dangerous ways. You don’t need aggressive antitrust enforcement, because of the disciplinary power of markets. You don’t need labor unions because shitty employers will not be able to retain workers in a well-functioning labor market. You don’t need to worry about inequality, because high returns to market success motivate others to work hard and challenge the competitive position of successful entrepreneurs and bosses.
But of course power matters a great deal. Power allows the powerful to shield themselves from accountability: from regulators, from the accusations of people who have been sexually assaulted, from the taxman, or indeed from market pressures. One of the important contributions of empirical economics over the past decade or two has been to demonstrate the ways that power matters—in labor and product markets, in how concentrated economic power translates into political power, which helps sustain yesterday’s winners in permanent positions of strength. (Though it would have been nice if the profession had not decided several decades before these empirical contributions that the subject did not deserve much attention.)
Power undermines markets’ capacity to do good for society. It would be nice if that weren’t so, but it is. But that means that to take best advantage of markets, you need to have in place all the various institutions which restrain and counterbalance the power that has a tendency to accumulate in an under-policed marketplace. You can’t count on well-meaning policy-makers to do that for you, because the system becomes corrupted by the influence of powerful economic actors. You can’t count on the consciences of the economically powerful to restrain abuses, because the market system elevates into positions of power and influence those individuals who do not let ethical concerns constrain their behavior. I can absolutely see why the economists of the 1960s and 1970s looked around and lamented all the friction-generating detritus left over from the economic conflicts of the first half of the century. They thought they understood markets, and they thought that by getting rid of all that mess markets would work better, and everyone would be better off.
But they didn’t understand how all the pieces fit together. They didn’t adequately grasp that the political and social and ethical stage on which the theatrics of the market were played out could not be taken for granted, but might well change over time in ways that corrupt the operation of the market and threaten the entire edifice. The Warren-curious, those on the uneasy side of the elite rift, are beginning to appreciate all of this, and beginning to understand that something of the broader social machinery which made postwar prosperity possible needs to be rebuilt.
This is an uncomfortable train of thought to entertain, no question. Having neglected to take adequate account of the role of power in society, we have allowed power to concentrate in ways that make reforming the system very difficult. Economic growth, economists like to say, is a positive-sum affair. If you make the right policies, then you ought to end up sufficiently rich as a society that winners from policy shifts can compensate losers and everyone ends up better off than they were before. This is the sunny picture that people on the other side of the rift—those more or less happy with the status quo—like to share with each other. It’s an appealing image! Because if no one has to lose, then everyone can get on board and no one has to feel bad. But if power is the problem, then you have a different situation. Power is necessarily zero-sum. Correcting the balance of power means reducing the power and privilege that the powerful and privileged now enjoy. And that’s a very icky notion to a lot of people.
It’s icky because it implies the need for disruptive change, and disruptive change can be very messy. It suggests that power needs to be redistributed—but then who should wield more? Do we trust them more than we trust the current elite? If we’re taking the elite down a notch, isn’t it possible that the elite that gets taken down is the elite that includes...us? Or our friends and partners and patrons? These fears don’t have to boil down to naked self-interest, though they often do. In some cases concern of this sort is simply about a fear of the unknown, or fear of an imagined known: the rabid left of the past which was responsible for political correctness and inflation and gulags. And look, I get it. It’s scary to contemplate a different and unfamiliar world. That’s one of the reasons Donald Trump is such a deeply disconcerting phenomenon: because he reveals that certain ugly world states which we imagined were no longer realistic possibilities in our modern day and age are, in fact, realistic possibilities.
But those of us on this side of the rift, the one that’s worried about power, have come to think that maybe we don’t have a lot of choice here. Trump emerged from the prevailing system, after all, and there is likely to be worse where that came from. And Warren’s political argument—that American society is increasingly transactional and corrupt, in ways that inhibit the realization of badly needed policy reforms—well, it looks pretty persuasive.
I know that the economy is in the midst of the longest expansion on record. I know that unemployment is low and stock prices are high. This doesn’t mean that society is ok, or that the world has gotten back to some less-fraught normal such that radical change is not in fact needed. Take climate, for instance. If we keep doing what we’re doing now, the world is likely headed for more than 2°C of warming, and potentially twice that much or more. You can get a sense here of what that means, but it’s not good. It is significant environmental change leading to significant economic costs and significant social and political instability, which *will* affect the welfare and security of residents of rich countries. It probably means millions of unnecessary deaths relative to a world which only warms by 1.5°C. It could mean hundreds of millions.
For economists, and many members of the wonk elite, the answer to this problem is simple. Climate change is a consequence of particular market failures which can most efficiently be addressed through things like carbon taxes and research subsidies. Policy platforms like Warren’s, which includes components of a Green New Deal, as well as things like a proposed ban on fracking, are not economists’ cup of tea. Tyler, for instance, calls the proposed fracking ban “the single worst policy idea I have heard this last year”. Fair enough. But what’s the means by which America suddenly finds itself in a position to pass appropriately aggressive, economist-approved climate policies? I am aware of all the good things which have come out of America’s energy boom. But let’s be brutally honest for a second. Is America more likely to commit itself to the necessary emission reductions if oil is expensive and America’s supplies are vulnerable, or if America is a petrostate? Is an America in which energy companies enjoy considerable wealth and power and political influence going to do what’s necessary to prevent catastrophic climate change?
That’s just one example. To see another, consider the looming impeachment trial in the Senate. It seems sure to be resolved in Trump’s favor as a result of the raw exercise of political power by Senate Republicans, unconstrained by ethical considerations or a sense of obligation to anything other than the desires of those with the ability to do as they like. That strikes me as a very worrying turn of events. If what goes in American politics is whatever the powerful can get away with, then it isn’t clear that the rule of law matters any longer. And the old, law-respecting way of doing things isn’t going to magically re-establish itself. Things are not ok, and they aren’t going to get better on their own.
I could go on. But our problem is not just a seeming inability to prevent looming disasters. It is also a failure to realize better alternatives to the current state of the world. Our healthcare system doesn’t have to suck! It doesn’t have to be a lottery of doom, where one is never quite sure what horrible misfortune or unpayable bill will be sent your way. It doesn’t seem implausible at all to me that America could have found ways to direct a much larger share of GDP to workers in the bottom 90% of the distribution over the past generation, at negligible cost to growth. I don’t think it takes much imagination at all to envision a world in which corporate power was treated much more skeptically over the past few decades, and in which consumer and worker experiences were better even as innovation flourished. I don’t think we’ve done as well as we could do. But putting us onto a path to realizing more of our collective potential is, obviously, really hard. The system is broken. And it is eminently reasonable to conclude that fixing it requires addressing fundamental problems of power.
A view like that outlined above need not necessarily translate into unquestioning support for Warren. Fixing the problem she identifies is not the sort of thing that a president alone can accomplish, and indeed, a president who tried to get it all done herself might well leave the system more fragile than she found it. In my view there needs to be a significant bottom-up component to reform: an outbreak of social activism and political mobilization which guides reform-minded politicians, which strengthens their hand politically, but which can also serve as a check on the power of those at the top. If America’s problem is that power has become too concentrated in the wrong hands, the solution is not to concentrate lots of power in one set of hopefully benevolent hands. But it seems to me that the opposite problem is the more realistic one: that in the absence of broader social mobilization, Warren will find it impossible to do much of what she says she’d like to do.
If she wins, that is, and she probably won’t. But whatever the outcome this year, I would not expect the rift that has opened to close. Not anytime soon.
Please don’t respond to this by explaining why Bernie is everything Warren is but better. I’m not anti-Bernie and neither is this dispatch. Do, however, have a look at my most recent column, which considers why we get the technological change that we get. You might also enjoy the text of a talk I gave at Brookings in December, on how to rebuild the middle class.