Beware populists bearing ‘common sense’ economics

Outlining her ‘plan for economic patriotism’ this week, Democratic Senator Elizabeth Warren promised to ‘finally put American workers and middle-class prosperity ahead of multinational profits and Wall Street bonuses’.

She may present her ideas in wonkier terms, but the difference between the Democratic Presidential contender’s mercantilist slogans and Donald Trump’s ‘America First’ rhetoric on trade and jobs is barely discernible. That is no accident, nor is it a surprise. Economic nationalism has long been a bipartisan cause. And it is on the march.

So, odd spectacle though it must have been, it should not have been too much of a shock to see Fox News host and Trump cheerleader Tucker Carlson heap praise on Warren’s plans.

The left-wing Democrat ‘sounded like Donald Trump at his best,’ he said.

CapX readers will recognise Warren’s star-spangled proposals for the grab bag of reheated dirigisme that they are. They aren’t as radical, or novel, as she wants you to believe, and history would suggest that the list of interventions are unlikely to make American workers better off.

But rather than boring you with the nitty gritty – a subject for another day – I want to point out something more troubling: the big rhetorical lie that lets economic populists get away with peddling bad ideas.

After saying that Warren’s plans ‘make obvious sense’, Carlson blamed an elite split into two tribes for preventing such policies being implemented: ‘You’re either a libertarian zealot controlled by the banks, yammering on about entrepreneurship and how we need to cut entitlements… Or, worse, you’re some decadent trust fund socialist who wants to ban passenger cars and give Medicaid to illegal aliens.’ Warren herself wants to ‘reject the excuses’ for why American workers can’t be helped.

The idea that libertarians and socialists conspire to make US government policy is absurd enough, but more insidious is the claim that things would all be so simple were it not for a ruling class determined to oppress ordinary men and women. This is the swamp that Trump promised to drain. And it is anti-establishment sentiment in its purest form.

Here in the UK, Jeremy Corbyn’s Labour Party claims to possess a ‘common sense’ economic agenda that any government concerned with the interests of ‘the many, not the few’ would put into action.

His proposals are more extreme than Trump’s and Warren’s. Far from being common sense, they have failed everywhere they have been tried. But, according to the moralising language of Corbyn and his allies, it’s simply a question of being one of the good guys.

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Of course, the idea that advocates of liberal economics – or free trade, or neoliberalism, or whatever else it is that the populists define themselves in opposition to – aren’t interested in ordinary people’s well-being is patently ridiculous.

They also happen to have the weight of evidence on their side. From Santiago to Seoul, liberalisation has been the force behind ever greater prosperity.

And yet, so many appear to be persuaded by the idea that there is a big button labelled ‘make everyone better off’ that a lack of empathy is stopping policymakers from pressing.

Paradoxically, I think the very managerial politics that populists want to sweep aside is to blame. For years, the end-of-history generation of politicians overpromised. The economy was a beast that could be tamed, growth could be guaranteed, boom and bust could be ended.

When events proved otherwise, people needed an explanation for the gap between expectation and reality, and superficially the populist one was the most compelling. The managerialists’ overconfidence prepared the ground for the populists’ lie.

What is needed is humility: humility about how many problems can be easily solved; about the unforeseen consequences of policymaking; about how little officials can possibly know when they make policy; about the power of the technological and economic forces that governments are up against; and about the awe-inspiring complexity of the series of inputs and outputs that we call the economy.

That may sound defeatist. But, unlike the economic populists’ message, it has the advantage of being true. It’s why policymakers have made mistakes (and, contrary to what Warren may claim, that haven’t all been sins of omission). It’s also our best hope for good economic policymaking.

Armed with humility and an appreciation of what has – and hasn’t – worked in the past, governments have a far better chance of delivering greater prosperity than the populists who rush in, confident that it will all be so simple once they are in charge

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