- August 01, 2016
- CBR - Economics
Conventional Wisdom: Is the Modern Economy Morally Flawed?
Throughout my visits to the Republican and Democratic national conventions, I have been watching the goings on with John Maynard Keynes in the back of my mind. Specifically, I’ve been thinking of his prediction that when the struggle for subsistence recedes, it will cause a cultural crisis in which our demands of government and our economy shift, or at least lose focus. (I examine this prediction further in the fall issue of Chicago Booth Review.) Both conventions provided ample opportunity to consider Keynes’ prophecy, for if there is any commonality between the campaigns of Hillary Clinton and Donald Trump, it is the guiding belief that the modern economy is morally flawed.
Consider a few lines from Secretary’s Clinton speech at the Democratic Convention on Thursday night:
I’ve gone around our country talking to working families. And I’ve heard from so many of you who feel like the economy just isn’t working.
Some of you are frustrated—even furious.
And you know what? You’re right.
It’s not working the way it should.
Americans are willing to work—and work hard.
But right now, an awful lot of people feel there is less and less respect for the work they do.
And less respect for them, period.
The populism of Donald Trump taps the same sense of grievance Clinton does, albeit with a dash of nativism that makes unnamed enemies abroad as much to blame for the woes of the working class as malefactors of great wealth at home.
As such, for Democrats and Republicans alike, this election has seen a shift away from free markets and smaller government toward policies that, by protecting industries and redistributing resources, tilt the economy in favor of the middle and working classes. For example, consider the shift in the language of the Democratic Party Platform in respect to trade. In 2012, the platform promised the following:
Alongside Australia, Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Singapore, and Vietnam, we are on track to finalize the Trans-Pacific Partnership [TPP], a historic high-standard agreement that will address new and emerging trade issues, lower barriers to the free flow of trade and investment, increase exports, and create more American jobs.
In contrast, the 2016 platform declares that, over the past 30 years, “America has signed too many trade deals that have not lived up to the hype.” It continues:
Trade deals often boosted the profits of large corporations, while at the same time failing to protect workers’ rights, labor standards, the environment, and public health. We need to end the race to the bottom and develop trade policies that support jobs in America.
The 2016 platform does not ultimately repudiate TPP—a bone of contention between the Sanders and Clinton supporters on the drafting committee—however it stipulates that any new trade agreement must meet the “standards” described above, “including the Trans-Pacific Partnership.”
Donald Trump objects not to the substance of such aims but to their sincerity when avowed by Hillary Clinton. Indeed, he predicted in his own convention speech that Bernie Sanders supporters “will join our movement, because we will fix his biggest issue: trade.” Trump went on to declare that he would not let “companies move to other countries, firing their employees along the way, without consequences,” a promise Clinton echoed when she said in her own speech that, “if companies take tax breaks and then ship jobs overseas, we’ll make them pay us back.”
To be sure, there are still important policy differences between the candidates—Trump has proposed a massive tax cut, Clinton a raise in the federal minimum wage to $15—but in respect to their domestic agendas, the center of gravity for both parties is economic populism.
These are very confusing times with respect to the future of American politics and its implications for capitalism. When attempting to make sense of this confusion, I return again to Keynes’s seminal essay, “The End of Laissez-Faire.” Near the end of that essay, he writes of how our moral and technical appraisal of capitalism can sometimes be at odds, making for the bewilderment that both scrambles politics and obscures, even to ourselves, what we hope to accomplish and why. “Confusion of thought and feeling leads to confusion of speech,” he says:
Many people, who are really objecting to capitalism as a way of life, argue as though they were objecting to it on the ground of its inefficiency in attaining its own objects. Contrariwise, devotees of capitalism are often unduly conservative, and reject reforms in its technique, which might really strengthen and preserve it, for fear that they may prove to be first steps away from capitalism itself. Nevertheless, a time may be coming when we shall get clearer than at present as to when we are talking about capitalism as an efficient or inefficient technique, and when we are talking about it as desirable or objectionable in itself. For my part I think that capitalism, wisely managed, can probably be made more efficient for attaining economic ends than any alternative system yet in sight, but that in itself it is in many ways extremely objectionable. Our problem is to work out a social organization which shall be as efficient as possible without offending our notions of a satisfactory way of life.
It may be that a defeat of Donald Trump would see the defeat of economic populism in the Republican Party. Likewise, perhaps a victory by Hillary Clinton would see a swift return to the free trade policies her husband so passionately promoted when he was president. That said, reflecting on my experience at both conventions over the last two weeks, I am increasingly convinced that, even if the two parties don’t see eye-to-eye on the prescription, they agree on the diagnosis: namely, that there is a serious moral flaw in the modern economy. Whether or not its remedy is consistent with the demands of free trade and market efficiency is a matter that is not unimportant, but obviously secondary.
The Conventional Wisdom series features John Paul Rollert’s dispatches from the 2016 Republican and Democratic national conventions. You can see more Conventional Wisdom posts here. If you want to engage the discussion, tweet John Paul @jprollert.
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