Eric Hake: ‘Le Pain’ of our shifting economy
By now, the story should be familiar. The historic presidential run-off election in France between Emmanuel Macron of En Marche! and Marine Le Pen of the National Front shows another country struggling to decide how best to move forward amid high unemployment and a weak economy.
Across the globe, moderate politicians of either the left or right have failed for the last nine years to find an appropriate response to the real estate and bond collapse, the eurozone crisis, the commodities bubble. In France, the two parties that have dominated elections since 1958 have been marginalized. Like many other countries, the voting public has given up on half-measures, and so we now see the rise of political parties offering radical solutions.
Where moderates or mainstream parties have held on to power, they are referred to as technocratic, dull, beholden to financial interests. They use austerity measures to promote growth. Unfortunately, the old joke holds: austerity is austere.
Where the moderates have failed, radical political agendas have spread, promising to build walls, close borders and turn inward. A peculiar dynamic has emerged. While promising to slash legal red tape that stifles business enthusiasm, this radical brand of politicians also promises to use law and order to reduce civil unrest. Businesses need fewer laws, but the public needs more prison time.
So, what, exactly, is going on?
In 2016, World Trade Organization General Director Pascal Lamy started one explanation by restating a classic Buddhist proverb — “When the philosopher points at the moon, the fool looks at his finger.” To which he added — “Market capitalism is the moon. Globalization is the finger.”
As we concern ourselves with the individual after-shocks and fresh outrages of each news cycle, we are unfortunately focusing on the finger, and missing the moon.
And that moon has been rising for some time. The resurgent faith in an unregulated capitalism, which began in the 1970s and spread around the globe in the following decades, has led to extremely rapid but unequal economic growth in many parts of the world. It has also led to a great increase in uncertainty, a shifting of risk onto those populations least able to bear it, and a greater disparity of opportunity in many developed countries.
When market capitalism promises and fails to deliver economic progress and growth for large segments of the population for decades at a time, or moves forward on a false optimism that is then wiped away by waves of bankruptcy, more radical solutions begin to look promising.
This was John Maynard Keynes’ greatest concern in the 1930s, and the reason he hoped to reform capitalism rather than allow it to destroy itself. Unlike the totalitarianism of communism and national socialism then on the rise, he believed a democratic capitalism remained our greatest hope for human progress.
Those alternatives that threatened in the 1930s, the totalitarianism of the left or right, now appear to be creeping back in. Unfortunately, criticizing or discussing the limitations of a perfect market economy in the political environment that has prevailed since the 1980s is a first order heresy. And so the tides keep moving.
Meanwhile, a population that has been told hard work is the primary ingredient for success has been working hard. In the words of the poet philosopher Ricky Bobby, “If you are not first, you are last.” And those who have failed to succeed can cast about for a scapegoat — either government, a minority, foreign powers.
As Karl Polanyi explained the pull of the moon in 1944, optimism about the benefits of unbridled capitalism leaves our society increasingly exposed to a logic that treats every element of our life as a commodity. In his argument, the purpose of statecraft is not to thwart economic change, but merely to moderate its effects to allow society time to adapt. By embracing the idea of a naturally occurring economic progress associated with “free markets,” he believed we were undermining the only countervailing force that exists in our society. A functioning democracy.
If the 20th, and now the 21st century, needs to be cast as a battle of ideologies, perhaps the real fight has been between democracy and capitalism, instead of capitalism and communism. Democratic government, public debate and a consideration of the social effects of market power are the only foil to that system.
Unfortunately, our environment has bred a new cynicism. The mechanisms of government are now commonly seen only as tools to enrich specific interest groups, instead of levers for social action that operate in the public interest. Has government corrupted business, or has business corrupted government? If the only solution is to further roll back and undermine the legitimacy of democratic government, what will we be left when it is gone?
So, what’s happening in France?
Eric R. Hake is an economics professor and associate dean of academic affairs at Catawba College’s Ketner School of Business.