The zeitgeist keeps shifting
Who's up and who's down
There is a great deal of ruin in a nation — Adam Smith
Hold my beer — Donald J. Trump
(OK, I made up the second quotation.)
Tyler Cowen occasionally does posts evaluating the way that current events have affected the status of various groups. Because the past three months have been a particularly “current event” rich period, it might be time to make a few preliminary observations.
Who’s up:
Neoliberals: Economists can argue until they are blue in the face that neoliberalism is the lesser of evils and that all of the alternatives are worse. But the broader public won’t be persuaded until a sharp decline in their 401k balances makes then wake up and pay attention.
Who’s down:
Mercantilists: Life is unfair. Yes, this wasn’t exactly the optimal way to roll out a protectionist trade regime, but then 1980-2017 wasn’t exactly the optimal way to do globalization. That’s how things work in the real world. An extremely bad protectionist regime does a great deal of damage. A well-constructed protectionist regime would do a smaller amount of damage. And perhaps that’s what we’ll get after all the dust has settled. But almost all forms of protectionism are a net negative.
Who’s up:
The experts: People with expertise in international macroeconomics overwhelmingly oppose this sort of trade policy (even if designed a bit more cautiously.) Over the past 10 years, economists have been out of favor in the halls of power, and to a lesser extent in areas like the media. Indeed, when the media discuss economic issues they are more likely to interview a businessman than an economist. Reporters seem to (wrongly) believe that business is applied economics. Being a CEO doesn’t teach you general equilibrium theory—the fact that import tariffs are taxes on exports. It would make almost as much sense to interview a barber or autoworker as a CEO.
Who’s down:
The populists: This group had been ascendant in both the Democratic and Republican parties, a fact that largely explains the inability of the Dems to come up with a coherent critique of Trump’s tariffs.
Who’s up:
TDSers: In my view, the tariff fiasco isn’t even Trump’s worst sin. Indeed I’d put it third on the list, behind his hyper-nationalistic foreign policy and his domestic authoritarianism. And TDS isn’t even a partisan issue. The people with the best critiques of Trump were often the so-called “RINOs”. In contrast, Democrats have been quite disappointing in their criticism, mostly focusing on the wrong issues. (BTW, as with everything Trump touches, the truth is always the exact opposite of what Trump says. It’s the Trumpistas that are Republican in name only, at least in the late 20th century sense of the term ‘Republican’.)
Who’s down:
Anti-anti-trumpers: The people who said that Trump has lots of problems, but that his critics exaggerated his flaws. Actually, even his critics never predicted anything this bad. They thought he might side with China by abstaining from a UN resolution blaming Russia for the Ukraine War, but they never predicted he’d side with North Korea and Iran in opposing the resolution. They never predicted that he’d refuse to rule out an invasion of Denmark. Of that he would actually withdraw the names of appointees who were discovered to have stated that Biden won in 2020. Think of the anti-anti-Trumpers as the modern equivalent of the anti-anti-communists that were largely discredited after 1989.
Who’s up:
The elite media: Elite pro-globalization media outlets like The Economist and the Financial Times are looking better and better.
Who’s down:
Fox News: Here’s a radical claim. The Fox News of 20 years ago was more similar to the MSNBC of 2005 than to the Fox News of today. How is that possible? After all, MSNBC is a cable news network with a liberal bias whereas Fox News is a cable news network with a conservative bias. If you have not watched Fox News recently, you might be in for quite a shock. I’m tempted to compare it to Pravda, but that would be unfair to the former Soviet media outlet. It’s more like something I’d expect in North Korea, a weird personality cult centered around exalting the infinite wisdom and infallibility of our Dear Leader. It’s also been dumbed down to a 5th grade level, from the normal 8th grade level you expect on TV. If you don’t believe me, watch a few hours in the evening. (Better yet, save yourself the misery and take my word for it.)
I actually feel sorry for the Fox News hosts, as they obviously don't believe a word they are saying. (We discovered that in the Dominion Voting System lawsuit, where emails revealed that they privately had contempt for Trump.)
Who’s up:
Chinese and Canadian liberals: Pierre Poilievre is not a bad guy, but he’s been badly hurt by the fact that he’s Trump’s preferred candidate. In China, the anti-liberals really are bad guys. (It’s makes no difference whether you call them far left or far right.) This is from a few weeks before the trade war, and describes perceptions in China:
Various features of Mr Trump’s rule recall the Maoist mayhem. One is the appointment of an outsider, Elon Musk, to lead the assault on the federal bureaucracy, just as Mao’s wife, Jiang Qing, was put in charge of his “Cultural Revolution Leading Small Group”, tasked with “bombarding the headquarters”. Mr Musk’s young helpers are compared to the gangs of Red Guards; Mr Trump’s ill-qualified Cabinet members to Mao’s neophyte picks for the Politburo. “He who saves his Country does not violate any Law,” tweeted Mr Trump on February 15th. As some note, that was like Mao’s rallying of Red Guards in 1966 with what became the Cultural Revolution’s catchphrase: “To rebel is justified.” . . .
[M]embers of China’s neo-Maoist fringe acknowledge Mao-like features of Mr Trump’s leadership style. “The centre of the mass democratic revolution has shifted from China to the United States,” enthused Zhang Hongliang, a prominent Mao-worshipper. “The ideological flowers of the Cultural Revolution in China in the 20th century are bearing rich revolutionary fruits” in America, he wrote, seemingly without irony.
Trump’s trade war is going to hurt the reputation of China’s neo-Maoists.
Who’s down:
Non-US nationalists: The problem with communism is that it doesn’t work. The problem with nationalism is that it is difficult to build into a global movement. Nationalists demonize the foreigner, making cross-border cooperation difficult. The current trade war puts nationalist parties in Europe in a particularly difficult situation. Brexit already looked like a mistake; this makes it look even worse.
Who’s up:
Deficit hawks: Those of us who warned against big budget deficits in the late 2010s and early 2020s now look prescient. The fiscal situation is about to get even worse, and the recent moves in 10-year bond yields are particularly worrisome.
Who’s down:
Deficit doves: Those who brushed away deficit concerns back when rates were close to zero, forgetting that the massive debts being accumulated would still be there if and when interest rates rose in the future.
Who’s up:
Principled conservative free speech advocates: They warned about giving the government the power to cancel “hate speech”. What if Trump were to become “the government”.
Who’s down:
Unprincipled conservative free speech advocates: Conservatives that previously opposed cancel culture but ignore Trump’s crackdown on free speech now look like hypocrites.
Who’s up:
Integrity hawks: Those who suggested that we needed to hold politicians to high standards now look vindicated. Character traits such as dishonesty and corruption are highly correlated with bad public policies.
Who’s down:
Issues people: Those who say they only care about “the issues” have forgotten an important lesson. A politician without integrity cannot be trusted to do the right thing.
Who up:
Rules hawks: Recent events tend to underscore the importance of appropriate procedures. Norms, rules, laws, even entire constitutions are crucial to a well functioning society. International treaty commitments (Nato, USMCA, etc.) should be respected.
Who’s down:
Autocracy advocates: Those who say that it’s only results that matter, not procedures. Those who dismiss the wisdom of the crowd. Those who say, “rulers need a strong hand”, or that “might makes right.” Those who dismiss constitutional provisions giving Congress the power to declare military wars and set tariff policy. Those who say we need to pack the Supreme Court with judges that share their views. Those who oppose term limits for national leaders. Here’s the FT:
Earlier this week, Trump said he would consider excluding US companies from his tariffs, but added that such decisions would be made “instinctively”.
Hmmm . . .
Who’s up:
Critics of bullying: Those who have warned that the US and other big powers were doing too much bullying of small countries on issues including trade, tax law, intellectual property rights and technology transfer.
Who’s down:
American exceptionalists: Those who were complacent about giving the US enough power to become the “world’s policeman”. That’s not to suggest that isolationists have been vindicated, rather that the US should work with its allies, and not bully other countries in a unilateral fashion.
Other brief notes:
I recently warned that the EU might respond with heavier taxes on US technology firms. This FT story suggests the threat might be real:
The EU is prepared to deploy its most powerful trade measures and may impose levies on US digital companies if negotiations with Donald Trump fail to end his tariff war against Europe.
The idea that the US has lots of “leverage” in any trade war is based on the myth that foreign countries gain and the US loses from international flows of goods, services, and assets. The fact that US stocks comprise 60% of global market cap suggests that we have plenty to lose. Not to mention that the gains from trade that flow to US consumers, and to producers that rely on international supply chains for components.
For 10 years, I’ve been warning of the US tilt toward a banana republic polity. Now others are sounding the alarm.
Trump was gung-ho for protectionism until he learned that it would make iPhones more expensive. This reminds me of an old Monte Python lion tamer skit.
Fareed Zakaria points out that the administration’s policy makes a Chinese invasion of Taiwan more likely. What do they have to lose?
Trump believes that trade wars are easy to win. Unfortunately, he doesn’t understand China:
“Chinese people think differently from foreigners. We save money, and we can survive on our savings for one, two, even three years. Foreigners spend what they earn,” she said, proudly showing off a premium product for the US market — a zombie mask featuring hand-painted blood spatterings.
“We Chinese will win any protracted war. Chinese people are hard-working, diligent and can ‘eat bitterness’,” she said, using a phrase favoured by Chinese President Xi Jinping.
In Australia, Labour seems to be benefiting:
Trump has loomed large over the five-week election campaign, with Australian markets seeing similar lurches to those worldwide following the US leader’s reciprocal global tariffs. While Australia was subject to a 10% levy, its biggest trading partner China was eventually hit with 145%. Dutton is now trying to distance himself from Trump despite early praise for the leader.
Albanese and his government have worked hard to tie Dutton to Trump, with Deputy Prime Minister Richard Marles on Sunday accusing the opposition of “trying to copy and paste policies from overseas to try and win an election in Australia.”
This is very funny:
PS. David Levey has an excellent new Substack, with some commentary on the tariff fiasco.
Reading this felt like watching the slow march toward a long-overdue Dies irae-a reckoning not just for Trumpism or protectionism, but for every ideological tribe that's played fast and loose with economic reality. Neoliberals, populists, deficit doves, nationalist dreamers, free speech hypocrites-all of them, each convinced they had the keys to the kingdom, now standing in line to hear the judgment bell ring.
It's like we're approaching the final movement of a symphony we've been ignoring for years. The notes have been there-the unsustainable deficits, the abandonment of expertise, the hollowing of institutions-but now the crescendo hits, and no faction gets to walk away clean. Everyone gets their verse in the Dies irae.
I'm not rooting for chaos. I'm just tired of the smug certainty across the spectrum that they alone were right, as if reality was a mere inconvenience. The market doesn't care about your politics. Bond yields don't respect vibes. And sooner or later, everyone will have to pay the piper-whether they were singing neoliberal hymns or populist chants.
" the truth is always the exact opposite of what Trump says." Exaggeration alert! Unless you really think that the amount of regulation and taxation we have is just fine and that there is no problem with wokeism in academia.