Growing concensus that we now need active government

In A shift in political thinking is giving Labor a sense of purpose Lenore Taylor argues that there's a new wave of thinking in economics and politics stating the old open model is now reducing growth because of rising inequality.

Australian thinkers, and political parties, have been grappling with a growing wave of thought that the economic challenges of the 2010s cannot be solved by the old 1980s political consensus – the consensus that said economic growth is best achieved by market deregulation and lower taxes and lower spending that generate growth, and allow “all boats to rise” by providing the revenue for governments to pay for social programs and do something or other about poverty.

The rethinking has been going on for quite a while internationally, from Thomas Piketty through to the major international economic institutions. And it turns the old consensus on its head – arguing that rising inequality harms growth, that smart social spending is not the kindly thing governments do after they raise the revenue, but rather a first order revenue-boosting exercise in itself, and asserting that governments need to intervene more to get their economies through this economic transition.

The IMF now says income distribution matters for growth. “Specifically, if the income share of the top 20% (the rich) increases, then GDP growth actually declines over the medium term, suggesting that the benefits do not trickle down. In contrast, an increase in the income share of the bottom 20% (the poor) is associated with higher GDP growth. The poor and the middle class matter the most for growth,” an IMF discussion paper said.

Trump and the disconnect between the Republican elites and their base

Martin Wolf makes some interesting observations in Donald Trump embodies how great republics meet their end.

Why has this happened? The answer is that this is how a wealthy donor class, dedicated to the aims of slashing taxes and shrinking the state, obtained the footsoldiers and voters it required. This, then, is “pluto-populism”: the marriage of plutocracy with rightwing populism. Mr Trump embodies this union. But he has done so by partially dumping the free-market, low tax, shrunken government aims of the party establishment, to which his financially dependent rivals remain wedded. That gives him an apparently insuperable advantage. Mr Trump is no conservative, elite conservatives complain. Precisely. That is also true of the party’s base.

Authoritarians and Trump

In The rise of American authoritarianism Amanda Taub describes the almost linear correlation between how much someone supports Trump and their level of authoritarianism. One of the experts she interview was PhD student Matthew MacWilliams.

MacWilliams studies authoritarianism — not actual dictators, but rather a psychological profile of individual voters that is characterized by a desire for order and a fear of outsiders. People who score high in authoritarianism, when they feel threatened, look for strong leaders who promise to take whatever action necessary to protect them from outsiders and prevent the changes they fear.

The Republican rank and file are revolting

In The Great Republican Revolt David Frum writes about the war inside the Republican Party.

The angriest and most pessimistic people in America aren’t the hipster protesters who flitted in and out of Occupy Wall Street. They aren’t the hashtavists of #BlackLivesMatter. They aren’t the remnants of the American labor movement or the savvy young dreamers who confront politicians with their American accents and un-American legal status.

The angriest and most pessimistic people in America are the people we used to call Middle Americans. Middle-class and middle-aged; not rich and not poor; people who are irked when asked to press 1 for English, and who wonder how white male became an accusation rather than a description.