"Things happen" in the White House

Female journalists have been the target of Donald Trump this past week—hardly for the first time. One of them dared to ask about the murder of U.S. journalist Jamal Khashoggi in front of Trump and Saudi Arabia’s strongman, Mohammed bin Salman (whom the CIA holds responsible for Khashoggi’s death). Trump called her “a terrible person, a terrible reporter.” He then added, referring to Khashoggi’s killing, that “things happen.”

Another female journalist asked about Trump’s ties to the convicted pedophile Jeffrey Epstein aboard Air Force One—and was called “piggy” in response.

All this occurred in the same week that members of Congress received death threats after stating that soldiers should not obey illegal orders. It was also the week when political scientist Daniel Treisman suggested on CNN that Trump’s Ukraine “peace proposal” is written so awkwardly that it may even be a translation from Russian.

Some adopt an analytical framing that sees Trump as part of a broader “wave of populism” or “wave of backsliding.” From this perspective, we are told not to worry too much: this is not Hitler, and no one is about to be exterminated. This, they say, is more akin to Orban, Bolsonaro, AMLO, or Maduro. Relax—it’s not the same.

Viewing Trump—especially Trump 2.0—through this lens pushes us to focus on similarities with other populists, including those on the left. These other populists certainly exist and have their own pathologies. But focusing too narrowly on this comparison obscures the class dimension of Trumpism, and the immense social and economic power behind what The Economist has called a corrupt, autocratic force.

There is another perspective, of course. Trump may be a unique figure, yet also the product of a long historical trajectory—of deep-rooted social conflicts within the United States. These may resemble dynamics elsewhere, but the American case remains distinctly singular. The U.S., after all, is the most powerful country in the world and, while its history includes bright moments such as the Progressive Era, the New Deal, its role in the Second World War, and the Marshall Plan, it also includes darker chapters: what Margaret Atwood has described as an eighteenth-century theocracy, slavery, post-slavery discrimination against Black Americans, McCarthyism, and support for dictators such as Franco—still defended today in the pages of The Wall Street Journal—and Pinochet.

The opportunity costs of violence have so far kept Trump from using overt force against the American population. But selective violence persists: abroad, and against immigrants at home. Even under Hitler, violence was selective; killings of Jews were more frequent outside Germany’s borders than within them.

There are effective populists and there are efficient politicians, but we have yet to see someone who is both an efficient politician and an effective populist. Trump is neither. Instead, he is immensely powerful, he is not alone, and he is extremely dangerous. Efforts to appease him may be understandable—after all, who does not want to avoid a third world war?—but we should not delude ourselves about the true nature of the threat.

Is the London Consensus Just Wishful Thinking?

In The London Consensus, a group of economists bring together contributions presented at an event held at the London School of Economics in 2023. Some of the contributors are affiliated with the LSE, while others come from different institutions. All share a desire to help shape a new paradigm to replace the now-obsolete Washington Consensus.

Although the contributions do not yet amount to a fully coherent paradigm, they offer a valuable set of principles and policy proposals that could form the basis of a new “consensus.” Today, however, such a consensus may seem over-ambitious, given our era of polarization and the fragmentation of public opinion. We appear far from a context in which broad majorities might embrace a shared set of economic ideas.

Still, the mainstream of the economics profession has shifted toward more egalitarian and progressive positions in recent years. The authors of The London Consensus (Aghion, Van Reenen, Rodrik, Besley, Velasco, among others) combine support for a New Industrial Policy (or “productive development policies”) with a Schumpeterian view of economic growth—one that links innovation (driven by entry and competition) with social protection.

Yet the trajectories of some of the authors illustrate the limits of the project. Many were on the intellectual front line of the failed fight against Brexit, or advised center-left politicians such as François Hollande, Michelle Bachelet, or Joe Biden, none of whom managed to build lasting coalitions. A new paradigm—like the Keynesian or neoliberal did in the past—must strive for hegemony. Today, that means having the ambition to defeat the authoritarian national-populism that seeks to dominate global politics.

Something more will be required. That includes a new vernacular, as Bowles and Carlin argue. Or a new (beyond national) dimension of the welfare state, as proposed by Morelli or Piketty. But also a strategy for forging national and international majorities and for consolidating or creating institutions for collective action—institutions that include political parties and trade unions, but also extend beyond them through think tanks and online platforms.

The London Consensus offers a reasonable set of principles and policies—a minimum standard of decency that authoritarian populism will never provide, and that may even rival well-organized authoritarian regimes (such as Xi’s China) in effectiveness. But if it is to help defeat Trumpism in the democracies we seek to preserve, it must be paired with a political strategy.

Piketty after some tough book reviews

In one of his most recent articles, Thomas Piketty states that he considers his book A Brief History of Equality the best expression of his thinking on inequality. It is shorter than his previous works, offers a broader—indeed, global—perspective, and is more optimistic and forward-looking.

In this book, the French economist argues that the past two centuries, and especially the twentieth, have been marked by overall progress in reducing income and wealth inequality. This progress has certainly not been linear, but it demonstrates that social mobilization and the power of ideas can foster policies and institutions that promote both economic and political equality. Yet this progress remains incomplete, as current levels of inequality are still morally indefensible.

Over the course of his intellectual journey—from Capital in the Twenty-First Century to A Brief History of Equality—Piketty has moved from pessimistic laws to optimistic ideas. In my habit of reading book reviews after finishing books I enjoy, I revisited the tough review written by Blume and Durlauf on Capital in the Twenty-First Century, in which they criticized Piketty’s use of macroeconomic theory—never his strongest field.

After reading A Brief History of Equality, I then turned to Paul Seabright’s review, which is perhaps even harsher than that of Blume and Durlauf. Although Piketty avoids delving into the technicalities of macroeconomic theory in this shorter work, Seabright challenges, among other things, some of Piketty’s empirical claims about slavery and colonialism.

There exists a continuum between a scientific book and a political manifesto. One could draw an analogy between Marx’s Capital and the Communist Manifesto: A Brief History of Equality stands closer to the latter. Perhaps it should even have been marketed as such—as Piketty’s political program.

The ongoing debate about Piketty’s contribution can also be followed in the chapter that John Cassidy devotes to him in Capitalism and Its Critics, which includes several interesting biographical details. Cassidy, however, does not mention the reviews by Blume and Durlauf or by Seabright.

I find myself sympathetic to many of Piketty’s political ideas, which I do not think are undermined by the reviewers’ criticisms. The French author defends a genuinely democratic and decentralized socialism—based on shared ownership—which stands in complete opposition to Soviet communism. He also advocates what he calls a “federal welfare state” rather than a “national welfare state,” arguing that pursuing social objectives solely at the national level is wholly inadequate.

The weakest part of his political platform, in my view, is his notion of “universalist sovereignism,” which sounds like an oxymoron—a rhetorical attempt to balance the pro-European and communitarian-nationalist wings of the French left. There is still work to be done on that front. Piketty reportedly collaborated some years ago with U.S. Senator Elizabeth Warren (as noted by Cassidy), and there can be little doubt about the democratic and internationalist credentials of the progressive wing of the Democratic Party. The broad progressive coalition recently endorsed by Alexandria Ocasio-Cortez, following Mamdani’s victory, might well have room for Piketty and other European intellectual activists.

The federalist proposals of Morelli and Piketty

I was recently invited to a dinner in Barcelona where I met Massimo Morelli, Professor of Economics and Political Science at Bocconi University. I was deeply impressed by his ideas on populism and federalism, and in the following days I downloaded and read several of his most recent academic papers.

In his research, Morelli analyzes both the demand and supply sides of populism. The demand side stems from public dissatisfaction with the unequal outcomes of globalization, economic crises, and technological change. The supply side arises from the strategies of political actors who seek to exploit these grievances, often combining them with established or newly constructed narratives.

The vicious circle of populism becomes reality when the economic costs of failed populist governments make it increasingly difficult for conventional parties to repair the damage (as seen with Starmer’s challenges in the UK). The scope for genuine reform is extremely limited in national democracies with little fiscal space—at least within the current context of free capital movement.

Morelli argues that Dani Rodrik’s Trilemma has been overtaken by reality: authoritarian populists have shown that protectionism, authoritarianism, and a smaller state can coexist. The prospect of a democratic nation-state that restricts globalization has effectively vanished. According to Morelli, the only real hope for Europe—his “dream”—is a federal United States of Europe that pools resources to create a common defense, coordinated policies, and a genuine European budget and fiscal policy.

He also contends that earlier work by Italian economists such as Alberto Alesina and Enrico Spolaore—who argued that small nations could thrive in a globalized world—has become obsolete. Today, only deeper European integration can offer hope to a working majority and break the vicious circle of populism.

Morelli’s originality lies in his attention to the dynamic effects of policies designed to counter populism. A strategy aimed at discrediting populist leaders may succeed in the short term, but in the long run it can also foster an anti-politics climate that benefits new populist movements.

While Morelli does not propose an ambitious progressive platform like Thomas Piketty does in A Brief History of Equality, he shares with the French economist the conviction that a federal (instead of national) welfare state is a key ingredient in building an egalitarian coalition.

Do we now know why nations like the USA fail?

Banerjee and Duflo, winners of the Nobel Prize in Economics in 2019, are leaving the United States to begin working in Switzerland. In my field, this is so far the most significant example of the brain drain that the U.S. is already experiencing as a direct consequence of the second Trump administration’s attack on science. This phenomenon is beginning to appear in many other fields as well—and it can only accelerate. The U.S. innovation engine, long powered by its research system, is grinding to a halt, with inevitable negative consequences for productivity and economic welfare.

Over the past year, we have witnessed a lively retrospective debate about the work of the 2024 Nobel laureates in Economics—Acemoglu, Robinson, and Johnson. I strongly recommend reading their three Nobel Prize lectures, as well as the many articles and critiques that have followed.

This year also coincides with Trump’s return to power and the first months of his second administration, marked by an assault on all forms of institutions—institutions we once believed strong—that sustain democracy and innovation. Acemoglu and his co-authors devoted many years to developing a theory of why nations fail (in their book of that title and in numerous articles). Their answer seemed clear: nations fail when they lack inclusive institutions. Yet the apparent clarity of this conclusion masked some ambiguity about what “inclusive” really means. Still, their work left little doubt that countries like the United States and the United Kingdom possessed such inclusive institutions. Unlike much of Latin America, the U.S. was thought to have developed inclusive institutions because its early settlers could establish systems similar to those that would enable the Industrial Revolution in England.

Some critics argued that this theory could not be universal, since the most striking economic success story of recent decades—China—was not built on the kind of inclusive institutions Acemoglu and his co-authors envisioned.

In another book, The Narrow Corridor, they argued that nations thrive when there is a balance between effective government and a vibrant civil society. Again, one might have thought that the United States—with its universities, companies, foundations, and think tanks—was a perfect example of such balance. Checks and balances were meant to protect broad-based property rights, thereby sustaining long-term prosperity.

In their most recent book, Power and Progress, Acemoglu and his co-authors, in my view, come closest to a convincing explanation of how institutions emerge or collapse: it is power struggles that define them. Institutions reflect the interests of powerful groups—especially in times of technological change—and the ability of the working majority to resist those interests determines how democratic and fair institutions become.

In an article in the Financial Times, Acemoglu warned of the possible collapse of the U.S. economy under the Trumpian assault on institutions. Yet his earlier framework could not have predicted that the supposedly resilient American institutional system would crumble under the alliance of a narcissistic, corrupt president and a powerful tech oligarchy.

A combination of moral decay, ignorance, and concentrated economic power can destroy any institutional structure—no matter how strong it once seemed.

The Federalist Utopia versus the Nationalist Dystopia

Most African languages use the same word for “guest” and “stranger” (as James Robinson notes in his Nobel Lecture). African immigrants must be deeply disheartened when they encounter a very different mindset upon arriving in many parts of Europe. In the long run, though, I don’t think it matters much—after all, we all come from Africa.

Spain expelled Jews and Muslims in 1492, at a time when these communities were making significant contributions to the Iberian Peninsula’s culture and economy. We paid a severe cultural and economic price for that expulsion. Yet a few centuries later, we are fortunately part of the European Union (imperfect, but governed by some of the most civilized rules on the planet), we again have a Jewish community, and we are receiving new waves of migrants—including many of Muslim faith.

The creation of the State of Israel was an understandable decision by the international community to provide a home for the Jewish people after the Holocaust. But a home for the Jewish people does not necessarily mean an exclusively Jewish home or a “Jewish state,” since such a definition almost inevitably leads to discrimination against those who are not Jewish, as is happening today.

Attempts to create “pure” nation-states—accompanied by ethnic cleansing, what I call the nationalist dystopia—are nothing new. On page 51 of her recent book Indignity: A Life Reimagined, in a chapter entitled “The Unmixing of Peoples,” Lea Ypi describes the feelings of a character subjected to forced displacement at the end of the Ottoman Empire:

“That poor man didn’t choose to be born speaking Turkish or Albanian… Tomorrow he is off to where he’s told he belongs, even though he’s never seen it before; he doesn’t even know if he will make it across safely. And anyway it’s a highly dangerous precedent. Now every time there is a war they will think it’s a good idea to start swapping people around, to force them to move from one side of the border to the other, all in the name of an orderly settlement. I find it frankly terrifying.”

Many—if not all—of these once “unmixed peoples” now seek to reunite within the European Union, with its free movement of people and shared European public goods.

We are not going to solve humanity’s problems one nation-state at a time. I have more faith in universal justice than in the recognition of a Palestinian state as the sole way to stop the genocide in Gaza and the apartheid in Israel–Palestine. Two states can only be a long-term solution if they cooperate within a common confederal or federal framework, as suggested by Piketty, many other intellectuals, and people on the ground (and as envisioned in the original plans of the United Nations).

A perfect federal structure may be a utopia—but a useful and reasonable one, to borrow Javier Cercas’ words. The European Union, with all its imperfections, shows how such a project can still succeed. The analogy between today’s Israel and apartheid-era South Africa is relevant and illuminating. But recall that, although some argued for it (such as the neoliberal and racist economist Murray Rothbard), the solution was not to create a separate state for Black South Africans. It was to share the land in a democratic South Africa with equal individual rights.

Free speech as part of economic and social welfare

Karen Attiah, the woman who hired Jamal Khashoggi, has been fired from The Washington Post. Khashoggi, a journalist, was brutally murdered on the orders of the Saudi dictator for speaking truth to power. She is being interviewed by Paul Krugman here.

What is happening in the United States is worse than McCarthyism because it is broader in scope and more directly driven from the top of executive power. The attack on freedom of speech is part of a wider reconstruction of institutions in a dystopian direction.

Obama’s observation that abstract issues and the price of eggs are not separate things comes to mind in trying to explain why the attack on free speech in the United States (and, by extension, in democracies more generally) is damaging not only in cultural terms but also for economic and social welfare.

Not all the economic effects of policies and public decisions are captured in GDP or other macroeconomic indicators, though these too may suffer in the long run. Freedom of speech is one of the essential capabilities required for a free life, and therefore everyone has the right to enjoy it—just as they do housing, education, or basic healthcare. Amartya Sen’s capabilities approach emphasizes what people are able to do and to be, rather than merely the resources they possess or the utility they derive.

Free speech is part of human dignity. Education, health, nutrition, and shelter up to minimally adequate levels do not exhaust the list of fundamental capabilities. The freedom to express opinions and to criticize the powerful affects individual welfare directly—not only the welfare of creators, journalists, and citizens who want to voice their views, but also the welfare of those who benefit from consuming others’ opinions. The right to irony and sarcasm is itself part of individual freedom.

Freedom of speech also affects economic and social welfare indirectly, by fostering dialogue and creativity. Its absence does not harm only elites. Without free speech, dialogue collapses and innovation dries up: ideas eventually stop circulating, as happened under Stalinism in the Soviet Union.

As historian Timothy Snyder notes in reference to youth mobilization in Serbia: a young generation sees no future in their own country without the predictability and freedoms safeguarded by the rule of law—and once lost, these could be gone for good. Free speech is a fundamental part of the rule of law. Without it, one of democracy’s key contributions to economic and social welfare disappears.