Saturday, September 17, 2022

Populism and the evolving cloud of related concepts

The literature on modern populism and economics keeps producing interesting contributions. The last issue of the Journal of Economic Literature includes the final version of the survey by Guriev and Papaioannou, which had been circulating for some time, as well as a book review of Barry Eichengreen’s book on populism.

In summer, Funke and co-authors published what apparently is the working paper version of a long and ambitious empirical project on the economic history of populism and its (bad) macroeconomic effects, that will soon be in journal format.

If Eichengreen’s book is mostly about Trump, and its review warns about extending the analysis to a much more complex and diverse European populism, Funke and co-authors put together in the same data-base populisms from all over the world at the national level since 1900 to the present time. They use what they call a “Consensus definition” (based on the work of Mudde and Rovira-Kaltwasser), to codify populist national leaders as those who promote an anti-elitist rhetoric that opposes an homogeneous virtuous people to an elite that is responsible of the grievances that they, the populists, focus on. This anti-elitist component is also emphasized by Guriev and Papaioannou.

I am not so sure (especially after the elitist Boris Johnson’s spell as British primer minister, so well captured in Simon Kuper’s book, “Chums”) that the anti-elitist component should be emphasized so much. It is better to list the related phenomena with which Funke et al. supplement their working “consensus definition:” disdain for existing institutions and for checks and balances; preference for direct democracy; recommendation of simplistic solutions to address complex problems; anti-pluralism…

Funke et al. distinguish between a left wing populism that is more about economics, and right wing populism that is more about cultural grievances. Some populisms combine right wing with left wing rhetoric, like the Catalan secessionist movement (sometimes in different groups, sometimes in the same groups or even individuals).

Although Funke te al. attempt to separate the nature of the phenomenon from its outcomes or consequences, sometimes this is difficult: is the erosion of institutions an outcome of their anti-elitist style? Or is disdain for institutions a feature inherent into populism?

In spite of these conceptual problems, definitions are important, although in social sciences they are imprecise by nature. Definitions help find related phenomena, and therefore learn from them over time and space.

But precisely because definitions are difficult and imprecise, it is useful to relate those phenomena that we are at least tempted to call populist, to other phenomena, classifying populisms by their proximity to these other phenomena. For example, President Biden has qualified some MAGA elements as Semi-fascist, and historian Timothy Snyder famously said that “Post-truth is pre-fascism.” Historian Finchelstein has also addressed the relationship between populism and fascim in his work. Both populism and fascism (or related words with a prefix) are in turn related to different degrees, depending on the example, with authoritarianism and nativism.

An evolving cloud of overlapping concepts and traits, more than a single concept, may help explain, distinguish and relate phenomena as diverse as January 6th, or the Salvadorean Bukele, or the Catalan secessionist movement, or all the episodes wonderfully described by the Colombian writer Carlos Granés in his book “El Delirio Americano.” Like the Innuit have different words to refer to snow, we need different words to refer to different populisms, or to “populist coups” -the Catalan illegal declaration of Independence in 2017 was aptly called by some a postmodern coup, to differentiate it from military coups.

Saturday, September 10, 2022

The optimistic view about the journey of humanity

In his book “The Journey of Humanity,” Oded Galor draws from his professional research on economic growth in the long run to answer two related questions: why humans are not like squirrels, and why some humans have distanced themselves from squirrels before others. The life of a squirrel, like that of all other non-human animals, is spent caring only about survival and reproduction, as was the life of humans until very recently, at some point in the last two or three hundred years.

The answer to the first question is the reinforcing interaction between technological progress, population growth and cultural adaptation that inevitably brings the pace of technological progress to a tipping point, beyond which education of the masses is essential for the production process.

Ever since the emergence of Homo sapiens and the development of the first stone-cutting tool, technological progress fostered the growth and the adaptation of the human population to its changing environment. In turn, growth and the adaptation of the population widened the pool of inventors and expanded the demand for innovations, further stimulating the creation and adoption of new technologies. Nevertheless, over most of human existence, one central aspect of the human condition remained largely unaffected: living standards. Innovations stimulated economic prosperity for a few generations, but ultimately, population growth brought living conditions back towards subsistence levels.

For millennia, what Galor calls the wheels of change – the reinforcing interplay between technological progress and the size and composition of the human population – turned at an ever-increasing pace until, eventually, a tipping point was reached. The rate of technological progress generated for the first time in human history a demand for skilled and educated workers who could navigate this rapidly changing technological environment, incentivizing parents to invest in the education of their children and therefore forcing them to bear fewer of them.  Fertility rates started to decline and living standards improved without being swiftly counterbalanced by population growth, and thus began a long-term rise in human prosperity that the world has experienced in the past two centuries.

The acceleration in technological progress is occurring over the entire course of human history not only in the eve of industrialization. The difference is its impact on human capital. This occurred only once the tech environment changed very rapidly.

Technological progress has been inevitably rising steadily (due to the reinforcing interaction with population) till it reached a tipping point above which human capital was demanded, fertility therefore declined since parents could not afford as many children as before, the Malthusian equilibrium vanished and the economy gravitated towards the modern growth regime (producing the “hockey stick” graph emphasized in the first chapters of the e-book “The Economy”).

The answer to the second question is even more difficult. Why some countries escaped the Malthusian trap before others? Here the author's answer is very generic. It is not so much about why the Industrial Revolution started in England instead of in France, Germany or Spain, as about why it took place in more or less Western Europe, of all places. The complex answer has to do with instituions and culture, but mostly about deeper factors such as geography and diversity. Galor’s answer is closer to Jareed Diamond’s than to Acemoglu and Robinson's: the Industrial Revolution could not have happended in the Sahara desert for geographical reasons.

The main contribution of the book, and the research on which it is based, is that diversity is a key component of social outcomes. There is an optimal level of diversity, because too little diversity creates stagnation for lack of innovative ideas, and too much diversity creates conflict and difficulties in collective action to provide public goods and solve discrepancies. The exogenous measure of population diversity taken by Galor is distance to the first African human communities, because the more distant “travellers” were less diverse than the first ones. But the optimal point of the hump shaped curve relating diversity to social outcomes changes with technology and time; it could have been in China in the XVth century and in the US today.

Although the mechanisms through which diversity affects growth remain vague, Galor is careful not to say that the optimal degree of diversity can be socially engineered. Each country or social group has a given level of diversity, and policies must be tailored to make the most of it. If there is a lot of diversity, policies must tackle its risks, and promote tolerance. If there is little diversity, policies must promote different views. There is not much more in terms of policy recommedations, but perhaps that is just fine, given that policy recommendations stemming from previous explanations of human evolution have not been very successful (namely the Washington Consensus, as argued in the book).

Since technological evolution only goes in the direction of progress, Galor has an optimistic view of the evolution of humanity. Economic depressions, world wars, genocides, colonialism, have been serious accidents in our journey, but they are anecdotes compared to the increasing welfare that is accesible to everybody, according to the author. Even those that escape later from the Malthusian trap can escape nevertheless. He is also optimistic that technological progress and demographic control will suffice to contain climate change, which perhaps will be remembered as another past accident in one hundred years time. Hopefully.