Saturday, September 9, 2023

From zero sum mentality to negative sum reality

Not everything is a penalty kick –the quientessential zero sum interaction, where there is pure conflict, and no common interest among the players. In fact, most social interactions are not zero but positive sum: they combine conflict and common interest (think of a firm or a family).

A problem arises when what is a positive sum game is perceived by the main players as a zero sum game, and opportunities for mutual gain are not realized. Economist Maitreesh Ghatak from the London School of Economics uses a bus analogy: when a bus is crowded and the riders are ethnically heterogenous, instead of blaming the lack of budget for more buses, some may be tempted to blame the excess of riders from “the other” ethnicities. 

According to Ghatak and his co-author Vedier, “Economic hardship or rising inequality or slowdown of economic growth alone can create political discontent. When any two of these three aspects of economic malaise coincide, discontent turns to despair, but there is still a vent through which some steam goes of. For example, economic hardship and rising inequality may still seem tolerable if there is some prospect of economic growth, the benefts of which are expected to trickle down in the form of a higher standard of living in the future. But when long-term income stagnation for most of the population and decline for some go together with high rates of income growth at the very top, you have zero sum economics –when your loss is someone else’s gain. Zero sum economics turns despair into rage against the establishment and whips up a perfect political storm,” which is what Trump’s electoral victory in 2016 really was. 

“When long-term income stagnation for most of the population and decline for some go together with high rates of income growth at the very top, one has zero-sum economics and that naturally raises the possibility of using various kinds of social identities to claim a bigger share of a fxed sized pie.” They show that in ethnically or racially polarized societies this naturally leads to the salience of social identities that enable majority ethnic groups to vote for policies that exclude minority groups so that they get a greater share of a dwindling surplus.

Brexit and Trump, seven years later, have proven politically and economically disastrous, but they are not totally defeated. What comes after rage? Why don’t we see more disappointment with these proposals? A combination of economic and cultural issues keeps complicating the analysis. Biden is clearly better economically (see Freedland and Krugman) and, yet, Trump can win again. A majority of Brits regret Brexit, but no political party wants to reverse the decision.

The Brexit Project also convinced voters that they were in a zero sum game with the EU. Now citizens realize that there was also common interest with Europe and they are immrsed in a negative sum post-Brexit reality.

Journalist Peter Foster in “What went wrong about Brexit and what we can do about it” (the last book to give details about the disaster that Brexit has been, see a review here), writes this: “Understandably, Brexit played on the insecurities of communities that felt they were losing their sense of agency in face of global forces: big tech and social media; flat wages and unaffordable houses; low growth and rising job insecurity; immigration and outsourcing. Those issues have roiled all industrialised democracies in different ways, with differing results. But the original sin of Brexit was to promise that leaving the EU would make the UK better able to meet those challenges. It didn’t, it won’t –and it was never going to. Those who made those rush promises should have known better. Most of them surely did.”

The UK has decided to come back to the HORIZON European research program. As a pro-European anglophile, this makes me happy. My prediction is that they will come back to everything (including the single market at some point), but they will hardly be accepted again at the decision-making table. They will become rule-takers, (some) reluctantly accepting that the interaction with the EU is a positive sum one. So much for sovereignty.

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