Meeting of the Minds

Last week, I attended a program at The University of Chicago entitled A Meeting of the Minds: Business and the Human which featured William Howell, Professor of American Politics and Raghuram Rajan, Professor of Finance at Chicago Booth.  The discussion was moderated by Bret Stephens of The New York Times.  The discussion topic was Democracy, Populism, and Capitalism:  Are They Compatible?

Howell began by defining populism in the negative.  He asserted that populism is not a commitment to standing up for “the little guy.”  Rather it stands in opposition to the political elites and the existing political order.  Populists push back against existing political institutions.  It expresses itself in claims of who “true Americans are” and a need to “return to our political heritage.”  Populists see political institutions as “the swamp.”  It arises out of political failure to deal with population movements, technological change and income inequality.  These things lead to harm and disaffection.

Rajan responded by addressing income inequality, that the returns to education and skills have increased.  It is hard for some people to get to the first step on the ladder.  Poor family structure, bad schools and bad work habits combine to put people behind.  Nobel Laureate James Heckman says that many people are doomed by the age of 5.  He also asserted that much of this is driven by technology, and that is nobody’s fault.  Governments have not remedied lost opportunities.  In Rajan’s view, Davos does nothing.  Rajan is warmer toward nationalism (as am I).  It has become a dirty word but can be synonymous with patriotism. 

Howell’s take on immigration was that in the main it is good for the country, but when government doesn’t control it, it let’s the populists step in.  It is not necessarily a good for all.

Rajan sees more upside to social media.  It is easier to get in touch and get together with people and we will use technology to deal with some of the bad sides.  He sees that it will strengthen relationships.

Both Brett Stephens and William Howell believed that social media was instrumental in getting Trump elected.  Stephens said that he got elected because he was good at Twitter.  Howell believed that Trump got a free pass from the media.  Rajan took a middle approach and said that there were things that Trump said that resonated with the electorate.

It was clear that both Stephens and Howell are more wary of populism.  Rajan was more positive.  In the final analysis, he said, the virtue of populists is that they raise the right questions.  They might not have the best answers, but they raise the right questions.   They are doing a service when they say that the elites have gotten too cozy with one another. 

Rajan said that under a populist president we are growing at 2.5% while not spectacular, is still pretty good and we are at 3.7% unemployment rate.  Despite all the angst, things are pretty good.

My own sympathies were with Rajan.  He is loathe to finger point, ever.  His book on the Great Recession, Fault Lines was the best of its kind.  In it, he blamed the system while others were blaming government, the banks or the borrowers.  His position was that people were acting rationally based on the financial system that was in place. Likewise, Rajan’s view is that the emergence of populism is rooted in economics and technological changes.  I agree.  It is easy for the Left to write off populists as xenophobic, nativist, Islamophobic, or whatever, but the fact that we are undergoing seismic shifts means that uncontrolled immigration, especially from either places that have cultures that may have compatibility issues with ours or peoples that may need extended periods of state support will meet with some opposition and resentment.

Brett Stephens did say that the most valued thing he did intellectually was to attend The University of Chicago, that his degree was the most difficult to get.  But I did leave part way through the Q & A session.   While attending a University of Chicago event is often illuminating, there is a downside.   University of Chicago grads are not bashful about having their ideas heard and unless they are tightly controlled, Q & A sessions can deteriorate into long winded pontifications from the audience, and those people tend to forget that we came to hear the ideas and insights of Rajan, Howell and Stephens and not theirs.