By Michael Every of Rabobank
In 2018 I spoke on the Thai political economy at the UN in Bangkok. I argued that what were then perceived as uniquely turbulent Thai politics were arguably international trend-setters. If one ran an economy polarized between a globalized elite and a left-behind rural populace; with low unemployment but low wage jobs; and relied on asset bubbles not productive investment; and elected a charismatic, highly controversial, establishment-shaking billionaire starting with the letter ‘T’, then bitter political division --onto the streets and into public buildings-- might not remain a Bangkok phenomenon. Thai media now agree.
Rightly, the conversation still revolves around what happened in D.C. on 6 January. What we do not hear are the usual American homilies about coming together and unity. Quite the opposite. There is talk of the 25th amendment or impeachment, and of “domestic terrorism”. That is as an opinion poll showed 20% of all voters and 45% of Republicans supported the siege of the Capitol. Heuristics elsewhere show that you cannot expect to run ‘democratic BAU’ with those kind of numbers saying they don’t buy into the system. As Philip Marey underlines again in his latest note, this is a bitterly polarized society that no economic stimulus package is a solution for.
Tablet Magazine also has a worrying take in “The Five Crises of the American Regime” by Professor Michael Lind. Agree or disagree, it is worth a serious read:
“In the past eight months, two Capitol Hills have fallen [Seattle and D.C.]. Two shocking events symbolize the abdication of authority by America’s ruling class, an abdication that has led to what can be described, not without exaggeration, as the slow-motion disintegration of the USA in its present form…Many Democrats claim that Republicans are destroying the republic. Many Republicans claim the reverse. They are both correct…. As a rule, comparisons between the US and Weimar Germany or late republican Rome are misleading, but when rival elite political factions tolerate or encourage mob violence in the streets, the comparisons might be forgiven.”
Lind then goes on to list the US’ Five Crises:
Political: “…the centralization of power in a small number of ambitious elite factions and coteries…American politicians today tend to be picked by the small number of zealots of various kinds who show up to vote in party primaries. The national parties themselves are no longer functioning organizations, but mere brands.”;
Identity: “Neither America’s partisan leaders nor their militant followers are any longer restrained by a common sense of cross-party solidarity and shared American patriotism.”;
Social: “People who are rooted in real communities…do not make good foot soldiers in partisan armies deployed by remote elites who are battling for control of government offices. They have jobs they can’t miss and children they have to pick up from school and errands to run..”;
Demographic: “The rise of unmarried and childless young Americans in their 20s and 30s who can be mobilized by left and right for unrestricted partisan warfare…”; and
Economic: “The strategy…, encouraged by neoliberal Democrats and libertarian conservative Republicans alike since the 1970s, has been to lower labour costs in the US…American business has also driven down wages by smashing unions in the private sector, which now have fewer members—a little more than 6% of the private sector workforce—than they did under Herbert Hoover.”
For now the public debate and headlines remain instead of the latest “coup d'état” (and even Hitler’s 1923 failed Munich Beerhall putsch); and of the “coup de grâce” of removing Trump from office, surely risking further polarisation when he will leave in less than two weeks anyway. Fortunately, there was no risk of an actual coup of the kind seen in Thailand dozens of times (and it deserves noting that in the Thai case recent coups were against populist outsiders, not led by them.)
Indeed, Edward Luttwak --the author of the literal handbook on coups-- has criticized Trump for not being conciliatory, and earlier, but also argued “…during the Capitol Hill riot, Wall St went up – traders were unmoved by TV hysteria” as there was never any chance that Biden would not be sworn in on 20 January. Ask yourself, would the markets really have rallied Wednesday if an *actual* US coup had been happening?
Perhaps! Because to add another crisis to Lind’s list, two coups arguably already happened:
- One was financialisation / central-bankification. Markets will tell you it’s all about the Fed, not the head (of state). It doesn’t really matter who sits in the Oval Office as long as the Fed prints dollars with previous occupants on them. We also all know economies without free elections are perfectly acceptable to Wall St; but asset bubbles as economic policy makes central-bankification part of the polarisation problem not the solution: who voted for this?
- Second, rather than the head of state banning media, today the media bans the head of state: Trump, still president, is now officially off Facebook, which had equally little problem keeping major election-related news off ahead of 3 November. We all know that economies without free speech are perfectly acceptable to Wall St too; but it will only deepen political polarization as people move to new politicized platforms, neutral ground disappears, and distrust builds further.
As Lind concludes:
“The painstaking reconstruction of the United States, if it takes place,…is not one to be met by 10-point plans and PowerPoints. First we must agree on the causes of the collapse of the latest in a series of historic American regimes.”
Well, Wall St does *not* like things that don’t involve 10-point plans or PowerPoints; it usually doesn’t even like 9 points of a 10-point plan. Yet Lind’s proposal would be a good start, even if it isn’t going to happen.
In the meantime, either buy into the reflation trade on the presumption that the new administration will at least attempt to use economic stimulus to bridge the political divide; or expect the worse and just buy Bitcoin, which is at over USD40,000 as even conservative pension funds are apparently now getting interested. (“So, Mr and Mrs Smith, we’ve looked at your risk appetite and retirement date, and we think that overall it’s best to plan for a post-nuclear apocalypse scenario. Have you considered studded-leather hot pants and bondage mask producers? And have you thought about gasoline and water at all? They are going to be quite the ticket!”)
But to end a troubling week on a positive note, Elon Musk is now the world’s richest man - provided he never sells any of his shares. So nature is healing.