The FT Asks "Is This The Elites' "Marie Antoinette" Moment?"

Authored by Wolfgang Munchau, originally posted at,

Some revolutions could have been avoided if the old guard had only refrained from provocation. There is no proof of a “let them eat cake” incident. But this is the kind of thing Marie Antoinette could have said. It rings true. The Bourbons were hard to beat as the quintessential out-of-touch establishment.

They have competition now.

Our global liberal democratic establishment is behaving in much the same way. At a time when Britain has voted to leave the EU, when Donald Trump has been elected US president, and Marine Le Pen is marching towards the Elysée Palace, we — the gatekeepers of the global liberal order — keep on doubling down.

The campaign by Tony Blair, former UK prime minister, to undo Brexit is probably the quaintest example of all. A more serious incident was the forecast by the Office for Budget Responsibility in the UK, which said last week that Brexit would have severe economic consequences. Coming only a few months after the economics profession discredited itself with a doomy forecast about the consequences of Brexit, this is an astonishing reminder of the inadequacy of economic forecasting models.

The truth about the impact of Brexit is that it is uncertain, beyond the ability of any human being to forecast and almost entirely dependent on how the process will be managed. “Don’t know” is the technically correct answer. Before the referendum, Project Fear was merely a monumental tactical miscalculation. Today it is stupidity. One of the debates was whether people should be listening to experts. We have moved beyond that. Because of a tendency to exaggerate, macroeconomists are no longer considered experts on the macroeconomy.

Out-of-touch former leaders and the economic establishment are not unique. In Italy, the political establishment is considering amending recently modified electoral law solely to keep Beppe Grillo’s rebellious Five Star Movement from power. This is intertwined in a complex way with next Sunday’s referendum on constitutional reform.

The electoral law that came into force in July gives the strongest party quasi-dictatorial powers. It was a stitch-up agreed in 2014 between Prime Minister Matteo Renzi’s Democratic party and former prime minister Silvio Berlusconi’s Forza Italia. Neither man then believed the Five Star Movement would ever be in a position to shake the cosy duopoly. No matter how the referendum on constitutional reforms ends, expect to see one of the most glaring efforts of gerrymandering in modern politics. But Mr Renzi’s problem is not the Five Star Movement. It is the voters.

The EU itself, too, is doubling down whenever it can. The trade agreement with Canada, and the yet to be concluded Transatlantic Trade and Investment Partnership, are about as popular today as the stationing of medium-range nuclear missiles in the 1980s. A popular insurrection is under way against them because people fear a reduction in consumer protection and a power grab by multinationals.

Why is this happening? Macroeconomists thought no one would dare challenge their authority. Italian politicians have been playing power games forever. And the job of EU civil servants is to find ingenious ways of spiriting politically tricky legislation and treaties past national legislatures. Even as the likes of Ms Le Pen, Mr Grillo and Geert Wilders of the far-right Dutch Freedom party head towards power, the establishment keeps acting this way. A Bourbon regent, in an uncharacteristic moment of reflection, would have backed off. Our liberal capitalist order, with its competing institutions, is constitutionally incapable of doing that. Doubling down is what it is programmed to do.

The correct course of action would be to stop insulting voters and, more importantly, to solve the problems of an out-of-control financial sector, uncontrolled flows of people and capital, and unequal income distribution. In the eurozone, political leaders found it expedient to muddle through the banking crisis and then a sovereign debt crisis — only to find Greek debt is unsustainable and the Italian banking system is in serious trouble. Eight years on, there are still investors out there betting on a collapse of the eurozone as we know it.

Mr Renzi could have used his ample political capital to reform the Italian economy instead of trying to cement his power. And imagine what would have been possible if Chancellor Angela Merkel had spent her even larger political capital on finding a solution to the eurozone’s multiple crises, or on reducing Germany’s excessive current account surpluses. If you want to fight extremism, solve the problem.

But it is not happening for the same reason it did not happen in revolutionary France. The gatekeepers of western capitalism, like the Bourbons before them, have learnt nothing and forgotten nothing.