(Original caption) Caricature of William Bryan (1860-1925), populist presidential candidate in a “mighty dangerous experiment.” Undated engraving showing Brian trying to split a gold dollar at the back of a man’s neck without injuring him.
Bettmann Archive
On vacation, I caught him in a frenzy online debate over whether the poverty line in the United States should be set at $140,000; Only about 12 percent of atom wage earners earn more than $140,000, so this standard would mean 88 percent of working Americans are in poverty.
Others already have sharp out the many technical ways in which this idea is flawed, and I don’t have much to add to this part of the discussion. The idea is so ridiculous that it deserves little serious consideration.
But this episode is a great window into populism. While most people did very well for decadespopulists claim that almost everyone was doing badly. And Americans seem to believe them because they think everyone else he was doing badly. Populist politicians then play on people’s fears and promote drastic policy solutions, mostly those that suit their priorities.
But people are mistaken for “everyone else” and some of these populist policies risk killing the goose that lays the golden egg.
Free enterprise economies, more open to trade and legal immigration, fare better than closed nationalist alternatives. While the facts on this point are clear, populist politicians have a long history of blaming foreigners, big business, and big finance for all the problems that supposedly ruin everyone else’s lives.
Trump populism It’s nothing new
None of these follies are unique to Trump-era populism. Indeed, it is not even unique to populist politics governing the overall economy. Federal policy that regulates financial markets offers a lot historical examples of how quickly stupid ideas spread, how dangerous they can be and how long they can last.
Perhaps the most telling example is the story surrounding the 2008 financial crisis, which was used to justify the Dodd-Frank Act. It is still widely believed that the crisis was caused by the deregulation of financial markets in the 1980s and 1990s. But financial markets were not unregulated during any part of the 20th century, and the Dodd-Frank Act was largely a step in the wrong direction—it added tons of regulations, but did little to address what caused the crisis.
Great crashes aside, centuries of history have documented the love-hate relationship people have with financial markets. This complex relationship, of course, makes it a rich target for populist agitation.
Populism always targets financial markets
Financial markets help level the financial playing field for people who are less well off — but only after they take financial risk. Many of these risks don’t work out so well, so it’s no surprise that people tend to distrust, if not hate, financial markets. But they shouldn’t hate the financial markets because this risk is no different than the risk any business owner takes when investing in their business.
Even where the educated are supposed to evaluate the evidence objectively, the love-hate situation doesn’t improve much.
For decades, academics have characterized finance as unproductive and wasteful, if not outright dangerous and malevolent.
Even John Maynard Keynes, one of the most famous economists of all time, vilified financial markets as the cause of the Great Depression in little more than reflexive revulsion. Decades later, Nobel Prize-winning economist James Tobin doubled down, complaining about derivatives and protesting “speculation on the speculations of other speculators” in financial markets. But, like Keynes, he never determined how much was too much, or how to objectively separate investment in “real” assets from speculation.
In 1998, Nobel laureate in economics Merton Miller struck back. He argued that whether financial markets contribute to economic growth “is a proposition almost too obvious for serious debate.” THE evidence is very clear—countries with developed financial markets do better than those without, and financial markets are inseparable from American prosperity. (It’s also kind of funny that, historically, American populist politicians complain about the financial industry and on the public’s lack of access to credit.)
However, people have believed in the story of fraudulent financial markets for decades. Although this narrative contradicts the data, it explains why they believe most people are not very well off. More often than not, they ignore the evidence in favor of things that just look or sound right.
Populism depends on fiction
The populism of the Trump era is the culmination of these sentiments and is full of examples. In his 2020 book, “The Stakes: America at the Point of No Return,” author Michael Anton laments that the California of his parents and grandparents, “the greatest middle-class paradise in human history,” is long gone.
To support his claim, Anton asks his readers to evaluate their lives through the lens of “The Brady Bunch,” the popular television sitcom that ran from 1969 to 1974. It’s a clever idea because people, especially those over 40, can easily identify with the show. It helps them connect to Anton’s idealized past, when “any man could earn a living and raise a family on one income almost anywhere.”
It should be obvious, but “The Brady Bunch” was a fabrication. It wasn’t about a real family or a career. Unlike the show, it was very difficult – as it is now – to earn enough money to raise six children and live as a maid in a huge house in a southern California suburb.
Mike Brady wasn’t a real architect, and the show tells us nothing about how hard life is now compared to 1970, for architects or anyone else. (And I remember an episode where Carol complained about the high price of butter, but I digress.)
Fiction makes bad politics
Anton’s book is just that a exampleand the latest explosion over the idea of the $140,000 poverty line shows how seamless this narrative of doom and despair has become.
The dangerous part, however, is that members of Congress and the White House are using these stories to implement dangerous policies. They don’t just have conversations.
The core of the populist plan is to essentially tear down the free enterprise system and replace it with something completely different. The administration wants immediate government bets in private companies and want to rule protection international trade, and to some extent migration.
The whole thing is contrary to the American experiment and will give government officials more control over the lives of Americans. This approach tends to work poorly for people who are not in power.
It’s even worse that these awful policies are based on fiction. Just like the Brady Bunch, they are based on stories, and not particularly good ones. It’s hard to see, even fifty years later.
