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Laying a few myths to rest

The middle classes in the UK and America are getting richer again. Inequality is diminishing. There are many problems, of course, but they are primarily down to the fact that the impact of the Great Recession ended up dragging on for years, with the previous misallocation of resources and capital wiping out a decade’s worth of productivity gains.

Allister Heath

So why the rise of populism? While wages are finally improving, there has been no return to boom times. Millions of younger people are despairing at exploding housing costs, fuelled by government-created low supply and rock-bottom interest rates; older workers are facing a nightmarish pensions crisis, also created by ultra‑loose monetary policy.

Voters feel culturally disconnected; they rightly voted for Brexit because they realised that democratic control was being destroyed by technocratic unaccountability. The welfare state’s inherent defects mean that people feel caught up in a Hobbesian war for resources – school places, hospital beds – of all against all, especially with high levels of immigration. But the middle classes should direct their ire towards politicians and central bankers, not free markets or technology.

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8 comments to Laying a few myths to rest

  • Paul Marks

    There are endless attacks on inequality in the media and in the education system. However, very few of these attacks mention government backed Credit Money expansion. This is an odd as it has been known that Credit Money expansion tends to favour the rich at the expense of the poor (even after the boom-bust has worked itself out) since Richard Cantillon back in the 1700s In short that there is (not is not) massive artificial inequality in this world -as the “financial system” Credit Bubble economy has never been more distorted than it is now.

    This is actually where Putin’s boy Max Keiser scores – because he does denounce government backed Credit Money expansion (the Federal Reserve, the Bank of England, the Bank of Japan, the ECB and so on) – but then he suggests irrational policies (basically ever more statism) in its place. An interesting example of someone rightly identifying the problem – but then responding wrongly.

    As for the rise of Populism.

    People who think most Americans are doing well are in terrible error – the United States (whatever official statistics may say) is in a terrible mess – and the voters know it. And they also know that Mrs Clinton presents more-of-the-same (without the “cool” charm of Mr Obama – whose personality and manner really does seem to appeal to many people).

    Mr Trump’s policies?

    Awful – wild “infrastructure” government spending (just like Mr Obama and Mrs Clinton), and Trade War.

    “But Paul the free trade deals are not really free trade”.

    I know that – but Mr Trump hates the free trade treaties because they are too close to free trade – not because they are too far away.

    People are desperate (and rightly so – regardless of the official statistics) – but to clutch at Donald J. Trump is like a drowning person clutching at a snake.

  • PersonFromPorlock

    Again, Trump support isn’t support for Trump, but against the political establishment. Even if Trump greatly disappoints in office, his winning the election keeps the political force represented by his supporters intact, and they will find another champion.

  • john

    Millions of younger people are despairing at exploding housing costs

    This may be true in other places, Europe, a few big coastal cities in the US, but from the middle America point of view it is not that simple. Something odd is going on.

    I’ll spare you the long-winded version and simply say that my brother and I own a house in an inexpensive (but not terrible) neighborhood. It rents for $1000 a month. If someone bought it, the mortgage payment would be in the neighborhood of $400. People are paying a premium *not* to own the house.

    I *think* there is a kind of circular reasoning going on: “I’m not going to buy it because nobody buys houses anymore, and so, if I do buy it I’ll never be able to sell it again…”

  • Watchman

    A simple answer to the question of why the rise in populism is that whilst the crisis has gone (although not necessarily if you listen to those who have been calling for double-dip recessions, post-EU withdrawal crashes and many other similiar things – and people do hear the doom-mongers), the systems that created it have not. Those in charge are trying to carry on regardless, whilst people seem less willing to do so and more open to change. And in most systems, the change is coming from outside (although I suspect we’ll find that in the UK the Conservative Party manages to do its normal trick and follow the change enough (whilst also resisting it in places) to come out on top).

  • Thailover

    “The middle classes in the UK and America are getting richer again. Inequality is diminishing.”

    Why should different incomes be “equal”? Why is it perceived as an injustice? Allister Heath doesn’t seem to understand that wealth is created by those who do so.

    “…down to the fact that the impact of the Great Recession ended up dragging on for years, with the previous misallocation of resources and capital wiping out a decade’s worth of productivity gains.”

    Misallocation of whose resources? Whose capital?

  • Alisa

    If someone bought it, the mortgage payment would be in the neighborhood of $400. People are paying a premium *not* to own the house.

    That’s because they don’t get approved for the mortgage.

  • Paul Marks

    Actually the “political force that Trump represents” are worse than Mr Trump himself.

    They are the “Alt Right” – and they are evil. They represent a “right wing” version of leftist “Identity Politics” of sex and race. They are a mirror image of the left – the Black Flag to the leftist Red Flag. Both vile.

    Mr Donald J. Trump is himself NOT part of the Alt Right – he is just a New York City Conman. It is “the political force he represents” that is the evil.

    There will be a three corned fight after the November election – within the American “non left”.

    The establishment – with their darling Senator Marco Rubio (who will be reelected in Florida).

    Then there will be the “Alt Right” – who will not go away even if Donald Trump is soundly defeated.

    Lastly there will be people who really do want a smaller government (which the “Alt Right” do NOT).

    People such as Senators Rand Paul, Mike Lee and Ted Cruz.

    Plus Russ Johnson in Wisconsin – if he survives.

  • Laird

    Thailover, no one said “income” inequality. You read that into it. There are two principal forms of economic “inequality”: income and wealth. I don’t much care about income
    inequality; as you said, it is largely a legitimate reward for “those who do”. But wealth inequality is actually a serious issue. It’s a direct consequence of government subsidizing the capital markets (through Quantitative Easing and similar activities), and it further concentrates wealth in the top 1%, who owns most financial assets. And that wealth is by no means the consequence (or reward) for “doing”, but rather for political “pull”.

    As to “misallocation of resources”, haven’t you been paying attention? Government interference with the markets always results in the misallocation of capital; indeed, that is its specific purpose. And it has been occurring at warp speed for the last 8+ years.