The Problems Liberal Democracies Face: Information And Economics

The push for equality is why populism has taken hold across the western world

This is my response to a fantastic article by our good friend John Mason on the root causes and solutions to the problems with Liberal democracies and pressures they face. Please read his piece prior but my response can be read stand-alone

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Without writing a thesis on this topic, which one easily could, allow me to give you my two cents worth.

The rise of populism around the globe has been driven by one
basic structural issue. It revolves around income inequality but not in the way that most people think about it. Income inequality has always existed but up until the 20th century, true inequality was driven down racial and gender lines. Western institutions for centuries revolved around legal systems designed to advantage white men. This kept the labour pool tight, ensured the corridors of power were dominated by white men in the key economic ones i.e. the US and Europe and gave them an essential monopoly over education and technology. This kept women and non-whites economically supressed. As America (and the French for that matter), embraced liberal /libertarian ideals of equality, legal freedoms were awarded and by default, educational and eventually economic benefits started to accrue and this began to flood the globe with smart people seeking economic opportunity. The eradication of slavery, universal suffrage, the civil rights movement, Title 9 etc all increase the opportunities for all except white men and the structural, legal and economic advantage awarded to white men over the centuries went away. Combine this with globalization and the rise of the web and the world have been flooded with smart labour and entrepreneurs. The supply of talent has skyrocketed while aggregate opportunity have stayed roughly constant, using global GDP as your guide.

Income inequality has widen but it is most pronounced with white rural men. You often hear that people believe that their opportunities wont be as great as their parent / grandparents. Do you ever hear an African American who can now go to college or a Chinese student say this? Technology is shattering old business models but many of these business models were operated majority owned and operated by white men in the US and Europe, models that were established when women and “foreigners” didn’t have economic clout. The world is an equal playing field but to achieve that equal playing field, someone had to lose and that was white men.

This isn’t just a US problem but a European, Australian and Canadian one. Notice how populist protests often have a racial tone. African Americans didn’t vote en masse for Trump or Marine Le Pen or for UKIP. Anti-globalisation is the domain of white people, generally older who are blaming the level playing field on immigration and the elites when it has been the elites who put in place the legal frameworks to ensure the homogenous has an structural economic advantage. This doesn’t exist anymore and many don’t like it.

The solution? As you infer, competition isn’t going away. Everyone needs to compete on the level playing field to survive.

The skills to compete are the only solution. Education etc is the big picture solution but frankly, I think we are heading down the path of the living wage. Read Homo Deus. There will just be a shortage of “people” opportunities going forward because tech wins. Under employment will be the norm going forward. Anti-trade policies can help because they slow the structural rate of growth and reduce opportunity. Anti-immigration policies miss the point. The Mexican immigrant isn’t stealing your job, your sister and your smart african american neighbours are.

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