Life is a circle unlike a linear graph which we are taught especially in economics. The economic imperialism is slowly ending as people are increasingly rejecting the advice of economic experts. And all this rejection is not coming in Asian economies but in their own homes. Now they can no more say these other countries just don’t understand principles of economics.
Jeffry Snider (of Alhambra Partners, Florida based fund!)has a great piece on the topic. He lashes out at a recent piece by Greg Mankiw:
Very few people are against the concept of free trade, and those who are aren’t worth listening to. As a matter of economics (small “e”), free trade was established as a universal good that benefits all sides in one of the first scholarly debates that in the early 19th century helped turn political economics into a separate study meriting its own discipline. Trade has marked the upward surge of humanity out of the dark ages and feudalism toward republican democracy and dignity.
What people all over the world are objecting to today is the economic criminality that has masqueraded as the supposed benefits of free trade. The open borders for the flow of goods has been turned on its ear; it is now just open borders for the flow of finance. This is not in any way associated with free trade, though the reality of it has yet to reach the economics profession.
On Sunday in the New York Times, Harvard economist N. Gregory Mankiw wrote what is truly a remarkable piece of self-denial, extraordinary in that his contempt for anyone not an (elite) economist is scarcely cloaked in favor of his own self-regard. He writes:
Voters clearly aren’t listening to economists. In a recent poll, an overwhelming number of leading economists agreed that Brexit would most likely lower incomes both in Britain and in the rest of the European Union.
This statement can be taken two ways: that economists have some explaining to do, or economists shouldn’t bother explaining themselves. Mankiw chooses the latter.
In the long run, therefore, there is reason for optimism. As society slowly becomes more educated from generation to generation, the general public’s attitudes toward globalization should move toward the experts’. The short run in which we find ourselves now, however, is another story.
In the days before the internet, media dissemination was forced through narrow bottlenecks. The hazards of Journalism (capital “J”) meant an emphasis on standards of information and the people giving it, not all of which was negative. Editorial pressure meant verification, but that was a double-edged sword. If an economist from Harvard makes claims that are at odds with everything around him, they are more likely to be published anyway because he has checked all the editorial boxes for big “J” journalism. If some unknown blogger chooses to disagree and point out all the ways in which he is utterly contemptible, that never saw the light of day.
In this new media environment the bottlenecks are much more easily overcome; the public is desperate for answers from people who aren’t full of it. We don’t need the New York Times or CBS News to go out and “filter” what is and what is not; Google is now the editorial method of choice, and it opens up the possibilities that to the elite are frightening.
This democratization of information is a direct challenge to particularly economists in 2016 because the economy in 2016 is nothing like what they promised several years ago or even last year. Rather than confront their own shortcomings, economists lash out at the “barbarians” attempting to destroy their beautiful “science.”
He says we should not blindly look at ivy league credentials:
There is simply no way to reconcile Mankiw’s obsession with “free trade” as if it were actually free trade. What was promised is not what was received; economists’ predictions all failed. Even though Ross Perot was “more wrong” about why, his prediction actually proved correct. The eurodollar system was the imminent factor that none of them perceived, and many if not most still do not appreciate.
The difference between 1992 and 2016 is that we are no longer forced to listen to the Mankiw’s of the world exclusively. The opening of the internet means that people can get useful information from someone who never set foot inside Harvard, MIT, or Princeton, where credentials matter much less if not at all; and that upsets them on a personal level as economists’ own failures come back to haunt them as they increasingly lose their grasp on the population at large. Economists own this depression and the populace is finally starting to realize it as an empirical, established fact of evidence entered outside the legacy media in rejection of “free trade” theories.
“Voters clearly aren’t listening to economists.” If only the internet had been born a few decades earlier.
Lessons for India? Plenty of them. But we will never learn. Our idea of economic competency is just directly connected to the very names which are now being rejected by the people who we aspire to be. We will also learn from a crisis in future..