Friday, 2 May 2014

How Big's Your Boat?

Gillian Tett made an interesting observation recently about the different reactions to Thomas Piketty's Capital in the Twenty-First Century in the USA and Europe. Over the pond, the book is a bestseller and the object of both awestruck admiration and dismissive contempt. For us cynical old worlders there is a feeling that his empirical analysis is excellent but the thesis is hardly a surprise. That the state and economy were being "reformed" to benefit patrimonial capitalism was crystal clear in the UK by the mid-80s, and only the credulous would have believed that the tide of money washing through the City thereafter was ending up in the pockets of ex-barrow boys rather than the usual elites.

In the US, Reagan's "Morning in America" schtick extended the shelf-life of the American Dream, but realisation appears finally to have dawned there as well. Tett suspects "that the real reason for Piketty’s rock-star reception is not the quality of his numbers but the fact that he has forced Americans to confront a growing sense of cognitive dissonance. Nearly two-and-a-half centuries ago, when the country’s founding fathers created the nation, they proudly believed they had rejected Europe’s tradition of inherited aristocracy and rentier wealth. Instead, it was presumed that people ought to become rich through hard work, merit and competition".

This immediately reminded me of the film The Patriot, which sought to repeat Mel Gibson's Braveheart formula of the big-hearted little guy taking on the empire, with only his preternatural fighting skills and a few scruffy mates to rely on. This had an unintentionally hilarious scene where the dastardly Brits discuss carving up Ohio as the spoils of a new landed aristocracy, an act treated by the film as one more in a long line of atrocities. In fact, the historical analogue most regularly used to express contemporary American anxiety is not the embattled Colonies but the late nineteenth century Gilded Age, a particular favourite of Paul Krugman.

The term, part-coined by Mark Twain and implying superficial opulence, refers to the three decades between the end of the Civil War and the start of the twentieth century, which saw the USA's spectacular growth as an industrial power and its debut as a global actor following the Spanish-American War. It was marked by the accumulation of massive fortunes by "robber barons" such as Andrew Carnegie and John D Rockefeller, enabled by laissez-faire policy and pork-barrel politics. The inevitable crisis of representation led to passing fears of socialism and anarchism, and more lasting attempts to divert popular anger through the "yellow press", whose finest fictional incarnation remains Citizen Kane.

There are two reasons for the popularity of the Gilded Age trope today. First, even though it was a period of massive inequality, it was also an era of rapid growth and burgeoning opportunity. The salient point about Carnegie and Rockefeller was that they lived the dream, dragging themselves up from poverty to riches. Second, the Gilded Age was succeeded by the Progressive Era, which was a self-conscious attempt to modernise the governance and culture of the USA between 1896 and 1929. This was the age of scientific management, prohibition and cultural propriety (the demotic Twain being succeeded by the elitist Henry James and Edith Wharton). While I doubt Paul Krugman wants to ban alcohol, there is an obvious parallel with liberal hopes that the last 30 years of growing inequality may give way to a more enlightened era, albeit without the sting in the tail of another Great Crash.

In reality, the Progressive Era marks the subterranean start of the long neoliberal age, though that term would not gain currency for many decades. An emblematic development was the restraint of abusive capitalism through anti-trust laws and improved consumer protection, though organised labour was vigorously resisted: the preferred economic model was the enlightened despotism of Henry Ford and the esoteric financial magic of JP Morgan. This was topped off by the "popular capitalism" of mutual fund share-ownership that would fuel the 20s boom. The idea of government as a market regulator and the protector of "ordinary people" dates from this time, as does liberal interventionism (famously embodied in Woodrow Wilson's League of Nations) and the growth of the international technocracy (e.g. standards bodies like the ISO) that would ultimately enable globalisation.

The reality of the Progressive Era was that wealth was barely inconvenienced and increasingly held up for public praise through the philanthropic funds established by the likes of Carnegie and Rockefeller, which served to project American soft power internationally as well as normalise elite interests domestically. The funds also served to obscure the extent to which the founders' fortunes continued to cascade down the generations as private wealth. Though war and reconstruction certainly reduced the relative wealth of the elite, it did little to erode their capital base, hence the resilience shown over the course of the twentieth century.

While I think Tett is right that the different reaction to Piketty in the USA is indicative of "a growing sense of cognitive dissonance", I don't think the underlying anxiety is that Donald Trump will become the Duke of New York. It's not even a concern about inheritance or rentiers: this is a society that love-hates Paris Hilton and Kim Kardashian, after all. It is rather a fear that as social mobility dwindles, the future increasingly looks like a caste system based on exclusion and curtailed rights, an anxiety played out in many modern films, from Elysium to 12 Years a Slave, as well as in the tussles of the Supreme Court.

Perhaps the most interesting recent take on this is another film, Noah, which explores the theme from the opposite perspective: an extended family, threatened by the dissolute mob, reliant on Golem-like servants, and led by a patriarch willing to kill his grandchildren and banish his son to satisfy an angry god. And he's got a massive yacht. It's easy to laugh at the 0.1% casting themselves as an embattled minority ("our critics are Nazis!"), but it does not suggest a healthy society.

1 comment:

  1. Note to self: Larry Summers and Brad DeLong on the significance of Gilded Age institutional and political arrangements for US economic pre-eminence in the 20th century; and how similar challenges are now presented by the "New Economy" (the paper was written in late 2001), particularly in respect of IP.
    The ‘New Economy’: Background, Historical Perspective, Questions, and Speculations