The re-emergence of the Jacksonians

We’ve pelted Donald Trump with all the withering humor we can muster, and even though it is hard to imagine an easier target for elitist humor, with his blustering narcissism, his intellectual inconsistency, his questionable business record, and his truly stupid television show, above all of which rages his ferocious hair, it’s been so frustrating. Although we have shown again and again that he is dishonest, unfit for the presidency, and incapable of office, not only has he been able to survive, but he actually seems to thrive on the relentless series of what for any other candidate would have been knockout blows. Donald Trump’s supporters are indifferent to our wit and to our arguments, and we’ve convinced ourselves that this only proves what probably didn’t need much proving, that his supporters are racist nitwits and that they support Donald Trump for reasons that are too trivial to matter. This frightens us because collectively they seem to be bringing something new to American politics.

But we are wrong on all counts. Most of Trump’s supporters are not racist nitwits, and not only do they have legitimate reasons behind their support of Donald Trump, in fact they are very important ones. We are finally starting to see this. We are wrong, however, to see recent events as some kind of turning point in American history. The outrage which the American political establishment is being rejected certainly brings dangers and risks, but much fewer than we think because in fact we’ve been here many times before, and by remembering our history we can make some pretty good guesses as to how this all of will evolve.

Trump’s supporters belong to what we sometimes call the Jacksonian tradition in American history, and their history, which of course pre-dates the presidency of the man who gave them their name, combines the impressive with the shameful. Like Andrew Jackson himself they have been the strongest defenders of some of our most fundamental American values while undermining others. While their social peers in Europe have largely accepted their limited role in politics, except from time to time when they rise up in sans-culottes rage, the Jacksonians always demand to be heard when they feel their rights are threatened.

But while he may count on the support of the Jacksonians, Donald Trump is no Andrew Jackson and soon enough, like most of his predecessors, he will abandon his followers or be abandoned by them. Because Jacksonians lack sophistication, and tend to be largely uneducated, at times when the small victories they have worked for are threatened to the point of creating deep-seated anxiety it has always been easy for scoundrels to exploit them, but as one of the greatest of their heroes reminded us, you can’t fool all the people all of the time. The Jacksonians have been the defenders of American democracy even when their history has been marred by misjudgment, and although Donald Trump’s time will be limited, the effect of Trump’s supporters will be far-reaching, and probably positive for the US in the longer term even if it risks foolishness in the short.

I won’t pretend I’ve ever been a Jacksonian. In the early 1980s, when I was getting my Ivy League education, my brother and I lived in Manhattan’s notorious Alphabet City and ran a music space on Avenue C and 3rd Street. One of the friends we made in that heavily Dominican neighborhood was Dani, a bright, uncontrollable but ferociously charming 15-year-old, who at some point within a few months of our meeting him suddenly seemed to have constructed us into his family. As we got to know Dani, we quickly learned about a life very alien to ours but which he took for granted. Dani’s daily life combined what to us was the romance of New York street hustling and the sheer awfulness of life for a kid living in one of the worst neighborhoods of the city. It consisted mostly of petty crime and street hustle, avoiding trouble with local gangs and only picking fights you knew you could win.

He didn’t stay often with his Dominican mother but, until my brother and I managed to get him a tiny apartment in the basement of our building, Dani usually slept in Lower East Side squats, friend’s apartments, and even sometimes in a wooden box tucked away on a side street. He went to school occasionally, and until we put him on an allowance he depended mostly on hustling, shoplifting and small burglaries to earn spending money (in fact we met him when he tried to charm my brother and me into not noticing as a friend of his made off with a crate of beer from our bar). When he was 16 he got caught up in the crack epidemic sweeping New York and it took us more than a year, and a tough year at that, to get him to stop.

Dani never knew his father but had been told that his father was half African-American and half Dominican, although if Dani wanted to seem white he easily could. Over time we met his two younger sisters, who both eventually became prostitutes and junkies, and both eventually died of AIDS before Dani turned 25. His older brother, with the very inappropriate nickname of Hippie, was a fairly scary guy, heavily scarred and stocky, who had been in and out of jail several times. He too died early, in his mid 30s, halfway through a 12-year sentence. Hippie had been convicted of a series of armed robberies at local ATMs, and because he had forced Dani to join him as lookout – and Dani, like most of us, was far too frightened of Hippie not to do whatever he demanded – Dani was himself sentenced to four years in jail.

I was glad to see Hippie in jail because of the way he had dragged Dani into dangerous crime, but my brother, both tougher and less judgmental than I was, would send him care packages six or seven times a year. After Hippie died my brother’s girlfriend showed me some of the letters Hippie had sent my brother from jail: badly written, misspelled, with the most hackneyed expressions of emotion, which conveyed nonetheless an almost heartrending gratitude for packages that were the only evidence Hippie had during his final years that anyone on the outside cared or ever thought about him.

With that kind of background it was easy to assume away any useful future for Dani, but he had always been bright and ambitious. I think I may have been the first person ever to tell him how smart he was, some time when he was still 15, because when I did, and then had to insist that I wasn’t just making fun of him, his mouth fell open with surprise and he began beaming cockily when he realized that I was probably right. He certainly was bright, and while in jail, Dani decided he would complete his high school education. We spoke by telephone nearly every week so that he could brag about his progress, and about the facility for computers he discovered he had.

How to succeed

Over the next few difficult years after his release Dani made an amazing recovery. He got a job working in some computer capacity, and then another job driving a truck. After a lot of oats were sowed, mostly with the arty white girls who had begun moving into the neighborhood in the mid-1980s, he suddenly fell in love with a working class girl of Irish descent, and decided he had to marry her. He did, and they are still married nearly three decades later.

A few weeks after the events of 9/11, an event that shocked him terribly, I happened to meet Dani for beers when he told me, very casually and without the least sense of having done anything praiseworthy, that beginning two or three days after the Trade Center disaster, every morning he had joined the hundreds of volunteers working downtown to dig up bodies and clean up the rubble of the devastated Twin Towers. I didn’t know what to say when I heard that except that I felt very proud of him, which surprised him. After a moment of confusion, he suddenly figured out why his volunteer work was indeed sort of an impressive thing, and he beamed, realizing that he had just hustled some big points with me.

Around that time I left New York to live in Beijing, but from there I learned that Dani’s knack for computers paid off. A few years after 9/11 he wrote to me to say that he had started a small computer consulting business and had moved to the Midwest. He had three daughters, of whom he was inordinately proud, and joked about the dictatorship his wife exercised within the family. He was now a member of the middle class, and although he was much closer to the bottom of the middle class than to the top, he had achieved a social standing almost unimaginable for anyone in his family. He was very clear that his adored daughters were never going to be given the chance to return to the place from which he came.

Over the years during trips back to the US I saw him from time to time, although rarely, but I got emails and later was able regularly to check his Facebook page. His page consisted of the expected combination of family pictures, silly animal videos, and the corny jokes he had always been famous for, along with dutiful messages about the various volunteer work he and his wife (and the kids) were doing as community members and as a family. He had determined to become “normal”, as he saw it, but of course far from being normal what he had become was the result of extraordinary effort and determination.

Late last year I noticed for the first time on his Facebook page that he had taken an interest in politics, and this year I could see that the candidate of whom he seemed most to approve was Donald Trump. I sent him a joking Facebook message about his new-found interest in politics and asked him if he really was a Trump supporter. He wrote back, a little sheepishly, knowing that I was unlikely to be impressed, saying that yes, he was going to vote for Trump if he got around to voting.

After a few more kidding messages back and forth, as I expected, I could see that Dani didn’t know much about Trump’s policies and his background, even though many of his friends also supported Trump, and he didn’t mind that he knew so little. To the extent that he and his friends even noticed it they dismissed the controversy around Trump as noise, and probably to be expected by anyone who had decided to take on the establishment, which he believed Trump to be doing. He had never paid attention to politics before because he had never thought any of it mattered, but he had some idea that Trump was a successful businessman determined to toss out a political establishment for whom Dani had always seemed irrelevant.

Few people who follow the Trump saga will be surprised to learn that Dani never really was able to explain to me very clearly why he supported Trump, except to the extent that he felt a vote for Trump was a vote against everyone else, and that rather than be swayed by the howls of liberal or conservative anti-Trump rage, which he barely followed, he thought that every time some over-educated pundit attacked Trump it only reinforced his sense that Trump was probably taking on the Washington establishment. Democrat or Republican, Dani wasn’t able to distinguish among the Trump critics, and we shouldn’t be too quick to take that as evidence of how hopelessly naive Dani is when it comes to politics. As fas as he and his family were concerned there really was little to distinguish the two.

Dani’s success in life was tenuous enough that he was unwilling to admit that his middle-class life was threatened in any way by financial difficulties, but from the way he talked about how the government had mismanaged the economy, and his concern about illegal immigrants taking jobs, I suspect that things weren’t always easy financially, and the educational needs of his daughters would certainly be creating pressure for him. The things that worried him seemed to be the things that were weakening his grasp on the edges of the middle class.

Trump and the dummies

Dani clear doesn’t seem to most of us to be an obvious Trump supporter. Given his background he is clearly a tough guy who can handle himself in a fight, but I know him well enough to know that if he ever actually attended a Trump rally, which I doubt, there is no way he would be one of the trouble-makers that joined the mobs looking to beat up protesters. He probably wouldn’t have any sympathy for the protesters, but in Dani’s world you mind your own business.

So how does Dani fit in? Clearly he isn’t a racist, and just as clearly he isn’t one of those losers who flock to Trump campaign events to get reassurance that their failures are caused by someone else. He is a successful, middle-aged, middle-class family man, not terribly educated but smart, of black and Latino descent, who participates and volunteers in community events (grumbling just enough to be good-natured about it), and who cannot hide the sense of joy and even surprise whenever he looks at his daughters.

And yet he supports Donald Trump, a man who probably isn’t especially racist himself but is distressingly reluctant to reject racism, and who is so intensely narcissistic that the idea of his volunteering to help some abstract community, and for no reward, wouldn’t even register with most of us. It is almost impossible, for example, to imagine Donald Trump working shoulder to shoulder with Dani, digging through the fetid ruins of the World Trade Center to pull out bodies, simply because, as Dani tried to tell me that night over beers, he felt there was an obligation to show respect to the bodies of the people who had died there, especially the cops and firemen.

It is also hard to imagine that Dani could have much sympathy for someone who inherited a fortune. He came from a wholly dysfunctional family, and shortly after he turned 18 he was in jail for violent crime, had almost no education, and a history of crack addiction, and yet he was able to turn himself around through hard work and a total lack of self-pity. Even Donald Trump might agree – or perhaps he is narcissistic enough not to – that Dani’s pitiful success is heroic in a way that Trump’s magnificent success isn’t.

But in fact Dani’s support for Donald Trump isn’t any more surprising then the fact that Dani is almost completely ignorant of anything Trump has done or said. His support for Trump simply reflects a recurring and predictable feature of American history. There are so many historical precedents for anyone willing to read American history in light of the Trump campaign that it should have been obvious from the surge in recent years in immigration and, even more so, the surge in income inequality, that sooner or later someone like Trump was going to emerge and someone like Dani was going to support him.

In fact what is important about Dani’s support of Donald Trump is what it says about the bulk of Trump’s supporters and what it says about the ignorance of the opposition to Trump. The political establishment in the US, the press, and much of the huge anti-Trump constituency loves the excitement of the Trump campaign because Trump has given America and much of the world a wonderful gift whose value we are too embarrassed to acknowledge. He allows us to feel the thing that we most eagerly want to feel: unified and justified outrage.

Nothing seems to make us happier than when we are able to join hands to recoil together in outrage at some thing that is unambiguously detestable. We count with delight the racists who flock to Trump’s campaign speeches as fodder for our outrage, we quiver with an almost delicious anger as we note the redneck shit-kickers who show up hoping that some raghead will allow them to unleash their hatred of Muslims, we recoil when Trump measures his penis, we are enraged when Trump has the effrontery to contradict today what he said only yesterday, and then we damn the sheer stupidity of anyone who is unable to see the contradiction. We are certain that Trump’s supporters consist of the worst people in America, and there are enough of them to make him president.

But Trump’s supporters are not the worst people in America, and they will never make him president. Of course it is true that many of the worst people in America do support Trump. Why wouldn’t they? There is no doubt that if you think black people have slyly and unfairly, and no doubt at the connivance of the Jews, gained the upper hand in America and deserve to be knocked down a notch or two, or that the only important decision that must be made by the mob of which you are a part is whether to beat up the Mexican first or the Arab, or if you loathe foreigners but aren’t really sure where you stand on people from Oregon because you can’t remember whether or not Oregon is a foreign country, then of course you are going to attend a Trump rally – which gives you the comfort that a homogenous crowd grants itself – and roar with approval every time Trump says something outrageous.

But who cares about whether or not these people attend Trump rallies, except for those who are eager for the excitement and danger of showing up to protest? We must remember two things. First, these people, the dumb ones, are not the ones who are going to win Trump the presidency, or even the Republican nomination, because these people don’t vote. They aren’t smart enough to vote. They find voting to be too complicated and confusing.

Second, the dumb ones and the thrill seekers who attend the rallies only because they are cheap entertainment have locked Donald Trump into an unwinnable position. If he wants to keep them roaring their approval at ever-larger rallies, and his narcissism makes him want it desperately, Donald Trump must be outrageous every day. But our standards of the outrageous adapt so quickly that this only means that every day Trump must do or say something more outrageous than he did yesterday, or he risks losing his momentum. The whole penis incident only makes sense when you recognize the pressure under which Trump has placed himself to remain outrageous.

Strotspheric outrage

But if you have to be more outrageous every day than you were yesterday, and the election is months away, it is certain that at some point you will become stratospherically outrageous, and you will have gone way too far. This is when Trump’s real supporters will begin to get over their intoxication, as they eventually almost always do, and this is why it is probably only a matter of weeks before the whole Trump phenomenon begins to collapse. You cannot easily maintain a geometric progression when it comes to outrageousness.

Because while the dummies of America may indeed flock to Trump’s campaign speeches in order to enjoy the spectacle, it is unfair to dismiss Trump’s supporters as if they are all the same. Many people who support Donald Trump, and Dani is an obvious case, are good people, honest, hard-working, perhaps not especially well-educated, but they are often the backbones of their communities and their country.

And they are not as stupid as we want to believe. Does immigration hurt them? Yes it does, and while I believe that immigration has always been one of the greatest and most powerful sources of American success, and will continue to be for decades, if not centuries, I also fully understand that only someone who treats trade as a matter purely of ideology can deny that there are short-term costs. But Dani and millions of Americans do risk paying these costs, and it is unnecessary and even stupid to point out the irony of Dani’s own immigrant background as if this conclusively proved anything because it is wholly besides the point. When Dani worries about immigration it is because he is worried about his daughters’ education, and not because he has forgotten that his mother is Dominican. Trump’s supporters know that some of them may end up paying the short-term cost for what many of them even know is America’s long-term benefit, and they know that they do not have enough slack in their incomes and savings to afford it.

And what about their fury at what they believe to be unfair international trade? While there may well be global benefits to free trade, and almost certainly are, it isn’t so incredibly hard to recognize that the global trading environment is systematically gamed by many countries – and yes, sometimes by the US too – and that they do so because there are gains to be had at the expense of other countries. The global trade regime has undoubtedly benefitted certain constituencies in the US, but it has also created significant costs for the US and, more importantly, has resulted in a redistribution of income, and while the hard-working if uneducated millions who support Trump may not be able to explain the costs to them as glibly and as self-confidently as they are denied by bankers and other winners from free trade, they are right to complain. Trade is undoubtedly a complex issue, but there is a real case against the current system of free trade that must be addressed in a way that makes sense to Trump’s supporters.

And finally Trump’s supporters are enraged by the inexorable rise of income inequality. The only response they have been offered is that this rise in income inequality is natural, probably the result of technology, and cannot in any way be reversed, so we might as well get used to it. This response is so profoundly untrue that it can only be seriously proposed by someone for whom American history is a total mystery. We have had periods of rising income inequality before, and they have always been reversed once there was a political determination to do so. Dani, and the millions like him, have every right to be enraged by the past three decades of rising income inequality, and if they dismiss every anti-Trump witticism as completely irrelevant until it addresses income inequality, they are right to do so.

Trump’s followers may not articulate it very well, and they may too easily allow their anxiety about immigration and trade to spill over into nativism and hatred of foreigners, but they do have a strong case that makes them in fact part of a venerable history. Trump is almost certainly not going to resolve any of these issues for them – the historical precedents are pretty clear on that point – but it isn’t stupidity that drives them anyway to Trump. It is the recognition that because anyone that belongs within the political establishment has clearly proven himself unwilling or unable to resolve any of these issues, then gambling on someone “outrageous”, who they identify as outside the political establishment, is perfectly reasonable because it has no possible downside. Their logic is the logic of successful hedge funds: when there is no cost to being wrong, then you must gamble, no matter how small the chance of being right.

The Jacksonians ride again

The Jacksonian tendency in American politics has existed throughout American history. Their first flag bore the motto “Don’t tread on me”, and all of their subsequent flags have retained that message in one form or another ever since. Their often-admirable self-reliance, however, comes with other qualities.

They are often ferociously nativist, i.e. anti-immigrant, and while we think they are always foolishly unaware of the irony of their provenance, in fact they understand that irony to be irrelevant. They know that the filthy immigrants that thirty years ago threatened to corrupt the American ideal are today the nativists that are determined to protect American purity, but the fact remains that they often have too little slack in their daily lives, and those of their families, to afford any financial interruption. Perhaps that is why they seem so unimpressed with irony and it is probably only arrogance on our part that assures us that they are too stupid to see it. Dani and I have spoken about his family background many times, and he knows full well that his American genealogy is shallow, but he grew up in the streets of New York and he is convinced that he is as full-blooded an American as any one else, and of course he is.

Jacksonians can shift their views haphazardly. In modern times, for example, they usually support states’ rights, although during the 19th century, during Andrew Jackson’s campaign, they demanded a much stronger presidency. But there are also rock-hard consistencies. Jacksonians romanticize the common man, whether he happens to be at the time the frontier settler, the homesteading farmer, or an employee of the Ford Motor Company in the 1920s, in the same way that Dani spoke feelingly about the police and the firemen whose bodies he felt obliged to dig up after the tragedy of 9/11. They have always fulminated against anything resembling a hereditary aristocracy, and instead admired or even worshiped, sometimes with astonishing foolishness, the nouveau riche that displaced them because these men made their own way. Trump has convinced them, in spite of the truth, that he is one of these self-made men, and as long as they believe him they will forgive his clownishness and his self-importance.

This is because Trump has positioned himself well, if dishonestly, among people who have a long history of loathing monopolists and big city bankers. Jacksonians have always despised New York and Washington (and now Los Angeles too) as the homes and headquarters of all that is wrong with the Republic. They value fair play and a level playing field as the highest aims of government, and oppose on principle government actions that attempt to redress social wrongs by favoring any group – and while this hatred of government redress can very easily slide into racism, it is unfair to dismiss it as only racism, especially when many conservative and religious but often silenced African-American and Latino families scattered around in cities, small-towns and farms across the country share the same feeling. In fact if someone were ever able credibly to overcome their fear that nativism leads automatically to racism, many of these blacks and Latinos would quickly join the Jacksonians.

Jacksonians include the original tea-partiers and the Sons of Liberty, who despite their subsequent glorification included hooligans and sometimes-vicious mobs who were often revolutionaries less for love of liberty than for hatred of the rich. They included the Know-Nothings of the 1850s, nativists who rose up in anger to purify an America that was likely to be overrun by filthy Irish Catholics, along with the Locofocos of the 1830s, who rose up in anger to protect workers from the depredations of rich monopolists. William Jennings Bryan counted on them in his crusade against gold, and even more against the New York City bankers who backed the gold standard. His followers were known as the progressives, and their racism and nativism was largely romanticized out of history, but they were no less Jacksonian than those who say they support Trump today, something Harvard historian Niall Ferguson has already pointed out.

The Jacksonian fury with the changes brought about by rapid industrialization and the monstrous Second Bank of the United States, around which the new country suddenly saw individuals of once-unimaginable wealth emerge, put Andrew Jackson in the presidency, and it is unfortunate that the real concerns many Americans had in the 1830s have been subsumed by the racism of Andrew Jackson and his followers – both against black slaves and against native Americans – but we do no favor to our understanding of American history if we allow racism to be the whole story of Jackson’s presidency, any more than if we forget that people like Dani, who is not a racist, comprise a larger share of Trump’s supporters than the racist fools we love to mock.

Dirty rotten scoundrels

The strength of the Jacksonian tendency has waxed and waned depending on American conditions. It is during periods of especially heavy immigration, and during periods in which income inequality is especially deep, that they have come out in force, so much so sometimes that they rock the political establishment to its very bones, and usually none too soon. But with very few exceptions the Jacksonians have almost always chosen as their leaders the worst and most hypocritical of scoundrels, scoundrels who nearly always betray them once they’ve pocketed the millions they’ve obtained from thrashing the old elite.

When we tremble at the idea of Trump as president, we should remember their weak track record in putting presidents into office (even William Jennings Bryan for all his oratorical brilliance got trounced). Perhaps their only triumph was Andrew Jackson himself, but his success in no way suggests that Trump can do the same. Andrew Jackson, for all his barbaric treachery towards native Americans, was no hypocrite and no opportunist, and his accomplishments, especially as a soldier, put in him in a category that is wholly out of Trump’s reach, so much so that to compare the two is meaningless.

But while they have nearly always been unlucky or foolish in who they end up choosing as their leaders, the Jacksonians have still managed to disrupt the political establishment in ways that proved pretty permanent, and they are doing so again. As absurd as Trump may be, he channels their sans-culottes hatred of the elite in ways that might actually strengthen democratic institutions. Trump’s supporters might be why the US has never developed a European-style permanent aristocracy or its institutionalization of power. And perhaps it is not just coincidence that any period in which there has been a significant downward redistribution of wealth seems to have been preceded by a period in which the Jacksonians have done well. For better or for worse, Trump is not exceptional in American history and the good news is that even though he will never win the presidency, he has made it clear that future presidential candidates have no choice but to address income inequality and the anxieties of the Jacksonians if they want to keep the likes of Trump out of office.

Even if Trump does get the Republican nomination, the only effect might be to destroy Abraham Lincoln’s party forever, and the Democratic candidate, almost whoever it is, will win by an historic landslide. And for those who need the bogeyman of a possible Trump presidency in order to maintain that delicious feeling of justified outrage, so what if Trump becomes president? That is not the end of the world, or even close to it. The first thing every American president learns is how little he is able to do, and President Trump will be in office for four years, with a Congress in which both parties despise him, and he will accomplish nothing, after which he will exit office with among the lowest popularity ratings ever recorded.

And about that wall, how many times have we heard our liberal friends threaten that if Trump becomes president they will give up their US citizenship and move to Canada? What idiots. In the incredibly unlikely circumstance that Trump becomes president, the very first decision he will make, because he has no choice but to make it, and probably the last he will ever implement, is to build the wall between Mexico and the United States that he has promised. But anyone whose has followed Trump’s business career knows damn well what will happen. He will indeed build the wall, but inevitably he’ll build it on the wrong side of the country – perhaps out of incompetency or perhaps because there is a lot more money to be made with a longer wall. Those liberal idiots can talk all they want about going to Canada, but they won’t be able to get there. There’ll be Trump’s wall in the way.


P.S. I don’t really write about political events on my blog, but after a discussion about Trump with an English friend during one of my business trips, I wrote this on the flight home with some vague idea of perhaps submitting it to some publication. However I didn’t want to spend too much time on this as I am swamped with other commitments and so have decided to publish it here. By the way I wrote this just before the horrible events Tuesday in Belgium, which reminded me that while I dismiss the chances of Trump ever making president, or even of lasting much longer as a candidate, there is a fly in the ointment that will give him a few more weeks purchase. Terrorist organizations seem to know that we are in a period of elections in the US and Europe, and that to the extent that they can affect the election process in the West – and clearly they can – they must do what they can to ensure that the extreme parties of the right perform well. The two are in a self-reinforcing loop. The awful events in Brussels will not only strengthen Donald Trump, Marine Le Pen, Vladimir Putin and a host of others, but their increased strength will raise the number of domestic recruits for terrorist organizations. It is a maddening process.


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  1. Even if Trump does get the Republican nomination, the only effect might be to destroy Abraham Lincoln’s party forever, and the Democratic candidate, almost whoever it is, will win by an historic landslide.


    he has made it clear that future presidential candidates have no choice but to address income inequality and the anxieties of the Jacksonians if they want to keep the likes of Trump out of office.

    1. If a party replaces the Republican party, what characteristics would it have, other than increasingly isolationist tendencies?

    2. If Trump loses in a landslide, as you predict (or exits four years later with rck-bottom approval ratings), then why would any future candidates feel the need to address income inequality or the Jacksonians’ anxieties? Even now, those who are currently running against Trump or who expect to run against Trump don’t appear to even bother paying much lip service to the economic considerations that are propelling his supporters (or the more isolationist stances). I don’t understand what would cause them to do so after an election if they can’t be bothered to do so before one, but I never really followed politics, so maybe there’s a lot of precedent that I am simply unaware of.

    As an aside, I’m curious how Trump can ever really fund his presidential bid past the primaries. Even now, he seems to be relying on free media coverage (which must be killing his hotels outside of America, I would think??). I don’t see how this carries over in a helpful manner past the convention, and I don’t see all the traditional Republican supporters contributing in any meaningful way given how hard they are fighting against him now. I sure as hell don’t see him putting up his own money beyond a few million or tens of millions. That’s not going to be enough…

    • In the case where you were to see the GOP fragment, you could have two separate candidates with a third Democratic candidate. If that were to happen, you could see a situation where no one gets to 270 electoral votes and that would end up with Paul Ryan choosing the next POTUS. It’d be funny to see Paul Ryan’s face if he had to choose between Ted Cruz, Donald Trump, or Hillary Clinton.

      In the words of Ian Bremmer, who runs the Eurasia Group (and ironically enough, Trump actually has former employees of the Eurasia Group who worked under Bremmer in his foreign policy advisers), said of Trump’s foreign policy:
      “Trump is not an isolationist. He’s aggressively unilateralist. It could be worse.”

      • I find Bremmer, ho hum, mediocre, always in the mix of any present discord, switching from one butt cheek to another, with a swoop of the head, the sag of his shoulders, and an over-eager sigh, with a re-positioning of his arm, to provide (the image of) gravity, to his superficial, common-place, and trite evaluations. Next.

        Any who followed the GoP, knew back before 2008, but definitely after Obama’s win, that the Party was in need of re-invigoration. Search C-Span. Neither Ryan, nor Cruz, despite the muse of Gingrich, were the panacea. Don’t assume the Party is over, nor that alterations to the competitive myopia, that has been the obstructionism that has pervaded their actions, in the face of being unable to form a new ground, really after Clinton moved Dem’s to the right in the 1990’s, either demands the dissolution of the Party with potential infighting in the convention, nor of slow moving alterations during the last 20 years.

        Clinton moved Dem’s, that accomplished, the loose confederation of divergent interests, were faced with more ground to compete against each other…..this new era, is a reinvigoration.

        Frankly, Reps need to aggressively push GoUSA policy toward Small Business, there is depth to literature, and ethos more generally, for a reinvigorated dialogue, enabling continuity that is useful, this should push Dem’s into Social supports, and all can go along normally.

        The ground is moving, and people always see apparitions in states of fever.

        • Well, did you see the most recent Democratic poll for the nomination process? Clinton and Bernie are in dead heat. The problem for Bernie is that he can’t win people that aren’t white or aren’t young and he’s down by >300 pledged delegates. If it’s close, I don’t see how the super delegates don’t give it to Clinton. With super delegates, she’s at ~1680 which puts here 700 delegates short of the nomination. She also still has New York and California which have yet to vote. Bernie can’t win urban areas or minorities, which is a real problem for Cali and New York. I don’t possibly see how Bernie can win New York considering New York is her home state.

          More importantly, there’s a real rift in the Democratic Party between the Liberal Democrats and the Progressive Democrats. I was an Obama Democrat and if Clinton wins the Democratic nomination, I’m probably gonna vote Clinton (she’s the only adult in the room). If she doesn’t get the nomination, I’m probably gonna vote Trump. I’m NOT the only one that feels this way.

        • One of my black friends worked his way through school with no debt and it took him 7 years to do it where he took advantage of tax credits for college tuition when working part time. When he listens to Bernie talk about things like “free tuition for all public colleges”, it makes him CRINGE. My friend is not a Progressive Democrat. He’s a Liberal Democrat. So I think Clinton has a much better chance to hold the party together than Bernie. I agree with Clinton’s idea of debt-free college, but that doesn’t mean you just give free tuition to someone who wants to study women’s studies and push Marxist bullshit.

          Honestly, I think a lot of white kids like him because he’s reminds them of their old hippie grandpa (Bernie spent most of his young life poor and writing for socialist journals, newspapers, etc and he never had a job before the age of 40). One of the problems with Bernie is that he’s 74, which means that there’s a good chance he could die in office due to complications from old age. Even Clinton and Trump are 69, which I find too old to begin with. To put a 74 year old in the White House would be ludicrous IMO.

          I also think there’s a lot of Bernie supporters that WILL NOT get behind HRC at any cost. So we’ll see what happens. What I’d like to see is 4-6 candidates running for the Presidency with someone like Mitt Romney winning Utah and Idaho with no other states. No person gets to 270 so it goes into the House of Representatives where Paul Ryan chooses the guy with the least amount of popular support: someone like Mitt Romney. Then, I’d be very happy because it’d be clear to everyone the United States is not a “democracy”, that it’s not about “equality”, and “socialism” would never work in the Republic. I’d love to see the faces of all these equality pushers, leftists, and Marxists that back Bernie. It’d make me SOOOOOO happy.

        • I think it was a TERRIBLE mistake to pass the 22nd Amendment. It’s clear that the person most fit to be President is the current President. Over time, his administration has built credibility and has taken the long view. Over time, his approval ratings will only continue to rise and most of the populace seems to trust him.

          Those running for President talk about “unifying” the Republic, but you don’t win elections or operate the Republic by unifying it (and the Republic was created this way by design). You win elections and operate the Republic by dividing it. The one exception is in a time of war. What you’re starting to see are serious regional divides in the Republic. I’m beginning to think it’s more likely that no one gets to 270 electoral votes and Paul Ryan is forced to choose between poisoning himself or shooting himself. I wanna see that, which makes me excited for this upcoming election (as long as Bernie doesn’t win).

    • I’m curious as to why you believe the free media coverage will stop before November. If he keeps doing what he’s doing now, the media coverage will continue to increase. Most of the stuff that gets broadcasted by the media that Trump says isn’t even that absurd IMO (some of it is, like when he discussed the size of his package). He talks about it, but then some journalist uses the soundbite to misrepresent him and take something he said way out of context.

      And we do have a serious problem on our Southern border. I’m personally not a huge fan of the wall as I favor more imperial solutions to these problems, but Trump is largely correct on the border. When you have $1.5 billion/day of drugs and sex slaves pouring across your border I think there’s a real problem.

      • I don’t think the free media stops but I believe that once they enter the election for president the media are obliged to give equal time to both candidates. When that happens it’ll be harder for Trump to dominate the airwaves.

        • No, they’re not. Net neutrality is both unconstitutional and dead. It doesn’t matter any more. More importantly, net neutrality is a clear impediment on free speech. I’m tired of these leftists and “progressives” talking about “free speech” and then purposefully trying to limit dialogue and control media institutions with this kinda shit. They’re hypocrites.

      • I have neither a problem nor a concern for the wall.
        Along with this we should help the Gov of Mex realize a Maquilladora system on their Southern border as Central Americans are the ones coming through at present. Along with many, more broadly (Brazilians, Chinese, etc…).

        Frankly, if gamer’s of the system do not get their beggar thy neighbor policies together, instituting taxes on foreign held assets, like the Brazilians, and greater inspection of goods at the border, might be required.

        If the short term perspective does not realize, that development is not a decadal or generational process, but one of several generations, then we might just want to prevent, those alive today, willing to sacrifice the project, for their own short term gain as we adopt more realistic frames as to what we can support and why, or not support, and why.

        • For the record, the Mexican-American War was a just war where we did the right thing. Honestly, I think we should’ve taken more turf. The only reason we didn’t IMO was racism (we didn’t wanna let in brown Mexicans as a territory). I’d have taken Veracruz for sure.

          • i am not sure we could have, Suvvy. political opposition to the war was ferocious, and had the US taken even more, or acted worse, president polk and any congressmen who supported him might have faced significant election difficulties. it may be hard to believe, but there were a lot of highly principled americans who believed that the greatness of the US lay precisely in its refusal to behave as rapaciously as europeans (let’s pretend we’ve forgotten native americans for a minute). anti-war opposition has a long history in the US and as at times been very powerful — certainly more so than in recent decades.

          • You may be correct. Zachary Taylor thought that it was an unjust war. It was a very unpopular war and Polk didn’t even want the war. He wanted to buy territory that Mexico wasn’t using. They really pushed him to the limit, he bluffed saying he’d take them over, they called out his bluff, so he acted on his bluff and it was no longer a bluff.

            Polk was only President for 4 years so reelection wasn’t an issue for him, but you’re right about the Congressmen. I may be wrong, but I thought there was a political wing that actually did wanna take more territory, but didn’t wanna do it because they didn’t wanna take in more Mexicans.

          • Also, do you think it’s a matter of time before we take Cuba? Why do you think Cuba isn’t an American territory yet?

      • Careful, Suvy, the drug/ sex-slave story has been told about every group and is nor more true of one than of any other. Of course there are both in every immigrant group, in the same way that in any country in the world if you want drugs or sex you should go to the poor neighborhoods, but while I am sure that among the Greeks who came to the US there were many criminals, pushers and prostitutes, the vast, vast majority, like my grandfather and his family, were ferociously family oriented and wanted nothing more than to be successful in business. Ok I confess that my grandfather was wealthy and came for political reasons, but he was firmly part of the Greek community in NY and while they had their share of drug dealers and prostitutes — which fact by the way I don’t find as awful as some others do, and anyway in most cases it was out of necessity and not vice — to dismiss millions of people that way is cheap demagoguery and can only can pass muster among real dopes. If you want to aim your disgust at anyone, it should be the middle class nice people who go to bad neighborhoods to fuck and get high (although I don’t find that especially awful behavior either).

        • Well, my point on this matter is that there’s a lot of negative immigration from south of the border that’s largely related to the drug trade. Before the 90’s, the primary trade routes for drugs was over the ocean. After the fall of the Berlin Wall, I believe the military and coast guard decided to shoot down planes flying 10 feet above the water with no lights on. So the cost of drugs skyrocketed (like crack cocaine, which was largely responsible for defusing the crack bubble IMO). That shifted the drug trade to the border.

          For the record, I believe the best way to deal with this problem is through expansion. I think we should buy territory from Mexico. A large part of the northern territory of Mexico is controlled by the drug cartels. As far as I’m concerned, there’s nothing good about drug cartels controlling our Southern frontier. There is absolutely no upside for anyone involved except for the drug cartels.

          Sure, most of the demand for drugs comes from rich/upper-middle-class kids, but you’re not gonna eliminate that demand. So the solution is to find a way to treat drug addiction like a health issue, get a lot of these people the care/treatment they need, and destroy the revenue of the cartels. With the exception of the imperial solutions, Trump’s solution is about as close as we’re gonna get.

        • Not only that, but these cartels are destroying our inner cities. The Bloods and Crips have largely been wiped out by Mexican gangs and the Mexican gangs are more cruel. The decriminalization (and legalization, in some places) of pot has really cut into their revenue, but we need to end this. The African-American unemployment rate is the highest now than it’s been probably since Reconstruction. This isn’t healthy or sound or robust. We have to deal with this problem.

          • i don’t think there is much evidence that drugs enter the country in high correlation with immigration. i think they enter the country when there is sufficient demand. of course when demand come comes from a place that supplies both the drugs and immigrants, we shouldn’t be surprised their is overlap, but i am surprised anyone would think there is causality. north korea, after all, is a major supplier of chemical hallucinogens and dance drugs to much of asia, about i’d find it hard to explain it on the grounds of immigration patterns. spain is the world’s largest consumer of cocaine per capita, but i don’t think peruvian immigration, while large, is in any way commensurate with cocaine usage. trump is misusing a fact that anyone should be able to see through in a flash, especially someone as logical as you. this is lying with statistics, and very crudely.

          • Also it would be wise to check what Trump actually said about the Rapist / Immigration thing. I actually went back and checked when i was arguing with a Trump supporter, and I had to back down. Trump was not super clear – which has left him open to accusations, and he also has somehow failed to clarify, but he definitely was talking about illegal immigrants being the victims of rape at the hands of the so called people smuggler “coyotes”, and was also talking about the same people smugglers often using their routes to move drugs into the US. He directly referenced several articles during the initial comments, and the articles are about these topics, not about immigrants being rapists or whatever it has been spun to.

            I think his main sin here was letting everyone think that’s what he said, probably for the free media coverage and the appeal to the people who think that the immigrants are evil already.

          • It’s not that there’s a causality. It’s that the kinda immigration from the drug trade is not the good kind. You can look through the violence that occurs near the border.

            If there’s gangs bringing across drugs from across the border, there’s people coming with those drugs. The stuff about the inner cities is true. The drug cartels are going down their supply-chain like any other good corporation would do to control the distribution networks. The guys were doing the inner city shootings before are the ones getting shot up now.

            For example, just take places like Ciudad Juarez. Again, I favor imperial expansion, but I don’t think that’s gonna happen.

      • I don’t believe that the free media coverage will stop before November–I only believe that it will cease to be the advantage that it originally was when he was trying to get his voice heard over a dozen other possible candidates, at least one of whom was incredibly well funded.

        I’m willing to bet that his strategy of “being heard” is going to be copied very often in future elections by aspiring candidates, though, and that every first Republican or Democrat(ic) debate is going to involve one or multiple candidates coming up with an “outrageous” (that’s not the exact word I want to use, but I can’t think of the more appropriate one at the moment) stance that will garner enormous amounts of free media. This time it was “build a wall”. I wonder what it will be next time?

        The problem for Trump, though, is that once you are running against a single other person, you no longer need people to know that you exist–you need people to believe that you are somehow better than your opponent. A lot of the free media when he runs one-on-one against Clinton is going to be heavily oppositional to him (pick a random article in the NYTimes or Washington Post that involves Trump, and you will notice that they actually read like editorials instead of news stories). I guess that he will need some money to counter that criticism (along with more money to counter the Democrats’ criticisms, and even more money to counter the Reuplicans’ criticisms, and then even more money to get his own thoughts out in a digestible form).

        I don’t see where all that money is going to come from. If someone like Buffett or Gates wanted to buy themselves an election, I guess they probably could because they are much wealthier than Trump and because their wealth is liquid. I don’t believe that Trump can simply sell apartment blocks to buy his media, and I doubt he would be stupid enough to want to do so, anyway. Then again, as I mentioned above, he seems pretty happy to destroy his brand name in foreign countries–I can’t believe that more people are booking rooms in his hotels abroad now than they were before he decided to run for president–so maybe he really is willing to sacrifice his financial interests for a run at the presidency.

        Having said that, maybe he doesn’t need to buy his media–maybe enough people simply hate Hillary enough, and maybe people are financially insecure enough and angry enough about medical bills and bank bailouts and immigration and losing foreign wars to countries that have no standing armies that they will simply vote Trump no matter what happens. I would be suprised, though, if a few hundred million dollars of his detractors’ funds would be unable to counter that combination of anger and fear.

        As an aside, I really enjoyed reading Michael’s post this time (I almost always do, but this one seemed a bit less formal, which was “fun”), but as a complete junkie to this site because of its economic insights, I find it sort of depressing that the one recent post focused on politics seems to be getting more attention and reader contribution than any of his weightier posts. Roughly 48 hours in, and over 100 comments…Sort of interesting indication about what people value and prioritize (?)

        • Well, American politics is great. It’s very exciting, and regardless of all the whining about “it’s not civil” or “it’s so crude”, we all know most everyone actually loves it. What’s not to like? The mudslinging, the hell-raising, the demonization of the other side, and mocking of those with the slightest disagreements as completely stupid buffoons.

          As I said, most states/districts are effectively represented by one party (at least in the national level). So in many cases, the threat to cronyism comes from the primary challenge, not from the other side. Basically, in a right-wing district, the non-crony guy who can win is the guy that’s further to the right. The same thing is true in a left-wing district. So I only expect these things to get worse for the next 20 years or so.

    • I think he would leave in disgrace, Cllair because he will have proven himself unable to work with Congress and because he does not really represent what the Jacksonians want, but just as Sarkozy in France recognizes that he must take policies from Marine if he does not want his party to become irrelevant, Republicans and Democrats will understand that if a buffoon can do well simply by pretending to some of these positions, these positions resonate with voters. I admit I wasn’t terrible clear on that point, so thanks for picking at it, but this was really a rushed job on a ten hour flight without revising — stupid, yes, but I knew that if I set it aside for revisions I wouldn’t get around to revising it for a year.

      • Michael, your posts are usually well researched, so I wonder what do you know/read about Trump? How did you differentiate between equally plausible alternatives of him being a buffoon who just got lucky vs him being the most skillfull guy in the field who experiments with what can be achived without kissing donors body parts?
        Do you agree that anybody trying to truly run against establishment would have no choice but learn to provoke and utilize negative (since the tenor of coverage is controlled by this very establishment) advertising? Trump seems to be running by far the nimblest and most cost effective campaign in history (recent estimates give about $2bn in free media). Look at his costs per primary vote…

      • but this was really a rushed job on a ten hour flight without revising

        Wow…You write better without revisions than I do after spending hours revising my work.

        I think that no matter who ends up in the presidency, they will likely leave after four years in disgrace because, as you pointed out, the country will need to rebalance, and it’s going to be a very difficult process no matter how talented or brilliant the incumbent turns out to be.

        As for not working with Congress, though–I guess I’m just really dense on this point, but if the Republicans and Democrats believe that his positions resonate with voters, then they would pay some lip service (at least) to his points, whereas they are currently coming out strongly opposed to his platform.

        But let’s say that soon changes, and both parties feel the need to adopt some of Trump’s policies in order to maintain the public’s favour. In that case, then I guess they would have to work with him in any case (?)

        As an irrelevant aside, elsewhere on this page you wrote:

        Actually I think most American actually agree with me, but the best lack all conviction and the worst….

        I hate to pigeon-hole people, but it’s surprising to read a Spanish-born American financier with a physics background and an interest in punk music quoting an Irish poet…


        Wasn’t the US, according to some late 19th Century British wit, the only country in history that went from childhood straight to senility without ever passing through maturity?

        I think you may be referring to Georges Clemenceau’s quote that “America is the only nation in history which miraculously has gone directly from barbarism to degeneration without the usual interval of civilization.”

        • figures. he had to be french (actually there must be half a dozen variations on this line, most of them probably generated in the 1920s, a time during which we were a tad more obnoxious than normal).

          • Iirc he was the bad(pragmatic?) guy in Keynes excellent “Economic Consequences of the Peace” as well.

  2. Fantastic essay. Thank you for sharing Dani’s story and your insights.

  3. I want to believe you Professor Pettis, I really do. (Love your blog, by the way — long time reader, first time commenter.)

    Can I ask you, though: is it possible that this time is different? I don’t want to believe it, and history is a good guide, but maybe eventually media changes and demographics change and there is a phase transition… and then historical precedent is broken.

    I only offer this because it may eventually happen, and when it does, recourse to history will be a false lead. The forces at work are the same, as your blog post details, but if the mechanics are different — even in a locally incremental way — the result can be wildly, chaotically different.

    I hope you’re right, though, and Trump is just a typical Jacksonian that’s part of a typical historical cycle. I hope this time isn’t different. But I still worry.

    • I don’t want to believe it too but I think Pettis may be wrong on this. It makes sense to me that the Trump campaign will fizzle and die because I’m sick of hearing the same nonsense over and over. It also makes sense to me that the reality shows, including The Apprentice, should have gone away years ago for the same reason. Many make me want to stick a pen in my neck when I see them, yet many have been on more than a decade.

      I don’t think you should underestimate people’s appetite for drivel.

      • I used to watch The Apprentice as a kid. I always thought it was a good show. I like the way Trump carries himself. He’s funny and entertaining. I’m also excited to see these foreign country freeloaders scared of him. I LOVE seeing foreign elites cringe and talk about how they know what’s better for us than we do while their societies are in self-destruction and they have serious social catastrophes in Europe. They have ACTUAL FASCISTS rising to power, but somehow we’re the psychos when our institutions are specifically designed so that the biggest risks over there (fascists rising to power) are not risks here because the US isn’t about “democracy”, “equality”, and “socialism”.

        • Suvy, you’re a smart guy but you spend too much of your thinking resenting the people you think are your enemies. One of Nietzsche’s greatest insights is that you are no greater than your enemies, so choose them well. You understand quite a lot of stuff, and you think logically most of the time, but you allow your analysis to be affected by your rejection and hatred of others and this allows you to veer from logic. I don’t mean to get all profesorry on you, but you’re way too smart to get pissed off at people and let that anger drive your analysis, and that’s how you are going to let yourself make mistakes. Ideology might enliven debate, and there’s a place for art if argument, but ideology obfuscates too much, and economics is in such a mess that we need clarity, not enmity.

          And please, NO CAPS. that’s never a good sign. At some point, I think you and I are going to write something together, but it has to ice-cold, respectful, and open to wherever the logic takes us, and the point is to move the debate in a slightly better direction, and not to prove that anyone’s a fool. I’m not there yet either, but I’ll get there. The sooner you do, the more influential you’ll be,

      • I amy be wrong, Ryan, and PC7. I remember when Reagan first got the Republican nomination I was so surprised that the GOP thought he could win, that I assumed Carter’s reelection was a done deal. That turned out to be a real misreading of the public mood, didn’t it? Of course I hadn’t understood what Volcker was doing, and why he guaranteed that carter couldn’t win, but even with that it does go to show that my president-picking skills trail my crisis-picking skills.

        For the record, I never liked Reagan when he was in office and opposed him all the way, but in the last decade as I have gotten wiser, I hope, I have come to recognize that although he isn’t the smartest President we’ve ever had, he’s probably one of the great ones because of his skill in leading the country. I also recognize that just as the people get it right on certain issues more often that the geniuses, Reagan was convinced of certain things that anyone with half a brain knew was wrong, and yet his instincts turned out to be stronger than their brains.

        I know I am treading on dangerous grounds here. The only permissible beliefs one can have if you want to be credible must be virulently ideological and totally consistent, and must follow the extreme wing of one party or the other, but in fact I am willing to accept that I am a Democrat who respects quite a number of Republicans, although not so much the virulently ideological and totally consistent ones who assume that hobgoblinizing their minds makes them cleverer. Rather than ideological tests, however, we need purely logical ones.

        Actually I think most American actually agree with me, but the best lack all conviction and the worst….


    • The world, of previous course, will be wildly chaotic, nonetheless (insofar as near previous expectations).
      So, we really need to unpack this.

  4. I thoroughly enjoyed this political observation, very insightful and very on point – all too often the political elite and the chattering media frame their views in terms of their own outlook, its refreshing to see an intelligent piece that tries to look at the Trump phenomenon from the perspective of the genuinely ordinary people who are supporting him. So thank you. I do hope, however, that you will shortly be writing a piece on the outcome of the recent Chinese Congress as I am very much looking forward to your views on the rather mixed messages which seem to have emerged.

    • Tim, I am less impressed by the NPC outcome than others. It seems to be Beijing has a series of scenarios it can follow, and it can say whatever it likes but these scenarios are fairly constrained. What matters is not what the NPC says, but how powerful Xi is and whether he understand the urgency and is able to move. Obviously there are things I’d rather say in person than in writing, but I think the politics is a little messier than many realize.

  5. With regard to Trump, I think his appeal is much broader than just to the working class. I know lots of LEGAL immigrants and those in higher classes who voted for Trump. They don’t publicly announce it or talk about it, but when they show up at the ballot box they vote Trump.

    With that being said, is it crazy that I actually agree with 90% of the stuff Trump says on policy? Trump IS NOT anti-immigrant and he’s talks about it all the time. He’s against illegal immigration. His wife is a model from Slovenia who immigrated here.

    I don’t get this entire racist thing about Donald Trump. He’s consolidated all of the black support on the GOP side and he’s polling very well among blacks for a Republican. Trump has black in key positions across his administration. There was only that one issue in an interview with Jake Tapper, but he was asked that question several times in a more straightforward and direct manner in an August 2015 Bloomberg interview and he gave a very decisive and direct response.

    I actually think much of Trump’s platform not only makes sense, but can actually win elections. He’s bringing a lot of important discussion to a lot of real issues. I actually know a lot of Asians and Indians who are voting for Trump because they’re worried about issues like political correctness and unrestricted immigration from certain regions of the world.

    • It is ironic, that he is referring to Corporate Raiders, ahem, Shareholder Activists, as businessman that know how to get things done, but this might be a nice tonic, to those reared in the wild west Globalizations, meets euphoria of a flatter Friedmaner world.

      It, at least, as Monty Python, says, might be, and Now for something completely different, which from Aristotle to Bergson, would be noted, as nothing, in life, but change, is continuous.

      The alarm clock is buzzing, and snooze button may be too over-worn to work.

    • I think perceptions are very different, and while you may dismiss them as wrong, first, I am not sure they are, and second, whether or not they are wrong, they matter, and Trump is fully aware of them. If he chooses not to change them, that in itself contains information.

    • With that being said, is it crazy that I actually agree with 90% of the stuff Trump says on policy?

      I intend this purely as a (superficial) analysis, so please don’t take it as an insult, but I don’t find this surprising. From your posts, you seem to be very extreme in just about everything you do or think, and have very little tolerance for moderation of any sort (at least intellectually-speaking–I’m sure you can have a beer or two without feeling the compulsion to get totally plastered). That’s neither good nor bad overall, but I guess it would make sense that you would resonate with a candidate who also speaks as if he approaches the world as if it were black and white.

      • Honestly, I don’t think Trump does approach the world as black and white. I think there’s many shades of gray in everything he says, which is really what irritates people.

        On policy, this is where I agree with him:
        1. He’s said things like placing a 40% tariff on foreign goods in order to finance development in inner cities. I agree with that.
        2. On health care, he agrees with the individual mandate, wants to break down state line barriers on health insurance companies to increase competition, and he wants to have some mechanism so “we don’t let people die on the street”, which I also agree with.
        3. He’s also said he’d take hardline stances on these issues and use them as bargaining tools where everything is negotiable. I agree with that too.
        4. On defense, he says we spend too much money on things like NATO, on foreign bases where we station troops, and many of our interventions make our problems worse. I agree with that.
        5. On our inner cities, we have entire populations of people who don’t have jobs or access to any sort of opportunity while pointing to our high African-American unemployment rate. I agree with that.
        6. On immigration, we need to restrict the negative inflows of immigration as the world becomes much more dangerous. We need to make sure that those who study here in our universities, especially as graduate students stay here, but we need to make sure that we don’t get in people into our society who will either have difficulty assimilating or those who pose a risk to others in our society. I agree with that.

        In other words, from what he’s said repeatedly, he’s actually diagnosed real issues and provided solutions to which I largely agree with. Everything he said just seems to make sense. Maybe I’m a crazy lunatic, but I don’t think I’m being unreasonable. I don’t think Trump is either.

        Some of the stuff that he does in his rallies or that he says can be construed as being crazy, but I don’t think that he’s crazy on the issues or policies at all. Quite frankly, I think he generally makes more sense than most people.

        I don’t agree with him when he says climate change is a hoax. If you read history, it becomes clear that when you have certain kinds of development, there are environmental risks you run. I’m pretty sure this isn’t the first time in history we’ve had human related compounds being pumped into the air that resulted in major climate shifts. So on these respects, I disagree with him.

  6. For a guy who has consistently declined to make any specific predictions on China’s economic future, you sure seem to be making a lot of them about Trump’s ability to win the election and run the country.

    Perhaps you are in the wrong profession and would reconsider a career in politics as you appear far more confident in your predictions on the course of political events than of economic ones.

    • Your are wrong, John. I don’t see them as predictions so much as parallels with precedents, which is something I do quite a lot. You’ll have noticed how many times people refer to me as the person who predicted X or Y or Z. Because I do try to present logical scenarios and and because I am interested in historical precedents, I have always been confident of what you call my predictions but which I call my logically necessary scenarios. Anyone who has followed me on China knows that the scenarios I laid out in 2007 and 2008, in which growth dropped to levels far below what anyone said was possible and debt rose uncontrollably, were very confident, very contrarian, and logical, and the fact that were historically consistent made me all the more confident. In 2012 I said I could not work out mathematically how metal prices would not drop by 50% within three years, and the only reason I did not “predict” that iron would test $50 within three years is because I let my friend convince me that this was so crazy I would lose all credibility (unfortunately I listened to him). In 1997 in my memo to Treasure I said I could not work out arithmetically a scenario in which Argentina would not default within 5 years, and probably within 3, without violating basic financial distress. I could go on and on but all I do is try, with the help of history, is to work out the logic of balance sheets or institutions. My predictions about Trump are much less confident than my economic predictions because it is hard to rely on logic but the institutional distortions are there as are the political parallels. As long as we don’t get another 9/11, or a series of brussels in the US, I would say that Trump’s chances of winning are vanishingly small. We like to tell ourselves how stupid ordinary people are, but I don’t buy it. Only someone who doesn’t understand the structure of news and the historical parallels in the way we interpret identical events are unable to see the very obvious fact that democracies are actually pretty smart.

      • Re your last sentence above, could you, please, elaborate. What is it about the structure of the news which is worth understanding in this context, etc (i confess to being unable to see the obvious here).

        • we are not able to distinguish between how things happen and how they are reported to happen, and we are unable to separate ourselves from contemporary conventional opinions. when democracies do brilliant ((or stupid) things we are almost never aware of how brilliant (or stupid) until much later. or to take the other side, everyone knew that if we let the dumb europeans vote on the euro and on european integration they would have voted completely wrong and the experts would have never been able to give us the perfect union they did. in fact we’ve never come up with a system that is better at making good decisions than the democratic system, and although they often make as many bad decisions as monarchies, dictatorships, aristocracies, etc. they key is their adjustment mechanism. i would argue that a good political system is not one that has developed a system of coming up with better decisions because i don’t think any system can do that. i would argue that a good political system is one that is credible because it allows every major economic sector to work out an acceptable compromise and it adjusts quickly. that’s why i think we have to trust democracies — granted, its the worst possible system for making the right decision, except for all the others as churchill suggested — but the intelligence of the system is the process, not the specific pieces of outcome.

      • …We like to tell ourselves how stupid ordinary people are….


        • the problem about writing about trump is that there used to be on this blog a certain type of humor which didn’t need laugh tracks, or a big hammer for hitting home, but once we discuss trump, this type of humor comes across as bewildering even “elitist” to many, because for a while elitists used to pretend this was a bad word that they could use with which to hit each other, but it was just a joke.

          it’s like the phrase “sans-culottes”. two of my friends thought it was hilarious that i would use the phrase in this article (not once, but twice) and one insisted that this threw me out forever from the trump club. how do i explain that? i suppose if i tried, i’d set off snarls that i am an elitist, which is also sort of funny.

          in the latest issue of my newsletter i said this was turning out to be a dreary month because the english composer peter maxwell davies died and then, two weeks later, john cruyff, the examplar of world’s most beautiful football style (and a long time associate of my club, barça), also died. there was nothing about trump that made march so dreary, because compared to davies and cruyff, he simply isn’t important. some people know what i mean and others don’t, and some among those that don’t for some reason will be infuriated.

          i am not sure i have made anything clearer, have i?

          • We…..there is a certain cachet from being opposed to elites.
            There is a certain working class, middle class, self-made class, ethos, existent that is coming to recognize they have been bamboozled by a process, that was little more than an attempt, discussed as a truth, when this is little more than theory.

            One can cross disciplines with components, categories, classifications, and framing devices within theory, because theory has to be common sense. It has to make sense. Ideologues can use these components, and the more they are used, the more they take on a life unimagined in their original use, and over -time, the initial common sensical component distorts, into a beast, far larger, than the initial theory, and generally, becomes a problem for strategy creation, and narrative guidance, of the original idea users (strategists, marketers, issue oriented people, etc)

            So, Trump is important because he rides a wave of ground movement.
            Where many different types of people, are coalescing around need for change.
            This is something most new politicians get elected on locally, and certainly at the national level. Obama, got elected on change, Bush before, Clinton, and Reagan.

            So, in the present, many of the longer term vital assumptions are up in the air.
            Able for re-determination, for disconfirmation, for reconfiguration, redefinition, and so forth.

            Trump, is playing polls, at such a focused degree, with the support of God knows who, but he has done it well.

            Further he is saying what others wouldn’t. And we are finished with politicians pretending; they, not we, are mired in their directed, manipulative, and superficial perspectives and rhetoric.

            As to Trump, haven’t followed anything at all of him. Or any other candidate.
            But the more he is detested abroad, the more I hope he wins.

            In many ways, nt dissimilar to the german general in band of brothers…

            it’s been a hard war, it’s been a long war….

            I think it is time to test the waters, letting chips fall where they ma, and then seeing where a re-invigorated set of interests, partners and policies lay.

          • “As to Trump, haven’t followed anything at all of him. Or any other candidate.
            But the more he is detested abroad, the more I hope he wins.”

            I thought this was funny as shit. I actually tend to agree. Whenever people start to slam him or far left protesters show up at his events trying to impede speec or someone on social media starts personally attacking me for agreeing with what Trump says, that immediately makes me wanna vote Trump. The more I hear about “political correctness” or saying something that “offends” someone else, I just love seeing Trump go up in the polls.

            It’s almost like I’m rooting for a Yankee elite from NYC because he’s the underdog. It’s a crazy world.

          • it is part of american history that jacksonians have never failed to bewilder foreigners, and even terrify them, but i find it hard to understand why so many americans have the kind of inferiority complex that drives their hatred and resentment of foreigners, to the extent that pissing off foreigners is any positive part of our policy calculus. maybe it’s a big-country thing. i have always thought that one thing americans, russians and chinese have powerfully in common is a combination of paranoia, an intense attachment to conspiracy theories, and deep resentment of foreigners based on an almost childish sense of having been treated unfairly. this exists elsewhere, of course, but never to anywhere near the same extent, with the exception perhaps, and tellingly, of small groups of people with severely and even pathologically distorted recent histories. i wonder if after a few more years of rapid growth, india joins the club?

          • As to hating foreigners,I do not

            I have sent a good portion of my adult life working cross-culturally domestically or in other countries. I might say, that I feel at home just about anywhere, have never had culture shock and people from Asia and Europe were often bewildered, I thought you were Dutch, French. German, Italian or Canadian. In the Middle East, when turning off my electric at the end f a contract before I left the country I was in, the gentleman behind the counter inquired if i was a national. Even having seen my name, I just fit in.

            From Eastern Europe soon after the wall speaking with very well educated Anglo socialist workers party types to later super-reform minded former USSR libertarians, to middle class Asians, and swilling vodka at 6 AM in the morning with toothless construction workers about to climb bamboo with sandals up 10 floors, etc…

            I have neither hatred nor fear of foreigners.
            I have had a significant concern for what the project has become.

            And, Trump supporters, the bulk of them, do not hate foreigners.
            From bureaucrats to farmers, from self-made businessman, to inner urban, hard working, family types of any vein and color, they have witnessed the volatility, they have witnessed a stagnation, they have taken pride in creating their lives, raising their children, living within their means.

            The entire project has distorted. It was a gamble. The underlining theory, founded on either an empirical basis, or on the value-infused conceptions of critical perspectives, while able to influence for awhile, hasn’t materialized, as issue based pundits, of one vein or another, have risen to speak as experts, spewing the lessor considered and directed memes of their paymasters. The people know it, and the underlying principle of forging better for those that follow has lessened of this great mass of distorted messages.

            Have you seen Zedillo’s recent lecture in Geneva?
            But, even he doesn’t go far enough.

            Again, not far enough.

            The time is nigh to push a new global bargain, and most who know mean might be surprised to hear me support a Neo-Con perspective, but there might be something to league of democracies.

            It is funny how China took up the Plaza accords, as if that is what caused the Lost decade(s) in Japan rather than the incestuous relationship between industry, finance and government, along with high investment rates, real property asset bloat and money printing (which China has done on steroids, with less cohesion as a people, and much greater institutional weakness)

            Most people have to work hard, raise their kids, attend any number of children/friend/family functions and also work on their relationships spending quality time with family members.

            Elites similarly, but as their power is of the support of many, their commitments are many (multiplied) and varied, their frames, conceptions and considerations, abbreviated, dated.

            It just isn’t a Jackonian backlash. It is a fundamental process by which all of the constructions, assumptions and experience have led to a serious discontent, confounded by false calculations of what is going on globally while people see nominal figures of debt, prices, costs of living and similarly rise, along with misuse of PPP numbers, along with a slew of repeated memes, along the line of theory that has been used to support the project leading to contradictions that can be scarcely understood by very busy people; elite and normal person alike.

          • As to India….
            Indians have long been members of the club you imagine.
            And, as well, very many, almost universally globally.

            Not just big countries. The only thing that is universal is delusion.
            From Eastern Europe to Southern Asia, from the former Soviet Union to the former Yugoslavia, South East Asia, and the Carribbean.

            That is why I always speak of Hollywood.
            I am speaking of the impact of flashy fictional plots.

            Look at Zeitgeist, or any number of other similar conspiratorial documentaries.

            Focus on the video frames, the cinematography or whatever it is called.

            Listen to the soundtrack, the tone of the speakers voice, the visual effects. Distortionary techniques meant to bespell. Hell, look at how Islamic Extremists, and other extremists have adopted these techniques.

            But India, due to the structure of its society, previous incarnations, have had very large, wealthy and educated populations, admittedly amongst a sea of despair. The subcontinents writers have been very involved in these dialogues as you imagine and for a very long time.

            Look at the conceptions of the BJP.

            Heck, even Indonesia, Pancasila,…..
            In Indonesia’s case this runs the gamut from national pride, to murderous zealotry.

            This is what I refer to when I describe, against a global elite, techno-globo-utopia, I always refer to the:

            Age of Revolution and Romance, meets mid-19th century German Idealism to the Age of Nationalism, unto the Revolutionary Socialism that extended from the latter part of the 19th to the early 20th century, that fostered highly subjective-idealistic-nihilistic early 20th century Continental philosophy, that has led us to the overly value-subjective, with a purpose beyond finding, but creating a Marxian justice-truth academic philosophy of Critical Theory, today (Black Lives Matter, Gender, White Supremacy, for that matter, Asian Exceptionalism, etc)

  7. There’s been a real misportrayal of Trump amongst the media. Journalists talk about his incitement of violence, but Trump isn’t the one inciting violence. He specifically says to his supporters to not incite violence, but that if the other guy incites violence, then hit them back. Is it crazy to think that most of the stuff he gets ridiculed for is the same stuff I would say in the exact same way. He hasn’t really done much differently than what I would do, although that’s also probably the same reason why he’s getting the responses he is.

    Also, I’ve always felt that Ted Cruz was more Jacksonian than Trump. Trump grew up in New York City for God’s sake. Cruz also has a much stronger, and much less humane stance, on illegal immigration. What Trump has suggested is to deport illegal immigrants and then let all of them come back in. Of course, he’s obviously lying considering that he supported the ‘Gang of Eight’ Rubio/Schumer immigration bill. He’s also said that all of his positions are negotiable. Also note that when Nancy Pelosi and Harry Reid were asked who their favorite GOP candidate was, they said Trump without any sort of hesitation.

    I also think if Trump were elected, he could get a lot done. He’s basically been a moderate for the past 20 years or so and he supported Hillary Clinton in 2008. I actually think Trump’s support base is much more diverse than is commonly assumed. Why do I say this? Because I know Chinese people, Indian people, Koreans, and blacks that’ve all voted for Trump. There’s A LOT of Trump supporters in the shadows.

    Right now, he’s got a decent lead in delegates in the GOP race and if anyone gets to the required amount of delegates, it’ll be him. If not, we’re gonna see a brokered or a contested convention. I also agree with you when you say Trump could fragment the GOP, but if he does and we were to see three Presidential candidates, that could mean no one gets to 270 votes which means that the choice for President would essentially come down to Paul Ryan. It’d be funny to see Ryan have to choose between Hillary Clinton, Donald Trump, or Ted Cruz.

    Right now, the only hope to stop Trump from getting the GOP nomination is with a brokered convention. There’s 18 states remaining for the GOP nomination process and of those 18, most are winner-take-all or winner-take-most states including the big prize. Either Trump is barely gonna get the GOP nomination or we’ll see a brokered convention.

    • “but Trump isn’t the one inciting violence”? Come on, you think he is unaware of the impact of some of his statements?

    • “I promise you, I will pay for the legal fees.” trump talking about going after protesters.

    • Yeah. If you offer to stick up for someone in court, or pay their legal fees that come as a consequence of the legal trouble you should get in for attacking a peaceful protestor (i know they are not all peaceful, but the ones at the events where he made those two statements were), then you are offering to diminish the legal burden on someone for a violent action. That is a textbook way to incite violence.

      You may say that Trump was joking, but that is beside the point. Anyone who does a violent act, who then suffers a legal consequence (this could still happen for some of those attacks caught on camera), will have a lawyer, who will if they are wise claim that their client was inspired by Trump’s words. Trump, whether he was joking or not, may then be called upon to genuinely pay legal fees for an accused criminal (sometimes with their assault recorded on camera), or possibly be implicated in a legal case.

      Claiming he was being tongue-in-cheek or just joking etc / gung-ho public speaking will not help him in that case. And it may be during the general, when he has to win over moderates, not the right wing. So he has left a big risk mark on his candidacy, although of course Clinton’s emails leave one on hers too!

      • Far more primitive
        Frankly, whether Rawls or Nozick is to be commended is for a 1980’s Ethics course.

        Trump supporting those that, at least thought, they were supporting Trump, is as simple, and enduring, as you stand up for me, and I stand up for you. And far more powerful, than ethical opposing viewpoint plots.

        Simple, direct, powerful, along with the…..I am as sick as you of this S**t

        He is crass, I always despised his work before, but in the interest of shaking off the soot, blowing the dust of the frame, I can only commend him.

        Frankly, most of us have been very much disinterested, on all corners of the political spectrum, with the politically correct, sanitized, flacid and sterile dialogues that have been foisted upon us.

        With no offspring, but children as my ears, I might say, I am happy should you draw up a user agreement in that fashion, but please do not teach my children such a poor practice contaminated by such structures of thought as to imagine our selves as so impoverished as to need it (even if you do).

      • I would’ve said and done the same thing as Trump, including and especially the part of the legal fees. There was one black Trump supporters who’s a Staff Sargeant in the Air Force that beat the shit out of a protestor holding up a Trump sign as Hitler with his other protester friend wearing a KKK mask. I’d definitely pay his legal fees. I think that’s just.

        There was another protester who was flipping people off and yelling curse words with children and families around. So some elderly man punched the thug in the face. If that happened anywhere in public and a regular person was doing that, that’s what’d happen. When you’re at a politically charged rally when the guy talking is getting interrupted by protesters every 3-5 minutes, someone is bound to get punched in the face.

        If these protesters go down the street doing that kinda stuff, you’ll get punched in the face.

        These are private events. Protesters shouldn’t be infiltrating these events. You had protesters in Arizona blocking a road, jumping on cars, tying themselves to cars, etc to prevent people from getting to the Trump rally. There are people trying to tackle him as he’s about to talk.

        • It is true the protestors are being disruptive, but US law is pretty clear about what is allowed (non-violent protest, free speech), what is not allowed (violent protest; assaults on non-violent protestors, incitement of violence against others).

          A rally being politically charged does not make US law stop applying, as far as I know. And nor does it mean that inciting violence suddenly becomes allowed. Whether you support Trump or not, you have to admit that it may not be a good idea to put himself at risk of law suits related to this.

          • Those protesters were violent. The people inciting violence were the protesters, not Trump. I was watching these events as they were unfolding live. Everything that you’re stating and how it happened is entirely bullshit.

          • Totally agree. I also think Trump is very impatient. He may rush halfbaked ideas into policy.

  8. Many people blame Trump for being a terrible danger. But in view of your article, could we not rather blame it on the reasons why Trump has become significant? i.e., isnt the danger rather that political elite who has accepted or promoted the ever increasing income inequality and economic stagnation? Something to think about.

    • Absolutely, Luis, income inequality is a problem we’ve wrestled with so many times before and its a huge problem — economically, socially, politically, and to our republican virtues (which I guess is something we should be a little embarrassed to say, even when we believe in such silly things.)

  9. All good until the point where you lumped Putin in with Trump and Le Pen. Now I have to question your judgement on the rest.

    • Wow, one word undermined 5000. The 5000 couldn’t have been terribly strong although in their defense you haven’t made much of a criticism. In Russia you’ll see many of the same supporters as for the rest of these guys (and gal) with the same resentments and the same sense of anxiety and aggrievement.

  10. Let me also add one more point. There’s a group of former libertarians who basically met in college or around that time and we still meet about once a month or so to discuss ideas, we have a Facebook group where we post various things, and we have a Facebook chat where we discuss these matters among ourselves. The views that Trump has expressed and the mechanism by which he has expressed those views is simply a synopsis of our collective worldviews and ideas literally to the tee.

    What are the demographics? Racially, ethnically and ideologically the group is quite diverse. We may all be right-wingers, but we are all right wingers of different kinds. The group ranges from liberal (Hamiltonian) imperials to American nationalist to Jacksonian populism. Amongst our population and our peers both locally and nationally, we have good money habits, we’re very intelligent, we’re very well educated, and all of us have a lot going for us. Almost all of us have traveled large parts of the world and across the country. So the idea that Trump’s appeal is limited to the white working class is COMPLETELY FALSE!

    What Trump is doing is energizing a movement that includes many young people. We talk about it all the time. We think that the platform that Trump has laid out and the discourse he’s bringing on key issues is the future of the American right. We think he’s very forward looking and his ideas are largely correct. We think we can campaign on these ideas and win elections for the next 40 years.

    • There is a candidate who’s support is almost entirely white who is speaking to the down-trodden younger generation and who’s desperately trying to appeal to minorities and tries to make the public speeches he gives seem much more diverse than they actually are (by placing the people standing behind him in the camera view to be diverse, but when the camera pans to everyone else it’s ENTIRELY white people). However, that candidate isn’t Donald Trump and that candidate is on the left. Of course, you don’t have to take my word for it. Just look at the exit polls.

      Trump won regions like Guam, Nevada, Florida, and a whole bunch of other states. You don’t win that many states, even in the GOP primaries, by appealing to a small demographic limited to white people. Look at the election data on the other side and then let’s see who the people with the broader demographic appeal are. Keep in mind that many in the white working class don’t mind skilled labor because skilled labor doesn’t depress their wages. Illegal immigration and low-skill labor does depress their wages.

      I’m a graduate student who sits next to brilliant foreign graduate students who don’t know whether they can stay here all the while you have people on the left that’re saying we need to give people who demonstrate violently and that’re here illegally citizenship. This is a disgrace! The funny part is the only candidate actually discussing this issue is Trump! So let’s be real on the whole immigration thing.

  11. Absolutely fucking BRILLIANT. Peace, Bill in New Yawk.

  12. Courageous essay. I welcome the destruction of the current configuration of the Republican Party as a necessary first step to the re-creation of a meaningful two-party system. I do not yet see the coalition of interests that in the future will call themselves “Democrats” and “Republicans”, but it is clear to me that Republicans have to broaden their demographic appeal, and that Democrats must recognize that their party can not both represent Capital and Labor. The fact that Trump was initially dismissed, and to a large extent is still misunderstood, speaks volumes about the separation of elite opinion from the concerns of many if not most Americans. Living through historic change is messy and scary, but I agree with Dr. Pettis that we will be a stronger nation for all this.

    • Thanks, Mlnberger. The exercise of democracy is filthy, messy, chaotic. bewildering, and yet it manages to get things right, although perhaps only, as Churchill says, after trying all the alternatives. If the European elites hadn’t shielded the design of monetary union from their idiot voters, I am sure the result would not have been as elegant, but I bet it would have been resilient. I realize that this might just be ideology speaking, but I do think there is a track record to support it.

  13. I am grateful for your long flight back from Europe. This is the best essay I have read on the Trump phenomena. Tweeting immediately!

    • Thanks Brandon. beginning tomorrow you will be able to retweet all the responses, calling me a total jerk. This is a controversial topic, I am finding. Quite a lot of people have responded to it on blogs around the world.

  14. I have been hugely impressed by Mr. Pettis’s economic analysis that outclasses most other analysts by miles and shows actual understanding of the contemporary meaning of Lord Keynes insights.

    The brilliance of Lord Keynes was due in no small measure is that he understood real history. That is why I am so shocked and disappointed that Mr. Pettis obviously does not.

    My advice to Mr. Pettis is this: just because you excel in one area intellectually, do not suppose that it qualifies you in another.

    Mr. Pettis has a huge amount of remedial work to do if he wants to get up to speed as a political analyst.

    Mr. Pettis’ piece has also convinced me that Mr. Pettis has no real understanding of the politics of China nor of China’s recent real history. Again, it is shocking to me. I assumed Mr. Pettis had a much greater depth in these matters, particularly with understanding the foundations of Lord Keynes political insights, which were based on Lord Keynes exemplary and deep understanding of real history.

    • If you write the words “Lord Keynes” and “real history” enough times, perhaps a coherent argument will emerge spontaneously.

    • I am eager to be enlightened. Please help me go deep.

      • Haha! Not unexpected the amount of vitriol coming out here. Turns out years of good work is indeed completely wrecked by writing anything that contradicts people’s heartfelt political passions!

        Not surprising perhaps! And i felt the air of cheekiness throughout the article, which to me said that you were expecting this to rock a few boats Professor!

        • yes, this subject necessarily had to draw a different and very excitable crowd pronne to fairly categorical statements, and a crowd that wouldn’t find my humor, limited as it is, terribly funny at all. trump has already told us how much he values and welcomes the uneducated, but i can’t believe my making fun of the shit-kickers who beat up protesters at his rally got me accused of elitism — that seems like a pretty low bar for what constitutes an elite.

          when i was a polite, well-mannered 16 year old, during my first visit to the US, about to enrol as a freshman at columbia, some person in her 30s who knew my parents and was a member of mensa was very nice to me and helped me shop for my course books at the columbia bookstore while telling me all about mensa, eager that i join because, she said, it was a great organization for some one like me to get to meet friends. i was a little shy, and joining clubs isn’t really my style, but of course i was polite and heard her out, and when she told me that mensa members are geniuses, in spite of my manners my 16-year-old ego was a little flattered. i completely ruined things however when at one point, to clinch the deal, she told me that mensa only allows members once they pass a test that only people in the top 2% of human intelligence can pass.

          i was shocked. i never meant to sound rude but when i heard her say that i couldn’t help blurting out in surprise: “you accept the top 2%? wow, that means you accept pretty much anyone with above average intelligence, right?”

          as soon as i said it and saw her face fall i realized how rude it sounded, and tried to backtrack and apologize, but soon she stopped helping me buy my course books and that pretty much spelled the end of my candidacy, although i later learned that mensa people mainly get together on websites and make puns, usually followed by the phrase “as it were”, so maybe membership really wasn’t for me. the point is that to me, the sort of childish arrogance i unintentionally displayed that day might qualify as “elitist”. describing the knuckleheads you see attending trump rallies on TV as if they are noot especially bright does not qualify as elitist at all, any more than describing danny de vito as not especially tall would make one a “heightist”.

          • Hah! It’s too bad that in response to your teenage self’s “you accept the top 2%? wow, that means you accept pretty much anyone with above average intelligence, right?” she didn’t quickly retort that “No, that means we accept 4% of those with above average intelligence, as anyone with above average intelligence could quickly figure”!

          • Yes, Tew, but she was in the top 2%, and so probably wouldn’t have missed the point so completely and retorted with such a clunker. She would have seen it for a rather breezy way of implying that there is nothing impressive about being in the top 2%. I agree with Professor Pettis. If you want to accuse someone of elitism, the 16 year-old Columbia freshman is an elitist, although his attempt to take it back because he didn’t want to seem rude shows that he is a well-bred elitist, and this allows him to reduce the charge by around around half, don’t you think? The middle-aged (I assume?) Peking University professor who referred to a bunch of stupid people as, well, “a bunch of stupid people”, is not really an elitist. He is what we might call “an observer”.

          • StephenYao. I should have plastered that comment with smiley icons for you. That’s meant to be a simple joke. And it wouldn’t be a clunker if laid on an arrogant teenager. And for heavens sake, smiley face, smiley face, the joke was meant to be disarming and certainly not to call Professor an elitist.

        • yes, this subject necessarily had to draw a different and very excitable crowd pronne to fairly categorical statements, and a crowd that wouldn’t find my humor, limited as it is, terribly funny at all. trump has already told us how much he values and welcomes the uneducated, but i can’t believe my making fun of the shit-kickers who beat up protesters at his rally got me accused of elitism — that seems like a pretty low bar for what constitutes an elite.

          when i was a polite, well-mannered 16 year old, during my first visit to the US, about to enrol as a freshman at columbia, some person in her 30s who knew my parents and was a member of mensa was very nice to me and helped me shop for my course books at the columbia bookstore while telling me all about mensa, eager that i join because, she said, it was a great organization for some one like me to get to meet friends. i was a little shy, and joining clubs isn’t really my style, but of course i was polite and heard her out, and when she told me that mensa members are geniuses, in spite of my manners my 16-year-old ego was a little flattered. i completely ruined things however when at one point, to clinch the deal, she told me that mensa only allows members once they pass a test that only people in the top 2% of human intelligence can pass.

          i was shocked. i never meant to sound rude but when i heard her say that i couldn’t help blurting out in surprise: “you accept the top 2%? wow, that means you accept pretty much anyone with above average intelligence, right?”

          as soon as i said it and saw her face fall i realized how rude it sounded, and tried to backtrack and apologize, but soon she stopped helping me buy my course books and that pretty much spelled the end of my candidacy, although i later learned that mensa people mainly get together on websites and make puns, usually followed by the phrase “as it were”, so maybe membership really wasn’t for me. the point is that to me, the sort of childish arrogance i unintentionally displayed that day might qualify as “elitist”. describing the knuckleheads you see attending trump rallies on TV as if they are not especially bright does not qualify as elitist at all, any more than describing danny de vito as not especially tall would make one a “heightist”.

  15. Michael, I do not think you get it at all wrt Trump, but don’t have time to elaborate on all counts. Only one point because it seem to be right up your alley. You talk about trade and income inequality as two separate issues. Granted, primary driver for todays “abnormal” (in terms of balance between consumption and productive investment) inequality is technological revolution which requires painful adjustments in employment patterns. However, isn’t it obvious that “free” trade with totalitarian countries like China tremendously amplify/accelerate the resulting income imbalance, threatening the very cohesion of US society. Something’s gotta give, and there are only two ways to restore the equilibrium: (i) Sanders way of moving our economic and political system closer to China or (ii) Trump way of trade intervention to stop US from importing China’s et al political and economic realities. Granted, trump speaks to viscera, not cortex, but sometimes uneducated/unsophisticated folk viscera has better feel for reality than big brains in ivory towers…
    Ok, another point. I agree, Trump is no Jefferson, he is truly an opportunist. However, the most salient feature of the corresponding cycle in US politics has nothing to do with finer details of Jefferson vs Trump populism, but rather with dynamics of charismatic vs bureaucratic leadership. People instinctively feel that US has lost its vitality and succumbed to mindless political correctness, and that it is time to stir things up a little. Herr Gott likes to stir things up from time to time, that’s how she creates new life forms 😉

    • Not sure who thinks US has lost its vitality, many do complain that the US lessens it what interests them, coupled to the Techno-Global mantra, cum disappointment at Political Venturing, US decline story of the 2000’s.

      But most of these, were either, hubrisic of what was happening in their region, American and bombarded with the delusions of the common punditry, or one of the previous, and ethically posturing of their simplistic framing devices.

      The fact is, of so many trends, the world is at an inflection point. The US, from Roosevelts Conservation corp, to attaching more of its own demand, and confronting disblers of the system, has much it can do.

      Perhaps it is just that baby-boomers are confronting their need for Viagra, pain ointment and walkers. What a long Strange trip it’s been.

      • I think I agree with you CSteven, if you are questioning the idea of some mythical loss of US vitality. You might have to live abroad as an American to understand just how astonishingly creative the US is, but if you try objectively to imagine what kind of evidence you might see if it were true that the US had lost its vitality, and what kind if it hadn’t, it seems to me astonishingly easier to come up with the former than the latter. Anyway if you know your history the US has officially lost its vitality dozens of times in the past 200 years. Wasn’t the US, according to some late 19th Century British wit, the only country in history that went from childhood straight to senility without ever passing through maturity? There is something about the sheer messiness of democratic vitality that simply confounds us again and again until longer afterwards. I am not sure why. It seems so easy to see.

        • The quote is from DH Lawrence (Studies in American Literature): ‘from barbarism to atavism with no intervening stage’ (that’s from memory, but it is almost word for word).

          Fabulous post, Professor; needs syndicating.

    • I can’t tell where you agree and where you disagree.

  16. Excellent essay. The dimension which concerns me, and which I think is out-of-sample relative to Prof. Pettis’s other historical analogues, is the global role of US relative to pre-WWII history. There are three very real geopolitical flashpoints (Korea, Eastern Europe, South China Sea) where perceived US interests and resolve have a deterrent effect and contribute to global stability. This deterrent has weakened substantially under the current administration (weak response to Russian aggression in Ukraine and effectively ceding Syria to Putin), and when Trump speaks of pulling the US out of NATO and South Korea (we’re getting a bad deal!), I wonder how that is heard in Pyongyang, Moscow, and Beijing. Garrisoning troops abroad is indeed expensive, but the negative carry is outweighed by the avoided costs of great power wars and barriers to trade. I’m pretty sure Trump misses this, and I’m pretty sure the odds of his election are higher than Prof. Pettis implies, thus my concern.

    • This is something worth pursuing, Andy, and I don’t know where I stand. The isolationist in me often conflicts with the interventionist, and its a matter of choosing which is less bad — although less bad for the US or for the world I cannot decide.

    • Trump hasn’t said any of the things you’re accusing him of saying or supporting. He never said we should withdraw from NATO or stop garrisoning troops in other countries. What he said is that we need to change the deals we make so we’re not paying for the brunt of the cost.

  17. I am a faithful and inspired reader of your articles. I totally agree with your conclusions about Trump. In my opinion he his the product of the loss of income of the middle class, mainly white, in the last 20 years. In one think I disagree. I do not believe the number of voters will shrink with the time. I feel this election will have an extraordinary participation. As evidence of this I like to “promote” the study of Mr. Berlusconi raise in Italy. I lived there at the time and I am amazed of the many similarities between these two political “pirates”.

    • You may be right, Roberto. Belusconi does show one possible outcome, but was the establishment as determined to thwart Berlusconi as they were Trump? In Italy Belusconi’s election brought a party with him that Trump cannot, right?

    • Berlusconi win is mostly due to massive corruptions stories that affected left and right in 80. But of course Washington is broke and also corrputed so it might be possible. But I should add that nowdays corruption is more sophisticated that it was back then, and so, far less visible to the public eye.

  18. I enjoyed the history, and there are some important points in the essay (for example, that the president has less power than most people think), but overall the essay highlights only one side of Trumps’ appeal, and minimizes the importance of nationalism as a driver. Trump’s appeal is broader than portrayed by Michael, as Suvy and Leos point out above. Also, the context for what’s happening now in the US doesn’t include just US history, but global forces at work elsewhere (see the rise of nationalist parties in Europe). I find it especially odd that Michael, who is very familiar with trade, discounts trade as a factor in the rise of nationalism.

  19. Good one. Thanks for sharing about Dani; it humanizes Trump supporters. It’s so easy to scoff at these guys, but they have a point, as you say.

    • Thanks, Vammo. I am hoping Dani never reads this because he’ll beam with cocky pleasure at being the hero of my story, and he won’t let me forget.

  20. The anti-Trump lamentations of mainstream political leaders obstinately refusing to address the impact on a large portion of the US population of an unbalanced global trade and monetary system in terms of high debt load, stagnant real incomes and widening income and wealth inequality reminds me of this quote from Bossuet: “God laughs at those who deplore the effects of which they cherish the causes”.

  21. I am a Trump supporter, and I will admit that I am not completely clear as to what he will actually do or accomplish in office.

    I am clear, however, as to what his Republican and Democratic opponents will do. They will expand foreign wars while tightening security at home. They will destroy nations, then shame us into accepting the refugees. They will replenish the underclass with immigrants, while many remain unemployed. They will use the educational system for political indoctrination, then claim the country does not have the skilled workers. They will rely on advisers from Wall Street investment banks. They will reform the healthcare system so more of their cronies can get in on the skim. They will condemn “hate speech” while bombing half a dozen countries. They use teleprompters to read stories about their father the dishwasher/immigrant/mailman/garbageman. They will be regarded as brilliant for having attended ___ school.

    • I am no Trump supporter and yet I cannot really disagree with much of the rest of your comment. Sad, isn’t it?

      • I am surprised Mr Pettis will agree with Chris’s arguments. And assuming Chris is right, how can a bigot and a clown who is legitimizing a sort of neo-fascist political rhetoric in the US (no American politician that I know talks like this about people of other races/ethnicity’s and women and disabled people) set things right? Assuming we agree with Chris about the others, why should we support Trump? We should be even more revolted by Trump because he would be a hundred times worse than the others. It is like we concede that our leadership is not good enough and then think Trump is the solution! I am questioning that Trump supporters support him because they agree with the reasons Chris puts forward about others not being good enough. The majority of his support among the Republican primary voter base (without which he wouldn’t be a political phenomenon) is based on other far less palatable factors- basically racist bigotry.

        Finally how many refugees were we shamed into accepting from Iraq? Do our politicians only replenish the underclass with immigrants? I thought immigrants have taken over Wall Street and Silicon valley as well! Half of the guys going to jail for fraud on Wall street are Indians! Who used the education system for political indoctrination? And is that the reason we don’t have skilled workers? What is a skill? We are not China or Russia. Without the liberal arts, there is no real democracy. (The one thing that living in China has taught me is the importance of liberal arts – there is nothing like this here and cannot be for obvious reasons). Dismissing Obama’s health care reforms with that one sentence tells us more about someone’s inability to make a logical argument than anything about Obama or health care in America. Forget Trump, will you be able to do better if you were in his position? Which half a dozen countries have Obama bombed? Obama’s background is impressive and interesting as it was, he didn’t need to invent any stories. Clinton or Obama are very smart people (whether we support them politically or not) and not just because they attended school, that lot of people do. This kind of rant by Chris (sorry!) based on illogically running down our political system and leaders is ultimately feeding support for bigoted clowns like Trump. The United States is doing better, has done better and will continue to do better than many other countries (not in all ways, but in many ways) because it has good institutions and reasonable leaders who won’t teach us to hate each other. Lets keep it that way.

        • Without the “liberal arts” there’s no real democracy?! LOL! Every state promotes the “liberal arts” to project its own views and effectively function as a propaganda tool. I have no problem with the liberal arts or those that want to study them, but the “liberal arts” aren’t what’s responsible for liberty. In fact, I’m willing to bet you that more often than not, the people who study the “liberal arts” are generally the ones in favor of more autocracy and centralized control.

          Ultimately, the level of liberality in a society is almost always related to the liberality of its market forces. Countries that can hold a gun to your head to tell you how you can participate in markets, what you can buy, what you can sell, what interest rates you can use, etc are the same ones that can tell you what you can and can’t say. Even today, the biggest pushers of a lack of liberality are the so-called “progressives” in their disdain for anything that’s not “politically correct” or “offensive” because that stuff isn’t “equality”. If you’re bothered that someone somewhere said something that made you “feel bad”, you need a reality check. And keep in mind that most of the people who say this are on the left, which are dominated by those who study liberal arts.

          Since when is it “liberal” to censor speech because it’s “offensive” or not “politically correct” because someone “feels bad”? How is this for “free speech” if you’re actively stopping people from freely expressing what’s on their mind?

          I’m sorry, but Trump is right when he says we’ve gotten soft. If you wanna stop people from saying stuff because someone “feels bad” while claiming you’re for “free speech”, you need to be punched in the face repeatedly until you stop being such a statist hypocrite. The way the left is moving is literally along the lines of fascism and Communism. This is utter hypocrisy.

    • Trump hires more foreign, low wage, workers than all the other candidates as a whole. Trumps said he will consider using nuclear weapon against ISIS. Trump University ripped off those middle class people who admired him. He cares his hair more than the well being of other people. It’s wishful thinking that he can do better.

  22. Michael has demonstrated the depth of his sophistication in this blog many times in the past. Now he displays the breadth of his understanding, of not only American political history but also in being able to see the world from the viewpoint of the common man – better than the common man. And obviously far better than the elites. This is almost unique, as far as I know.

    Michael – I would very much enjoy reading your viewpoint of Hillary Clinton & Bernie Sanders. Although I’m a lukewarm Clinton supporter myself, I think I’m aware of her rough edges. It would be fantastic to get a gut-check in the eloquent, balanced prose that makes your work so enjoyable to read.

    Keep up the great work, Michael. And I suggest you open up a ‘Donate’ path for us who enjoy your work and want to show our appreciation. Spend it on beer or donate it to your favorite charity – I don’t care, just keep sharing your wisdom (more often if possible!) and I will keep clicking the DONATE button.

    • If I were smart enough to do the “donate” thing, Dave, I would. I spend more than 50% of my money supporting the Beijing underground scene, and in October we’re getting four of our favorite Beijing bands and performers to do big club dates in New York, Berlin, Tokyo, Istanbul and Sao Paolo. If you’re anywhere near, check them out. Your ticket money would be a great help in covering our expenses.

      • Do you mean that it’s been years that i read your economic blog but you don’t know anything about getting rich? I build your app/website/news-letter/syndicated-content for free…

        • ha ha thanks, cedric. i earn more money today than i did when i worked as a senior guy on wall street, but more than half my income before taxes is just pissed away supporting the underground music scene or paying random kids’ school bills. no complaints at all, by the way, as i’d rather be best friends with stravinsky or duchamp than own a rolls-royce and a van gogh (which i would promptly sell to use the money to buy a dozen good paintings). i won’t pretend that i don’t live a comfortable life, but when it comes to getting rich, i rely heavily on luck (and an inheritance, which — i know, i know — undermines any claim i might have had to respect ha ha).

          • aww c’mon Van Gogh was a very great artist…But I can see the benefit of a dozen paintings over just one.

      • Maybe try the Patreon system? I have seen several other blogs doing that recently. It is optional, and people can cap their donations (X amount per post per month with a maximum of Y).

      • What are the bands and club dates, especially for New York? Or where would we find this, since you (understandably) don’t advertise them on your blog?

        • We try to keep things updated on the CD label’s website:
          Our musicians now tour pretty constantly, so that on any given month there’s a 50/50 chance that someone will be touring Europe or the US, but in October we’re taking some of our favorite performers to do an especially big series of shows in New York, Berlin, Tokyo, Istanbul and Sao Paolo. If you live near any of those cities please keep your eyes open.

          In New York Daniel, we play a lot of clubs and spaces — in February for example a short piece composed by one of the scene’s “heroes”, Shouwang, was performed at Merkin Hall by our favorite NY new-music ensemble (Bang on a Can) — but New York performances tours almost always start, or do the biggest show, at Baby’s All Right, because it’s one of our favorite spaces and one of their partners, Zach, was among earliest to recognize that something really exciting was happening in Beijing and has always gone overboard for us when it came to support. In addition the musicians always get a lot of respect there as artists, and not as “Chinese” artists.

          But you see why I don’t write too much about the topic on this blog. I can easily get too carried away with the music scene here.

          • Looks like Maybemars hasn’t been updated since 2014, which is sad! Too busy making music to update the site. 🙂

            Baby’s is great, look forward to hearing the October shows there.

        • The people at the Maybe Mars website were very helpful when I asked about shows in Beijing.

  23. We have got to stop sending jobs overseas. It’s pretty simple: If you’re paying $12, $13, $14 an hour for factory workers and you can move your factory South of the border, pay a dollar an hour for labor,…have no health care—that’s the most expensive single element in making a car— have no environmental controls, no pollution controls and no retirement, and you don’t care about anything but making money, there will be a giant sucking sound going south.
    …when [Mexico’s] jobs come up from a dollar an hour to six dollars an hour, and ours go down to six dollars an hour, and then it’s leveled again. But in the meantime, you’ve wrecked the country with these kinds of deals.

    Ross Perot-1992.

  24. That was a nice point early in the essay contrasting sans-culottes extremism with Jacksonian reformism. If the reformist energy is blocked, the danger of real extremism arises. Andrew Jackson is far less dangerous than Robespierre and Napoleon. The far right in Europe and America have been gathering power since 2008. A Trump presidency, of whatever specific nature, would deflate at least the American phenomenon. It would be interesting, though, to see where it might tend under a Hillary regime. It’s notable that Trump and Hillary have unprecedented unfavorability ratings. America is badly split at the moment, and neither of those two are popular.

    Whether it is possible to achieve any kind of Jacksonian impact on American politics is doubtful. The bureaucrats and courts present much more intractable obstacles than they did 180 years ago. And the educational and media systems are both one party states (Leftist of course). The elite remains incredibly effective at telling Americans what to think. My favorite test case on this is gay marriage. As soon as the media began its campaign in earnest, the polls began to shift–and they shifted a great deal very quickly. American is run by some strange amalgam of mind-control state, bureaucracy, and plutocracy–with a thin veneer of democracy as cover for the sausage factory beneath.

    As to the repetitive references to stupidity in this essay: How many dumb whites do you think are out there? Need I remind you that half of blacks have sub-85 IQs, but only 16% of whites? And 66% of blacks managed to vote in 2012–ie, at least a third of sub-85 IQ blacks managed to vote. Based on that, one might estimate at most 10% of whites don’t vote due to mental incapacity–not a significant factor. And not all the moronic whites are Trumpers. I’m always surprised at how recklessly the Left throws around the intelligence issue, given the large racial differences in intelligence and their hypersensitivity to the notion of racial differences.

    When it comes to immigration, the elites decide who and how many. Popular support has long lagged behind elite enthusiasm for immigration. Could this be because of differential benefits? Could it be that average Americans do not benefit at all?

    There is a kind of prevalent insanity, not least among economists and repeated in this essay, which consists of speaking about “immigration” in the abstract, as though it does not matter WHO the immigrants are. Yet it matters. Had we imported 35 million Nigerians or Russians or Japanese or Pakistanis or Germans–we would be living in a different country than the one that imported 35 million Mexicans. I do not say better or worse, but assuredly different. There are meaningful genetic differences between groups around the world and large cultural differences as well. To speak of immigration abstractly is to commit a lie of omission, which is only the most effective type of lie if you have secure control over the media. The assumption that there are long term benefits from any and all immigrants is absolutely baseless, a mere prejudice that happens to be in vogue among the elites–and one which is never, ever discussed honestly in any mainstream publication. How a man can live in the Far East for so many years, a region where racism remains vigorous, and still call race-conscious Americans fools–is this even a mystery at all? Unfortunately, hypocrisy is an easy game.

    But, I’d like to read the Professor’s thoughts on East Asian racism, as exemplified, for example, in Japan’s prohibition on immigration. Or how about China? It has entire empty cities in which Syrians or Sudanese or Somalis might be resettled. But, no, they will not be resettled in China. They cannot be. The Chinese elite is not so impregnable as the Western elite supposes itself to be. They cannot risk betraying their people, as the Western elite betrays its people in both words and actions.

    Why do Jacksonians choose dubious leaders? The conventional leaders are too far up their own asses to be able to question the status quo. After all, the status quo ushered them into the elite, n’est pas? So how bad could it be? Maybe a little tinkering will satisfy those importunate groundlings? Maybe not. Consider Ted Cruz’s tinkering type of proposal on reforming Muslim immigration. Cruz is very smart, highly educated. But, his proposal makes no sense from a security perspective, which is the perspective he’s selling. It’s simply mendacious. Why does he stoop to mendacity in such a case? He stoops to avoid being clothes-lined by the squads of snobs and bullies who police our thoughts. Recognizing the geographic scope of Islamic terrorism entails offending numerous American allies, like Saudi Arabia and Morocco, both of whom produce very effective terrorists. The other candidates are even worse, except Trump, who very sensibly proposes a temporary ban on all Muslim immigration.

    • I voted for Trump in the primary, but there are real concerns with him.

      Also, if Jackson was in Europe I don’t know how much different he’d be than Napoleon. I don’t think Napoleon was an evil psychopath. I think he was just kinda foolish.

      There’s also an attack on the “elite” that you posit, but it’s better to have a liberal elite run the show than the masses. If we’re talking about stupid stuff, then let’s talk about Trump not saying climate change is a hoax. This is just absurd. After this year, 3/10 hottest years on record since 1980 will have been 2014, 2015, and 2016. There’s NOTHING more dangerous to our national security than climate change. Of course, these aren’t even my words. This is coming from our military and our high command. Hell, our military probably does more to deal with the impacts of climate change than the EPA. Climate change is the single biggest threat that we face.

      With regards to Mexicans, the Latins immigrating to the US are no longer Mexicans and haven’t been since the ~2008. They’re Guatemalans, Colombians, and other Latin Americans that aren’t Mexicans.

      • Not 1980, but 1880. That was a typo.

      • I used to make the argument about the military taking AGW seriously. I’ve rethought this because the military is subject to groupthink, especially on politically sensitive matters like this. They reflexively follow orders. This is as it should be, but it means their judgments are not to be trusted.

        I have some AGW links for you. The first is my favorite:

        The next two are useful correctives to excessive panic:

        None of the candidates put the matter in the way that Taleb puts it above. Yet, Taleb’s approach–agnosticism guarded by the precautionary principle–is the only logically defensible position. If the Left were serious about this matter, as they claim to be, they would be doing intensive R&D on nuclear power and also building out nuclear power. Renewables are a gamble; nuclear is a sure savior.

        Also, the argument that high carbon emissions cause acidification of the oceans is much less beset by doubts and counterarguments than the AGW argument. It’s always worth mentioning when AGW comes up.

        • I agree with Taleb’s position on this. That’s exactly where I’m coming from. That’s why I’m so concerned.

          When you start screwing around with things like CO2 levels and methane levels in the air and think there’s nothing bad that could happen, you’re really setting yourself up for a huge fall.

    • I don’t really know when there was ever really a discussion of race and the kinds of immigration in this article or that all kinds of immigration is good. Obviously, when you have thugs and violent criminals as the primary form of immigrants, it’s not a good thing. I don’t think anyone ever said unrestricted immigration is the path forward. I’m quite sure everyone on this page finds that idea absolutely insane.

      In my comment above, that should be: Trump saying climate change is a hoax is absurd.

      • On another note, the issue with climate change isn’t even mean temperatures. It’s the volatility of global climate patterns more generally. I’d be much more worried about the shifting swaths of arable land than I’d be about mean temperatures, but there’s other risks too. We can’t put someone in charge who thinks this is a hoax.

        For what it’s worth, ISIS will never be an existential threat to the United States. Climate change is an existential threat to human existence.

      • Early in the essay, the Professor says: “I believe that immigration has always been one of the greatest and most powerful sources of American success, and will continue to be for decades, if not centuries…” This implies a belief in the success of the last 50 years of immigration. Most of those immigrants were Mexican. Taking LA as a test case, I see only evidence against the proposition. LA was much nicer 40 years ago, before it became the second largest Mexican city. There were also immigrants from Haiti, Jamaica, Africa, Puerto Rico, and numerous Muslim nations. I do not see success. I see cheap labor, high burdens on welfare/police systems, and votes for the labor party. I also consider the notion of America as a “proposition nation” to be incoherent. Too many of those pretending to accept the proposition will burn it if they attain power.

        • “This implies a belief in the success of the last 50 years of immigration. Most of those immigrants were Mexican.”

          It doesn’t imply that, but there’s an implicit assumption you’re making regards to immigration: that it’s the proportion of “good immigrants” that matter. Of course, this assumes away winner-take-all effects, which means that your entire statement isn’t valid.

          BTW, immigration from Asia into the US is now larger than immigration from anywhere else.

        • I wrote a long response, Craken, and then accidentally erased it, and can’t for the life of we write it again. My main point is how useful here it is really to study the history of immigration and to read contemporary books and newspaper accounts. The arguments never change.

          If you do, you will find that the worst group of all by far were probably the black Irish who started coming here in the 1840s and 1850s for the sheer horror and contempt with which they were treated (I don’t included ex-slave blacks because of course their American lineage exceeds that of nearly any other group, and it is foolish to think that whatever it is that is American culture can somehow be defined without a huge dollop of black culture at its core, so these guys don’t really count as immigrants).

          Except among a few idealistic souls there was never any doubt that the black Irish were the most disgusting, intellectually inferior, sex-obsessed and lazy louts who had ever disgraced American and American ideals, and who polluted American blood (the fact that they were white, and could sneak in their blood by pretending to be real whites, made them far more frightening than the blacks, who couldn’t). Laziness and criminality were not things they they did when they had no choice. It was who they were. If it weren’t for powerful manufacturers who needed cheap and stupid human fodder, (and in much of the second half of the 19th Century manufacturers controlled the Republican party and the GOP controlled the US) even the most generous of Americans would have long recognized that we needed to reform our immigration laws because of the Irish.

          All our worst fears were, of course, confirmed when the animal-like Irish rioted viciously in New York while our boys were dying to save the Union and democracy (although many of those dying boys turned out to be Irish, but like the black troops, who also died in their fair numbers, it took a while for them to fit into the story), and this was further confirmed when their support of Tammany Hall corrupted American politics to the bone — the Irish, after all, were not manly enough to “get” democracy, and all you needed was to give them a swig of whisky to pervert any civic sense they might have had.

          It wasn’t until the end of the the 19th and beginning of 20th centuries that the Irish started to become human, but only because you have to be human to be a low-IQ amiable buffoon with a weakness for the bottle and a talent for sentimental song. But not all of them were that kind of human. Most were still criminals because that’s what Irish do.

          But by then, it was clear that there might be another loathsome, filthy, sex- and drug- obsessed group of degenerates, whom only a whip could squeeze work out of, and whose immigration was polluting the idea and the blood of America, and these were of course were the Chinese (and Japanese and Koreans) who snuck into our country because they thought they could enjoy the easy life and high pay of building railroads. But we had to regularly to exclude them because only someone totally blind was unable to see how filthy their habits and subhuman their thinking, and how corrosive they were to American ideals.

          It wasn’t until around WW1 that the Irish became crafty (i.e. dishonest and criminal, which was part of their DNA, but smart about it) and not until WW2 that they finally went totally white and became the all-Americans of our current American myth (although not until the 1960s did they stop being secretly under the thumb of Rome, and ready to betray us in a minute if the Pope ever asked them to). Meanwhile the filthy Asians had worked their way into model immigrant status by the 1970s. Today, amazing as this might sound to any intelligent and civic-minded American 100-150 years ago, we actually wouldn’t mind having a lot more of each.

          Also today, after a relatively short period of immigration, Muslims, whose only trait we know is a visceral hatred of everything American, especially American freedom, have managed to work themselves to the point where within one or two generations of immigrating into the country they are wealthier than the average American (unlike in Europe where I think they earn 70% or less than the average, even after several generations), which cannot be easy when you’re constantly trying to impose sharia law and bomb people. This must be one of the fastest immigrant success stories we have, with perhaps eastern Jews their only competition. But others might be doing faster than expected. I a few years ago read that the average Haitian (and what could be more useless than a Haitian immigrant?) is, by the second generation, more educated than the average American. They didn’t even speak English when they got here, from by far the most desperately, stinkingly poor country in the hemisphere (my family lived there during the four years I was in college, and I loved visiting such a graceful island and might even one day retire in beautiful Jacmel).

          Sorry to be so crude, but we are incredibly teleological. Every currently successful immigrant group, from the Irish, to the Chinese, to the Eastern Jews, to the Nigerians, to the Italians, to the Pakistanis and Indians, and recently to the Iranians (although the escape of wealthy Iranians after the fall of the Shah made them human quicker than most because, let’s face it, nothing makes you human quite like middle class income and education), has started out with subhuman intelligence (scientifically proven by all the tests, by the way), and with filth, laziness and criminality etched into their DNA.

          But because they have all been successes, we have whitewashed their history. I assure you however that if you read contemporary books and newspapers, there is no insult we can apply to Mexicans or Latino peasant immigrants that even matches some of the bile that was commonplace as applied to their predecessors, by which I mean bile overwhelming accepted even among the educated.

          Some people say that in fact Mexican immigration has a long enough history to disprove my thesis, but in fact Mexicans that came here before WW2 have followed the path as closely as anyone else. They are boringly American and middle class for the most part. Mexican who have come here in the past two decades are just as awful as the black Irish, but without their relative numbers and their instinct for criminality (or at least not quite as bad).

          I am very aware that sarcasm doesn’t always appear as sarcasm in writing, especially when read by foreigners, or by American boneheads who are reading my comment ecstatically because they think they have stumbled on a soul brother who can use big words, so let me make clear that a lot of what I have said above was said sarcastically. My point is that every time someone concedes that immigration worked in the past but that the current group of shit immigrants are different, totally worthless, and don’t fit the American mold at all, you immediately know two things.

          1. That history repeats wonderfully, because once Americans realized the value of earlier immigration to our country, perhaps around the 1820s and 1830s, we have always used the same argument to dismiss the latest filthy bunch of arrivers. These latest immigrants, we always point out, with total sincerity, are not at all like our immigrant grandfathers and great grandfathers — they really are stupid, sex-obsessed, criminal and lazy and there is no way ever of changing it. It’s time to end immigration or this country will fall apart.

          2. The person who said it has NEVER immersed himself in the primary sources and so has no idea of what nice people at the time really believed about the Irish, the Jews, the Italians, the Nigerians, the Pakistanis, the Indians, and so on. No matter how certain we are that this batch is unlike all the others, we have always believed exactly the same thing and said so in exactly the same words. This, by the way, is so easy to prove now that we can google up old books and newspapers. Just check.

          Ha ha my short summary of the long piece I lost gives you a sense of how long it must have been, but here’s what I propose. Just because our immigration policy has always been one of our greatest strengths doesn’t mean it always will be. I am willing to be purely practical about it.

          But the reasons that “this time is different” is the reason why each time was supposed to be different, and each time it turned out that it wasn’t. So if we are going to be practical we are going to have to assume that our disdain for the current batch is just standard noise and has no informational content. We cannot simply assume that this time is right.

          But we’ve had a winning strategy for 250 years. Let’s keep doing it until the first time we actually fail. Let’s wait to see if there ever is a time that is different. Once we’ve encountered a group of immigrants — a nation, race or ethnic group — that truly has failed to live up to our standard immigrant success after two or three generations, then we can discuss changing our strategy on the grounds that America has changed and we no longer have the intelligence, flexibility and grace to be the kind of Americans our forefather were. In that case we can decide to become more European, Japanese, Chinese, or whatever, and lock the doors, while we age slowly into homogenized bankruptcy.

          But until then, why would we ever change out strategy? It’s been such a brilliant strategy. It has come with costs, and with income distribution effects, but it is the role of government to make up for these effects. Professionals, bankers, commodity producers, labor intensive manufacturers, and a whole host of others benefit from open immigration. Unskilled and uneducated workers lose out. Use our tax system to transfer wealth from the winners to educate the losers and otherwise increase their levels of productivity. Minsky, by the way, hated welfare payments and preferred instead that the federal government provide guaranteed jobs — and I won’t get into why this is such an obviously good idea but for those who are interested, read him on the subject.

          I have heard people oppose immigration because if you let in people whose income is below the average American income, you must be lowering the average, and so making us all worse off. I kid you now, I have heard this argument many times. I won’t explain why it is idiotic beyond belief, but I will point out that immigrants support the pension system, they make the US more powerful as a nation (although I am increasingly an isolationist and prefer that power be used as a threat against foreign meddling in the US, and not as a tool for our own foreign meddling), and even as they temporarily bring down the average US income, they raise total income and raise the average income of those who were here before. Once we figure out how to handle the distribution impact, it is almost nothing but positive.

          Two more things that somehow fit but I don’t know where. First, I think it was Suvy who at some point began bitching that we too often confuse classism with racism, and blame mistreatment of the poor on racist behavior. He is absolutely right. We just don’t like poor people (although that’s a little hard for us to admit), especially when they dress and eat differently, and because many immigrant groups are poor, we confuse ourselves into thinking that we hate their ethnic group when in fact we just don’t like the poor. Think about Iranian immigrants. They had their insults, but my sister-in-law is Iranian, as is my lovely niece, and from her experience I think that for some reason Iranians never seemed to get the horrible treatment that other immigrant groups, including other Muslim groups, have received. I suspect that this is Mr. Khomeini’s doing. He caused all the rich and middle class to flee and we discovered that they are far more like us than other immigrants, so perhaps they aren’t that bad.

          Second, and I hesitate to say this because it can so easily spill into conspiracy lunacy and fodder for racist idiots, institutions that were set up to combat racism have the tendency to translate things that are not necessarily racist into evidence of racism. It is a kind of institutional creep, and it is evidence not of viciousness or conspiracy but simply evidence that institutions consist of people.

          I won’t give examples because these create anger that actually undermines rather than encourages resolution, and while Suvy is young enough to feel that being right is enough, and that you should throw your integrity into people’s faces, because the angrier they get people, the more honorable you are (and believe me Suvy, thirty years ago I would have proposed that we join together into a bomb-throwing organization to ram our arrogant truths down people’s throats), today I am wiser and much more interested in finding ways of resolving the problem because sometimes, when we turn bad behavior that is not racist into racist behavior, we make it harder to resolve and we make certain types of Americans feel hopeless.

          Before I came to Chinas while I worked on Wall Street and taught at Columbia, I was lucky enough to act as mentor for about a dozen Columbia undergraduates, including some of the brightest kids I ever met, and these included 3 korean-americans, a morrocan, and 3 black kids (one immigrant), one of whom, along with one korean and the moroccan was part of the 4-5 core members of the group. I know a lot of very bright “ethhnic” kids, in other words — and assume these were typical examples of their peers at other schools. They were of course very grateful to the civil rights movements but they also seemed concerned that institutional anti-racism has simplified relationships to purely ethnic, whereas they (and I) think it should be clear that economic class may be the relevant issue, and is the thing that dare not say its name. But I am digressing, although this is not totally irrelevant to the whole Trump essay.

          • That was your short response?!

            I agree that primary sources are indispensable to understanding history (and the present).

            A difference between our time (the last 50 years) and the epochs you’ve evoked through nativist impersonations is that in our time very little crude anti-immigrant propaganda is to be found. Trump is exceptional in part because he has dared to perpetrate such crudities. They are not to be found in the mainstream press, whose ideology is much more unitary than in the past. The “moderation” of the press on this matter has prevented effective opposition to extraordinary levels of immigration–notably, opposition has failed in spite of stagnant median wages for over 40 years. Opposition to free trade has failed in the same wage environment. It’s a remarkable feat to suppress such seemingly obvious interests.

            You call Haiti “a graceful island”–yet we find it denuded of its forests, its best soil eroded away, most of its wildlife long ago hunted to extinction, and its people heirs to 220 years of abject failure in every higher human pursuit. I am aware of their difficulties, including unfriendly neighbors and a brutal independence battle that left them with very little material/financial/cultural resources to found their nation on. Haitians have not yet attained their full human potential. Even if Haitians have all the potential you accord them, the flip side of immigration for a disastrous country like Haiti is that the most talented tend to leave. Does this not intensify its problems? This escape of talent afflicts the third world in general, to one degree or another. The West does not need their talent. It can put them to work; but it does not need them. If these immigrants are so great, have they no moral obligation to their native lands? Are the saintly NGO’s, festooned with their Ivy Leaguers really more capable than the best native talent? A parallel dynamic is part of the story of black America’s social decline: once freedom of association was abolished, the most capable blacks moved into white neighborhoods. The places they left were then bereft of local leadership or successful examples–replaced by hapless social workers, NGO’s, etc.

            That the IQ of American Jews was ever demonstrated to be sub-par is a canard–maybe some of the other groups you mentioned, but not the Jews. From a recent paper titled “Natural History of Ashkenazi Intelligence,” authored by Gregory Cochran, Jason Hardy, Henry Harpending: They note that there is “a widely cited misrepresentation by
            Kamin (Kamin, 1974) of a paper by Henry Goddard (Goddard, 1917). Goddard gave IQ tests to people suspected of being retarded, and he found that the tests identified retarded Jews as well as retarded people of other groups. Kamin reported, instead, that Jews had low IQs, and this erroneous report was picked up by many authors including Stephen Jay
            Gould, who used it as evidence of the unreliability of the tests (Seligman, 1992).”

            I will grant we have won more than we have lost in 250 years of immigration. I also like the frame you suggest: immigration as an experiment. But, there is a difference between intelligent experiments and unintelligent experiments. To take an extreme example, Sweden is conducting an unintelligent experiment–verging on suicidal. Obama’s plan to admit Syrians at a time of war against a terrorist organization comprised largely of Syrians–unintelligent. There is no such thing as human equality. Economists find it convenient to count quantities of immigrants without regard to qualities. Yet, they have different qualities–qualities which are determinative in how they will reshape America. Consider the manifold impact of the Jews. I applaud everything the Jews have contributed except what they have done to political thought and discourse. They changed the country–how much, one may debate. Some Americans prefer that the nation should evolve organically, rather than at the prompting of foreigners–a path which need not entail a spiral into “homogenized bankruptcy.” And, insofar as our immigration policies are experimental, is it really wise to conduct such a large experiment as we have with the Mexicans, increasing their population share from 1% to 12% in 50 years? To admit a million Cubans is one thing; to admit 35 million Mexicans is quite another. This sociological study of first through fourth generation Mexican-Americans gave me pause:

            You are correct to identify opposition to over-reaching, often misdirected institutional anti-racism as part of what drives the Trump phenomenon. Many white supporters are not so much pro-Trump as opposed to the mainstream consensus, in which they see themselves cast in the hopeless position of being guilty by inheritance. Then they observe illegal immigrants receiving welfare benefits and affirmative action preferences. Recipients of affirmative action have their own problems, since differential academic standards are an open secret. Asians, though, do not have this problem–rather, their complaint is about facing higher standards, as prominently argued by the Free Harvard/Fair Harvard group now running for the Harvard Board of Overseers.

            Assuming that the only other politically feasible option is welfarism, Minsky’s jobs arguments make much more sense–common sense, actually.

            I also agree that class and race can often be conflated when judging groups.

            I agree that there is little recall of our history with immigrants, even among the credentialed. Beyond that, I wonder how well the causal agents of our immigration policy are understood. Is this something you’d like people to remember?: “The bill will not flood our cities with immigrants. It will not upset the ethnic mix of our society. It will not relax the standards of admission. It will not cause American workers to lose their jobs.” – Senator Ted Kennedy, speaking to the Senate regarding the introduction of the Immigration Act of 1965

          • haiti is a graceful island because of its people.

          • If you look at this spreadsheet :
            you will see that you missed the number 1 in the list : Germans ! It is surprising as they were the main import in the latter part of the 19th century. What is interesting is why you forgot them. Could it be because they integrated more easily ?
            It is worth noting that the US enforced a literacy test from 1917 for legal immigrants. That is a very powerful way to alter the distribution of abilities in the immigrant population. Overall, the relative success of the US (compared to Europe) to assimilate immigrants is in my opinion very much correlated to its selectivity. If immigrants can get into Columbia, it is a no brainer to deduce that they are going to be a boon for the economy. If they come with bags full of dollars, like the Chinese in North California, they usually come with brains AND provide monetary stimulus. What’s not to like ?

            Considering US resources and size, the debate was never one of allowing immigration or not, but how to maintain the selectivity advantage but adapting policies and enforcing them rigorously.

            To put it in Trumpian words : a Wall with carefully operated Doors.

          • I am uncomfortable with the idea that we should get the “good ones” and leave out the garbage, both for moral reasons and as a very old-fashioned American who is rather proud of the inscription on the base of the Statue of Liberty. I really do think the US is supposed to be different, and I say this as someone born in Spain of a French mother, who grew up everywhere but the US, and who has lived in China 14 years, with Brazilians, Chinese, and Iranians in my immediately family, who goes to Spain when I want to see them, so on. I know we’ve often failed miserably to live up to our standards, but it doesn’t follow that we should give up those standards. The US is a different country than others, and I am not implying that this means other countries are worse, only that more than any other country it represents the standard for open doors and an unwillingness to accept that one man is better than another because of lucky birth. Again, I know we too often fail in practice to maintain our ideals, but these are nonetheless beautiful ideals. and if we give them away, I see no reason to be American, especially when no one living outside his country of citizenship is treated worse by his own government, especially on tax issues, than an American. I know this might seem more romantic than practical, but the idea of the US is indeed a romantic one.

            But there’s is also a practical matter. Of course we urgently need more of certain professions — computer coders, nurses, etc. — and of course we benefit from importing the most educated from abroad, but importing the rich has brought us little more than money, which is a drop in the bucket of our wealth, and they often bring class attitudes that are more harmful than whatever wealth they bring us. More importantly, there is no evidence that the rich and educated did a better job of building America (and cherishing its ideals) than the despised scum-of-the-earth types. On the contrary, it was the latter, in my opinion, that brought us so much vitality, and bring to the US the quality that makes it different. Many countries practice selective immigration, allowing in only the rich or those with valuable education, but I see no evidence that over the longer term they have created better or more exciting societies. The great industrialists and inventors of the late 19th century were often the worst of immigrants, or their offspring, and none of them could have gotten into Columbia.

            Sorry for this fuzzy and idealistic argument, but I really do think the US is special in certain ways, and all my life I have seen the way that foreigners, especially the poor ones, admire the US even when we are at our worst behavior, which is often enough, and this has rebounded tremendously to our benefit. I remember my taxi-driver in Amsterdam, born and grown up in Amsterdam of Moroccan parents, who told me he was so eager to emigrate to the US and would as soon as he got the visa, and when I asked him, “Why? You’re Dutch, and the Dutch have a good life. Why give it up and start from zero?” he responded “See? That’s why I want to go to America. You think I am Dutch because I was born here, but no one in the Netherlands or anywhere in Europe has ever called me Dutch. For them I am Moroccan or Arab. Only Americans say I am Dutch. That’s why I want to go to America.” I don’t support at all throwing away that radical sense of citizenship that so impressed this young Moroccan, and it strikes me that people who know least about life outside the US, and so who consistently fail to understand it, are always the most eager to throw away the best part of our “American-ness”.

          • This is brilliant Prof. Pettis – you are using your education/erudition for a just cause (in favor of tolerance and our best values/ideals!). The world may or may not be short of intelligence, but it is certainly short of empathy. People like you who have both the traits are always in short supply! As an Indian immigrant in USA (now in China), I can relate to what the Moroccan taxi driver said, I also felt the same when I traveled around USA.

          • Cracken,

            Most white Trump supporters (assuming they’re working class whites) probably benefit from affirmative action. It’s people like me that lose out. I can’t tell you how many of my white working class friends benefited from affirmative action while a middle-class immigrant like me got screwed over.

          • I don’t see the magical automatic means-ends alignment that you see in American immigration. America is structured to maximize the chance of successful integration. That does not mean there’s a magical guarantee. The idea of admitting anyone who wants admission strikes me as gambling blind–not to mention unrealistic from a demographic view. There are billions who would like to resettle in the rich nations around the world. De facto selection necessarily operates given the sheer numbers. And wouldn’t it be more romantic, in your view, if the immigration slots were more widely distributed, rather than allocating half of them to one nation (Mexico)? I suppose that’s just the plutocratic side of the bargain. In exchange for provisioning them with suitable laborers, romantics gain the privilege of choosing a diverse range of immigrants to fill the other half of the quota. It seems you and a great many on the Left romanticize the foreign perspective on America, while conservatives tend to reserve their romanticism more for American cultural and religious traditions.

            It occurs to me that part of the aversion conservatives feel for immigration today is the fact that immigrants vote at very high rates for the Democrats–the party that is both taxing conservatives to pay for the immigrants and also attacking their traditions at every opportunity. There is a break-down in the concept of immigrants integrating into American culture. Instead, American culture itself is attacked, even as alien cultures are promoted, excused, euphemized by the mainstream press.

          • I don’t think it is quite “selecting blind” because there is a well-known process of self-selection which, from most accounts, does an enormous amount of positive sifting, but I don’t know what you mean when you say we “on the Left” (is it because i helped out a poor kid, or is being against Trump enough?) “romanticize the foreign perspective on America”. I have found that Americans who are truly multicultural and grew up in one or more countries abroad tend to have both a more realistic and a more admiring view of America than most, and no, I don’t mean Americans who in college years or thereafter move abroad for a few years, because these aren’t really multicultural so much as just Americans who live abroad, and it involves a different but very powerful kind of sorting that predetermines their attitudes — the one who goes abroad as a banker, versus as an engineer, or a soldier, or diplomat, etc.

            The worst of them is the lover of all cultures who leaves his home in the US (or Europe) to find the authenticity that he believes cannot exist there, and has decided that he wants to help protect the culture of whatever developing country he chooses to live in from rapacious western agglomeration (i.e. Coca Cola, which I actually like quite a lot). For these people the “authenticity” they want means a slightly more sophisticated set of cultural stereotypes and “protecting” means discrediting the attempts of young artists in developing countries to reconcile themselves with their modern lives. As someone who works extensively with brilliant young Chinese musicians who are constantly battling well-meaning foreigners (in alliance with the Chinese middle class and the government), I am infuriated by the way they insist on discrediting these Chinese musicians if they make music that sounds like it was made by people who live in huge, polluted, traffic-jammed cities, who get to school by subway and spend hours on smart phones and computer games, which is exactly what they are, but celebrate them as heroes defending authentic China if they, many of whom have never even seen a farm animal, make music that sounds like it was composed by nomadic horsemen who roam the Gobi Desert or by cheerful peasant girls from river villages in Yunnan.

          • i may have strayed a little from the point in that last reply, but only a little, i think, because in a sense you are their mirror opposite. i am not sure where you get your sense of what is authentic about an american culture that can be “attacked”, “even as alien cultures are promoted, excused, euphemized by the mainstream press”. this is a very paranoid view that assumes an incredibly fragile culture that is in fact ferociously non-fragile.

            like the brave indignant defenders of the culture of our little brown brothers abroad, even those these brothers want us to stop defending their damned culture and let them do what they want, you seem to have a frozen sense of american culture. american culture however is precisely what can’t be frozen. it is extraordinarily resilient because it consists of a process, and not a series of unchanging rituals, and this process is the process of constantly being “attacked” as you put it, by alien cultures, which i would rather describe as the process of constantly absorbing alien culture that emerges not only exogenously but also endogenously (e.g. in the latter case american culture has effortlessly absorbed an internet culture that sprang up far more suddenly than mexican culture ever did and is far more alien, but has become totally american). much of what you might think as american culture is actually what happens when foreign alien culture invades us: the fevered imaginings of a bunch of russian and easter european jews who escaped to vaudeville, broadway and hollywood and created what they imagined was something that seemed like america, and they stuck it to a soundtrack mainly of music made by a bunch of black sharecroppers leading completely alien lives who migrated to a further-alienating chicago and then figured out how to turn the mishmash of american and european pop and folk influences they heard into the purest american music, pure only because it expresses the idea of america, and not pure because of its rituals, and it kept that purity going the whole time as it was swept up in waves of latino, east asian, french, indian, greek, and other cultures.

            it really is a weird paranoia to think that american culture can be attacked, and so should be protected from that attack, because american culture is about absorbing what you call attacks but what american artists have called influences, ideas, or just “check out this cool shit those guys are doing”, at least that’s what american artists have been explaining this for the past 200 years.

            people who want to protect american culture simply don’t understand what they are trying to protect. it is by far the world’s most dynamic culture precisely because of its almost infinite plasticity and its capacity to absorb everything that comes its way and turn it into the american idea. that’s what makes NY the most american of cities. i don’t want to fling about cliches like the word “democracy” too easily, but read walt whitman. he explains almost in detail what american culture is and why it is an idea that cannot be killed by foreign influences, which it just absorbs messily and makes democratic. i am not so naive not to know how vicious this process could be been — after all when those worthies gathered at harvard in, i think, 1928, to argue over what it was about america that made us incapable of producing american music of any value, louis armstrong had already completed his “hot five” recordings and had completed or was about to start the “hot seven” recordings, which together may be among the most important body of music of the 20th century, and something which should have had them jumping ecstatically out of their seats, but nigger sex music was i guess too alien to count as the answer to their question — but even the violence and viciousness of both domestic america and of foreign influence get absorbed and turned into american culture.

            this is getting too long again, so i end here, but when your liberal purist counterparts wail about the implacable evilness of america’s ability to commodify even dissent, you both get the point wrong. neither mexican culture (which i don’t find terribly alien, by the way, and if you do, so what? there is nothing in the idea of america or american culture that says that appreciation must be unanimous) nor advertising nor any other alien culture will ever cause a breakdown in american culture because american culture doesn’t do breakdown. the only way it dies is when it stops being democratic. until both of you, the left who hate exuberance and vulgarity and the right who hate precision and its opposite, chaos, join sides and gang up to protect it from becoming unpredictable. it is brilliant in a way that no other contemporary culture is, but it also produces vast amounts of the worst crap imaginable. unfortunately the two come together because, as whitman explained, the astonishing brilliance of the democratic process that is american culture requires that we accept as valid everyone’s utterance, no matter how pathetically stupid. and so we broadcast both “breaking bad’ and such unutterably stupid television that only the brits, when they overly contrive, have a chance of matching it, and our political leaders can measure their cock sizes.

            apologies for typos and grammatical fuck-ups. i suppose writing about american culture made me go all kerouac, and whip this out non-stop.

          • I gotta say that whole job guarantee stuff seems absurd to me. That’s a terrible idea because of the possible political ramifications. Think about how politicians could (and definitely would) misuse that. This is my biggest problem with Minsky. His understanding of politics (and geopolitics) is poor at best IMO.

            I do remember reading Minsky and I think he does talk about how welfare isn’t really a very good way to go about doing things. I agree with him there, but the way he discusses issues like the petrodollar recycling in the 70’s tells me that he doesn’t understand geopolitics as well. Minksy (correctly) says the same things the libertarians say: it was the liquidity expansion by the Fed and the Treasury that allowed the petrodollar recycling to take place. Of course, Minsky seems to forget that when you import lots of natural resources, you need to secure those inputs at all costs. So you have an entire geopolitical financial system centered around demand management, but in order to make that work, you need the kind of foreign meddling that we had at that time.

            You can’t have it both ways: demand management based policy without sensitivity to shifts in the prices and supplies of natural resources if you import most of your natural resources.

            Minsky advocates for centralized investment spending by government with a decentralized consumer base in a financial system that’s very similar to MMT. The problem with that system is when you add geopolitics. In Minsky’s system, he basically pushes for the US to run current account deficits. That necessarily means the rest of the world should run current account surpluses. In other words, you’d have a world wherein the wealth countries are importing capital from the poor countries essentially for consumption. If investment is state-directed and largely fixed, it must necessarily be consumption varying with the current account/trade volatility. With your reading of financial history professor, how stable is a geopolitical system where the largest, most-powerful, and most capital-rich country in the world is the largest net debtor with its government absorbing all of the trade volatility? Actually, I find it funny when the same people that argue for this then lump in Kindleberger with Minsky because those two don’t say the same thing in this regard.

            Minsky’s system of centralized investment with a decentralized consumption base is great for developing countries where investment must be small as a portion of income, but rich countries must necessarily invest more because they have the institutions to use increased investment more productively.

            Let’s also be real here. Minsky attacked Reagan and his administration, along with all of the things that happened since, for the deregulation of finance. The left blames the rise of shadow banking for the bubbles we’ve had and the costs on the banking system, but shadow banking actually reduced the cost of recapitalizing the financial system. Hell, our government actually made money by recapitalizing our banks.

            Minsky argues for a system of decentralized banking built on debt. Minsky essentially argues for a financial system that relies more on debt than equity, a financial system that’s more nationalist, and the result is a geopolitical/political system that has those same features. It’s just a direct consequences. If you have an equity and capital asset based financial system, the primary financial institutions are market dealers. This financial system will be less nationalist and more imperial because the primary transfers of assets across borders will come in the form of equity instead of debt like the US in the 19th century.

            Actually, what I think we should be working towards is a system of countries across the world with decentralized democracies (particularly in Asia) where they’re linked with a financial system and all of the transfers of assets occur in the form of equity. This is almost a “neocon” type of thinking, but I wanna remove the nationalist elements. I want these systems to be relatively financially deregulated with the exception of state directed investment for the poorer countries.

            For the most part, much of the reason that American banking today is no longer how it was throughout most of its history is because the agrarian populists are effectively dead. Now, these same agrarian populists are now rallying under the banner of “democratic socialism” although the policies and the kinds of people attracted to this banner are largely the same groups of people–mostly whites that haven’t done well under the capitalist system we’ve had for the past 30-40 years.

            I will say that I’ve started to come around on your whole immigration thing regarding class-based immigration. It’s the kids that grow up under wealthy or upper-middle-class backgrounds, especially upper-middle-class, that don’t have the same ability to “hustle” who end up supporting socialism. After all, capitalism doesn’t reward the people who do well in school and get straight A’s that much. Capitalism rewards the immigrant kid with the ability to scrap, who doesn’t give up, and who’s unwilling to relent in the face of all hell.

            Now, when I hear this kinda stuff on the left that I hear today, the stuff ends up favoring the kids who get good grades always listened to their teachers, and generally don’t take risks.

            This is the problem with the schooling system too. It hurts people who take risks, challenge themselves, and fail. Yet the further you go on the left, the more they want to actually hurt the hustlers who scrap for every damn thing and help the kids who do what they’re “supposed to”.

            Taleb tweeted out something that I largely agree with: that if you want to remove fragility, replace government with politicians/bureaucrats. If you don’t view things this way, we really are likely to increase fragility because you create institutions that you can’t then reverse.

          • Cracken,

            We basically have zero Mexican immigration and Mexican fertility rates are below American fertility rates. All of the Latin Americans coming into the US aren’t Mexicans. So targeting Mexican immigrants is really avoiding the topic of discussion. Mexican immigrants basically stopped coming into the US completely in 2008.

            Secondly, what the hell is “American culture”? Do you seriously think that Eastern North Carolina or bumfuck Alabama have the same culture as Seattle or NYC. A lot of the comments you’re making make absolutely no damn sense. Do you think Utah has the same culture as Miami? These are outrageous and absurd comments.

          • Professor Pettis continues to amaze with keen insights, sharp with, and lengthy, impressive data, analysis, frameworks, and synthesis. And yet there is Econ dogmatic stuff like “…if you let in people whose income is below the average American income, you must be lowering the average, and so making us all worse off. I kid you now, I have heard this argument many times. I won’t explain why it is idiotic beyond belief…” Oh really? We’ll as a sweeping statement it surely does need explaining. Let’s say a country increases its adult population by 50% by allowing the rapid immigration of completely unskilled people with no work ethic and an expectation of full welfare benefits? How would that not at least temporarily depress per capita income and negatively impact current citizens? An extreme example, but you made a sweeping generalization.

          • Immigration may immediately lower the average income but it’s an inanely simple-minded fallacy to think that if immigration causes GDP per capita to drop, then those of us who were already here are worse off. Our wealth individually is not a function of GDP per capita. The drop in GDP per capita is just an arithmetic necessity, it has no direct impact on the income of the rest, except to the extent that it increases the net supply of goods and services, in which case it actually increases everyone else’s real income.

            By the way, too many of you think you are making a counter-argument by describing a statement as “Econ dogmatic” or left or right, and this is incredibly lazy. Either the assumptions are factually incorrect or the logic is wrong. There is no other legitimate way to dismiss an argument, and while in the context of most internet discussions it may seem I am making a brazenly outrageous and provocative statement, in fact I am literally correct.

            I am not trying to be rude, Tew, because you have contributed to the discussion, it’s just that I am not eager to replicate in my blog the nonsense that passes for debate elsewhere. If that sound elitist, it probably is, but there it is.

          • Your point comparing endogenous and exogenous changes in American culture is excellent–it gives a better sense of proportion to both categories of phenomena. As to the Leftist patrons and defenders of foreign cultures, I have a certain sympathy with them. They see it mostly as a battle against exploitation; I see it as a battle against deracination. You seem fired by a kind of revolutionary spirit, to which I oppose Burkean caution and respect for social structures (which evolved and were selected for over centuries or millenia). I think your position may be the result of a psychological error. Elites transform deracination into cosmopolitanism, then apply their intellectual and financial resources to the enjoyment of the its various strange delights. However, your revolutions also uproot the rest of the population, who do not have your resources and end up seeing their (usually healthy) traditional cultural and social arrangements displaced by some cheap, trashy derivation of American characteristics. I do not idolize Ancient Egyptian stasis. But, accelerating these processes makes the unavoidable challenges of modernity more difficult.

            One way to view a political system is to consider whether entropy is increasing or decreasing in the system. America had the good fortune to be founded at the onset of the Industrial Revolution. She has benefitted from continuous technological advance throughout her history. This virtuous techno-spiral is something new under the sun, as Gregory Clark has laid out in some detail. Are immigrants nearly as important as this dynamic? Many of us on the Right believe it conceals social decline, cultural degradation, and “demosclerosis”–a vision of America as akin to the late Byzantine empire, but saved by sufficient aid from technological crutches and comforters. When you said the only danger to America culture is that the Left and Right might “join sides and gang up to protect it from becoming unpredictable,” isn’t it the Left that is the main threat, with its bureaucratic gigantism, regulatory smothering, thought policing, politics-by-bribery? Unpredictability itself neither promotes nor decreases entropy.

            An analogy closer to home: just as China or Japan may grow successfully for decades under an aggressive investment regime, as long as their economies are under-invested–so it may be that America is able for a long time to assimilate an aggressive investment regime of alien peoples and cultures, but risks reaching an inflection point at which the aliens are deemed too numerous or too dangerous for us to continue the process. Was the immigration restriction starting in the 20s not such an inflection, following an immigration experience similar to the last 50 years? Did the 40 year immigration pause create any difficulties in America? Immigration is not just a yes/no question; it’s also a matter of degree, of numbers, of kinds.

            The less homogenous a nation becomes or perceives itself to be, the more politicized it must become, at least in the modern world. Observe the Left’s problem with “intersectionality.” Politics expands cancerously throughout society. The Left exacerbates the pressure of differences–race, ethnicity, sexuality, religion, class, culture–until politics curls into every crevice of human relations like a noxious gas. Under these political conditions, how could a Burkean possibly favor more immigration? It only makes the gas the Left is determined to pump more poisonous. Is the melting pot still melting? Or are the differences promoted by the Left hardening? The only thing that keeps a lid on the problem is that white Americans haven’t (yet) joined the scramble for spoils. They will. Though obviously reluctant to engage in this zero sum game, every incentive pushes them that way. The frogs may be as dumb as you claim, but they are beginning to suspect someone is cooking them. It’s the descent of whites into just another minority clawing for position and Bowling Alone in a socially engineered New Balkans.

            By the way, it you think disputes like this one on immigration are merely a matter of logic, as you suggested elsewhere in the thread, you ought to reread your “kerouacian” rhapsody above–which, I’ll grant, sounds authentically spontaneous. Immigration is a question of taste (including moral taste) AND a question of logic/evidence.

          • Hesitant as I am to intervene in a fascinating discussion, Cracken, I believe I can contribute a little because his comments on Chinese music inspired me to look up other pieces by or about Mr. Pettis on the subject, in which he manages the same combination of logic, nuance and the sheer, bloody-minded unexpectedness that is found often in his economic essays to make what I think is an important argument, similar to but with more depth than the one he makes here.

            You believe, I think, that Mr. Pettis prefers young urban artists in China to develop in a cosmopolitan direction, while you prefer that they should maintain links to their traditions, but in fact I think Mr. Pettis meant to dismisses either preference as patronizing and even disrespectful because only they can decide on how their art will reflect their lives, which are often as urban and modern (and even urbane) as those of Western artists. It is therefore unfair to saddle them with questions of authenticity, which I can assure you is a very debilitating burden that artists in many countries whose culture is considered “exotic” face.

            If a young man from my own country decides to “rap”, Mr. Pettis would probably say (and I would agree, even though it is a music form I detest) that his claim to this form of music, born I believe in New York, is no less than that of a young man from Los Angeles or London, particularly because their lives may be very similar in many important ways. But even that justification is likely to try Mr. Pettis’s patience. I know that he thinks, or has said, that a Chinese musician should no more have to justify his choice of form on grounds of authenticity than a Western artist. If his music is true to his life and meaningful to his peers (although perhaps Mr. Pettis rejects the romantic ideal that the function of art is truth, and prefers some other more rigorous standard) then his music is authentically Chinese. It can be good or bad, but only within its own terms.

            In short I believe Mr. Pettis is not suggesting how Chinese musicians should choose to make Chinese music, but rather that their decision about what is meaningful should enjoy the same respect, freedom and lack of “guidance” that Western musicians enjoy, and if their music reflects the huge social and urbanizing changes that China has experienced in so short a time, it may be arrogance to think any of us might know how it should sound. If their culture was “uprooted”, although many Chinese might use a less unfavorable word, it was some other thing that did this uprooting, not the music, which can only reflect this uprooting (and perhaps must do so if it is to be of any value). I have read interviews in which young Chinese artists have expressed resentment at being judged primarily as Chinese, and evaluated according to how well they perform that part of their role, when they want like Western artists to be judged against what they believe to be more serious standards. Of course they are not the first to feel this. Many artists in African cities are as tired of being “African” in a recognizable way that might also be superficial, and want just to be artists.

            I have gone on too long, and in doing so perhaps I have unfairly appended some of my own strongly-felt ideas to those made by Mr Pettis, but I did want to address an error that I think you might have made.

          • That sounds perfectly reasonable to me, Robert. The urban Chinese have already undergone a socio-economic transformation. Therefore, those artists who cling to rural musical traditions court hopeless nostalgia, an artistic dead end. Besides, their explorations do not close off other options for their audience, who may choose to study the nostalgias at will. The battle to protect indigenous arts, although it does have a certain justification, is quixotic at best. The internet sees to that. There is the consolation that Chinese artists will retain superior access to their own traditions and can be expected to twist together things unattempted yet.

  25. Thanks for the essay Michael.

    Lots of overlap wth Nassim Taleb’s analysis of Trump; more nuanced and reasonable. Reminds me a bit of the theory of altruistic punishment, too.

    I’m so curious what you think of Taleb and his thought.. I assume you’ve known (of) him for quite some time.

  26. Wonderful and insightful post as always Mr. Pettis.

    You can see similar dynamics at play with the support that Sanders is getting: mistrust of the elite, hate of trade, and anger about rising income inequality. Does Sanders represent a historical movement/group in American politics as well, or is his a phenomena that arose due to current conditions?

    • Faris, I think they’re clearly related, right?

      • Didn’t you write about coming protectionist populism a couple of years ago in the Le Pen and iron ore piece (that involved Africa as a relief valve)?

        • In 2002 I did an essay for Foreign Policy, Tew, that basically said that when the next global crisis rolls around, and it would soon enough, we should expect to see a rise in protectionism, a decline in international trade, rising anti-immigrant feelings, greater geo-political tensions, surging populism, etc. etc. There was no great insight to it — I was simply listing what happened in every previous case. I missed out completely on the political reaction to income inequality in that piece, which is idiotic because it should have been the most obvious of predictions.

    The Trump phenomenon is NOT – as the conventional wisdom suggests – a reaction to anger about the divisiveness and dysfunction in Washington OR a deep-rooted desire to restore America’s stature in the world and start “winning” again.  NOR is it about economic uncertainty, immigration worries, or fears about ISIS and Islamic extremism.

    It’s more primordial than that.  It boils down to JUST 2 THINGS:
    In “The Matrix” terms he is Neo to Obama’s Smith:
    “Oracle: He is you, your opposite, your negative, the result of the equation trying to balance itself out.”
    Obama, whether you agree with his policies and governance or not, is indisputably black, intellectual, thoughtful, articulate, tactful, measured, civil, compassionate, realistic, positive, and has humility.  As David Brooks wrote last week, “Obama radiates an ethos of integrity, humanity, good manners and elegance that I’m beginning to miss, and that I suspect we will all miss a bit, regardless of who replaces him.”
    Trump’s supporters live vicariously through him.  He is the model of consumptive excess; international celebrity and fame, reality TV star, impossible wealth, professional success, gorgeous younger wife, beautiful children, lavish lifestyle, real estate, casinos, beauty pageants, etc., etc.  He has attained the exalted status of someone to whom the rules do not apply – he can think, say and do whatever he wants without restraint or regard for consequences.  He could tell his boss (if he had one) or his wife to fuck off and completely get away with it.  The world truly is his oyster.

  28. I’ve essentially had to lay this argument out piece by piece to my family and coworkers for the past two months. It took about two weeks for my family to realize how poorly the middle class has done and how closely related this is to trade. To a bunch of hard-core free traders, this was heresy. But it’s pretty clearly correct to a certain degree.

    Sanders and Trump are just the same man playing on the anxieties of either party’s constituents. Sanders is a career politician, though, so approaches it slightly differently. Whether it’s reducing free trade or keeping out immigrants, the effect might as well be the same.

    This is certainly the end of Reagan’s America, which we have been living in for 35 years now. Taxes will come up, commitment to immigration and trade will decrease, and these are not bad things. The middle class needs some serious help.

    • We need income redistribution, Steven. If you have a chance, read what Marriner Eccles (FDR’s Fed chief) said on the subject.

    • I second this. Trump is just being open about what he’s saying. He’s shouting what everyone else whispers behind closed doors. So when people hear the shouting, they jump on board because it’s what they talk about behind closed doors. Bernie is saying much of the same stuff and you’re right, he is a career politician so he knows how to set people’s triggers off without coming off as outrageous.

      And yes, the days of Reagan are over.

  29. Dani’s story was very good but following the meanders of a first-class intelligence, in this case through politics and sociology, is for me, as usual, the main reason to read every entry this blog.

  30. Well said, Professor Pettis. Thank you for using logic and a well-informed perspective of history to make sense of the popularity of this bombastic buffoon. I agree he taps into the anger many Americans (right AND left) feel due to the deadlocked government and the overwhelming political power of the 1%. Anger has a way of changing history (Liberté, égalité, fraternité!). But, no, we probably won’t have a revolution (sorry, my man Bernie)…but ‘the people’ might regain some power as a result of this public conversation, regardless of the winner.

    • The problem with Bernie is the way he’s influencing younger people into believing all of these ideas that were “defeated” at the fall of the Berlin Wall. I was born after the fall of the Berlin Wall, but I don’t fall for that kinda crap cuz I’ve read history. There’s entire legions of college students that someone like Bernie can literally summon on his command, and that’s very dangerous. THAT’S the danger with Bernie.

  31. Good post, if lacking in supporting materials (besides telling people they’re stupid and uneducated if they don’t share a similar reading of U.S. history). Indeed, it would be quite a fine post except that Professor Pettis’s arrogance and condescension becomes loathsome when he refers to Dani’s success as “pitiful”. Saying that his success is “heroic” acknowledges the struggles he had to make the the obstacles he had to overcome. But it is backhanded and low to refer to it as “pitiful”.

    • I thought I explained about sarcasm, but still, it takes an astonishing among amount of thickheadedness to read even my very short account of my relationship with Dani and conclude that I think him pitiful.

      • I get sarcasm very well, including how it pervades this piece. Its use is especially clear in your very long comment to Suvy that, IMO, rivals the original post – the comment in which you clarified that “I am very aware that sarcasm doesn’t always appear as sarcasm in writing, especially when read by foreigners, or by American boneheads…” [Seriously, no sarcasm, that comment almost deserves its own post.]

        But your description of Dani’s “pitiful success” fell flat. The sarcasm you intended is especially difficult to detect due to the juxtaposition with the success being “heroic”. That’s my two cent opinion on that.

        I know you’ve disclaimed that this was written quickly and without proofing. Given those conditions, I find it quite clear, clever, and insightful overall. And it has stimulated some discussion…

        • Yup, I was turned off by the same thing. And turned off more by the defence of it when you called it out.


          Professor Pettis, you are still the man. Whenever China’s economy comes up at work or socially, I tell people that a guy called Michael Pettis figured it all out years ago. All new China economic news fits in to your framework and has done for years. So thank you for that. In fact, about a month ago, I referred an employee of a small asset management firm to your blog – they’re looking (I suspect rather too late) at getting in to China.

          I also understand that you have all kinds of people being rude to you in the comments section and that it’s easy in those circumstances to mistake a sensible constructive criticism for “I’ll grab at one point and twist it to make you look bad” trolling. Especially on China-facing websites where anything that deviates from the Party line is reliably attacked in often juvenile and personal terms.


          A successful economics professor from a good background (as you seem to acknowledge in your writing) being tone deaf on calling the success of a man from a harsh background pitiful (YES even as a joke about a friend!) does a better job of explaining the success of Trump than all of the above talk of Jackson, willful ignorance and the satisfaction some people get from hatred. It also explains why you haven’t figured out that Trump is going to win.

          • I don’t know if Trump is gonna win and I think anyone who puts it away for him could be foolish. He’s gonna send Florida to the Democrats. I just came back from Northern Virginia and I came away with the impression that he’s gonna get slaughtered everyone in Virginia north of Fredricksburg. In North Carolina, he get destroyed in the RDU area by Ted Cruz and barely beat Ted Cruz overall in NC in the primaries even though the conservative vote was split between Cruz and Rubio.

            Trump is gonna have a lot of difficulty in the South. Although Trump’s poll numbers have gone up slightly, they’ve actually fallen in states like Georgia where he’s in a statistical tie with Hillary Clinton. If Trump has to spend money to defend Georgia, I don’t think he’s gonna win.

            Also note that Southern conservatives do not like Trump. If guns aren’t an issue for them, they’ll take Clinton over Trump if you held a gun to their heads.

            People only see the losers of free trade, but don’t talk about the benefactors. Manufacturing has moved back into the South and a lot of places in the South, especially the city regions, are doing incredibly well. Most places in the South have benefited from free trade–especially in the suburbs where Trump has no support. If Trump can’t rally Southern conservatives (his new populist rhetoric on taxes and increasing government spending isn’t helping), he’s got no shot in Virginia and Florida while sending NC blue.

            So even if Trump can win Wisconsin, Ohio, Michigan, and Pennsylvania, he’ll lose if he can’t win either North Carolina or Virginia.

            The real issue is that there’s so many divisions in the Republic and Yankees (both Democrats and Republicans, especially the white populists sans the Hillary supporters) are talking about the South like it doesn’t matter. The South does matter and it’s a critical area that’ll determine the election.

    • “lacking in supporting materials”? You’re not serious, are you. Do you mean copies of the judge’s sentence? affidavits? a copy of his brother’s passport? the crack pipe? the stuff like that that normally comes with blogs?

  32. Tew, in the many times you’ve done this sort of thing for kids like Dani, are you always so incredibly sensitive about your words, or do you just never do anything like this? Anyone who did what Pettis and his brother did for Dani and Hippie don’t strike me as arrogant or condescending, but I have to say you strike me as one of those pricks who resents when some as successful as Pettis still remembers to do things like that. I am not a friend of his or anything but like a lot of people in Beijing I know the kinds of things he does for musicians, students, and poor kids in Beijing, and it pisses me off how losers like you who know nothing about him get all prissy and critical.

    • As if losers and whiners like Tew are a rare thing, Maurice. How naive of you.

    • I like Pettis, both his intellect and style. I’ve turned several people on to his blog and have mentioned the interesting work he does in music. That said, his claimed sarcasm in that description of Dani’s success struck a nerve. Nobody is beyond reproach, including our crusading blogger and professor.

      Sad still to see you and Tom going ad hominem on someone who thinks it’s bad form to be a jerk. Most of the comments are interesting. Yours and Tom’s are scraping the bottom of social media standards.

      Good work: prick, loser (2), prissy, whiner. No substance.

  33. As much as I like this post and follow on comments, I have several points of disagreement.

    First, it is wrong to dismiss a TRUMP presidency as a minor blip. The argument is equivalent to saying that the position of POTUS isn’t important, at least during the short run. Not so. Presidents matter, in particular w.r.t. foreign policy. My opinion is that we are coming up on at least 16 years of poor foreign policy leadership. A level-headed, calculating, informed, connected president (like HRC) would result in very different policy and outcomes than a TRUMP, regardless of how Congress would thwart him.

    Second, I would add to your “no slack” diagnosis of the Dani’s. In addition to having tenuous income security and a diminishing social stature, they often have a very direct and even physical connection with immigration. They live in neighborhoods transformed by cultures, languages, and customs they neither understand nor aspire to interact with – from Central Americans to Somalis, they see their jobs being undercut while those who do the undercutting move in next door, eight people to a 2 bedroom apartment. This is difficult for comfortable people to understand in a visceral way.

    Third, in you post and subsequent comments you do an excellent job relating past characterizations and fears of immigrant groups to the present day. However, your prescription that we should just keep doing it until it fails is misguided. A deeper understanding of why it has worked, under which conditions, and how things could change is needed. In fact, it is likely that part of past integration success is due to the very sentiments you lament: new immigrant groups and their customs and manners were suspect and prejudice acted to motivate them to “integrate” and adopt “mainstream American” habits not just of behavior, but of thought. The only way up, was to head out – out of “the neighborhood” and into the broader culture. Inability to adopt the manners and beliefs of your new homeland meant being stuck.

    Sure, there were relief organizations and advocates, but nothing near the scale of the institutional support for “diversity” and rejection of the mainstream “white” culture. Nor was the information and transportation infrastructure remotely similar. It was hard to go back and very easy to lose touch with the old country, the old ways, and the old superstitions and prejudices.

    And so I would add to that third point with a thought on Muslims that is sure to be, ahem, controversial. First, the large majority of Muslims in the U.S. today trace their route to the U.S. via secular and liberal causes. Many were not downtrodden, religious peasants (*). And Islam really is particular in the world, even more so than the Roman Catholic Church. For example, there was never any pervasive connection in the minds of Irish Catholics between their Catholicism and a goal to unify all Catholics across all boarders under the rule of Catholic law. I’m sorry, but the mindset of far too many Muslims leans that way. Furthermore, we have yet to witness on this planet an enduring, tolerant society composed of a majority Muslim population. Even where they exist in substantial minorities, faction and fighting is endemic. In many Muslim countries other beliefs are simply not tolerated. Look, I’m not claiming that you can’t find solid examples of Muslims living peacefully side by side with minority Christians, but only that the situation is tenuous and always guarded by a very strong authoritarian government.

    Since you pride yourself in looking at history through the long lens, consider the plight of non-Muslims in lands where Muslims have gained a majority. For every step forward you find, I’ll show you two steps back. Go ahead and play the tape on fast forward from the birth of Islam. Slowly, but surely, all other populations are assimilated or destroyed. The destruction of Christian communities in Iraq and Syria during the past decade are just a tiny blip at the end of the tape, but they are part of the overall pattern.

    So… we’re talking about a highly asymmetric risk here. If you were to get your first feedback signal with this group that it isn’t working this time, the signal won’t be benign and the scale of the consequences could be as severe as any human tragedy in the history of mankind.

    I very much want to see Muslims succeed in establishing their own versions of modern societies, peaceful, productive, respectful, and happy. But the U.S. should be very careful to protect what it has painfully built over centuries.

    * As you point out regarding the Iranian immigrants, many of whom were Jewish by the way.

    • I agree with this. As someone who comes from a half-Muslim hometown, I’m actually really concerned with the security of women in bringing in these refugees. In Europe, I believe 80% of the refugees were male. If they’re not coming as children or as families, I don’t think we should accept them at any cost.

      Keep in mind that it’s not just Christians either. There’s a reason why Northern India doesn’t have any temples older than 300-400 years (500 years tops). They were all sacked by Muslim invaders. In the South, most of the territory was captured by the British who made sure to preserve the temples. This is largely why I don’t hate the British imperial rulers of India, although they did some really messed up stuff.

      I know for a fact that there’s a lot of Indian, Chinese, and Korean immigrants who feel this way in the US. I’m also quite sure that’s why they’re drawn to Trump.

      • Mundeshwari Devi Temple, obviously in the north and far older…

        • Okay, let me rephrase me comment: Northwest India. The Mundeshwari Devi Temple is closer to Varanasi, which is near the Himalayas to the east.

          • Suvy i did not visited every indian temple but islamic influance was all arround the north and not on few north eastern spot.
            But do not miss that before islam ruller, there were BUDDHIST ruller and not hindu. So this story as a lot of flaws.

          • I don’t think there were any major Buddhist rulers out side of maybe the fringes of East India. For the most part, they were Muslim or Hindu.

          • Cedric,

            Remember that many Hindu temples became Buddhist temples. There’s so much crossover between Buddhism and Hinduism. A lot of the rituals or the dietary restrictions or the ways of life is very similar. The philosophy is largely similar. I have no problem with Buddhists in India. If we could trade our Muslim population for Buddhist refugees, I’d do it in a heartbeat.

            I really am a very tolerant person. I’m just not gonna let my tolerance be taken advantage of.

      • All temples in North India were sacked by Muslims? All?! It seems you are a historian specializing in India to be able to make categorical statements with such certainty! Except that I am pretty sure you are not! Your opinion on this issue is sounding like a particular group of nutjobs in India who go by the name of Hindu nationalists and who are engaged now in undermining democracy in that country. (their party is in power). There can be lot of prejudice against Muslims among Asians (particularly the kind of upper caste/class Indians that we tend to find in USA), but I don’t think many of them will support Trump – they are not foolish enough to sacrifice their self-interest at the alter of their prejudices.

        • I never said there can’t be a lot of prejudice against Muslims, but what I said about Hindu temples is correct. In regions where Muslims had more power, there are less old Hindu temples. There’s old Hindu temples in the South and they’re everywhere. They’re not there in the north.

          And for all of the “tolerance” talk regarding Muslims here, notice how almost all of it involves Christians and Jews, but never involves Hindus or “pagans”. Once we add this in,

          Quite frankly, I don’t really know if I have a problem in the rise of what’s called by the West as “Hindu nationalism”. I don’t think it’s actually nationalist because if you walk through India, most people are concerned about local politics, not national politics.

          On another note, do you think I give a care about “democracy”? In my hometown, it’s now >50% Muslim. There was a Muslim leader who came out and said the comment below.

          “In Hyderabad, our Muslim population has crossed 50%, and now we are in majority. Therefore I demand the Administration to impose restrictions on celebration of Hindu festivals such as Ram-navami, Hanuman Jayanti etc. In the Bhagya-Lakshmi temple, near Char-Minar, we have already shown our strength by stopping the ringing of the Bell/gong. We Muslims will ensure that this temple is also destroyed.”

          Akbaruddin Owaisi, Sansad, Majlis-e-Ittehadul-Musalmeen, (AIMIM), Hyderabad, India

        • By democracy, if you mean the “will of the people”, I just don’t care about it. I want LIBERTY, not democracy. India tried democracy which resulted in democratic socialism where the combined Soviet-style central planning with British style parliamentary democracy. The result was centrally-planned industrialization where the population increased >200-300% in <50 years. So if that's the result of "democracy", I'm unequivocally against "democracy".

          I'm a very tolerant person, but I'm not tolerate towards those who're intolerant. BTW, I like Modi and my entire family voted for him. My family was in the military and I also thought the execution of Indira Gandhi was one of the best things to happen to India. One of my family members in the military said, about a couple months before Indira Gandhi got assassinated, that she'd be assassinated by her own body guards and the military would stand by.

          I'm from Andhra Pradesh, which is about as anti-revolutionary a state as it gets. We led the charge against Indira Gandhi with the leader N. T. Rama Rao led the charge against these Communist and anti-liberty people with a firm hand. My state led the opposition and my family was in support of him from the beginning. We were right. My family (both sides) has a hatred for the Indian National Congress and their corrupt ways from the beginning.

          This is the first time in India where the government actually shows up to work. We actually like markets and supported them from day one. We want free discourse, but if there's any idea of "revolution" or the Marxist bullshit that the Indian leadership loved before 1991, it needs to be squashed.

          Even today in the United States, my allegiance is to the Republic. Not to the "will of the people".

          Oh, and for my own personal security, I'm more worried on my life by attacks from those on the left side of the political spectrum than on the right. The kind of militancy and hatred I get from those on the left really worries me. It's like I'm not even free to express what I honestly want without "offending" someone. I feel like I can't discuss issues about race or religion in a college library without being judged, hated, and people actively despising me and it really bothers me. What if I get kicked out over some comment taken by someone too far. What if I get sent to court for "emotional abuse"? This really worries me.

          Every time I voice these complaints, there's entire groups of people who immediately jump on me (whether on Facebook or social media or even in person) and every single one of these groups is on the left. There's entire political movements that want to censor people like me and most of the people on the other side are Bernie supporters. When I watch the Trump rallies where he gets accused of "inciting violence", I see the same things that happen to me.

          As I said, I'm probably gonna vote Clinton. But when I get attacked like this, or my right-wing friends get attacked like this, by people who have the most negative attitudes in the world, it makes me wanna vote Trump. It really does because political correctness is an issue for me.

          Do you know how many Arab/Muslim kids/young people who grew up in the United States have tried to demonize me or make me look evil? Those on the left make me look evil and seem like they actually wanna persecute me. Even on issues of financial deregulation where I say financial regulation hasn't really worked very well, I get attacked by the left from people who know nothing about finance. I get mocked and harassed. What helps someone like me is that I'm intelligent, I've read history, and especially financial history. I can defend my positions with logic and, fortunately, I'm brown. If I was white, I would've had serious things laid against me for the kinds of things I say.

          So how do you think people like me respond? I'm not going to react or succumb to fear. I will not let the fear I have turn into hate. I voice my opinion loud and clear. I defend myself without fear. And when I attack, I attack with discipline and self-control.

          • i didn’t expect you to be from India! But still I think you mix politics of today and history.
            But first why do you love freedom so much but don’t want people to express their views when they are against yours?
            Hindu natialism is REAL they kinda plot the death of many TOP indian politics like Gandhy.
            ‘When I watch the Trump rallies where he gets accused of “inciting violence”, I see the same things that happen to me.’ Come on! A Trump supporter was put in jail for punching a guy in the face, did some bernie guyever punch you?
            “What helps someone like me is that I’m intelligent, I’ve read history, and especially financial history. ” and in which financial history book did you find that a wall could make America great again? Trump argues for years AGAINST Obamacare and now he want to change it.
            But i REALLY wonder how you can suport Mody policy because as far as i know investment rate in India is kinda fake like it is in China. And i never heard that Mody wanted to change that. Mumbai stock market as actually ZERO correlation with indian growth like chinese one.

          • I have no problem with people who have different views expressing their views. I want no restriction on expressing their views at all. I want zero restrictions on speech regardless of how it makes people “feel”, who it offends, or whatever else.

            Trump argues against Obamacare because he’s gotta compete with Ted Cruz. You don’t win the GOP nomination by talking up the President on the other side. If you pay attention to his actual policy details, you’ll see pretty clearly that it’d be much easier for him to keep Obamacare and reform it.

            In India, investment is actually quite low as a portion of GDP. India is a consumption driven economy.

            With regards to the wall, I favor more imperial. But unless we get another James K. Polk, there’s really not much hope here.

          • You selectively quote one hateful speech by a Muslim Indian politician – but leave out dozens and dozens of hate speeches being made regularly in India by Hindu politicians. The Muslim politician had to be in jail for making that hate speech, did that happen to any Hindu politician in India? Then half of the Sangh Parivar would be in jail. (the Sangh Parivar is a group of Hindu fundamentalist organizations in India that wield enormous political clout). You vote for Modi and then complain about Muslims stereotyping you. Don’t you see the irony? Here in America there is rule of law – so even if anyone dislikes you, they can’t usually beat you up or kill you. Not so in India where the rule of law exists only on paper and (at least under Modi) the Hindu vigilante groups are free to perpetrate violence on Muslims. Over the last two years after Modi became PM, it has been one long campaign of hatred against religious minorities in India peaking before elections. I don’t know how many people will need to loose their lives as the BJP ratchets up sectarian rhetoric and bigotry before the UP elections. It is always rich when a Hindu nationalist or a supporter of Modi talks about tolerance or fairness.

          • “Over the last two years after Modi became PM, it has been one long campaign of hatred against religious minorities in India peaking before elections.”

            Oh really? That’s funny because I’m from a Hindu family where we have many members from groups such as Jains and Buddhists. They’ve actually been more “Hindu nationalist” and pro-BJP than the rest of us. I also believe Modi has a great deal of Sikh support too. So the only religious minorities under any risk whatsoever are Muslims and maybe Christians. Actually, the Modi government actually gave compensation for Sikh families that were killed in riots in the 80’s.

            Is it ironic that these are the two religions that have historically been the most violent and most willing to resort to violence? Is it ironic that the group with the most troubled and violent history is now facing difficulty that the people who they massacred, looted, pillaged, and completely tried to destroy have come to the realization that it may not be the best idea to let their land (for over 5,000 years) keep these people around that’re outbreeding them and poorer than them? It sounds like common sense more than anything else.

            BTW, the group that’s historically had the most violence in India with Muslims (at least proportionately to population) have been Sikhs. It’s funny because one of my cousins married a Jain who actually had family members that were attacked in religious violence by Muslims.

            So tell me Mitra, can you compare the amount of damage caused by Hindus to mosques to the amount of damage caused by Muslims to Hindu temples? Go and read through the history and then get back to me.

            Modi isn’t against religious minorities. He’s only got problems with a lot of Muslims in India and maybe some Christians. He said he wouldn’t let in Buddhist immigrants fleeing from their homeland into India in the East, but when push came to shove he didn’t do anything about that and really didn’t seem to care. So he’s clearly not against religious minorities. He’s only against people of religions that have shown themselves, and still show themselves, to repeatedly be intolerant (Islam and Christianity).

            I’ll tell you personally that I don’t want violence towards Muslims (in India or in the US), but I certainly want to create an environment so that they know they’re not particularly welcomed. I don’t want Muslims moving into my neighborhood and I’d rather we have an environment where Muslims choose to voluntarily leave without any sort of violence or hatred.

          • @Suvy

            Lot of injustices happened in history – if people started taking revenge for that, every country will be in turmoil. If blacks started killing whites in USA because of historical injustices or Indians started doing that in South America, no successful stable/decent society can be built. The fact that majority of North India have remained Hindu in spite of being ruled by Muslims for centuries tells me you guys exaggerate – you selectively use history to build and justify a politics of hatred against Muslims and Christians in today’s India. If you look at the voter surveys, very few Sikhs voted for Modi.

            Islam and Christianity are bad religions and Hinduism is great? Such a predictable thing for a Hindu to say! Where is all your learning and reflection? Ultimately your political views can be explained by your caste and religious affiliation. (Most votaries of Hindutva politics in India are upper caste). It always surprised me to hear Hindus boast about the alleged tolerance of their religion! Even today most Hindus treats the Dalits (Untouchable caste people) with as much contempt as one human being can have for another. Frankly I am yet to meet a single Indian upper caste person who doesn’t rail against affirmative action. (except for a few Communists and progressive journalists). Of course the record of violence by Hindu extremists in India against Muslims is well known. At least 10000 Muslims have been brutally massacred in the last three decades – and the people in India who commit such hate crimes are generally protected from the legal consequences of their actions. (even before Modi came to power).

            You want to create an environment where Muslims know they are not welcomed? (as you put it). Such diplomatic finesse! You possibly imagine your statement has nothing to do with bigotry! All the education that you received still haven’t taught you that stereotyping an entire group of people based on their last name/religion is a very uncivilized and inhuman thing to do. I have met Muslims who are bigoted and I am surrounded by Hindus who are bigoted. I treat every person as an individual human being, not as a representative of a country, race or religion. Please don’t use big big words like liberty, equality, fairness etc (a fan of Modi and Trump using such words seems like mockery) – fight prejudice at the basic level and stop seeing people through the prism of their race/ethnicity/religion.

          • “Islam and Christianity are bad religions and Hinduism is great? Such a predictable thing for a Hindu to say! ”

            When did I ever say this? What I said was a historical fact: that the two most (religiously) intolerant religions historically have been Islam and Christianity. Personally, I don’t think any tradition can claim a monopoly on Truth.

            “Frankly I am yet to meet a single Indian upper caste person who doesn’t rail against affirmative action.”

            Yea, no shit. Why would anyone do anything against their interests? With that being said, affirmative action is an inherently racist policy.

    • “Since you pride yourself in looking at history”

      that’s a rather cheap thing to say, but given our respective backgrounds it probably isn’t fair for me to make too big a deal of it, but since i suppose you also take some pride in knowing history, let me say that there are two major proselytizing religions, christianity and islam. it may be that one has a worse track record than the other in imposing its rule and extinguishing non-belief, but it isn’t all that obvious which one that would be, especially when adjustments are made for education and educational attainment. for example as someone who grew up in spain, where each religion reigned about 500-800 years, it is hard feel more impressed with the behavior of the christians, and while franco tried very hard to impress upon us that spain was essentially christian and civilized, and only temporarily “stolen” from us by the moors, until castilia and aragon (we always leave out aragon) gave christianity back to the people, it is really hard to find educated spaniards who don’t feel a little embarrassed by what is so clearly untrue. the christians clearly do not come out looking like the good guys, although in fairness, for much of that time the moslems were so much more educated and civilized that it is unfair to hold the christians up to the same standards.

      and you say “there was never any pervasive connection in the minds of Irish Catholics between their Catholicism and a goal to unify all Catholics across all boarders under the rule of Catholic law”, i am not sure why you specify the irish, but quite a few irish would disagree with you, and i am a little astonished that you don’t think catholics, and christians more generally, never tried to impose their religion across the world. they were quite explicit about doing so and this is so obvious that i feel i really must be mis-reading you.

      • I didn’t mean that as a cheap shot. I see that it could be taken as mocking. For that, I apologize. I should have phrased it better. Something like “You do clearly take a long view of history and have a respect for its use in guiding current debate…”

        I’m unsure what you mean about our respective backgrounds. I know a bit about yours (eclectic, international, highly rated institutions, etc.). Mine?

        I’ve been to the Alhambra (I know, I hear the sound of one hand clapping) and have an… OK understanding of Spanish history, so I’m aware of the sometimes magnificent rule of the Moors and the important ugly features of Catholic rule. (I’ve also got several friends in the U.S. whose families suffered and fled under Franco. One had a grandparent killed by his thugs.) And anyone that knows anything about the conquests of the Americas knows of the Spanish Catholic atrocities. Furthermore, we know that the spread of Christianity was a force within imperial and colonial ambitions and was used both zealously by some and cynically by others in support of detestable actions.

        As an aside, I’ve read some Ottoman history and have always been impressed with their relative tolerance and “liberal” attitudes for several centuries when compared to those of Christian Europe. (That said, consider the attitudes of Eastern Europeans towards Muslim migrants in light of ~1,000 years of occupation, war, and threat from Muslim forces. I’ve been to Christian churches in Hungary that have retained Muslim features of the original Mosque. I’ve been to the Aya Sophia. That had been a church. You certainly know this very well.)

        I mentioned the Irish because you’d elaborated on your message in a longer comment that I found very well done. In that comment you used the black Irish as a key example.

        But my point wasn’t to engage in a tit for tat on which religion has been more bad on balance across thousands of years, but what the current situation is.

        And there is no denying that Islam does have at its core a sword-wielding, conquesting Prophet. I know of nothing else like it. The Jewish Torah has some backwards stuff in it, but they’re not proselytizing (yet you probably would really dislike being a minority an a deeply Orthodox Jewish society) I just can’t dig out too much conquest and use of violence from the core teachings and traditions of Christianity, Buddhism, Hinduism, or Far Eastern religions. I do not claim to be an expert, but let’s not engage in false equivalence by finding a couple of verses to put up against a wall of worry. It takes an army of twisted theologians to justify violent, murderous forced Christian conversion. An everyday Muslim could pick up the source materials and run with it.

        I find a large asymmetry here. I think the risk of *not* encouraging Muslim immigration to the U.S. to be minimal, compared to the (outlier?) risks from encouraging it. Yes, I know, hack micro-bizspeak sounding stuff. But it is extremely doubtful that the U.S and the world would suffer from a lack of substantial Muslim population in the U.S. (The U.S. could continue to import immigrants for a long time even if no Muslim chose to join their ranks.) Yet the risk, even if small, of a bad outcome creates a substantial negative expectation, because the bad scenarios are potentially so devastating. The world will undergo serious stresses over the coming century. The U.S. will already have its share of religious fanatics, opportunistic cult leaders, and demagogues taking advantage of pervasive innumeracy and active anti-scientific minds. The U.S. doesn’t need tens of millions of people thinking the Ummah is the only path forward during times of stress.

        Let’s think robust, long-term, risk management.

        I should also note that many on the left in the U.S. are openly hostile to “evangelical” Christians. It is commonplace to hear claims of existentialist threat against our liberties posed by these bible thumbing who would impose a theocracy. Yet suddenly Muslims of all stripes are the darlings of The Struggle (TM). {For now.}

        Again, respectfully, and with apologies for first a misunderstanding and secondly a style of my own that read at some point too much like the ad hominem mocking style I so dislike.

        • [“-ly” on that “active, no “-ist” on that existential; tired, long-winded]

        • It is a strange world, no……in one country, met a guy who had settled in an anglo country, but was working in another country, having originally hailed from Chile.

          He had longish curly hair, was laid back, sandel type guy, who could easily be seen blowing on a Didgeridoo, or playing some bongo’s.

          He had been a journalist, was a Pro-Pinochet supporter, and the first democratically post-Pinochet government tried to blow him up, did destroy his car. To Whit, he absconded to another country as a refugee.

          What a strange world it is, when we so quickly yield to the truth, we hold necessarily in our minds.

          An attempt to sustain
          offering only disdain
          to the truth we so eagerly seek
          the narrow sustains only the weak (minded)

      • The issue isn’t with Islam or Catholicism or any religion or sect per se. The problem is with radical nutcases. In this respect, we could say that many of the Western countries (especially Catholic countries) were the worst in this regard.

        The problem with Islam today is that most of the places with Muslims actively have ideologies that’re explicitly hostile to other ways of life (largely propagated by the West 100-150 years ago). In the entire Middle East, the place has turned into a hell hole. You have peoples that were nomads for centuries or millennia that have became settled societies in locations that’re effectively wastelands. In these places, these governments use revenue from natural resources exports to bribe/control the people of their regions with extremely repressive governments and provide essential services.

        In the Middle East, you have regimes that rely on exporting natural resources to finance things like desalination and the importation of most of their food. All the while this is happening, climate change is becoming a real global risk that’s forcing the entire developed world to go off natural resources like oil and natural gas. On top of this, you have exploding fertility rates and poor educational systems across these regions with ideologies explicitly designed to undermine anyone that disagrees with them. If you include Pakistan and Afghanistan with most of the Middle East and most of Africa, that’s at least ~60-70% of the Muslim world.

        History tells us two things. The first thing it tells us is that it’s not possible for the developed world or the rest of the developing world to bring all these people in because of a variety of factors ranging from the risks of the ideology in place to class issues to world view to philosophical reasons all the way to the stress placed on existing institutions, infrastructure, and social services. The second thing it tells us is that there’s a certain way these problems get resolved.

        As of right now, Africa has a population of ~1.2 billion. By 2100, Africa will have a population of 3.7 billion if the current trends hold up. Something will give here. When you add in the potential impacts of climate change and the way it could affect factors from water to the arability of land to the viability of building/maintaining infrastructure to development costs.

        In places like the Middle East and Africa, the current trends aren’t sustainable. I don’t think it’s a stretch to say that by 2060 or 2070, I think you could easily see scenarios where 1-5 billion people die. I also think the worst thing Europe or the US could do is to have “more refugees” in many ways. I wouldn’t take in millions or tens of millions of refugees from other parts of the world unless they were under very specific circumstances and held no risk to our security. In the Muslim parts of the world today, we shouldn’t accept any refugees. I’d also probably be for some kind of a major restriction on Muslims entering the United States. I think saying all Muslims from everywhere is probably going too far, but most Muslims from most regions is something I think is both prudent and appropriate. Ironically enough, I actually think Iran is one of the places where I’d be okay with some immigration because they are ideologically and philosphically different from other parts of the Middle East. In terms of Arab Muslims or Pakistanis or Afghanis or Africans, I’d definitely place strict limits on those and keep those in check.

    • A lot of your facts are false. “In many Muslim countries other beliefs are simply not tolerated” a majority of muslim countries allow people to be christian like in Iran where there is christian politicians or in Indonesia.
      ” you can’t find solid examples of Muslims living peacefully side by side with minority Christians”: Senegal, Tchad, Malaysia.
      ” Slowly, but surely, all other populations are assimilated or destroyed. The destruction of Christian communities in Iraq and Syria during the past decade are just a tiny blip at the end of the tape, but they are part of the overall pattern”
      That’s a very fake argument. The only religious monolith on earth is EU. It’s the catholic church who prosecuted almost any other form of faith. When you go to the middle east there exist old christian communities(even though they are facing hard time). But where are old islamic communities in EU? You think they never existed, but actually they did like in Spain. And they where kicked out/forced to convict. But even if you think what i’m saying is propaganda, where are all these religions that use to be, before christianism? They exist everywhere in the world (and still in middle east). Unfortunaltly the very fact that in Turkey Alevy are under pressure prove a least that they were allowed to make it. Go in France, UK, Germany or Italy you will find no religious minorities others that christian jew and now muslim. For 500 m people that’s not what i would call diversity.

      • I’m glad you brought up Malaysia. It immediately comes to mind when we do a quick mental search for the most tolerant and diverse Muslim countries. I’ve been there and spent time with people of different faiths.

        Since my visit the country passed a law that only Muslims may refer to God as “Allah”.

        Also, the tolerance practiced in Malaysia can be at least partially attributed to some unique factors. First, the faith divide is largely along ethnic lines and the Muslim majority is not overwhelming: 60% Muslim, 20% Buddhist, 10% Christian, 10% Hindu and other. These large minority populations have very powerful allies among Malaysia’s neighbors. Many of the Christians are ethnic Chinese. A wholesale persecution of Christians would mean a wholesale persecution of ethnic Chinese. That could be a dangerous move (though Indonesia wasn’t invaded after scores of their minority Chinese were slaughtered in 1998, that was mob violence, not official policy) Buddhists and Hindus include many ethnic Indians. (Furthermore, boarding Singapore has employed benevolent dictatorship to very actively enforce integration and tolerance, which presents a powerful example.)

        In short, Malaysia is a smaller country whose Muslim majority is slim and concentrated in its indigenous population, while its minority religions are practiced by ethnic groups from nearby large, powerful neighbors.

        And if you’re paying attention to the huge scandal roiling Malaysia, you’ll note the influence of Gulf State actors.

      • Also, let me note your treacherous misquote. I wrote ” I’m not claiming that you can’t find solid examples of Muslims living peacefully side by side with minority Christians”. You quoted that omitting the first five words, which reversing the meaning. I don’t think many readers of this blog are stupid enough to fall for that kind of trick. Some may disagree with me, but they’re mostly a smart set.

        Claiming that the EU is a religious monolith is just plain silly. First of all, that regions suffered greatly from wars between Christian factions.

        Secondly, prior to WWII, though Jews had experienced waves of persecution, varying across geographies (including the worst examples in Inquisition Spain), there are large, thriving communities for many centuries and some countries had begun assimilating and removing barriers over a century ago (including the UK). The Holocaust was a catastrophe in Europe, but prior to WWII and especially since, tolerance for Jews in the Muslim world has collapsed. We’re talking wholesale expulsion from vast swaths of territory where Jews and lived and thrived for thousands of years.

        Furthermore, many EU countries have openly tolerated Muslim communities for many decades. Recent events are changing attitudes, but remember that Algeria was not just a French colony, but it included three bona fide departments! The belief in secular French identity was so strong that they felt it transcends any religious identity! And, of course, tension between secular forces and religions (primarily Catholic) is at the core of French history, especially since the Revolution and the subsequent Republics!

        Aside: I’d mentioned in a different reply how impressed I’ve been in reading Ottoman history with regard to its tolerance for other Abrahamic religions (just pay the jizya, as dictated in the Quran) that compared favorably with European practices many hundreds of years ago. So, sure, five hundred years ago, a Jew in Anatolia might be doing better than on in Saxony.

        Also, let’s remember that the substantial Christian, Jewish, and other communities in Anatolia and the Middle East pre-date Islam as did Christianity in Europe. So when armies under the banner of Islam invaded Europe in waves over centuries, it was natural to resist that domination and to understand that those forces needed to be completely pushed out to ensure security. Some wretched history in there, but the threat was real. The Ottomans were at the gates of Vienna more than once. And remember that they got their start by defeating the Byzantines, capturing the key Christian capital of Constantinople…

      • “” you can’t find solid examples of Muslims living peacefully side by side with minority Christians”: Senegal, Tchad, Malaysia.”

        Definitely should not put Malaysia on that list. I am now knowledgeable about Senegal Tchad.

        This is the exception to the rule that proves the rule. We’d have to think real hard to find an example, even when there are so many Muslim countries around the world.

        We are currently in a third world war of a sort involving a certain section of Islam.

        It is not only happening in Europe and the middle easy but also in Africa and Asia, hence world war.

        I full understand Pettis’ point about how each generation has its own hated immigrants but this time it does seem to be different.

        Did Irish or Chinese or Indians blow up civilians in Europe and Africa (it is a plague in Africa, it might now show up on western media much, but the impact of Islam on non Muslims in Africa is terrifying.)

        And, yes, of course not all Muslims are like that but how come there are no massive demonstrations in Europe or the USA against this phenomenon?

        This I really don’t understand.

        I’ve seen Muslims in London have huge demonstrations, constant, about a certain issue that bothers them but not against global Islamic fundamentalism. Has anyone? please educate me with a link.

        Every poll seem to have some high support for sharia law or some twisted logic on how a suicide bomber can be justified.

    • I never liked this comparing of religions. There is little difference in the pathology of any of the larger religions. The only difference between modern European Christianity and Islam is the Enlightenment. It means that you are comparing an enlightened Europe with the strong authoritarian political systems in the Middle East. I still agree with Adorno that the dialects of enlightenment will create estrangement and thus barbarism as seen with the good German Christians of the 1930s and 1940s. To systematically kill millions of Judes in the name of a religious superstition (In this case Christian) is something the Islamic religion has as yet to do. Immigration in Europe is a problem but it has only become one because the EU leadership in Bruxelles has excelled in uselessness and incompetence. The EU should be shut down and a new more federal system should be created, but the old European nationalism will never let this happen. Muslims have already succeeded in Europe. Most are well integrated and have accepted an enlightened society. The few that create destruction and dream of a Chalifate are just that few.

      • Well, I think most of the Islamic world is still living in the past and I think you need to be careful about Islamic immigration. Unless you see some real philosophical shift in the Islamic world, I think we need to be careful.

        With that being said, I do think Islam is in the very beginning phases of what happened to Christianity during the “Enlightenment”. I actually listen to, and admire, many Sufi philosophers that even teach in the US. The problem is that–in terms of immigration–we should separate the professors or philosophers with the larger population as a whole. A typical Muslim is not a person who studies the metaphysical and spiritual teachings of all traditions.

      • Sorry Jews. no Judes. My bad

  34. Donald Trump is going to win the presidency in such a thunderous landslide Michael Pettis may get busted eardrums and require a hearing aid. Trump is drawing from all hues of the political spectrum but for the infrared extreme left. That he is doing so against the greatest resistance from his own party ever seen in our lifetime is a testament to the breadth of his appeal. He is brilliant probably genius, courageous to the point of taking on and toppling the reigning false god of political correctness, manifestly successful businesswise, and is fully financing his own campaign which is so unheard of the mainstream still doesn’t comprehend its power with ordinary Americans who are long past and far beyond fed up. His policy statements are right down the alley of what should be done. What is it people don’t understand about the l-e-g-a-l in illegal immigration? His policies, though not yet fully fleshed out (and why should they be at this still early stage since the voters aren’t wonks?), are actually a breath of fresh air. Those of his opponents just more of the shopworn same old, same old dog and pony show of more fiscal stimulus and easier money. To boot he is a world class negotiator … and about time as America’s industry and jobs have been sold across the seas for far too long.

    Evidently cobwebs of deep state propaganda, deception, and dumbing down have so occluded the brains of most intellectuals they cannot see the hand in front of this year’s extraordinary face if their lives depended on it. I hazard that a new law applies this season. Closeness of affiliation with academia or mainstream intellectual occupations is inversely proportional to insight about what is really going on. Strongly constructed beliefs can and sometimes do occlude perceptions of ever-changing reality.

    There are two building blocks here – the party’s nomination and the general election. By the method of the 13 Keys to the Presidency, to a high degree of probability this year’s incumbent party candidate does not stand a chance. The Democrats have already lost too many keys. That leaves the race for the nomination. In this Trump is far out ahead, with polls of most states yet to vote running lopsidedly in his favor. The real obstacle to a Trump victory is not his brashness. It is that Donald Trump is neither anointed puppet nor card-carrying member of the global elite. Globalists cannot continence a wrapped in the flag patriot like Trump whose theme, repeated over and over, is Make America Great Again. Globalists want to eradicate sovereignty, not revive it.
    Alas this post from Michael Pettis – an otherwise seminal economic analyst with much creative verve and real world sense whom I hold in the highest regard – is two-dimensional at best. That is, it falls completely flat.

  35. I’ve been looking forward to Micheal’s next post and now its arrived and I’ve enjoyed it as much as any of the others. It is an extraordinary thing that anyone, anywhere can follow anything they see of interest anywhere in the world and this American Presidential Primary is in my opinion very interesting.

    Thanks to Micheal we can all understand how Trumps riles against free trade are legitimate. I didn’t fully understand all the short term negative aspects of immigration but I should have guessed they were significant.

    I think there will continue to be more forced migration in future (I think of global warming) and I think it would be great if migration could be easier and more orderly. If it is agreed that young people with initiative, such as migrants, are valuable then it would be good if they could be invested in. If they were invested in there might be new jobs associated with their arrival and they may be more welcome. Perhaps there should be migrant bonds to raise money that would be used to build houses, schools and hospitals in areas where migrants settle? The bonds might pay 150%* more than the Fed funds rate…but I’m no expert I’d have to ask Micheal what the correct interest rate should be.

  36. Great article Professor (as usual) and thank you as usual again for taking the time to plough into the comments section! I have a couple of questions for you! Number 1, which is probably easiest, is: how do i get back on your newsletter subscription? I think i used to be on it, and somehow am now not on it!

    Number 2: Could you give your thoughts on the political polarisation that seems to have gripped the “united” states? I have been having interesting conversations with people about inequality, the GFC, the re-drawing of electoral districts across the US (Gerry-mandering? Jerry Mandering?), globalisation, etc. Given how you have argued in the past that inequality leads to reduced consumption, and thus affects the trade position of an economy, could you offer any thoughts?

    Thank you!

    • thanks jacques. the newsletter thing is a problem because the subscription list is pretty heavy and is now administered by a group in NY, in large part because it was becoming too time-consuming for me. revenues from the newsletter, i have to say, have been fantastic, and because all of the money goes to supporting the new music scene in beijing, we have been able to expand dramatically the stuff we do with our musicians. my next project is to put together a 6-10 piece chamber ensemble that specializes in contemporary classical music and to commission musicians from the beijing underground rock, improv and experimental scenes, which are now among the best in the world in my opinion, to compose 20-40 minutes pieces for the ensemble to perform and record, eventually to tour. everyone says that china will never have interesting young composers because the conservatories, from which composers usually come, are far too conservative in the way they teach music, but i am determined to prove them wrong by side-stepping the conservatories altogether until they finally get it — which i suspect will happen once our own ensemble and composers begin drawing attention from abroad, probably within 3-4 years judging from initial composition efforts. i have already found a brilliant 22-year-old violinist who will direct the orchestra and a wonderful 17-year old pianist, both from the shanghai conservatory, which is probably the most prestigious in china, but sick of the rigidity they’re forced to accept and prepared to move here in 1-2 years when i get this on the road. however this is all so expensive that i’ve had to become mercenary with the newsletter and i can’t go around the NY folks because my administrative capacity is null. sorry for the long answer, jacques. i’ve had so many requests for the newsletter but to keep it as viable commercially as it is i have had to become mercenary and limit the free subscriptions — mainly to senior academics an government officials — and much as i hate doing it, the beijing music scene has becomes so exciting and i have so much more to do that i accept being a mercenary shit.

      i have always been a skeptic about the extent of political polarization in the US, at least to the extent of its uniqueness. i first became aware of politics, i’d say during the watergate era, and although i didn’t understand much of what was going on, and living in franco-era spain we didn’t get the full coverage, but it was obvious that there was a lot of polarization back then, especially coming, as it did, on the heels of the 1960s and chicago convention. it stretches all the way back. the hatred for FDR was out of control, for example, and throw in the marches and fears of a communist collapse and i’d say the US more polarized then. during both the classic progressive and the late progressive eras the US was extremely polarized to the point that by the time of taft all you had to do to kill a bill was to say that it met with the approval of nelson aldrich, once by far the strongest politician in the country. reconstruction was a ferociously polarized time, and i don’t need to tell you that before then at some point US polarization was bad enough to collapse into the second bloodiest war of the 19th century. before that the politics of kansas was vicious in a way never seen since and bad enough even to make all of our high-school history books, and jackson’s war on the 2nd bank of the US was only a little less vicious, although it led to fist fights in the senate and even a death, if i remember well. and of course the viciousness with which my hero hamilton was treated by the hypocrite jefferson and his allies (although i confess i have learned to love jefferson again, for the elegance of his thinking, however, and not for his dirty fighting) probably has no parallel today. politics in the US, in other words, have always been brutally vicious and divisive and it is one of the glories of the US that the country has always been so vibrant and creative that it has always been able ignore its dysfunctional leadership and move on.

      as for inequality, there have been at least three times as bad as our own (i am thinking of the 1830s, the 1890s, and the 1920s, although there may well have been more) and we have always resolved it each time with major shifts in income distribution. this occurred under jackson and van buren (slimy perhaps, and not averse to letting a big chunk of redistribution accidentally fall into friendly pockets, but brilliant), with unfortunately much of it being driven by state bond defaults after the 1837 Panic ((bond defaults have been a common redistribution “tool” because most bonds were held by the wealthy). the progressives used taxes and anti-trust. and of course FDR used taxes and expanded federal spending, reinforced, once again, by a massive wave of sovereign and state bond defaults.

      except for the issue of income inequality i am reasonably optimistic about the US once we address inequality, and sincerely hope we do so or a new wave of bond defaults might well do the trick.

      • Also WWII and post-WWII financial repression?

      • One big difference between now and then is that the Civil Service Retirement System was only formed at around 1920 and pensions got popular far later then that. Pensions are heavily dependent now on the various financial instruments and of course already deep in the red.

        What would be the impact of bond defaults on pensions, or can you even redistribute wealth if causes the markets to crash. And perhaps this is a stupid assumption or a question so pardon in advance, but can you redistribute wealth without decreasing the growth in capital for those with capital and wouldn’t that necessarily cause the equity/bond markets to weaken?

      • and sincerely hope we do so or a new wave of bond defaults might well do the trick.

        If there are a wave of bond defaults (as opposed to only one or two), I assume that the pension and insurance funds become insolvent, which would increase consumption and reduce savings as functions of GDP, correct? That may be inevitable, but isn’t that the opposite of the trend that is needed in the US?

        Moreover, wouldn’t this further exasperate existing inequalities? The absolute value of wealth among the rich may decline more than the wealth held by the “non-rich” (however you want to define that), but the really rich probably don’t need the money–if they did, they wouldn’t be rich–while the non-rich do need it. Becuase the non-rich need some funding, this would just depress the labour market.

        I could be way off–I’m just trying to reason things out. Anyway, I think defaults are probably inevitable (although if the federal government justified bailing out the banks, it will be hard to see how they avoid bailing out the individual states…I guess Wall Street has probably arbitraged that play many times over by now).

        i’ve had so many requests for the newsletter but to keep it as viable commercially as it is i have had to become mercenary and limit the free subscriptions

        Not my business, of course, but have you considered lightly editing a collection of the older ones (or getting somebody else to do so) and releasing them as a book? Presumably there is no loss of value to the subscriptions, as the information would not be timely, and I am guessing that it shouldn’t take too much time, since the entries are already written.

        i am reasonably optimistic about the US once we address inequality

        Have you thought about how this would best be addressed? Is this simply a matter of changing the income tax code, or are there better ways of doing this (H1B visas, trade policies, etc)? I’m sorry for asking, because I you wrote something about this a couple of years ago, but I can’t find the entry, and the search function isn’t turning it up (at least not my searches).

      • No problem at all Professor. I wasn’t aware that the model for the newsletter had changed, so no need to worry! Years of well written, well thought out analysis here has always been appreciated, as have all your books, so I have no complaints!

        Good also to hear your optimism for the US. I share it, and am now within 12 months of relocating from Beijing (after a respectable 12 years) to California! Although I am a bit concerned about what is going on in campuses in the US right now.

        A further thought (perhaps should be in a thread somewhere above this one), I was recently listening to academic / geneticist Jonathan Haidt, can’t remember which podcast, and he made some interesting points about the word “liberal” having got confused with the word “left” – especially in the US. His idea of the Illiberal left versus the Liberal left, drew more on the definitions from John Stuart Mill and more traditional liberals than the modern US definitions. In other words, the idea that you can shut down someone’s speech even in a classroom as it causes you “injury” (As seems to be happening on quite a few US campuses) is an illiberal trait that is taking a hold on the campuses of top schools such as NYU, Harvard, Brown etc. I am getting way off topic, but he was drawing parallels between this kind of mis-definition, and some of the polarisation that is going on (with Twitter and social media as instant enforcement / rabble rousing tools).

        • in fact outside the US, “liberal” retains its older meanings. read john dewy and lionel trilling to get a sense of the classic american “liberal”.

          • Yes indeed! I think Haidt actually made that point, he prefaced his comments by saying that this is an American phenomenon, and that in Europe (he didn’t mention the rest of the world), the older meanings are still valid.

            I will check out Trilling and Dewy!

  37. Hello world! Hello prof, hello everyone!
    Talking Trump is actually fun. the guy is actually really funny.
    [email protected]: I would like to extend my best wishes to all, even the haters and losers, on this special date, September 11th.” that’s a real tweet from Donald J Trump!
    You should all go check :
    I hope you can see that you guys in China because that’s really funny.

  38. Great take on current affairs. In every great republic, plebeians will gather around a patrician, whom they in the end will reject on the grounds of disillusion. Jacksonians rally around the flag, bible and racism for the same reasons as the free citizens of Rome rallied around gifts, tournaments and bread. They need something to believe in, but where the free citizens of Rome wanted the greatness of the Republic back the American plebs want something else. They want to left alone. The American nation is born out of English Protestantism and the revolt against James VI and I, Charles I and James II. Your Jacksonians are in essence a protestant English working class that never again would allow Popery or aristocracy interfere with their livelihood. Want Trump´s follows want is that bankers, immigrants, East or West coast intellectuals, do not interfere with their lives. The thing is that the world does not leave you alone. 9/11, the Lehman Brothers and 2008/2007 crash and the Chinese economy´s reentry into the world economy makes it hard for the American plebs to be left alone. That is why Trump does not have to make sense and that is why he might make it to the White House. If Trump can convince enough plebs, that he as their patrician will make sure they are left alone, then he can be as contradictory, inconsistent and irrational as he wants. They will vote for him anyway. The strange thing is that want would really allow the American Plebs to be left alone is universal health care, income redistribution through taxation and free education. This will never work until Americans understand that the Ninth Amendment does not mean they don´t have to share with each other and that wealth creation does not happen based on one individuals actions.

  39. Michael, this is a reply to your exchange to Craken. Could not find a Reply button there, so post this in the main thread.

    You talk about immigrant perspective on US. Since I grew up in the former Soviet Union, let me give you mine. To me US is (and always has been) special not in its multiculturalism, but rather in its emphasis on independence/self-reliance. When I first came to the US I was wondering for a while why so many poor rednecks vote Republican instead of queing for handouts from Democrats. And what I understood is that these people know instinctively that relying on somebody else leads to weakness and dependency, that to stay healthy and maintain sense of balance one has to resist temptation of handouts and keep standing on ones own feet. So, when I hear my well bred and learned friends, coworkers (and presidents) speak derisively of rednecks clinging to their bibles and their guns, i feel these people have lost the sense of american identity (or believe that there was no such thing to begin with). So, to me, multiculturalism is quintessentally European while the core of american exceptionalism is independence/self-reliance and deep seated awareness of and readiness to fight goverment tendency to expand its remit (primarily by corrupting people with free stuff).
    Now, I believe this difference in perspective explains a lot. To a multiculturalist, any immigration is good, while to me we should be careful not to dilute the good wine. In the same token, I tend to emphasize subtle role of incentives in economic health of a country. Soviet Union had very good education system, so total inadequacy of its economy was due not to deficiency in human capital, but rather to completely screwed up incentives due to, yes, income redistribution/”equality”. So, when I hear Sanders calls for income redistribution not only resonating with young people, but also supported by very influential economists like yourself, frankly, I am getting uneasy. Yes, i do agree that current income distribution in the US is out of wack with demand for US assets etc but I fear attempts to redistribute income will screw up the incentives and kill the proverbial golden goose. After all, whatever we do, US consumer can not be the engine of growth of last resort for the whole world. So, to relieve the pressure I would rather go Trump way of some isolationism, etc. You already quoted Churchill today wrt democracy, but the same can be said about capitalism. It’s an awful system which unfortunately is by far better than alternatives. So be careful with incentives.
    On another point, you mentioned your struggle between isolationism and interventionism. To me, the most dangerous thing is inconsistency in this context. If we embrace globalization economically, we need executive branch which is able to deal with its repercussions in international relations. I think this is where we differ with you on Reagan vs Carter and Trump vs Obama. It is one thing for a president to look good and empathic on TV and it is totally different ballgame to face one on one a totalitarian leader. In a street fight, image consultants do not help, there is no time for deliberations, and everything hinges only on your quick decisions. We need special people with good killer instincts for this kind of job. I believe that Carter and Obama were in way above their heads in this respect, but Reagan did and Trump very well might foot the bill here.

    • I agree with much of what you say, Leos, and you deserve a longer answer, but I have class soon followed by a trip to Chongqing, so here goes:

      1. I think to worry about the dilution of American culture is to fail to see that American culture is unlike other cultures. It is not so much a collection of beliefs and rituals as it is a machine that process and “democratizes” (and I mean a very American form of democracy in which, as you say, radical individualism is the ideal, if not always the reality) everything with which it comes into contact. Whitman explained it best, but you can see it also explained in the works of Kerouac, Fitzgerald, Hart Crane, Twain and plenty of others, including, in a sort of negative way, Eliot. Someone once very cleverly said (I forget who) that while Germany is a race, France a culture, and England an island, the US is an idea, and I am fully American, and perhaps you assume you are too, not by accident of birth (my dad was American) or residence but rather because in some sense I fully accept this “idea”.

      2. You say “when I hear my well bred and learned friends, coworkers (and presidents) speak derisively of rednecks clinging to their bibles and their guns, i feel these people have lost the sense of american identity”. First, my sense of why American democracy and individualism is different, that “idea”, doesn’t work because it means we all must love each other — and clearly that is a very un-American concept — but rather because we cannot deny anyone’s validity. The stupidest American or the most recent immigrant claims as much validity as the best-spoken or the one whose family roots go back to Virginia colony, and this creates in the US a kind of centripetal force which characterizes us culturally — it explains both the well-know American lack of taste (which is nothing more than cultural consensus about what is taste) and the fact that only Americans can ever really be “cool”, and it also explains why American are heavily overly represented on both sides of any distribution curve, in the sense that on any list of the best movies, smartest books, most imaginative scientists, coolest tech start-ups, top universities, etc. Americans will be over-represented just as they will be on the other side of the distribution: if in a bar full of people there is one especially loud, stupid and obnoxious person who feels absolutely no embarrassment at expressing to everyone else’s discomfort one cliched piece of idiocy after another, the chances are he too is American. I think of us as “the country of fat tails” (or “the kuntry of kurtosis” if you prefer), and so I am no longer embarrassed by the behavior of some Americans because I know that what I love about the US would not be possible with those fat tails and the fatheads that come with them. But to make fun of these fatheads is not likely to undermine American individualism or it would have happened long ago. Read your American history — maybe starting with John Adams, but the literature long pre-dates him, and among its sharpest practitioners are iconic Americans like Mencken and Mark Twain — and you can see that we are far from being the first to deride our fatheaded countrymen.

      3. I agree with you that one of the main strengths of the US is an institutional structure that rewards performance, and it is this probably more than anything else that explains America’s dizzying creativity. If you are interested I go into more detail in an essay explaining what I mean by “social capital” ( and in the March 23, 2014 entry on this blog. But high levels of inequality have never occurred because great inventors, engineers, artists or businessmen have kept a large share of what they produce, and there is no correlation between American creativity and periods of extreme American inequality. It is one of the great myths that the US is experiencing inequality today because of Silicon Valley. Check the lists of the richest Americans, and you will find that it is dominated by top managers of major companies, who were given substantial freedom to set their own pay packages (based on a faulty attempt to align interest with performance using options) and subsequently saw their pay packages soar with no commensurate productivity increase in the companies they managed (productivity may have actually declined as money that could have gone towards capital investment went instead to compensation), and by Wall Street types, and as an overpaid Wall Street type myself, I can tell you that the explosion in Wall Street compensation had to do with many things, none of which involved an increase in our economic or social contribution. On the contrary, the financial sector has surged as a share of US GDP and has taken some of our brightest and best trained scientists, engineers, mathematicians and lawyers out of the production of value to the economy and the country and into the extraction of profits in ways that hurt the functioning of markets at least as often as they help, and which rely far more than you might realize on simply converting taxes into profit.

      • ” Check the lists of the richest Americans, and you will find that it is dominated by top managers of major companies, who were given substantial freedom to set their own pay packages”

        This really has to be backed by data.

        I took a quick look (!= data) on Forbes 400 and saw plenty of rich people who created companies or ideas and received portions of the companies they started. Isn’t that one of the core American ideas? These are not CEOs who just got paid to manage, also of course there are some.

        As for the hedge fund managers, does capital allocation or investing have no social benefits?

        • There is almost no way the Forbes 400 can be considered an unbiased selection of the top 1% or top 5% or whichever group you focus on as a proxy for income inequality, and it is surprising to me that it so often is used in discussions about the sources of income inequality. I have nothing against backing statements with data, obviously, but doing so actually reduces, not increases, accuracy if there are obvious relevant biases in the data set. There have been several studies about the composition of the American wealthiest, and I suppose you can round up some of them with Google, but I can’t remember reading any that didn’t conclude that the rise in income inequality was not driven by business and technology innovators of popular myth but rather by people who most of us don’t think add social or economic value that can be increased by the wealth incentive — people like corporate managers, fund managers, inheritors (who memorably heeded Rockefeller’s call to show some initiative; I think it was a Rockefeller, but could have been some other scion clever enough to be sarcastic about it) and so on. Most of the studies I have seen date the beginning of the surge in income inequality to very late 1970s and early 1980s, and it cannot be a coincidence that during this time real US interest rates were the highest they had ever been, sometimes 2-3 times or more the average, hugely benefitting savers in proportion to the share of their income saved, which tends to be a very tight fit with increasing wealth (in fact we would have to address the whole issue of why we have marked periods of both sharply rising and sharply falling income inequality, and it has been hard to establish equally sharp rises and falls in any measure of “innovation” in which almost immediately you wouldn’t question the direction of causality. My Foreign Policy essay, to which I referred above, is actually partly about the likely consequences of a global crisis but even more so it is about explaining why periods in which we often see soaring wealth concentration are also often periods in which the commercial application of earlier innovations — which analysts sometimes use as a proxy for innovation, incorrectly, in my opinion — also soar. At any rate it can’t be so hard to design a tax code in which some of the more obvious distinctions between types of wealth and financial incentives are useful.

          • The Forbes 400 is obviously a biased view of the top 1%. And let’s also be clear that the issue isn’t the 1% or the 5%, but the top .1%. Let’s also make it abundantly clear that when you get a rise in inequality, it comes with winner-take-all effects. So the idea that the Forbes 400 is a bad example isn’t really a sound mathematical or statistical argument. Any discussion of inequality and it’s impacts must necessarily be biased because of the scaling of distributions that results in winner-take-all effects.

          • Let’s also talk about how interest rates got that high. Due to the disastrous policies of idiots like JFK and Nixon who kept printing money, running large deficits, and then holding a gun to their central bankers to make sure they did as they were told, you had rampant inflation when you added in a geopolitical situation where the US was importing most of its natural resources. Of course, you could’ve prevented the petrodollar recycling had the Fed tightened monetary policy and kept it tight, but that never happened because of egghead Presidents (and if I hear a leftist tell me anything about how Nixon was a conservative, I’m going to explode into a fit of rage because conservatives really don’t like Nixon).

            So if we wanna blame something for those high interest rates, we need to blame the inflation. When you have periods of high inflation, interest rates will climb. The longer you try to keep interest rates low by using financial repression while letting the inflation linger (like relying on importing natural resources, then resorting to price fixing instead of contracting liquidity like Nixon was responsible for) and then use these revenues to fund generous social welfare programs or wars (like LBJ, who I actually believe was racist), the consequences become obvious.

          • That shouldn’t be JFK, but LBJ. That was a typo.

          • BTW, the high interest rates explain the inequality we saw until ~1991 or so, but don’t tell us much after that when Greenspan brought Fed funds to ~2%. If we look at the 10 year, we’d see that the highest yield ever achieved in the 90’s was 8% and it was <6% for most of the decade (including the entire second half). So that explanation for burgeoning inequality may be valid for the 80's, but it holds little explanation for much after that.

          • That should be Fed Funds hitting 3% in the early 90’s, not 2%, but my point is clear.

            In other words, we can’t view the rise in inequality as caused purely from financial rent-seeking due to high interest rates, as that would only explain the first out of three decades. We need other explanations. A part of that explanation should be increasing globalization, increased immigration, and declining wages as a result of all of the other factors. Keep in mind that many people like me, who were children of skilled laborers, immigrated here in the 90’s.

            It may be a shocking concept, but when you bring in more people, the amount of money you can pay to people that do those jobs drops. I actually think that immigration was a bigger factor in rising inequality than interest rates, especially if most of that rise in inequality happened from the late 90’s. Again, we’d have to look at the political coalitions.

            In the 90’s, it was basically Bill Clinton and the Republican Congress who were making decisions. It was also quite clear that the entire system has been run by the financial system that really started to take hold in the late 80’s and 90’s when finance capital was given the keys by basically writing the economics books. So what did they do? They said we’ll let anyone immigrate here and basically bribe Congress to bring in large amounts of immigrants. The political strategy was to let people in and then use Wall Street money to flood Congress to buy votes to get whatever you wanted done. Of course, political donations and then using those donations to form coalitions between interest groups was an essential part of this.

            So what was their strategy when the people who voted for them realized that what they did wasn’t in their interest? Simple, you just provide a path to citizenship to laborers or their children so that in the next step, they’ll vote for you. If that’s not enough, use the alignment of incentives to create a liberal capitalist system wherein all of the intelligent or daring or lucky will vote for you because they do things right. If everyone else turns on you, it’s not a big deal because when they figure out what’s going on you’ve diluted their political power enough to maintain yours.

            How did this strategy work? Considering that my family and I got our citizenship about 6-7 years ago and that both of my parents are longtime Clinton supporters (the Clinton’s have looked out for our interests long before we became citizens) and we’re not close to being the only ones, it seems to have worked out really well.

            If you don’t believe me, just look at the demographics of the primaries. The people who have turned against the Clinton’s in 2016 are generally white, male, rural, and have lower incomes. The Clinton’s are winning off the well-off, the urban dwellers, and minorities which is showing to be barely enough to stave off Bernie.

            The fundamental factor of rising inequality is the political coalitions that formed between those who’ve been in power for the past few years and are seeking more power today by using Wall Street’s money (and doing Wall Street’s bidding) to bring in bright, talented, and successful people from other parts of the world to start families here. Judging by the results, it clearly seems to have work–at least in some capacity.

            With the rise of Bernie and the shift in the political axis to the left, a lot of legal immigrants (me included) will happily jump ship to fight against Bernie and these equality pushers. The reality is that what Wall Street has done may actually have a lot of positive benefits for the country in the long-run. If you didn’t have immigrants and relied on the native population already here, this country would be in decline right now. Did it increase inequality and put pressures to decrease real demand per capita? Hell yea, but there’s also structural benefits of doing this.

      • When I was in graduate school, my adviser was the department chair, teaching undergraduate and graduate classes, supervising ten graduate students and postdocs, running two companies, and doing other things at the same time. I have no problem if he earns three times of my income. I saw top smart people who came America ending up in top schools being star faculty. The American incentive system produces the best artists, scientists, doctors, entrepreneurs. The income gap makes this country vital and creative. The solution should be reducing unemployment rate. During Clinton’s time, everybody wanting to work had job. I agree with the idea that the current business tax rates should be lowered to attract more companies to build factories in America.

        • I agree that “The American incentive system produces the best artists, scientists, doctors, entrepreneurs. The income gap makes this country vital and creative.” and I think hardly anyone seriously believes that incentives don’t matter, but unless you believe that American creativity is linearly correlated with the rise in income inequality, believing that incentives matter tells us nothing about the costs and benefits of income inequality. But not only is there no evidence I have ever seen that suggests the relationship is linear (and such evidence would be astonishing if it implies that the value of an additional unit of income is the same, or almost the same, no matter what our income level), I haven’t even seen convincing evidence that there is any correlation once income exceeds some level, and of course any argument would have to settle once and for all whether the incentive value of money is determined in absolute terms or in relative terms — and because many here seem to have read Taleb, I would point to his noting how much happier the family that earns $50K in a society in which $40K is the mean than the family that earns $80K in a society with a $100K mean, because if Taleb is right, it becomes incredibly hard to justify soaring income inequality on the grounds that it leads to greater innovation. And because I find it hard to stop until I have worked out all the logical scenarios, I would add that even if we resolved every one of these issues favorably, we could still justify unlimited increases in income inequality only if we agree that it is impossible that the cost of income inequality can rise with the level of income inequality enough ever to outweigh the social benefits of an unlimited financial incentive.

          In the end, of course, none of this matters in any real debate because political beliefs determine which side we are on, and logic or data almost never influences our beliefs, so no matter how many times I have been slammed for right-wing fanaticism (for example when arguing that supply-side policies are not voodoo economics, but in fact are valid under fairly easy-to-specify conditions and invalid otherwise), the moment I suggest that we are not better off allowing unlimited amounts of income inequality and that is is pretty easy to specify with simple arithmetic the conditions under which we are clearly worse off, overnight I get to join the left-wing fanatics. All but the most irrelevant of topics have developed very firm litmus positions beyond which debate is namby pamby.

          I disagree with those who say, by the way, that the lunacy of the American political debate that has developed around all this litmus simply reflects the lunacy of American political thinking. I would say it simply reflects the fact the passionate intensity of the worst (nudge nudge wink wink to Claire) which has been amplified by technology, not least in the comments sections of a lot of internet media, obviously excluding us, I mean.

          • On the issue of inequality, it’s all winner-take-all. The things that create wealth are complete crapshoots, but the impacts and effects are fat-tailed (I think this is just necessary). So creating incentive structures to limit inequality could actually limit the wealth-creation effects as well simply because you limit the “winner-take-all” aspects of whatever happens. This comes straight from Taleb.

            So in order to detect wealth creation, it’s best to look at class mobility, not equality. I basically think that anything which increases the amount of trials in the economic/financial system is almost always beneficial.

          • Quoth Suvy, “So creating incentive structures to limit inequality could actually limit the wealth-creation effects as well simply because you limit the “winner-take-all” aspects of whatever happens. This comes straight from Taleb.

            So in order to detect wealth creation, it’s best to look at class mobility, not equality. I basically think that anything which increases the amount of trials in the economic/financial system is almost always beneficial.”

            In fact, my suspicion would be that policies allowing for unrestrained income inequality could limit wealth creation because they would significantly distort or limit “trials.”

            You are clearly a smart guy. Imagine your own offspring forced to grow up in the worst of the worst percentile. Surely s/he would be less likely to be taking down economic titans on Twitter and elsewhere, in addition to taking on more economically productive endeavors.

            That doesn’t mean we need to give everyone free cupcakes, or whatever boogyman policy frightens you most.

            Perhaps less income inequality would lead to better designed, more useful trials…if you will.

          • Deek,

            I never said inequality wasn’t an issue (it is), but we’ve gotta keep it in context. The people who always seem to be the most interested in making things “equal” are those who grew up in cushy backgrounds, have no courage, and constantly fuck up. These are people who’re often very “well-educated”, have done what they were told since they were kids, many were the kinda kids who got straight A’s or “good grades, and are genuinely scared of the world. These are the people that’re really jumping onto the “progressive” bandwagon. If you don’t believe me, look at the demographic splits in the primaries.

            The Bernie Sanders wing is really just the old “Progressive” wing. His supporters are constantly trying to tell minorities how they should vote for them and then classify a lot of these minorities as “low information voters”, which is actually not true at all. In fact, there’s a lot of minorities that look at the kinda stuff that Bernie says and get sketched out. When you go into minority communities to tell them you’re gonna increase the size of the government, have high taxes, and have the government provide large amounts of government services as a way to “redistribute”; minority communities get sketched out. Anyone who understands the political structure knows who this benefits. What these kinds of policies do, every single place they get tried, is that they created entrenched bureaucracies with entrenched political interests that become impossible to remove. The “Progressives” always make comments saying how this is just taking advantage of idiots, but it’s not true.

            When you have a government that has high tax rates, high regulations, and provides a large amount of services, it necessarily places barriers to entry. The “Progressives” will point out their “golden age” of the 50’s and 60’s, but they never talk about the longer-term impacts.

            I had a comment reply to Prof. Pettis about the structural rigidities created by those policies in the 50’s and 60’s that was largely related to the political coalitions created during that period and the impacts of those coalitions (this includes many of the centralized “investment” projects and the policies taken up by the Department of Education or the Department of Housing and Urban Development). It’s funny because many of those in the older black community, in other minority communities, or even in the working-class white communities agree with me 100% on these issues because they saw it play out in their lifetime exactly in the way I’ve described it.

            The policies in the 50’s and 60’s “fixed” inequality by largely taking resources from the regions that could sustain themselves and transferred them to regions that couldn’t sustain themselves. Well, in order to sustain those factories or projects or whatever else, those regions must start to drain resources from elsewhere. If you’ll notice the old industrial towns or the formerly powerful industrial cities, you’ll realize that there was never a sudden collapse. It was a slow decay because the structure of the communities just couldn’t be sustained. Over time, the infrastructure decayed as you the generous pension systems of these places would take away resources from the productive parts. The old regulations in many of these areas prevented new entrants or firms from stepping into these places. The communities were local and strong in many of these areas. These places used to have very strong families and communities. Over time, that underlying sound social structure started to fall apart while they were relying on “investment” (transfers) from some centralized authority to support that system. Of course, that keeps going until you reach a tipping point where the entire city or region just crashes.

            I grew up in the South and I was raised by country boys (this is really not a joke). All of the people in these regions agree with me. They saw it happen in slow-motion through their entire lives. In fact, they agree with me much moreso than any narrative or view espoused by the other side. If you take a ride through these communities and try to think about the local expenses of these places, you begin to realize that the shifts forced upon them in the 50’s and 60’s literally sucked the productive parts of these places completely dry. Quite frankly, many of these places are places that have no business being wealthy. They don’t have the networks to sustain their wealth. The only way they become wealthy is if you take centralized political structures to build coalitions to transfer resources across in order to “maximize” short term aggregate demand, which is usually how most policies targeted at “fixing” inequality have worked for the past 70-80 years. The classic example is when you look at the family structure in these cities in relation to the way the city was “planned”. There’s no hierarchy or layering, which is what makes the structures unsustainable. There’s no real complexity or adaptability. No places like that can survive.

            The kids that grow up having nothing end up, a lot of times, finding ways to survive and hang around. They’re the ones that find ways out and are willing to get their ass kicked as many times as necessary in order to have a shot at their dreams.

            Let me put it this way: those who grew up among at the worst of the worst would rather side with someone whose political views are closer to mine than they are to someone like Prof. Pettis. That is something I can absolutely guarantee.

            The problems for the worst of the worst percentile today are largely from “progressive” agendas taken up 50-70 years ago. Of course, the “progressives” refuse to admit this and think that they can do no wrong because they’re the ones that want “stability”. What most of them really want is a “safe” and “stable” society wherein those at the top can maintain their status level. In my eyes, everything the “progressives” really ask for is a way to prevent the mobility among elites. Their policies really don’t help the down-trodden very much IMO. The Progressive policies have (and still are) designed to help those who are having to look down because they can’t maintain their class level, not those at the very bottom looking to go up.

      • Re: “if in a bar full of people there is one especially loud, stupid and obnoxious person who feels absolutely no embarrassment at expressing to everyone else’s discomfort one cliched piece of idiocy after another, the chances are he too is American” I don’t know. I might bet on another continent-wide country whose name begins with “A”. But it’s a tough one.

        • I tend to think Michael was using this as a device, because it is well too cliche, and naive, by my estimation, to have spewed from his mouth. This is a very coastal and European notion; not likely to be found outside of large, important metro settings in either, and equally found among both art and business elites. But I tend to view Michael as supporting this notion, to support the notion, that is is useful that we have this facet of our “culture”.

          Because, any who has spent anytime outside of the Four Seasons, will know that this is a trait shared by many; from North America to North Asia, from Oceania, to South America. Some, like to to prefer that their expressions, are rather more cleverly delivered, while some take pride, in saying it like it is, most, well too considerate of what they think, and willing to say it loudly.

        • Ha ha they do share a lot with us, good and bad, except that unlike us some of them already believe they are Canada.

      • Again, some of these comment responses are better than 90% of posts in many other widely-read blogs. At least they’re witty and irreverent in the service of wisdom.

        Someday might you elaborate on those final words “simply converting taxes into profit”?

        I’ve come to view much of the increase in the financial sector’s share of national profits as equivalent to a tax on the rest of the economy and a bad one at that, certainly not some welfare optimizing Pigovian one. Yet I have a hard time articulating my reasoning. I feel like I have nearly all of the pieces, but can’t quite put it together in a way that gets it across to those who don’t think so much about these sorts of things. (And maybe you mean something in addition – that they transform our tax system into private profits. We know they profit from designing, implementing, and administering sophisticated tax avoidance (and evasion) strategies.)

      • Michael, I disagree with much of what you are saying, but it is just impossible to squeeze everything into a reply to a reply. So, I’ll comment only on the inequality part.

        To me, the argument about a need to further stimulate US consumption just does not hold water. If you believe both in value of open borders/immigration/globalization and in existence of coherent economic argument for wealth redistribution, then it is inconsistent to argue for income redistribution only within the US, since real inequality is between US and the rest of the 7bn humans to which we are more and more bound by globalization. US consumer already carries the water for the whole world, it is Chinese et al consumption which needs increasing.

        The jist of Eccles et al argument is that for economy to be in balance, workers should be able to consume everything they produce. You essentially say that currently this balance is under strain and I agree. However where we absolutely disagree is in your diagnosis of where the coresponding imbalance come from. You essentially claim that it is US workers who need wealth to be redistributed to them to increase their consumption. Since you claim this is not a political position but rather something which can be supported by Eccles et al economic theory, then the only logical inference to me is that you believe that US workers consume less than they produce. I am frankly amazed on two counts here: first that a deep thinker like yourself (and I am greatly indebted to you for your outstanding blog, including this thread, and your books) makes this argument, and, second, that this opinion seems to gain acceptance with other smart people. Isn’t it obvious that reality/numbers totally contradict this point of view. And this is not just some obscure statistics, everyday we are pounded with the fact that US already consumes about $500bn (!) pa more than it produces. Isn’t it the case that the only way to apply Eccles argument coherently to the current situation (we are not in the Great Depression anymore) is to require yyyyuge wealth transfers from US to China since it is Chinese et al and not US workers who consume much less than produce?

        So, we either see global income inequality as a problem and then accept what is currently going on, which is really just a part of the corresponding adjustment process, or admit to ourselves that we as a country have interests, and one of those is preserving current inequality between us and the rest of the world, which means precisely restricting trade and immigration. Instead we seem to be stuck in the middle, grasping for some almighty economic theory to allow us to pacify both Chinese and internal militants etc. and kick the can down the road.

        Now, granted, the problem is Americans are unhappy. We do not notice that US citizenship already puts us into about top 5% of humankind in terms of standards of living, and instead focus on how we lag behind top 1% of americans. However, to me, these are political rather than economic issues, in the sense that they are grounded in people’s emotional etc. needs conflicting with economic reality, and hence can be resolved only by political tricksters.

      • Prof. Pettis,

        This is a post where I strongly disagree with you. I’d argue that the periods of American creativity have absolutely varied with regards to inequality. In my eyes, it’s clear to me that the most creative period in American history (and the greatest IMO) was the ‘Gilded Age’, which I define as the years from Reconstruction to ~1900-1910. From the beginning of Reconstruction to beginning of the 20th century, I believe we life expectancy went up ~25-30% and childhood mortality dropped ~45-50%. Although in reality, those numbers probably understate the actual improvements because of factors like immigration and the diversity of the population. Death rates in the US were a little less than Europe and birth rates were ~50% of Europe. We also had a rapidly increasing population from immigration. In my view, it was by that time that the US was already the most innovative economic system at that time with maybe even the most sophisticated financial system. It’s actually funny how little people realize how much better race relations got during the Gilded Age, but this is somehow wiped away from any education in American schools.

        I’m also of the view that the innovative capabilities of the United States were relatively stunted after ~1965 or so when things really started to screw up (I think the problems started with JFK to be honest). It was the centralized decision making during that period. Hell, I even think the 40’s and 50’s created a lot of the problems we have today. After all, when did cities like Chicago, Cleveland, or Detroit peak? The problems were created when large, centralized labor unions were allowed to create national political coalitions with corporations, especially related to industry. Then you add in the centralized manner of creating the highways with suburbs where people would have to drive into these places to work at these industrial style plants built on corporate money from outside keeping these cities and towns alive. Those exact same policies were what led to the disaster we have today. The forced desegregation of communities by centralized policies to “mix” the cities basically meant that all of the middle-class/wealthy blacks in these black communities left to the suburbs. So you ended up with entire ghettos. The policies we had in the Great Society regarding the Department of Housing and Urban Development, then we add in things like the War on Drugs, the development of housing projects, and all the other stuff like that has completely devastated these communities in the long-term.

        On the list of richest Americans, the top 20 are Bill Gates, Warren Buffett, Larry Ellison, Jeff Bezos, Charles Koch, David Koch, Michael Bloomberg, Jim Walton, Larry Page, Sergey Brin, Alice Walton, S. Robson Walton, Christie Walton, Sheldon Adelson, George Soros, Forrest Mars Jr., Jacqueline Mars, and John Mars. Out of that list, I don’t think anyone is an actual manager of their company. These people aren’t CEOs, or if they are, they’re owners. They’re just owners in most cases.

        I disagree with the whole corporate structure of CEOs and manager packages being screwed up. It’s not every company that has that structure. Only the bad ones have that structure and they’re all getting destroyed. Firms that with poor management and payment structures don’t last long and the ones whose management structures become distorted fall pretty quickly.

        Even if we take someone like Jamie Dimon, who runs what I consider to be the best bank in the world, we’d see that he’s got skin in the game. The share price fell recently and Dimon took a year’s worth of his own salary to buy shares in the firm he runs because I think he realizes it’s a good profit opportunity (and I’d agree with him). He’s got skin in the game.

        Professor, the hardest hit industry in 2008 was Wall Street–in case you didn’t notice. I’d also say that Wall Street has done some wonderful things in the past few years. In fact, I’d disagree with your notion that the massive increase in inequality has come from places that aren’t like Silicon Valley. Just take a look at that top 20 list and tell me how many Silicon Valley or tech guys there are. That’s literally a quarter of the list. That’s not even including guys like Mark Zuckerberg or whoever else there might be.

        The only things that worry me about that list are the amount of people on the list who earned their wealth through inheritance (ex. the Walton’s and the Mars’).

        • You have to be careful about creativity, Suvy. Historians who specialize in technology warn us not to confuse the period in which a crucial technological or scientific breakthrough occurs and the period in which we see a massive spread of that technology. So although many argue that you can speak of “stages” in the Industrial Revolution, these stages do not necessarily coincide with the creative activity that enabled them. I am rushing to finish my newsletter so I’ll have to rely on memory, and the latest “stage”, the spread of information technology through PCs and the internet, is the easiest to remember. My potted history (and I am sure we have commenters who can add and substantially improve on it) dates the key breakthroughs in the creation of the internet as being the development of ARPANET in the early 1960s and the development of packet switching, theoretically in the early 1960s and practically in the mid-1960s. I have no idea if these were the most challenging and creative developments, but they seem to be the two most often cited, so I assume they represented significant breakthroughs intellectually. As for the PC, again my perception is based on repeatedly hearing about the same key events, and not on a terribly nuanced understanding of technology (when I studied physics it was always the theoretical stuff that seemed elegant and the practical stuff, or lab, where I quickly bumped up against my limits), but most of the major breakthroughs seem to date to a rich period in the 1970s.

          Apparently this is a fairly common pattern: the major scientific and technological breakthroughs are scattered randomly, or sequenced when they have to be, but as randomly as the sequencing allows, and then at some point, which is usually when we talk about things like stages in the Industrial Revolution, there is a revolution in the use of these technologies as they suddenly spread rapidly. The 1920s is famously such a period — with its wide use first the first time of radios and telephones, the birth of the movie industry, the electrification of industry, daring feats of flight, etc. — but most of the technologies that we associate with the period were built around breakthroughs many of which occurred before 1900, and of course WW1 contributed its share of the technological innovation that war always seems to bring. You will have probably already noticed the nifty coincidence of the 1920s and 1990s, both famously periods of technology and real estate bubbles and massive capital flows to developing countries, and when I add that the 1960s is usually considered the third of the three major technology waves of the 20th Century, it is hard to believe that it is purely coincidence.

          In fact I am pretty sure this isn’t coincidence, but rather a function of the massive availability of liquidity, which tended to drive down risk premia and send capital pouring into all kinds of risky assets, ranging from Florida swampland and Peruvian railways to the commercial application of new technology, dominated usually, you will notice, by transportation and communication technology. We sometimes forget how risky these original investments in subsequently transformational technology can be, but in one of my earlier posts someone already noted in the comments section, perhaps it was even you, the miserable history of the first great builders of infrastructure, whether broadband, railroads, or canals (the key networks built in the USA during the 1990s boom, the 1860s boom, and the 1820s boom) nearly all of whom subsequently went bankrupt. Bankruptcy may have been a key step because when these networks were purchased during liquidation, they were often purchased at huge discount from the original builders, and this allowed the new owners to slash rates dramatically and in so doing spur the real businesses that represented the real growth of that period. The liquidation of the railways are the classic version of the story because some major lines were picked up for as little as 20-25 cents on the dollar.

          It is too easy to digress because there are so many cool parts to this story, but notice I said the massive “availability” of liquidity, rather than the massive “creation”, because while I think most economic historians now accept that very strong link btween credit cycles and technology, some think the causality runs from technology to liquidity. Most however, and certainly I include myself, along with Austrians, Post-Keynesians, and of course every Minskyite, think it runs the other way. Most economic historians had originally assumed that the timing of the various stages of the Industrial Revolution was set by the timing of the associated scientific and technological breakthroughs, but they were always disappointed by the actual data, and I think that it was only once economists were able to developed a useful theory of credit cycles that they could make the connection.

          By the way I was shocked 15 years ago when I stumbled across a paper written by an economic historian at Oxford in which he listed the stages of the Industrial Revolution as they unfolded in England and I saw that his schedule almost perfectly matched my schedule of British lending waves to Latin American and other developing countries. I thought it couldn’t be coincidence, and after I checked the timing of other cases of substantial liquidity-driven collapses of risk premia, I figured that what I called globalization cycles were driven by monetary expansion that usually started with some exogenous shock (massive gold discovery, invention of joint stock banks, etc.) and then was accelerated by all the various balance sheet inversions and self-reinforcing mechanisms much discussed on this blog. If you’re interested check out a paper I did for Foreign Policy in late 2001 called “Will Globalization Go Bankrupt?”, which for some reason is presented has having been published in November 2009 (which I think confuses dates for another paper I wrote for them). You can find it at

          No I didn’t forget about the income inequality bit, it’s just so easy to digress on this topic. You might remember from other blog essays, and stuff I have written elsewhere, that there is a striking coincidence historically between periods of income inequality and periods of massive liquidity or monetary expansion, one for which there is also a very obvious explanation and with which most financial historians seem to agree. That’s why it is important to make sure you are not taking periods of widespread dissemination of technology for periods of scientific and technological creativity. It is easy to see how the latter can occur randomly even as there is a powerful correlation between the former and surging income inequality, which occur simultaneously because they are driven by the same liquidity.

          Anyway this has taken way too much time, but it is hard to step in without getting stuck. Your other objections are interesting but I won’t argue except to say I think they are all mistaken with the possible exception of your claim that I don’t truly understand American political cycles, not because you are right (I think that a strong historical background and logical thinking about structural issues makes it easier to be objective and to understand chaotic current events as much less random than they usually seem) but rather because I could see easily how I might make huge conceptual mistakes on certain issues.

          • I absolutely agree with you on your point that financial innovation precedes economic/technological development. I also never said your understanding of American politics or political cycles is bad. I just said that your understanding of the way the political system chooses winners/losers and the technicalities of that could be better (I never said it was bad or poor). It’s really on understanding the horse race aspects because the United States isn’t really a “democracy”.

          • Honestly, I think if you read 538’s politics stuff a couple times a week for a month or two, I think a lot of your “deficiencies” (I wouldn’t call them this because I don’t think you’re deficient, but I can’t think of a better word) would disappear. Especially with your understanding of history and your knowledge/skill set, a little bit could go a long way Professor.

          • Michael (or Suvy, if you have read any of this stuff),

            Whenever you have time, could you please point to books or papers (or even authors of papers) who discuss the intersection of finance and technology or the diffusion of technology?

          • Well, I’d just keep reading financial history. Basically every financial history book talks about it, but it’s all scattered. I don’t know about academic papers, but it seems like the stuff on it is pretty scattered.

          • “Bankruptcy may have been a key step because when these networks were purchased during liquidation, they were often purchased at huge discount from the original builders, and this allowed the new owners to slash rates dramatically and in so doing spur the real businesses that represented the real growth of that period.”

            This is why I say it was JP Morgan (and others like him) that were truly responsible for the power of the United States in the 20th century. I always get attacked (especially from those who lean left and claim it was the centralized coalitions of labor unions, people like Woodrow Wilson who supposedly fought for “equality (although such claims are about as hypocritical and stupid as it could get), and other nonsensical statements that make no sense). JP Morgan did in the US what it required fascism to do across much of Europe–form cartels and natural monopolies. Instead of market forces picking up the scraps in bankruptcies, the rest of the world had to form them via the autocratic arm of the state, in many cases via nationalization.

            It’s also for the reasons involving bankruptcy/liquidation proceedings that I think the 50’s and 60’s were so bad from a structural standpoint. There were institutions specifically designed to prevent these kinds of massive asset price sell-offs that would lead to investors picking up scraps at huge discounts. If you don’t have some degree of centralization in your financial system where you have large financial institutions with serious scale that can expand into all sorts of markets to make purchases of assets, you can’t have investors purchase stuff at massive discounts to do restructurings.

            Actually in the 50’s and 60’s, we had a system of subsidies and “regulations” for commodity markets and markets with “natural monopolies” if I remember correctly. So when you “regulate” these markets to “protect” the “lower class” from being “ripped off”, you prevent the kinds of market adjustment mechanisms that allow everything to operate smoothly. When you inflate away your problems and relieve these impacts with deficit spending while preventing any kind of scale in banking, the longer term impacts are felt. It’s funny because I’ve spoken to Silicon Valley entrepreneurs that said were talking about the details and going into the specific aspects of the network effects and how disastrous these “regulations” actually were. You’d basically have political coalitions to entrench these large industries with the “regulators” so that anyone who was trying to make money by breaking the existing elite were prevented from doing so.

            In economics, we can’t actually get anything for free. The idea that we can increase centralized control and create federal political coalitions to maximize demand in the short term without creating longer term costs or that leads to the rigidification of institutions is just a fantasy land. There are always tradeoffs.

      • I’m of the view that large corporations are inherently fragilizing purely because of their size (Taleb talks about this all the time). In large part, this has to do with scaling effects of fragility and the response of these corporations to volatility. Much of this is largely due to their centralized nature of decision making. If you want large corporations to stay in power, then you’d design the guys that run them to have good incentive structures. If you want instability for firms at the top of the pecking order, you want their incentives to be structured terribly so that they get destroyed.

        In other words, if you want large, strong, stable corporations then you should design incentives to be good for those companies. I don’t want that. I want companies that screw up to be thrown out.

        Prof. Pettis,

        There’s many things you know better than I, but it seems to me your understanding of the basic structure and operation of the American political system could be better. Whether that’s the organization of the parties or the mobilization of voters or whatever else it may be. For example, you said in this blog post that Trump would only hang around for a few weeks (and then said a few weeks further than that when you edited your note about the Brussels attacks). Well, Trump is currently leading the field for delegates at the GOP convention in July and we’ve still got New York and the other Mid-Atlantic states to go, like Pennsylvania or New Jersey or Maryland where Trump will do well. In other words, there’s basically no chance for anyone else to walk into the Republican National Convention with more delegates than him. So the only way Trump can be stopped is with a brokered convention, which means that he’ll be relevant till at least July. So at the very least, Trump will be an essential factor in the political process for a minimum of 4 months.

        If Trump doesn’t get the GOP nomination, there will be a revolt within the Republican Party if it’s seen as him being stripped of the nomination even though Trump won a plurality unless there’s a wide array of backers around an alternative, like Ted Cruz, as the consensus winner in a head to head fight with Trump (but of course, the battles in the “bound” delegates weren’t head to head). So basically, Trump will be relevant for much longer than a few weeks because of the political structure of the United States.

        It’s funny because you always hear people on the left say things like, “the people need more power”, but they don’t seem to realize that the people already have the power. Over the past 30-40 years, the Supreme Court has transferred a lot of power to the people (until the most recent Citizen’s United decision). In the United States, political parties are heavily decentralized with state/local operations completely independent of federal party operations. That’s why it’s very common to see states that’re red or blue in their state legislatures or governors vote the opposite way in the general election.

        More importantly, this political structure creates a certain set of coalitions, factions, and interest groups that work together by forming ties. Also note that the US doesn’t have socialized campaign finance–which is a terrible idea and I don’t know why people on the left think this is a good idea. You can’t fundamentally remove money from politics. That’s the dumbest idea I’ve ever heard and it’s the kinda thinking that gets you down the road to autocracy because when finance is no longer a constraint, real resources are. With finance, you do things by essentially bribing them. With real resources, things get done by the end of a gun.

        So when you start trying to remove money from politics completely by doing things like socializing campaign finance, you create real political distortions. You allow for politicians to literally leech off the system by bribing people with their own money. You end up with career politicians on a major scale. When you do things like socialize campaign finance, you end up with the creation of rigid bureaucracies that become entrenched and difficult to remove. What you end up with is a removal of the ability of the elites to have a say in the political process and give the “will of the people” as represented by career politicians a free say. This is the real problem in Europe right now where you have entrenched bureaucracies in governments like Germany, France, and the rest of Europe that’re basically impossible to destroy.

        So for all of your crusade against Wall Street or large corporations with poor incentives (that don’t last very long), the real crusade of rent-seekers should be against the armies of entrenched bureaucracies. Our crusade against corruption should begin at our colleges where we have entire college departments brainwashing children with nothing more than professional propaganda. We have college departments where professors in departments such as sociology or “multicultural studies” or others that are really nothing more than propaganda machines.

        The result is that you have a bunch of kids driving up the cost of college tuition that genuinely learn and get something useful out of it while they read Marx or are taught stuff based in Marxist theory that talks about how great a “revolution”. The worst part is that these same people that seem unable to grasp how a 6% interest rate has debt servicing costs that are a little less than 3 times the debt servicing cost of a 3% interest rate loan.

        The issues with corporate welfare pales in comparison to the amount of people who we have just spewing nothing more than propaganda at our public colleges/universities while this propaganda is influencing our young minds and our young people. We need real changes to our current structures.

        • If Trump doesn’t get the GOP nomination, there will be a revolt within the Republican Party

          If it is well thought out, there may not be, so long as the GOP leadership holds their nose and replaces Trump with somebody who is more popular than Trump (which basically means that he is unpopular with the leadership but palatable to the public), who has the enthusiastic support of a group of hard-core followers (and who so far has not had anything to do with this election). I don’t care enough about politics to figure out who that would be, but I don’t think it’s impossible—although it is a risky move.

          If this were to have occurred 20 years ago and the Republicans ignored their voters and picked someone like Colin Powell (or perhaps Ron Paul, or currently some recently-retired starting NFL Quarterback, or Oprah Winfrey or whoever), for example, they could probably get away with it. It would not be smooth and it would leave hard feelings and it may not win them the election, but with the right choice and enough spin, I don’t think it would destroy the party.

          The result is that you have a bunch of kids driving up the cost of college tuition that genuinely learn and get something useful out of it

          I’m not sure I understand this point, but I think the fact that student loans that are not dischargeable in bankruptcy are probably more to blame for rising tuition costs, since lenders have every incentive to keep extending ever-greater amounts of money to borrowers. For the life of me, I still really can’t understand what possesses people to take out such huge loans in hte first place, though, given that there are much better ways for an 18-22 year old to blow $200k (or whatever) over a four year period.

          The issues with corporate welfare pales in comparison to the amount of people who we have just spewing nothing more than propaganda at our public colleges/universities while this propaganda is influencing our young minds and our young people.

          I’m not sure how you would implement (or why you would want to) a curriculum that basically only allows certain things to be taught. That aside, I also don’t understand why you are so certain that people are too stupid to (eventually) be able to reason things out and discard untruths that they are taught.

          I have to admit that it is pretty amusing to read you (I assume you are in your 20s(?)) talking about influencing the “young people”, though 🙂

          We need real changes to our current structures.

          Well, from what I can tell (I have a STEMS background), academia is really one big pyramid scheme where ever greater number of graduates receive paltry funding from one of two or three major pools of money to generate papers (of normally very, very questionable value) so that a small number of well-paid advisors can get comfortable tenure-track positions. They do this with the vague hope that somehow, somewhere, somebody actually cares about their work for whatever reason (which is often pretty unlikely) and will decide to hire them at a salary that compensates for their below-average standard of living as a grad student or with the hope that they, too, will be able to eventually get a tenure-track position and have a comfortable job for life whether or not they produce anything in the future (which becomes increasingly unlikely as the number of grad students increase and the number of tenure-track positions decrease).

          I personally don’t think there is any pressing need to try to force change on such a system–the system is very likely just going to collapse under its own weight sooner or later.

          • That was a typo BTW. I meant to say you have a bunch of people driving up the cost of tuition than getting something valuable out of it. My bad.

            It’s especially bad in fields like the social sciences.

            As someone who studies mathematics, I’ll say that I don’t think the stuff done in math or electrical engineering or computer engineering is bullshit. There’s so much technical stuff in there and you’re dealing with things that only a handful of people in the world know anything about. Many of these fields are actually sponsored with private financing. The papers in the high levels of engineering or mathematics or physics aren’t just not BS, but they’re absolutely necessary.

            I’m 24 BTW.

            I also agree with the student loan bubble being driven by the inability to discharge student loans in bankruptcy.

            “That aside, I also don’t understand why you are so certain that people are too stupid to (eventually) be able to reason things out and discard untruths that they are taught.”

            Because when you’re taught “logic” in sociology, “philosophy”, or whatever they don’t teach you to reason. They teach you something called “dialectics”, which is logically equivalent to beginning with a proof by contradiction. In other words, the entire “logic” is that you begin with two opposite statements, use some sort of emotional basis for it, and then treating what’s “derived” from those “methods” as “fact”/”logic”.

            I just don’t get how we have Americans walking out of American colleges in most fields that have read more Karl Marx than Alexander Hamilton. I just find that incredibly disgraceful. It makes me furious. Marx was an idiot who couldn’t reason or think and deserved to get his ass kicked. He was born into wealth and ended up ruined. Hamilton came from nothing and died honorably while his service to the Republic was unmatched, but somehow these idiots think it’s a great idea to teach tens of millions of students/young people and indoctrinate them into this kind of leftist bullshit.

            Let me tell you right now that most of the wasted resources in regards to college financing doesn’t go into STEM. Even in STEM, there’s a huge difference between mathematics, the mathematical sciences (physics is not a bullshit field), or engineering than there is in the other sciences that just can’t be as rigorous.

            I have no problem subsidizing education, but I think we should use equity financing and not debt. How would this work? Some investor will pay for your schooling if you give up a portion of your future income for a set amount of years. The time/rates would be allocated via markets for various schools/majors. You could set up tax credits if you wanted to.

  40. Actually nobody is talking about Trump policies. is Trump Pro QE? Is Trump pro Uber? Is Trump Pro Russian economy? Do Trump have a plan for currency manipulators like Chin.. Germany?????
    It’s seems like a lot people like him here so i wish they can help me on this.

  41. It’s true what Michael says- Trump is popular because he represents anti establishment. His ideas about reducing government sound good but his other ideas about protectionism and immigration controls are horrible.

  42. The most telling remark in Michael’s blog is “A vote for Trump is a vote against everyone else.” Exactly. And everyone else with the possible exception of Sanders really deserves to be blackballed. I had a large bet just after she declared herself a runner on Hillary, and I still expect to collect it. Not that I support her, I can’t stand the lady, but she represents the Establishment and they usually win. Michael asserts that it would not matter if Trump won because he could not do anything. That is true because the Welfare/Warfare machine including Goldman Sachs and the Fed actually run the country. However the public’s expectation of Clinton is that she will kow-tow to these forces, so they will not be surprised if she does. A Trump victory would be on the back of voters wishing to see this machine dismantled, and his spectacular failure to do so will increase the anger of the protesters.

    I expect the second Clinton presidency to coincide with the need for the President to decide to launch an all out war, or chicken out and become the #2 military power. A tough decision because both options are losers – but I expect Hillary to go for the war. It may be a long time thereafter that either a woman or a Democrat becomes president.

    • ecome the #2 military power.

      #2 behind whom, exactly?

      But even if the US becomes the #2 military power, why would that be a bad thing for the US? I can see it hurting lots of other countries, but I don’t see how it hurts the US at all.

      • I would ask the same. American civilians are militarily better equipped and trained then the PLA. The US armed forces have been engaged in real time warfare for over 15 years on. The last time the PLA was in action was in 1979. It is pure paranoia to think that the US would have any military challenger in the next 50-100 years. China has four boarders Japan, India, Russia and Vietnam where the other nation is not a natural or cultural ally. The US has none. It is irrational to fear China as anything but a regional power.

    • Yea, the US isn’t gonna be a #2 military power even if we slash military spending by 70% tomorrow. This is nonsensical talk.

      • Ask yourself this question. When did the United States last win a major war? A win is requires forcing the opposing armed forces to surrender and removing the other state’s regime to be replaced by a regime friendly towards the US. Grenada and Panama are too small to qualify. So from 1945 it reads Germany win, Japan win, Korea draw, Vietnam loss, Iraq draw, Afghanistan loss.

        From Vietnam onwards the US has not been fighting to win. It will not use nuclear weapons. The Chinese government has changed its complexion over time but it terms of its active support. Korea was a draw, Vietnam a win and Tibet a walk-over. There is a serious doubt, not that the US has the arsenal and manpower to win a war – clearly it does, The doubt is that it has the will to use them all, rather than try 25% of its weapons and quit if they prove inadequate to win.

        The US government has not yet developed a special operations capability which it is prepared to justify rather than deny. Today the enemy does not wear a uniform that distinguishes friend from foe, he is a saboteur or terrorist who hides amongst the civilian population, he is funded often by governments who pretend friendship with the US. Effective measures against this type of enemy include: assassination of his financial backers, corruption of his computers (done), the disappearance of suspected cell operatives in advance of them becoming operational (as the British did with the IRA). The Mossad operation is a good example of how this should work, all operations are routinely denied but neither friends nor enemies are left in doubt that Mossad had struck.

        • When did was the last time we even had a major war? You’d have to go back a few decades for that.

          BTW, Iraq and Afghanistan weren’t actually wars. They were attempts at nation-building with no real objective or definition of victory.

          In Vietnam, we lost a battle, not a war. Vietnam wasn’t really war, it was a battle that was effectively a proxy war between the USSR and the US in the Cold War, which we won.

          Your entire post is built on a false premise. You’re trying to cite attempts at nation-building with no real objective or definition of victory as a “war”, but they’re not wars because there’s no definition of victory or any set objectives. Your post doesn’t make any sense.

    • Here’s an interesting talk about China that touches on the military aspects.

      I don’t think we will be #2 for a long time yet, but I do agree that China intends to establish themselves in their sphere and that presents the opportunity for conflict as a result of a miscalculation by either party or, as Kaplan observes, one of our allies.

      The Pax Americana has been financed on credit as we have insisted on guns and butter ever since Johnson launched the Great Society in the midst of the Vietnam War. That can’t go on forever. The less cohesive our country becomes the less likely it becomes that we will opt for the guns when we finally have to choose between the two, barring the rise of a man on a white horse.

      I would be interested in what Dr. Pettis has to say about Kaplan’s talk, if he is familiar.

      • I not am sure there is such a thing as a Pax Americana. The US is after all a Protestant society based on English common law with a constitutional foundation formulated in Europa in the period between 1600 and 1750. Without European nobility your founding fathers could create a seemingly classless society only held together by the common protection of natural rights and economical transactions. The US is precisely that, a place where natural rights and economic transactions are the only common denominator for a whole nation. Or as Prof. Pettis states it, an idea. I would argue that the US is more a collection of ideas, but that is a minor detail. The anti-Catholicism in middle of the nineteenth century is good indication of how the US viewed established religious institutions, with distrust and anger. I guess it is difficult to convince Americans that they should pay taxes, form unions and do collective bargaining because they believe they live in a classless society held together by rights and market forces.

      • Actually, it’s usually more cohesive societies that have always been more likely to choose guns, not the less cohesive ones. The rise of nationalism and the violence stemming from it has been unprecedented in world history. Less cohesive polities just experience decentralization, which actually makes the situation you’re talking about less likely. A more cohesive US would make a greater use of the reserve currency. A less cohesive US would make much less of a use.

        One of the reasons is regarding the transfer of assets across borders. In a homogenized society with a “common culture” or a “nation”, transfers of assets in the form of equity mean that foreigners take ownership of your companies which, as a politician, “your people” don’t like. So such systems actually force the transfers of assets to happen in the form of debt and they end up with financial systems that’re much less dependent on equity.

        On the thing about China, Kaplan doesn’t understand financial imbalances. India’s growth rates are higher than China’s and if Chinese growth rates don’t come down soon, China’s gonna have real issues. China doesn’t even have the 3rd most powerful navy in Asia, nevermind in the world. Both Japan and India have more naval power than China. Also note that China imports much of its natural resources and most (90-95% if I remember correctly) of those resources go through the straight of Malacca. The Indian navy could cut those supply lines off tomorrow and China wouldn’t be able anything about it.

        Beginning at ~1950 or so and running through ~2008, the US was basically taken over by nationalists. Since Obama, the US has returned to its normal state of the imperial Presidency. Throughout this process, our financial system has already mostly shifted towards equity financing as the primary mode of financing. The trade deficit is becoming a heavily politicized issue and it’s becoming clear to me that the current monetary system won’t hold, but also note that the opposition to the USD being the reserve currency isn’t coming from the left. It’s coming from the right. Based on what Trump has been saying, he seems to view the USD as the reserve currency as a relic from an ancient past that needs dispensing. He’s been pushing for ending multilateral trade deals and doing bilateral deals and the US being aggressively unilateralist.

        Basically, most everything in your comment isn’t quite accurate.

        • I don´t agree with the Indian navy being a match for the Chinese, but all of this does not matter because the US (or other Asian nations) will not allow China to interfere with international trade in any disruptive way.

          I also don´t agree with the fear of being a net debtor either (If that is what you fear). My argument being the following.

          The creation of currency or debt claims on the US government by the federal banks is as M. Rothbard put it legitimized counterfeiting. Fractional-reserve banking is your basic business-to-business distribution model selling money. Now as every businessperson knows the more people you can reach the larger your revenue will get. What the profit ends up being is on your own internal business set up.

          Fractional-reserve banking leaves the largest amount in the center and those in the outskirts get the least amount. To hold US-dollar assets in government bonds or in cash is being in the outskirts of the Fractional-reserve banking system. All the good profitable assets are already amassed around the center. Why is that? Because the US economy is based on market forces that allocate best within the US, and US based citizens hold the best assets.

          The greatest trick ever pulled (and I don´t think it was intended) was to have China and Japan hold massive amounts of diluted US claims in the form of currencies. Remember inflation never erodes assets only currencies.

          I agree with Prof Pettis in the balance sheet imbalances that he argues about, but I am not sure it is in the interest of the US to stop these imbalances from happing. I not sure the US could stop the balance sheet imbalances if it wanted, but I see no reason for US politicians to directly try to reduce debt. Someone else is picking up the bill for you (or was until a few years back).

          The reason why China cannot have a reserve currency of any reasonable size is the fact that investments in China are not profitable for foreigners (or most Chinese). The return on investment in China is slowly diminish more and more, because the system of fragmented authoritarianism cannot accommodate the market. The allocation of goods and services in China is being hampered by the current system.

          I still think that balance sheet are determined by allocation of wealth, and that this allocation is done best in a system of natural rights and free market conditions. How this wealth should be distributed is another matter, and I guess I differ from both M. Rothbard and others in the assumption that humans are not rational beings, so they should be taxed and regulated to some extent.

          In other words, I would push as many counterfeit USD as possible if I were you guys. You don´t have to back it with gold. If Trump wants to bring down debt, then he is not a good businessperson, because he holds assets close to the center of the world´s largest counterfeiting ring.

          • Counterfeit?! LOL! This stuff is backed with guns man. Get real.

          • The reason why China can’t have a reserve curreny is because it has capital controls and its entire financial system would break down because of financial controls.

            As for Chinese naval and military capabilities, 60% of China’s military spending goes to internal security. Almost all of China’s naval focus is on developing it’s anti-navy capabilities against foreign powers, but China still can’t protect it’s trade routes.

            I wonder how you can talk about the global financial system without discussing the interactions that occur over trade networks. There’s a lot of stuff you’re just assuming away.

        • Rothbard is a pacifist. That entire line of thinking doesn’t account for someone having the ability to centralize their resources and blow you to shreds while you’re living in your libertarian fantasy land.

          It’s this simple: the guy who has fractional-reserve is able to source more resources to fight wars. So if the other guy has fractional-reserve and you don’t, you’re gonna get run over. I’d rather be the guy who chooses to run over.

          • It don´t play like that. If it did the Russian currency would be just as good being that it´s backed by some 40,000+ nuclear warheads. The guys taking your paper money have to believe that you will pay them back or that the USD is useful for trade in the future. Still they get a claim on the US economy, which is slowly eroded over time. Funny thing is that as the US interest rates start to go up, the US is calling it´s liabilities home. You have made the best deal in history being a reserve currency for China and still think it a bad move.

          • Sorry 4000+ nuclear warheads

          • It is a bad move because of the geopolitical consequences and disruption in global development patterns. Libertarianism is a joke of an ideology. It’s active pacifism and built on faulty assumptions. Trying to argue for rich people borrowing from poor people to consume instead of rich people investing in poor people in regards to the ownership of companies to provide networking and technology for genuine development.

            There hasn’t been a single occasion in financial history where the most powerful country being the world’s largest net debtor has never made anyone better off and usually leads to instability both geopolitically and financially. Trying to use theoretical reasoning based in some bullshit economic theory and based in faulty assumptions is just not sound.

          • “It is a bad move because of the geopolitical consequences and disruption in global development patterns.”

            “There hasn’t been a single occasion in financial history where the most powerful country being the world’s largest net debtor has never made anyone better off”

            So making Iphones and Coca Colas for the average Chinese Zhou is bad deal for the US and Europe ? The younger Chinese generation has been transformed into a clone of the US or EU consumer because of this imbalance and the US being a net debtor. One of the thing Prof Pettis never talks about is the cultureal imbalance that follows with the imbalance in balance sheets. A massive inflow of American (and thus in reality European) culture has been entering China for the last 30 years. The country is more Western then it has ever been, because USD not only come bearing wealth they also bring in consumerism. And there are no “fixed” gobal development patterns, eventhough it would make Fatalists sleep better at night if there were.

          • “So making Iphones and Coca Colas for the average Chinese Zhou is bad deal for the US and Europe?”

            The conclusion depends on your assumptions.

            “And there are no “fixed” gobal development patterns, eventhough it would make Fatalists sleep better at night if there were.”

            When did I say there were fixed development patterns? Obviously, development patterns aren’t fixed because development is a dynamic process. So by definition, the process of development cannot be fixed.

            “he younger Chinese generation has been transformed into a clone of the US or EU consumer because of this imbalance and the US being a net debtor. One of the thing Prof Pettis never talks about is the cultureal imbalance that follows with the imbalance in balance sheets. A massive inflow of American (and thus in reality European) culture has been entering China for the last 30 years.”

            What the hell does this even mean? I see the Chinese grad students in my classes (who I think should be given green cards when they finish their degrees) and they do not live in the same cultural world as me. Hell, most of the people in the US don’t live in the same world I do. When people talk about “culture”, it really doesn’t mean almost all the time. This time is no exception.

          • Why would the accumulation of monetary and financial assets, by a country whose system of governance is antagonistic between levels, whose leaders hail from a group, where economic growth, very much financial asset growth, and thus growth in money, is a primary factor for advancement. This under a structure of institutional weakness that ensures that those who make decisions, of government, and by party, are able to benefit both materially and professionally off of volume in investment, with growing volume, greater benefits leading to a situation of engineering growth, on the back of supposed asset valuations, and increasing financial flows, and money printing, who can use these and other tools to alter the global development trajectory.

            Copper, channels of financing, opening and losing, as the supposed adept chinese leadership, steered through a sea of icebergs, with great courage and success it was argued. But look at copper, stockpiled, multiple groups using same stockpiles, as collateral for loans, increasing usage of device, increased commodity prices, increased attraction of investment to the sector, increased distortions to global development, trade, finance and investment, all because China can not have more market based financial system, for need of the powers at different levels in society to keep the structure of GDP, growth, money printing, FOREX hording, import substitution across sectors, etc,,,and so forth, going.

            ANd you think, because the recent trade and development, and rise of this that or the next thing, which has seen global trade decline for the last 5 years, you think the 1998-2008 Global GDP doubles, China enters the WTO and does its best to destroy diverse balanced commitment to a more open trading system, and how they have been enabled to develop, and to rise across multiple industrial sectors, attracting FDI, technology, skills, and jobs, while doing it s best to ensure any successful sector gets clawed up into SOE hands, along with any innovation in finance that they allow for a little bit of time.

            So, you think, that this is the best deal, because, on the back of all this, they have printed money, provided supports and non-tariff barriers to trade en masse, to game as many things in the system that it could.

            Why couldn’t the US just print the money, if it needed it.

            Why couldn’t it just put money in citizens accounts at the FED, as Adair suggests.

            Anywhere, Anders….old, dead and dying memes.
            No one takes that perspective serious anymore.

          • Csteven, I don’t think it’s practical to actually have a central bank to issue liabilities and hand those out to people. If you did that, it’d show up as a deficit of the Treasury or Finance Ministry. Central banks can buy assets by issuing liabilities. If they just issue liabilities, that’s a deficit someone has to pay for. You can’t create real resources.

            It’s basically the exact same as the government handing out tax cuts, which has basically been the American approach under the Obama (and late in the Bush II) administration for the past 10 years.

  43. Michael

    What do you think of this:

    The China Shock: Learning from Labor Market Adjustment to Large Changes in Trade

    • it’ll be a while before i get around to it, csteven, but from the abstract i suspect it will support some of the stuff we’ve been saying. there are benefits to free trade, and it is even possible that free trade is always a net positive (although i would treat this proposition a little more skeptically), but it may only now start to become intellectually respectable to recognize something the jacksonians have been bitching about for quite a long time, and usually dismissed as to dumb to get it — in an almost perfect mirror of the dumb europeans who thought we were going way too fast on the euro.

      we may not always admire the jacksonians up close, and i don’t want to do start distorting in the opposite direction by romanticizing them, but while they are often exhibit A in the case against democracy as an economically, socially of politically efficient form of government, i’ve always thought in fact they are more properly part of the defense.

  44. This country and the world are under enormous stress for natural reasons (population, technology, and cultural changes, mostly). People attracted to Trump tend to place blame for the stress on the social changes brought about by political decisions and they believe he can reverse the trend and “re-establish” a more predictable world.

    Personally, I think things are going to get a lot worse. If Trump scares you then the future may be quite difficult for you.

    We live in interesting times.

  45. Michael,

    I’ve enjoyed your posts for many years. This post was very interesting, and I agree with your analysis that class anxiety and inequality are driving this political moment. I look at phenomena like recent racial tensions, and wonder if they would be so pronounced had lower and lower-middle class incomes increased substantially in the last 30 years.

    Enough with my musings. Really though, I have a very different request. You often refer to the Chinese underground music scene, and I have finally gotten curious. Where can I learn more about it?

    Thank you.

    • Google combinations of music-related words that include, “d22 beijing”, “zhu wenbo”, “carsick cars”, “chuiwan”, “maybe mars”, “josh feola”, “yang haisong”, and you should get enough references and articles to start you off. as you find names of bands and performers you can find them (or “d22 beijing”) on youtube. the music ranges from stuff that is relatively easy to listen to (bands like hedgehog, hang on the box, chuiwan, carsick cars, PK14) to more on the edge (ourself besides me, snapline, white+), to very difficult (torturing nurse, mafeisan, and anything related to XP club or the sally can’t dance festival). enjoy.

  46. Really loved reading this entry. I like to think of myself as smarter than the average bear, so I go along with disliking Trumps candidacy. In my gut though, there are things I like about his campaign and now I know what it is.

    Anyways I do have two questions with regards to this. Hope you can answer.

    Question 1:
    Could income inequality in the USA right now be explained by demographics? What I mean is, there are a lot of Baby boomers and they have all the money. There are a lot of millennials and they are broke. In the middle you got Generation X and they are a very small group proportionally. Does this explain income inequality or am I not getting it?

    Question 2:
    I read something from a book called ‘Accidental Super Power’ (2014 when I think was written) that said the global free trade order we live in today was built by the US to basically bribe an alliance to fight the cold war. It then asserted that with the cold war being over that the US would eventually pull out or drastically reorganize the whole thing. Do you think there is merit to this idea?

    • in my view US “free” trade with China is protection money. Difficulty with trying to balance it is that China might see no choice but to join Russia on the path of jingoistic anti-americanism (both to deter US from changing anything, and to explain to its people why their standards of living decrease in case change happens). So this is a geopolitical issue requiring a special kind of leadership in the US. Trump seems to understands that US would need to ratchet up its military to have any credible leverage in negotiations with China. Am not sure I have the stomach for this fight, though…

      • There’s anti-American sentiment rising not only in Russia, but in Europe. It’s already here. The key American allies are to be found in South and Southeast Asia.

        I don’t think we need any more military power to take on China though. We have the navy to cut off the supply of their natural resources like oil, which all go through the Straight of Malacca. It’s not just the US either. Japan could do the same thing and India probably could too. China’s navy isn’t even the second strongest in Asia.

        The main issue we have with China is our trade deficit, which was $350 billion last year. Our trade deficit with China alone composed ~70% of our total trade deficit. China and Japan compose ~85-90% of our trade deficit. If we add Mexico into that mix, our trade deficit basically disappears.

        Another issue here is that we have troops stationed in Germany and Japan, who have little defense capabilities, and we get nothing for it. I have no problem with American troops being stationed in these regions, but Japan and Germany should throw us some bones for this.

        The thing is that the United States is an empire and we have to manage our empire properly. It makes absolutely no sense to see wealthy countries borrowing from poor countries to consume. Usually, you’ll see some economist or some guy with an economic theory tell us that this is good because we’re all consumption dummies and somehow buying someone else’s shit with no future cash flow stream while they accumulate financial claims that give them access to your cash flow stream is a good thing. Of course, this is just a fantasy land because of geopolitical imbalances and the distortion of proper development models.

        In reality, we need wealthy (capital-rich) countries to invest in capital-poor countries with the transfers of assets coming in the form of equity so that these countries don’t run into debt crises when international liquidity dries out. It makes no sense to have the country with the world’s most guns/military power being the world’s largest net debtor. That’s not sustainable and if someone doesn’t see why, they might need to bang their head against a wall until the realize the obvious. Secondly, it’s capital-poor countries that need technology, financial capital, and the development of institutions which capital-rich countries can provide.

        So what we need is a geopolitical financial system between decentralized republics across the world with liberalized financial markets and economies (that may be protected if necessary) wherein the financial systems are all based on equity and the transfers of assets come in the form of equity. What I’m suggesting is that we replace the old trade system designed to defeat the USSR with a new trade system wherein the financial systems are heavily geared towards equity.

        Basically, the real problem is nationalism. We need to focus on transitioning to a more decentralized, imperial world. Trump understands that we have a Republic embedded within the Empire. We have to start recognizing that and really going after foreign free-loaders.

        The thing I like about Trump is that I don’t think he has any real sort of ideology. He seems like a real practical guy who’s always changing his mind and envisioning where he can be wrong all the time. The only time he’s not like that is when he’s talking about very specific issues like trade, where he’s obviously dead on. So when people accuse him for flip-flopping and being inconsistent–although I don’t think he’s really been that inconsistent on that much (on most issues, he’s been remarkably consistent)–I just don’t really care. You have to think about and consider all options. In other words, I think Trump seems quite judicious on foreign policy. People don’t seem to get that he’s anti-war.

    • Peter Zeihan
      Accidental Superpower

      Peter writes and speaks in ways meant to amuse and challenge.
      The basically bribe to fight the Cold War, now over, less of a need is basically correct.

      But what I like about Zeihan is he is non-ideological, he is talking all structure; structure of relations.
      He is a former Intel Analyst, who then worked at Strafor, and now is doing Conference/Association speaking events, and advising large corporations on framing the future (in a way to state it). Essentially he is drawing into question many of the assumptions that many hold on what is occurring in the business environment (another way to say across PESTLE).

      Income inequality be caused by Baby Boomers…..
      well, insofar as they have been a large part of the polity that lived (and didn’t or did vote) during the last 40 years as inequality has risen. That they were an important part of the polity there are some general supports.

      That they have all of the money, this is common, of their position within the demographic structure; older people tend to have all the money. But the social structure, the orientation, the philosophical stances that deliver us assumptions to occurrences:

      Kipings Six Hinest Friends (What, When, Where, Who, Why and How)

      have all changed. They have changed over the period of time that the US has opened itself more, has allowed its currency and financial markets to be used in ways they had never been before, and as it pushed further a Free Trade, Government as Business, rise of the Technocracy, Financial Globalization, in which it, itself, has lain itself far more wide open than any.

      Where the rest of the world, as it grows in size, places greater demands on the US market, system.
      This, while, I might say, a baby boomer run Hollywood, has bounced its head around the late 19th to early 20th century social dialogues, descended down through the 20th century through various post-modern thought trends and critical non-sense, that have helped distort, through manipulation and ideology, or techniques of interest based communication strategy, Kiplings friends.

      What Ziehan gives, I believe, is yes, that has been so (unstated), but, structure prevails.

      More specifically of baby boomers they voted, watched, and/or enabled ill-considered patterns of thought.

      Thoughts are things, they have a life, and thoughts have brought about the conditions we find today, as do they many more ill-conceived notions globally.

      • I thought the book was fun and interesting. Though I have to admit I was kinda rolling my eyes on the chapter about Alberta becoming part of the USA.

        And yes it is nice to see a more objective + predictive approach instead of the mostly ‘what we should do’ kinda books.

        As for the demographic thing, I did not get that from the book. Well the demo breakdown I did but not the bit on income inequality. That wasn’t really covered directly, more about how it would effect government finances and other stuff.

        Anyways, thx for reply.

        • Why were you rolling your eyes about Alberta becoming a part of the US? I still think that’s likely and if we’d won the War of 1812, much of Canada today would be part of the US (which really came down to the Democrats destroying the First BUS).

          • I still think that’s likely

            Historically, how many countries have gone, say, 300 consecutive years without having seen their borders shrink over that time?

          • Well, we’re running at 225-250 (depending on how you wanna define it) years right now. By the end of my lifetime, we’ll prolly be there.

          • > Well, we’re running at 225-250 (depending on how you wanna define it) years right now. By the end of my lifetime, we’ll prolly be there.

            so the USA would be the first? If so, why is the US so different from every other country in history?

          • I’m not sure TBH. I can’t think of another country in that position, but there may be one.

  47. Thank you for an extremely interesting discussion and hosting of comments on the Trump issue. Is if possible that Global elites that have more in common with each other than they do with the countrymen they share national borders with? They have constructed a world with many positives however they are particularly vulnerable to over extension and hubris. The ‘don’t tread on me’ push back is by necessity alarming but need not be considered a disaster in the case of Trump. The strong sense of vulnerability exhibited by many in the US would appear to be justified by many years of global labour arbitraging, redirection of earnings into compensation packages rather than into new investments, to big to fail transfers of liabilities on to public balance sheets and many other self centered excesses that feed of rather than add to the common good. The US should not be considered the supplier of debt free final demand to the rest of the world. The overextension invites corrective action. Adam Smith’s principal that a man acting in his own interest also acts in the interests of all is I believe an important underpinning to the social contract. The fraying of this social contract and an apparent revision to earlier forms of social arrangement such as feudalism, is simply not going to be an option in this hyper connected global village. Trump does not represent a revolution but he does represent a warning.

    • It’s like Trump says: we can’t be a net debtor forever. He’s actually been saying this since the late 80’s too. I’m actually really glad he’s running and bringing attention to this issue. He’s just so correct on this issue that it’s mind-boggling.

      • “We” can be a net debtor forever. And to the extent it becomes impossible to be a net debtor, the alternative is that those debts are not repaid, which is (retrospectively speaking, leaving trust damage aside) a net positive for the once-but-not-future debtor.

        Prof. Pettis does a great service by analyzing “limits to debt,” when many economists don’t grasp the salience of debt. See how disciplined he has been about that analysis, over the years. The most important part of his discipline, IMO, is how realistic he is about the limits — which ones bind and which ones do not, and when they start to bind. Most debt analysis is confounded by moralizing about debt. Analysis built on that soon becomes non-credible, because morality doesn’t bind.

        Who is the “we” who can’t be a net debtor, and what is “net debt?” If you don’t pay attention it sounds like “liabilities – assets > 0” but it’s not, because you’re talking about national accounts.

        • Hmm another Daniel. Ok I’ll use DanielS to make it easier.

          Anyways, what I don’t like is how we (USA) run the largest trade deficit every year by a HUGE amount. Something like 700 billion a year. That doesn’t make a whole lot of sense to me. I do get that the US has the largest consumer market so it kinda goes hand in hand. That being said though, Germany has a large consumer market and they run one of the highest trade surpluses.

          Then I read about how Wal-Mart goes to Germany and the government forces them to operate a certain number of miles away from their towns? I won’t even go into all the crap Japan, China, and Korea have been pulling for years.

          Seriously, this doesn’t make sense to me.

          • Factor into this equation of unsustainable rises in US deficits, is that growth external to US, at levels higher than the US, under a global free trade system, requires that the US deficits grow as a proportion of US GDP, because of Trade cover (3 months, now 6 months, and increased operations of Developing Country companies Internationalization).

            Deficits, are used for Trade Cover and Capital Flow cover, and are suggested by IMF to equal 6 months of these for each country out there.

            So, RMB, if CHina responsible, not only desirable but necessary, but neither is China responsible, nor other parties in the SDR, who cry when others try to gain their monetary assets.

            Let alone others further afield (prominent EM’s).

            Thus, inevitably the dysfunction, the break. We do not need to worry of a demagogue doing it, it will occur of the structure of a system, that has benefited many, but required too little of all of them; those who were happy to gain while free-riding with nothing but criticism on the back of their irreal expectations, or manipulative deceptions.

          • To learn more about the German surplus – how it was deliberately designed and implemented and how it has impacted the euro, the eurozone, and beyond – may I suggest some lengthy and insightful posts by Micheal Pettis on his blog at

        • “And to the extent it becomes impossible to be a net debtor, the alternative is that those debts are not repaid, which is (retrospectively speaking, leaving trust damage aside) a net positive for the once-but-not-future debtor.”

          How can you leave aside trust damage? Saying that is, to be quite frank, extremely stupid.

          “Who is the “we” who can’t be a net debtor, and what is “net debt?” If you don’t pay attention it sounds like “liabilities – assets > 0” but it’s not, because you’re talking about national accounts.”

          When you run a current account deficit, you’re running a capital account surplus. A capital account surplus is–by definition–a net importer of capital. If those net capital flows come in the form of equity, then foreigners are gaining ownership of companies. If those capital flows come in the form of debt (which has generally been the case since rise of nationalism in the late 19th century), then your banking system is a net debtor.

          “Most debt analysis is confounded by moralizing about debt. Analysis built on that soon becomes non-credible, because morality doesn’t bind.”

          I’m not moralizing anything. I’m just going through the full accounts. If you honestly think that it’s a stable situation for the country with unmatched military power in world history to be the world’s largest net debtor, I don’t know what to tell you. That’s about as unstable a situation as you could have. Now if we add in the trust issue that you referenced along with its impacts, the results on the geopolitical system globally could easily be catastrophic. Under those conditions, civil order would break down in half the world.

          Of course there’s all sorts of people on both the left and the right that trumpet these “economic theories” that make these absurd assumptions, completely ignore the geopolitical implications of the assumptions they make, and then talk about how stupid others are because of “moralizing”. This is completely foolish thinking.

    • Good point Kiwiin. See the Atlantic Monthly Jan/Feb, 2011, “The Rise of the New Global Elite.”

      Best quote:

      “The U.S.-based CEO of one of the world’s largest hedge funds told me that his firm’s investment committee often discusses the question of who wins and who loses in today’s economy. In a recent internal debate, he said, one of his senior colleagues had argued that the hollowing-out of the American middle class didn’t really matter. “His point was that if the transformation of the world economy lifts four people in China and India out of poverty and into the middle class, and meanwhile means one American drops out of the middle class, that’s not such a bad trade,” the CEO recalled.”

  48. Great read as always!

  49. This is beautifully written. Makes me eager to see what comes out of Dr. Pettis’ pen once he is no longer living in China. 🙂

    • Maybe he’ll wax lyrical over a punk beat 🙂

      • Yeah, or over the people making the punk beat. It’s hard for me to imagine that he isn’t chock-full of thoughts about his experiences in China but that it’s awkward or, as the Chinese might say, “inconvenient” to speak plainly about all of it at present. I spent almost a decade in China, also doing a lot of music-related stuff, and it left me with so much to say that I wouldn’t even know where to begin.

  50. I had been expecting some academic commentaries on world’s economics. Instead, I ended up with diving into a political piece.

    Surprise is everywhere just as Trump has been one of the leading runners in this US election campaign. You may be correct that Trump would end up nowhere near the presidential office.

    But, as you mentioned above ‘when there is no cost to being wrong, then you must gamble, no matter how small the chance of being right’, it could be worth a punt.

    Looking at a different angle, majority of Trump’s supporters may turn out to be as rational as you, Dani, or any other readers here. His popularity is merely the ‘anger’ of what a portion of population thinks change is needed and long over due.

    An adjustment process can be smooth or abrupt, but will always happen if a system is over-stretched.

  51. Donald Trump supporters are the kind of people who have been called idiots all their lives. Now they are just trying to prove it to themselves by supporting a sure loser for president.

  52. Sir, respectfully: your posts interesting as they are, are far too long and rambling. Lo bueno si breve dos veces bueno that roughly translated means: good essays if brief are doubly good .
    In the XXI century time is scarce, and the reading input large.

  53. Oh hey, I found this funny. Steve Keen compared Japan in the 90’s to the US today on Twitter. I replied by saying that it was foolish to compare the two. Then Keen immediately points out how he “predicted” the 2008 crisis. I also hope he “predicted” that the US would escape the zero lower bound in 8 years because I don’t think he did. Comparing that to a country with a completely different financial system that has been stuck at the zero lower bound for 25 years and is now trying negative interest rates is foolish and wrong. Here’s the thread if anyone wants to see it (just click see conversation).

    I also challenged him to a PUBLIC debate in the US. I’d gladly take a road trip to debate him as long as everything is public.

    • Oh yea, a bunch of people that’re apparently in agreement with the other guys started to attack me on Twitter. So I decided I’d use it as free publicity. So I started talking about how I called the commodity price crash when I wrote about it in 2014. Did Keen call that? Of course he didn’t because he doesn’t understand differences in financial structures. Again, I’m willing to face the best guy these guys can put up publicly. I’ve got nothing to lose. I’ll shred all of them.

    • Oh yea, so we’ve had some developments in this saga. So as he started to mock me, then proceeded to call me childish, and then said:
      “Because your comments show you haven’t read my work. Can’t debate & correct in 140 chars”

      Of course, I actually have read his work. I was pointing out how the assumptions that underlie much of the work he’s done is faulty. The classic example would be using private debt/GDP as an indicator for asset bubbles without looking at the underlying structure of the financial system. Private debt/GDP can go up sustainably provided that there’s also a rise in financial intermediation, which actually reduces the cost of dealing with a financial crisis. Of course, I’ve also seen enough of Keen’s work where he talks about “regulating” away shadow banking and his models don’t even take it into account.

      Then, he said:
      “Good. Have you read Minsky yet? If not don’t bother with “Stabilizing” get “Can it happen again instead””

      I’ve read all of Minsky’s books, but there’s so many people better than Minsky. Hell, I think even Rothbard is a better guide than Minsky when navigating our current financial system. I’d also like to add that I think there’s a lot missing from Minsky and much that he doesn’t either seem to be able to grasp or link and put together. For example, the classic case is when he talks about the unionization in the 50’s and 60’s that led to centralized political coalitions across the federal political system–for the first time in American history. Now, I have no problem with unions provided that they’re all locally organized and left to states. Why? Purely to prevent the structural rigidities and entrenched interests strong unions can (and have) developed into across the federal level. If a state screws up, only the state gets hurt. If you screw up at a federal level, there’s really no going back. Once you create entrenched interests on a federal scale that’re centrally organized, it’s very difficult to prevent institutional rigidification from following suit. Other issues Minsky didn’t grasp is full geopolitical implications of having a domestic economic policy of demand management resulting in OPEC recycling and how the centralization of pricing mechanisms in commodities, natural resources, and energy must necessarily lead to the stagflation of the 70’s. When you import lots of natural resources and energy inputs and you’ve got a policy of demand management with liquidity expansion or deficit spending to prop up demand will lead to something similar to the OPEC recycling. When that happens, stagflation becomes the next consequence. In his books, it seems like Minsky references this period and talks about the stagflation as largely being coincidental without fully understanding the geopolitical links involved. You can either correct early with a tightening of monetary policy early and allow for the bust to work it’s way through or you can do what US policy-makers did in the late 60’s and 70’s. Minsky also attacks shadow banking and the “deregulation” (not just in finance) for the bubble we had in the 2000’s. Of course, if it weren’t for shadow banking, the costs of that bubble would be much, much larger because shadow banking acts allows a way for the entire financial system to protect the economic system by diversifying the risk across many different regions and across scales. Shadow banking actually makes financial systems much more flexible. Another thing about Minsky I don’t understand is that he calls for an economy with decentralized consumption and partially socialized investment that’s centrally directed where the economy relies on current account deficits. That works well for a developing country, but if you have a capital-rich country you can actually sustain much higher levels of investment. Also note that when capital rich countries run current account deficits, you create a situation where capital-poor countries are exporting capital which basically means they’re usually destroying themselves. You’ll also have the transfers of assets across borders occur in the form of debt, not equity, which means a rise in nationalism and probably war when you hit some kind of international tipping point. The funniest part about all of this is that the most successful development model in history was a model of centrally directed investment with a decentralized consumer base, but it was also heavily reliant on a highly liberalized financial system with little centralized control where the guys running the banking system used a corrupt legislature to run the show. There’s no way the American financial system after the Civil War and into the ‘Gilded Age’ was Minsky’s ideal system or anything close to it. From reading Minsky, it seems to me like the American financial system of the 19th century is something Minsky really didn’t even understand and wouldn’t even see the value of. So the US basically followed, during its most spectacular period of growth, a very different approach than the one advised by Minsky. Not only did the US not follow that approach, but in terms of financial markets of that time developed in such a way that Minsky describes as something that would be actively destructive to economic activity (Minsky didn’t like shadow banking, securitization, financial intermediation, the use of derivatives or insurance-like contracts to diversify various kinds of risk across many different regions and scales, or a whole host of other things). So if Keen’s only response is how great Minsky is, then he needs a serious newsflash to welcome him into the real world.

      Ironically, all of these criticisms I’m using on Keen, Minsky, and a large portion of the left-wing aren’t even anything new. All of this stuff is straight from great American financial historians like Howard Bodenhorn or Scott Reynolds Nelson or Robert E. Wright or even Calomiris and Haber (to a much lesser degree) or may others. I know people always lump Kindleberger and Minsky, but Kindleberger even speaks quite favorably about shadow banking, financial intermediation, and even the use of derivatives as a way to limit risk across many diverse regions and scales. So I’m actually kinda confused on how Minsky is worshipped as much as he is. He’s good, but he’s not that great by any stretch of the imagination.

      Then, I pointed out to Keen that the 2008 crisis was nothing like Japan in the 90’s. I said it was much closer to the US in 1873 because of the structure of the financial system, the development of even insurance contracts largely related to developments in mathematics on pricing such contracts (by those like Elizur Wright), the fact that the US was a deficit country then like it was in the 2000’s, the liberalization of the financial system that’d occurred over the past 20-30 years, and for the fact that you had a slow grinding away process of the debts accumulated during the past decade or so. So as we can clearly see, the 2008 crisis is much closer to the crisis of 1873 from the domestic point of view of the United States. It usually takes ~7-10 years to really start to come out of a crisis like this. That’s exactly what’s happened and what’s currently happening.

      How did Keen respond? He quoted my response and then said:
      “So here’s Dad throwing the painful teenager out of the house. Goodnight and goodbye.”

      It’s funny how he responded to my obviously correct criticism by saying I’m like a spoiled teenager who doesn’t know anything. Did he actually attack my argument? He never did. Were any of his responses really well thought or sensible in any way? Not at all. I even referred him to the work of Scott Reynolds Nelson on this matter (who goes through the details and basically called everything in the US domestically) earlier to which this is the kinda response I get. The saddest part is that I still run into these young kids (ranging from 18-22) that’re worshipping this guy and taking everything he says as fact. They take the entire economics agenda Keen and the MMTers push as this “belief”. It’s like a religion and not open to debate or discussion. Any criticism of the underlying assumptions or views is viewed as heresy.

      • That should say: “From reading Minsky, it seems to me like the American financial system of the 19th century (after ~1850) is something Minsky really didn’t even understand and wouldn’t even see the value of.” not
        “From reading Minsky, it seems to me like the American financial system of the 19th century is something Minsky really didn’t even understand and wouldn’t even see the value of. “

  54. Why does every thing get viewed through a political prism?

    Well apparently we do it, because that’s how it’s always viewed, in every discussion, and every media wall of propaganda and trite blog.

    So we have become conditioned to a culture where we naturally always make political ‘problems’ of everything, and then feel compelled to offer political ‘solutions’ to everything, as well, regardless of how crazy that has become.

    But what is a ‘political solution’ anyway?

    Well it’s nothing less than enacting coercion, disincentive, use of force, increased State violence against people, and more police thuggishness and abject absolutist attitudes, and State security expansion, spying, power abuse, and lack of accountability, for everything becomes a political crisis, an emergent … well, ’emergency’, requiring endless special exceptions to law.

    That’s what you all are really arguing for when you accept calling everything a political ‘problem’. Do you even realize this?

    And then you get a Trump, and when he’s elected will wonder why it was a mistake? And will go looking for the next political ‘solution’ to the next contrives political ‘problem’?

    All the time shooting yourselves in the foot? Never even noticing the self-defeating dynamic of viewing everything through pat media political prisms and its cognitively subverting ‘talking points’?

    PS: The ‘person’ who suggested imperial war against Mexico, to take its territory as political ‘solution’, i.e. state on state war and the death of a million or so and regional conflict and the response and intervention of most of South and Central America, is a total lunatic, and apparently doesn’t even know. This needs to be said in reply, given no one bothered to call out such foolish ignorant commentary.

    • I never suggested killing anyone. I suggested purchasing the territory.

      BTW, you should look at the violence on the Northern Mexican frontier right now. Go to a place like Ciudad Juarez and tell me that it’s not a warzone. These are places where the Mexican government has no control over. They’re all controlled by drug cartels. If you want peace in those regions, my solution is really the only solution where peace is sustainable.

  55. This is a splendid piece. It would benefit greatly from editing for typos and spelling. Some of us stumble on that.

  56. Charles Murray, ‘The Bell Curve’, 1994:

    “Predicting the course of society is chancy, but certain tendencies seem strong enough to worry about:

    – An increasingly isolated cognitive elite.
    – A merging of the cognitive elite with the affluent.
    – A deteriorating quality of life for people at the bottom end of the cognitive distribution.

    Unchecked, these trends will lead the U.S. toward something resembling a caste society, with the underclass mired ever more firmly at the bottom and the cognitive elite ever more firmly anchored at the top, restructuring the rules of society so that it becomes harder and harder for them to lose.”

    • Every functional society has a caste system embedded in it. The idea that you can have a society without a class structure is just retarded. I’d also strongly disagree that the elite today are determined only by their place of birth. In fact, I generally think most elites in the US especially are ones who deserved the positions they received through meritocratic means. There’s remarkable class mobility in this country. It’s not uncommon to see the guy at the top being some immigrant kid who knew how to scrap and refuses to relent in the face of all hell.

      The people who almost always favor socialism and advocate for the Marxist stuff that calls for the removal of the “caste system” are usually people who grew up in cushy backgrounds, end up studying art/literature/whatever, don’t know how to think logically, generally suck at math, and are even worse at dealing with money. Of course when you have capitalism that promises opportunity to the bottom and very bottom, all they want is a place to open up at the top for them to have a shot at reaching and end up with a sense of dignity and self-respect if they don’t. The people at the bottom don’t actually want no class structure (I’m speaking of the US, but this doesn’t hold for other countries). On the contrary, it’s often the working class guy who learns a trade by becoming a plumber or an electrician or something like that, is good with money, doesn’t get himself into debt, doesn’t fall for financial traps, learns basic mathematical/financial skills, and combines it with common-sense to avoid sucker thinking that has no problem with class structures.

      It’s the kids who grow up upper-middle class or wealthy backgrounds that’re the ones who live in the most trepidation. What does capitalism promise for them? It promises nothing more than guaranteed ruin in the face of failure from a lack of heart that many of them never develop.

      It’s important to remember that it was Karl Marx who hated capitalism and Alexander Hamilton who loved it. Of course, Marx disliked capitalism for the same reasons Hamilton loved it. For Hamilton, it not only meant a way out, but a way to channel his frustration, his rage, and his anger into something not only positive and productive, but something to fuel his vision for a better world. For Marx, capitalism meant facing ruin in the brutal face of the world.

      The immigrant bastard kid who found support among a religious community and vowed to channel his misfortunes into a positive force for the sake of all that is Divine conjures up dreams while the possible failures leave you with no regrets. The wealthy sucker who was handed life on a silver plate that lacked all wisdom and reasonable sense ends up absolutely ruined because he works from his fantasy land that offers him no proper channel for his frustration at the immigrant bastard who somehow breaks his will before any engagement. That wealthy sucker looks at the immigrant bastard child as a “lesser” because he’s somehow less “sophisticated”, as weird, as always seems screwed up in the head, and fundamentally no different from a sociopath.

      The Way Marx Viewed Someone Like Hamilton:
      That bastard would rather spend his time getting his ass kicked by “ape-like” people instead of watching operas or plays so he’s no better than that ape. He’d rather spend his time in “abnormal” financial books and spends his time doing work in topics only a “sociopath” would be interested in like mathematics and finance instead of reading literature or studying relations between people that’s much more “normal”.

      The Way Someone Like Hamilton Viewed Marx:
      He’s just a dweeby idiot who incapable of any sense, he claims to be intelligent but gets “hurt” when someone points out how his comments contradict themselves, he claims to be against bullying but resorts to bully-like tactics against those who have any consequential disagreements, and he claims a system is unjust and hurts the guy at the bottom when a guy like me benefits from the system while his idiocy, foolishness, and lack of heart led himself to blow the fuck up. That wealthy sucker deserve nothing more than absolute ruin.

      So again, we need to be very careful here. There’s a reason why leftists always praise Marx as a demigod, but don’t understand how politics seems to operate while generally despising Hamilton and his beliefs. They don’t seem to get that for there to be liberty, there must be power. If we assume men aren’t angels, then governments are necessary. Since there are a group of people who run the government and all governments are fundamentally oligarchies, any semblance of a government must necessarily require the existence of a ruling class. Hence, there must be some class structure.

      Note: I use leftist and left in the international term, not in the American sense although I do think there’s a much stronger leftist portion in the US than there has been in the last 10-20 years.

      “Unchecked, these trends will lead the U.S. toward something resembling a caste society, with the underclass mired ever more firmly at the bottom and the cognitive elite ever more firmly anchored at the top, restructuring the rules of society so that it becomes harder and harder for them to lose.”

      The exact opposite has actually happened. What you’re seeing is a United States where we do see winner-take-all effects, but the winners aren’t stable. We have a society with remarkable class mobility. I’ve seen most of the “studies” on it that claim otherwise, but once you start to go through their approaches, you realize it’s all bullshit. All of the well-done analyses say the same thing: that the US has remarkable class and social mobility.

      • “the US has remarkable class and social mobility” compared to what?
        Your post is precisely the English Protestant rejection of an upper class existing in the US. Wealth is not lost and found by merits as the misguided capitalists so often claim. It is inherited as fixed assets are passed down, or created by entrepreneurs that are good at forecasting or creating a demand for a product in society. This happens in a capitalistic system, and the skill set need led to do this become more and more demanding as the society evolves. This means that you need a large pool of educated people who are willing to take chances. How do you get that? Free education, social security and capitalism. All the enterpeneurs I know did something because they loved what they did and not to make money. If you do something to get rich you will fail from the beginning. You do it because you can and want to. Please compare your remarkable social mobility of the US with the Northern European countries. It will make the US seem like 1200 century feudal realm. What you want is good solid capitalism and then a fair system of redistribution based on the strength of the market. That is a fairly high personal income tax, tax on inheritance, tax on sales of fixed assets like housing. The wealth should then be used for free education, medical and social welfare for those with little or no means.

        • Northern european states are free riders on positive externalities generated by US “cutthroat” capitalism (not to mention Nato etc). If we adopt their model, who is going to generate such externalities for us? Take a look eg at this

          • And the US is free loading of 2000 years of European history. No Europe = no US. You are writing in an European language, so let us leave it at that.

          • “A greater gap of incomes between successful and unsuccessful entrepreneurs (thus greater inequality) increases entrepreneurial effort and hence a country’s contribution to the world technology frontier.”
            Wrong! It’s not the income grap that creates progress it is that the one who supplies the market the best gets the highest benefit. Now I am all for companies and people making money, but the moment you extract wealth from the company you should share, because you are part of a society.

          • Did i ever argue that we dont have to share? Nobody in their right mind advocates abolishing taxes. The real argument is about degrees. You advocate scandinavian model, while i believe there is overwhelming evidence that would US go this route, not only US but the whole world would plunge into deep recession. The reality is US is the only sound engine of growth in the whole world, european socialism is failing miserably, not to mention china et al. Claiming that we need to adopt northern european model to me frankly betrays total disconnect from this economic reality.

          • So, you dismiss the evidence and logic of the paper I referenced above because (i) it is written in a european language and (ii) “no Europe = no US”?
            This does not sound like a coherent argument to me.

        • “You do it because you can and want to. Please compare your remarkable social mobility of the US with the Northern European countries. It will make the US seem like 1200 century feudal realm”

          In France, 60% of wealth is inherited. Scandinavia basically has no billionaires. Most of the Forbes 400 wasn’t born into wealth.

          “It is inherited as fixed assets are passed down, or created by entrepreneurs that are good at forecasting or creating a demand for a product in society.”

          This is an assumption that’s definitely wrong. It’s funny because very little of the capital that actually financed real development across the developed world was fixed capital. Almost all of it (including, and especially, in the industrial revolution) was working capital.

          *Sigh*. Jumping from assumption to assumption to assumption and using it as a logical argument when all the assumptions are falsified by historical facts and data…

          • Let us look at the 10% of US society instead of this strange focus on individuals. The 25 million riches Americans have become so through fixed assets (remember that factory buildings, machinery, even inventory that so restocked automatically etc can also be defined as fixed assets), stocks and orther forms of inherited wealth. The problem is that this wealth is not redistributed properly back into society. I am not sure what your definition of “real” development is, but there is not doubt that real development comes in society that creates an equal playing field based on market economy. Free school, medical and a fixed low income creates that.

          • “The 25 million riches Americans have become so through fixed assets (remember that factory buildings, machinery, even inventory that so restocked automatically etc can also be defined as fixed assets), stocks and orther forms of inherited wealth.”

            Equity isn’t a fixed asset. Equity is a financial asset. And most of the richest Americans didn’t get there through inheritance. If you just take the top 400 Americans, you’ll see that most came from middle-class backgrounds and many were school dropouts. What you’re saying is factually wrong.

          • “remember that factory buildings, machinery, even inventory that so restocked automatically etc can also be defined as fixed asset”

            Factory buildings, machinery, etc are defined as fixed assets. Stocks, bonds, companies, etc aren’t fixed assets; they’re financial assets. Other assets that make you wealthy include assets like intellectual property which is very important. Access to human capital, network infrastructure, etc are other forms. Most forms of wealth aren’t fixed assets.

            Fixed assets are also necessarily depreciating assets, unlike financial assets. If you think passing down assets that depreciate in value is the path to wealth, you lack basic mathematical and reasoning skills.

          • You make blanket statements which have no basis in reality. I am one of the above 25 million Americans. Did not inherit anything. Left Soviet Union with $15 in my pocket, had no friends or family in the US. Have not received a single dollar of public assistance. Moving up the riches scale, Sergei Brin, Jan Koum et al did not inherit anything either, and they definitely would not be billionaires today would they immigrate to the welfare state of your dreams. You assume that you can redistribute wealth without hurting incentives, but this is a wrong assumption which betrays lack of detailed understanding of how capital allocation decisions are really made.

        • “or created by entrepreneurs that are good at forecasting or creating a demand for a product in society”

          LOLOLOLOL!!!!!! Forecasting?! It’s all about predicting something that’s inherently unpredictable. It’s about how well you predict the future, not you payoffs (even though this is a mathematical flaw considering that the expectation involves both the payoff and the ability to predict). When you add in fat-tails, everything you just said can be proven wrong mathematically. It’s actually quite simple once you add in scaling.

          • It’s about creating a demand that does not exist or filling a demand that has not been filled. What you want to call it up to yourself. “What you just said can be proven wrong mathematically” prove away, as long as I get paid I am right, that’s the one good thing about capitalism.

          • “It’s about creating a demand that does not exist or filling a demand that has not been filled.”

            No, it’s not. It’s about getting in situations where your expectation is positive. Otherwise, nothing in capitalism can be sustained over any extended period of time. The best way to reach a high expectation is by setting a lower bound and then increasing volatility.

            The problem is that this stuff isn’t deterministic. So filling a demand might mean 20,000 people taking 20,000 shots when only one of those succeeds. Capitalism works because it takes advantage of outliers with ruthless and consistent trial and error. In a previous comment or in the post itself, Prof. Pettis mentioned “the logic of successful hedge funds” as being the idea that “when there is no cost to being wrong”, “you must gamble” “regardless of the chance of being right”. It’s a more generalized rule called Jensen’s Inequality.

            Capitalism works because of trial and error, not because of the accumulation of fixed capital assets. Capitalism works because it’s long volatility. The more idiots you have doing stupid stuff, the more likely one random guy who’s brilliant comes out among the idiots.

          • “you lack basic mathematical and reasoning skills.”

            This is getting a little pointless and lay off the Ad hominem as it does not work on me as it bring nothing to the discussion.

            “Fixed assets are also necessarily depreciating assets, unlike financial assets”

            Use the force Luke and leave the school books behind. Fixed vs Variable is what we are talking about. Fixed is something that does not change easily like buildings, machines, land, long term employees, intellectual property (less fixed in China then in Europe or the US) etc. Anything that does not disappears easily. My point was that 10% of Americans inherite these things and because of a lack of redistribution, then the US becomes less and less of an equal playing field. I believe in an equal playing field, and I believe that people should have a minimal consumption level at all times.

            “When did I say English immigrant? None of those people were actually English immigrants at all (they were immigrants from all over the world ranging from Syria to Eastern Europe to England to even Asia).”

            Do you even read what I write or are you just too focused on Ad hominem attacks ? If you are seriously arguing that the founding fathers and the first settlers of the US were from Syria and Eastern Europa, then let us not continue down this path. If you are American then your culturally inheritance is English protestantism and the ideas created in relations to that in the 17th century and 18th century England / Europe. What you are talking about is the 20th and 19th century.

            “I’m also not culturally Protestant. I’m proudly (and culturally) Hindu. Anyone that knows me will testify to this.”

            My point is that if you are Amerincan then you will culturally have very strong Protestant ideas, because the US culturally is build on Northern European protestantism and the English political issues of the 1600s. Or let me put it this way. If you were to argue the Hindu Caste system in the US, that you should have the right of a Brahmin and others would have the rights of Dalits, then you would not get very far. You are making the common fallacy of not distinguishing between etnicity and culture.

            “No, it’s not. It’s about getting in situations where your expectation is positive”

            We are looking for a description of how supply and demand can be accommodated nothing more and nothing less. Or simply getting paid. The two option we have are the market or the state. Capitalism is the idea that the individual should operate freely in the market without restraints and should within the market be rewarded or punished. I argue to leave the market wide open (And I might be a more radical capitalist then you. As I like the hard constraints a gold standard gives and I dislike fractional reserve banking for the lack of constraints it gives), but I also argue that when you personally extract wealth from the market, then you share. It is possible to distinguish between the market and personal wealth.

            The only argument against this is that the individual would not engage in entrepreneurial activities if being taxed. I believe (like Nietzsche and the Greeks) that the individual is driven by will ( Wille zur Macht ) to create and that people will create even if they face a high income tax. Ask yourself if the Fortune 500 people you admire so much would have stopped if they had USD 100 – 500 milion less? (remember the company is not taxed in any significant way). No of course not. They do what they do, because they can.

          • “If you are seriously arguing that the founding fathers and the first settlers of the US were from Syria and Eastern Europa, then let us not continue down this path. If you are American then your culturally inheritance is English protestantism and the ideas created in relations to that in the 17th century and 18th century England / Europe. What you are talking about is the 20th and 19th century.”

            Okay, repeating the same thing is not a sound argument. Secondly, citing someone, or a group of people, that existed 250 years ago to how the world is today or the challenges we face without specific context isn’t a valid argument either.

            “Use the force Luke and leave the school books behind. Fixed vs Variable is what we are talking about. Fixed is something that does not change easily like buildings, machines, land, long term employees, intellectual property (less fixed in China then in Europe or the US) etc”

            I know what fixed capital is, but most wealth isn’t fixed capital. Employees aren’t fixed capital by any means. A “long-term employee” can leave the firm to do his own thing at any point. That’s not a fixed asset.

            More importantly, repeating what a fixed asset is doesn’t do anything to nullify the argument that fixed assets being depreciating assets isn’t a way to wealth. Again, the numbers simply do not add.

            ” If you were to argue the Hindu Caste system in the US, that you should have the right of a Brahmin and others would have the rights of Dalits, then you would not get very far. You are making the common fallacy of not distinguishing between etnicity and culture.”

            Actually, I do strongly advocate for a class structure. BTW, Hindu scripture says nothing about class as a birthright. It just speaks of class as a general structure for society. It was adapted as something done by birth, but I absolutely do argue for a hierarchical class structure.

            And quit telling me how my ideas are. I’m not “culturally Protestant” (whatever the hell that means) in any way. Again, stating something you said earlier doesn’t make you right and claiming you know how someone is doesn’t mean you do. For example, there’s actually a lot of stuff in Protestantism that I heavily disagree with.

            “We are looking for a description of how supply and demand can be accommodated nothing more and nothing less. Or simply getting paid. The two option we have are the market or the state. Capitalism is the idea that the individual should operate freely in the market without restraints and should within the market be rewarded or punished.”

            This is what I like to call sucker thinking. The world doesn’t operate this way. If you actually set something up like this in a society, some leader’s gonna rally a few thugs, run you over, and take what you have. Any discussion of money or resources without guns is just being really stupid. This kinda attitude is what gets you killed, your spouse raped, and your children enslaved.

            Look man, what you’re saying doesn’t really make any sense. You’re using poorly defined terms, bringing up concepts (like caste) from scripture you don’t really understand and confuse those concepts for the specific way they were embedded into certain society at a given time, talk about some idealistic view of some economic system of allocating resources without first talking about who’s got the guns or how you’re gonna protect what you have, and a whole bunch of stuff that doesn’t make much sense. Quite frankly, it’s the kinda attitude that gets societies killed and destroyed. I’m not even questioning your conclusions, but your assumptions. Stating your conclusions or how you got to your conclusions in the effort that it proves everything you’re saying right (even though the only well-defined term you’ve used is capitalism, although the entire context shows little sensible thought in the way it was used) again and again doesn’t change the underlying fact: the assumptions you’re beginning with are the ones that get you run over.

          • “Actually, I do strongly advocate for a class structure. BTW, Hindu scripture says nothing about class as a birthright. It just speaks of class as a general structure for society. It was adapted as something done by birth, but I absolutely do argue for a hierarchical class structure.”

            And where are you in that structure? Top or bottom ?

          • Where am I? I’m at the very bottom. I haven’t done shit and earned a damn thing.

        • The real creators of wealth aren’t “fixed assets being passed down” or anything of the sort. And I’m sure as hell not referring to any Protestant crap at all. I don’t know where you’re getting these things from. These are really flawed (and completely baseless) assumptions.

          The real wealth creators are people like the orphan kid who hop around towns in boxcars. He ends up in Chicago at 14 without a damn thing. He scraps all day every day. He realizes that he could take something from one part of town, collect them, and then sell it to someone else on the other side of town to make a buck or two. He saves that buck or two every few days he’s able to make it. Then, the kid starts building his connections, networks, and eventually builds up enough capital to do the same thing on a larger scale by the time he’s 18-20. By the time he’s 25-30, he’s one of the biggest players in town and when he’s 40, he runs one of the most powerful cities in the world.

          The real creators of wealth are like the immigrant kid who lands on the shores of New York at the age of 16 and picks up a job at some place making some stuff. He ends up finding a way to learn about the basics of bookkeeping, loves numbers, and gets good at math. Over time, he starts saving his money and realizes that if his company changed its production process slightly, they’d make more money. So he goes to his boss and tells him this. His boss doesn’t like it, views the kid as a threat, and throws him out. The now 21 year old young man ends up on the street, takes everything he has, puts it into a new production process. By 50, he’s one of the world’s most powerful men who commands the American political system at his beck and call.

          The creators of wealth are the elite Wall Street guy who was born to a wealthy father and converts it into even more wealth. Then, he finds people like those scrappy kids, starts throwing capital into their companies, realizes 95% of them go bust, but that his margins are huge regardless of how many go bust. So he ends up funding a bunch of crazy, ridiculous shit and if there’s a problem takes the capital in his other larger, firms to flush capital in and out of all of his ventures. Over time, his ingenuity makes a bunch of the punk-ass kids wealthy while he’s sittin’ on his ass collecting art, building libraries, shorting Europeans, and smoking cigars.

          If you look at firms like Facebook or Google or Amazon or Microsoft or Apple or anyone of these companies that we all use so much in our daily lives, they’re all American and almost all of the guys started off with the backgrounds I described above. They started off as some middle-class kid who dropped out of school or as the son of some immigrant kid whose grandfather wouldn’t let his mother or himself see his father. These are the creators of wealth, not those who get “fixed-assets” handed down to them.

          Also notice how you’re talking about the benefits of social welfare programs, but all of these kids get hurt by high taxation from social welfare. It makes it difficult for them to accumulate capital and places barriers of entry for them to create firms via “regulation”.

          Notice that most of those kids (or the one wealthy guy), if they were in Europe, would’ve ended up dead by the age of 25 for different reasons that range from religious or cultural reasons–and that’s often when they or their parents/families left homelands in the first place. So you’re completely wrong and it’s blatantly obvious that you’re wrong. These kids don’t need social welfare programs or any of that shit. They find ways to scrap and survive. They more their back is to the wall, the harder they hit.

          • You are, I assume, American and that makes you culturally an English Protestant who holds dear a set of values created in England during the 1600s and early 1700s. One of the cute things about Americans is that you at some point after the 1st World War started thinking of yourself as cuturally being Sui Generis. The idea of the poor English immigrant making it big “over there” is still so strongly embedded in your culture that you can leave it here 300 years later.

          • When did I say English immigrant? None of those people were actually English immigrants at all (they were immigrants from all over the world ranging from Syria to Eastern Europe to England to even Asia).

            I’m also not culturally Protestant. I’m proudly (and culturally) Hindu. Anyone that knows me will testify to this.

  57. For all of those interested, I had a comment thread on Prof. Pettis’ previous post about the structure of the American financial system in regards to a Bank of England paper and a previous exchange I had with Steve Keen about a month and a half ago. I wrote a post on how the Bank of England lacks a sensible understanding of how the world and its financial system operates while going into detail of how the BoE, Keen, and all of those who take this paper seriously as a real work on the current operation of the financial system or on money and banking are really being duped.

    To put frankly, financing operates in a very different way than what was described by the BoE. Here’s a post that I wrote specifically for this issue for all of those interested.

  58. The below story which i just saw seems particularly pertinent in light of Prof Pettis’s and others comments:

    • Although I’d take Trump any day over Cruz, let’s not overstate Trump’s support. If the GOP nomination process had Democratic rules, Trump would have no chance. The GOP’s rules are slanted with a slightly anti-democratic bias (although much less so than on the Democratic side), but the system definitely isn’t “rigged” like Trump (or Sanders) are claiming. Actually, the GOP nomination process favors Trump. On top of this, if Rubio dropped out of the race a week or two earlier, Cruz would end up with the nomination because of his mobilization at the grassroots level.

      On both sides, you’re hearing Trump and Bernie supporters make the claim that the system is “rigged” and that’s why their guys are losing, but the facts simply do not agree. In the case of Trump, most of the opposition against him was divided until now when you have Cruz as a solid opponent. Cruz also has an actual campaign organization/structure, a ground game, and is mobilized at the grassroots level. So what’s the impact? Well, the actual delegates chosen at the state conventions are mostly Cruz guys because Cruz’s supporters are at the conventions, Cruz’s campaign even creates a list of delegates who’re Cruz’s guys to vote for, gets them on the nomination, and then they end up becoming delegates at the RNC. This is not a “rigged” system. This is democracy in action. It’s taking ordinary citizens, getting them involved in a movement, supporting/organizing them as volunteers at a grassroots level, and getting in your guys as a support force.

    • Speaking of which, I’ll have an entire blog post that references this post by Prof. Pettis where I’ll go through all of the coalitions for each of the candidates in more detail. It’ll also talk about the electoral process, how the issues are coming into play alongside the coalitions that have been built, and the structure being built up for the general election. I’m still working on this, but I suspect it’ll be up by the end of this week for sure.

      It’ll also talk about all of the major candidates: Hillary Clinton, Bernie Sanders, Donald Trump, and Ted Cruz. When I was talking to Prof. Pettis on a candidate that could win the election by going straight to the people, I wasn’t talking about Bernie Sanders (who really never had much of a chance to win anything as his appeal really wasn’t very broad and he’s barely come under any real scrutiny, which is another topic I’ll talk about in my blog post); I was talking about Donald Trump or Ted Cruz. However, if the populist appeal is split among 2-3 candidates (I think there’s a good chance Trump runs as an independent in the general election), then Hillary Clinton will be the next President of the United States. Her campaign is really just building off the same structure and coalition Obama built in 2008 to defeat her. All of her high-level campaign staff are all people that either worked on Obama’s campaign or in his administration–largely both.

      Even if the Democratic race is close where Bernie leads in the pledged delegates, Hillary Clinton will still get the nomination. Bernie can win the popular vote by ~15% from here on out in every state, but he’ll still be down in the overall popular vote and in the pledged delegate count (the delegates coming from the voters). So his chances are minimal. The Clinton campaign understands this, so they’re no longer spending any money on her campaign and they’re saving the money for the general election. If the GOP isn’t united, she probably won’t have to spend money on the general election campaign either. So either way, this election is looking more and more like a shoe-in for the Democratic front-runner right now. With that being said, I just can’t see Ted Cruz or Donald Trump being able to unify the GOP. If they can’t, it’ll be Clinton all the way.

  59. As an outside observer (I live in Sydney, Australia), I’d like to share with your readers how far reaching the anti-Trump movement is.
    My daughter, who is almost 12 and attends her first yaer in High School (not sure what is the equivaknet in the US) attended a complusory talk by a guest speaker to the whole school. We found out later that this speaker was of American orgin and spoke for about an hour on the threats if Trump was to win the election. My daughter who is quite an intelligent and deep thinking individual, was quite taken back that this speaker portrayed such a one sided view….I asked her what she thought (however I was quite angry that my daughetr was subjected to such propaganda and thta a school shouold be a place of learning not this crap)… and she replied… “it sounded like something out of the movie “The Hunger Games”…
    So, it doesnt surprise me that the establishment are scared of Trump and Sanders. People are sick and tired of the politicians that have failed to deliver, not only in the US but also here in Australia and around the world. This is creating a ground swell of “loss of confidence” in government all around the world. To be proud of your heritage, values and nation is viewed now as being right wing and racist. My parents came to this country from Italy after the war, worked hard, no government handouts and made prospored in this country because they worked hard and government was not as it is today. Today, my parents don’t trust government anymore….this is what is happening.

    • My apologies for the spelling and gramatical errors. I rushed this post and I’m a hopeless typist!

    • Sanders basically has no chance. Trump has a ~50/50 or maybe even a 60/40 chance of winning the nomination.

      After the result in New York, Bernie needs to win the rest of the popular vote by ~20% to get a lead in pledged delegates. If he ends up splitting the Mid-Atlantic (this would be a good result and I think he may actually be able to win Pennsylvania), he’ll walk out needing ~22-25% of the remaining pledged delegates which will not be enough.

  60. Well, it seems pretty clear what’s happening in the 2016 Primaries. Both Hillary Clinton and Donald Trump had huge wins in New York and they also both lead in delegates.

    On the Democratic side, Hillary Clinton won New York by ~15% which pushed her pledged delegate lead to ~250-300. She’s got ~1450 pledged delegates with 2026 as the required target to get a majority of pledged delegates. We’ve also got Pennsylvania, Maryland, Delaware, Connecticut, and Rhode Island to round out the Mid-Atlantic in about 6 days where Clinton is up in the polls in every single one of those states by ~7-15%. Even if she breaks even in those states, that’d put her at ~1650-1700 pledged delegates which means she could split California and New Jersey while losing everything else by 100% and still end up with a lead in elected delegates. Of course, she already has most of the super delegates. So the 2016 Democratic primary is effectively in the books. Hillary Clinton has a 95-97% chance of winning (minimum). By April 26th when the results of the Mid-Atlantic come out, she’ll have basically guaranteed herself the nomination.

    On the GOP side, Trump is still in the lead and extended his lead with a big win in New York. As I said, we’ve got the Mid-Atlantic on April 26th where Trump is up big in every single Mid-Atlantic state. So it’s a battle between Ted Cruz and Donald Trump for the nomination. Trump will walk into the convention with the most delegates and the most votes, but the actual delegates themselves were all elected or nominated by the grassroots organization of the Ted Cruz campaign and his supporters. If Trump can’t secure the 1,237 delegates at the first ballot, Ted Cruz will win the battle on the convention floor.

    In my view, the most likely scenario is that Trump ends up with ~1,130-1,180 delegates walking into the nomination which’d be ~50-100 delegates short of the nomination. However, there’s also gonna be ~150-200 uncommitted delegates that aren’t pledged to any candidate. If Trump can get them to his side on the first ballot, then he’ll win. If not, it’ll be Cruz. Trump will win all of the states in the Mid-Atlantic by a landslide, but the question again is delegates. Due to the GOP’s wacky delegate rules (it varies state by state), we’ll see Trump walk out of the Mid-Atlantic with huge wins and he will extend his delegate lead. However, if Cruz can hang on in some of the Mountain West, it’ll still be close.

    In most GOP states, it’s winner-take-all by district including the big prize of California. In many districts in California, they’re very heavily Democratic with very few Republicans. Cruz also has excellent campaign organization and a ground game. So the few GOP voters in those districts will have disproportionate power. If Cruz holds on in the Mountain West/Pacific Northwest states of Nebraska, Montana, South Dakota, Oregon, and Washington state while doing well in states like Indiana and West Virginia, he’ll hang around. If he does that while performing well in California, he’ll stop Trump well short of 1,237 delegates. In this scenario, Trump and Cruz will have to duke it out on the convention floor. If no one gets to 1,237 on the first ballot, Cruz will win on the second and third ballots.

    Either way, the GOP nomination is gonna go well into July and Trump will be a factor for at least 2-3 more months. The key states to watch are the remaining states in the Mountain West, Indiana, West Virginia, the Pacific Northwest, and California. It’s gonna come down to the wire. If the contest ends sooner, it’ll be Trump. The longer this thing goes without a clear winner, the more likely the winner is to be Ted Cruz.

  61. This is the post I promised in my comment above. I just finished it and posted it a few minutes ago. I’d like to hear everyone’s thoughts on the topic.

    This post discusses why Donald Trump doesn’t represent the Jacksonian wing along with all of the “wings” each candidate does represent. If we notice closely, we’d realize that it’s Trump who represents the Old Yankee “moderate” Republicans (I call them the Roosevelt Republicans, but they precede Roosevelt).

    Ted Cruz is actually using a coalition that’s basically the exact same as Andrew Jackson’s coalition. He’s also more anti-illegal immigrant than Trump, if you actually listen to him on the issues. Cruz also favors “sound money” (a common theme for the Jacksonians), dislikes the “corruption”/”cronyism” on Washington, favors laissez-faire economics, and more “power to the people”. He claims to be against centralization of power and rails against the institutionalization of power much more than Trump.

    Bernie Sanders represents the old Jeffersonian Democrats that are the most worried about inequality, want to tax the rich, are worried about financial control over the Republic by high finance, are anti-finance, are against the big cities, heavily populist, heavily for “democracy”, and aren’t against increased control in Washington if it’s used “for the people” (unlike the Jacksonians who, even when the fight for increased power in the Executive, want to use that power to radically decentralize many things like banking). Much of the “progressives” are really just a leftover of the old Jeffersonian Democrats.

    In the case of Hillary Clinton’s wing, I guess you could technically call it the old Hamiltonian wing, but I call it the “Wall Street Wing” that’s essentially centered out of New York. They’re usually the “wing of the banks” that support what’d mostly be in line with policies like financial liberalization, globalization, and they’re in favor of economic/financial development via entirely market-based methods. They also favor a social safety net and tend to favor large amounts of immigration

  62. So we’ve had more developments in the Presidential nomination process on both sides. Now that the Mid-Atlantic states of Pennsylvania, Maryland, Delaware, Connecticut, and Rhode Island have voted, we know a lot more about the direction of the race.

    Hillary Clinton won ~200 pledged delegates when those states voted in April 26th and defeated Bernie by an average margin of ~10-15%. Her pledged delegate total is ~1650 with 2026 being required for the pledged delegate majority. We’ve also got California (477 delegates), New Jersey (126), Indiana (92), West Virginia (37), Kentucky (61), Oregon (74), the Virgin Islands (12), Puerto Rico (67), Montana (27), New Mexico (43), North Dakota (23), South Dakota (25), and DC (45) still left on the board. Bernie could win the rest of the race by ~25% and he’d still lose the pledged delegate count. In the super delegates, Hillary has ~520 compared to Bernie’s ~50. To put simply, Hillary Clinton will be the Democratic nominee for the President of the United Sates.

    On the GOP side, Trump had a yuuuge day. He beat all of his required delegate totals on his path to 1,237, but the calculus doesn’t really change very much. Trump picked up 110 delegates (out of a total 118 up for grabs) in the Mid-Atlantic (sans New York that voted April 19th) which gives him a total of ~955 delegates. As I’ve stated above, the only way the GOP can stop Trump is by preventing him from getting to 1,237 delegates and defeat him at the convention on the convention floor. John Kasich is still in the race, but he’s only there for his own personal gain.

    The states remaining on the GOP side are Indiana (57 delegates), Nebraska (36), West Virginia (34), Oregon (28), Washington state (44), California (172), Montana (27), New Jersey (51), New Mexico (24), and South Dakota (29). Due to the GOP’s wacky delegate rules, each state apportions its delegates differently. In West Virginia, almost all of the delegates are directly elected. Nebraska, Montana, New Jersey, and South Dakota are all winner-take-all states. California and Indiana are winner-take-all by district with both having ~15 statewide delegates that go to the winner of the state.

    Nebraska, Montana, and South Dakota all favor Cruz demographically and Cruz has won most of the surrounding states New Jersey will go to Trump. Oregon, Washington state, and New Mexico will be split up and aren’t very important because they allocate 96 (in total) delegates proportionately, which means they’re not that important. So the critical states in the “firewall” to prevent Trump from getting to 1,237 are Indiana and California.

    If you give Trump New Jersey and 24 of West Virginia’s delegates, he’ll be at ~1,030. Since the only way to stop Trump requires Trump not winning Nebraska, Montana, and South Dakota, let’s suppose all of those go to Ted Cruz (I think that this isn’t a bad bet to make because they all favor Cruz and Cruz won the neighboring states). If Trump can win ~45-50 delegates in Oregon, Washington state, and New Mexico, then he’ll be at ~1,070-1,080 delegates sans Indiana and California. California and Indiana combine for 229 delegates.

    There’ll also be ~150-200 uncommitted delegates although I think most of them are Cruz guys. I think Trump will be able to lobby some of the uncommitted delegates, but not all of them. So if Trump is close enough to 1,237, he’ll be able to win. However, if he doesn’t get to 1,237 by the first ballot, it’ll be Ted Cruz as I said in an earlier comment.

    If Cruz can get a big win in Indiana while Cruz and Kasich hold off Trump in Oregon, Washington state, and New Mexico with just enough popular support, Trump will need to have a big day in California.

    Also note that the last day to register to vote in California is May 23rd. I also believe that this is the same day to change party affiliation. So if the Democratic race is over by then (and it almost certainly will be), you could see a lot of Democrats changing party affiliation to vote against Donald Trump. That could be a potential problem for Trump.

    Also note that Trump currently has ~45-50% support among Republicans in California according to current polling while he’s up ~5% in the current polling averages out of Indiana. It’s also important to note that because California goes to the polls on June 7th, the polls right now aren’t gonna be the most reliable way as to tell us what happens. In Indiana, the polling is really restricted for a variety of reasons. Hence, the polls in Indiana aren’t really very reliable. So the only day to tell us what’s likely in Indiana is May 2nd, which is the next voting day for the primaries.

    • In summation: Hillary Clinton has clinched the Democratic nomination and Donald Trump has almost clinched the Republican nomination. If the polls in Indiana are accurate, Trump will clinch the GOP nomination in a 5 days. If he’s short of his required target in Indiana, then we’ll have to wait until California which votes on June 7th assuming Cruz wins all of the states that he’s favored in. If Cruz doesn’t win the states he’s favored in, Trump will be the GOP nominee.

      Right now, the betting markets have Trump’s odds of securing the GOP nomination at ~75%. I’d tend to agree.

    • We’re headed towards a Hillary Clinton vs Donald Trump election. I wouldn’t be surprised if Trump wins.

      Trump has been staunchly anti-free trade, which means he could win large chunks of the Industrial Midwest including states like Pennsylvania, Ohio, Illinois, Indiana, Michigan, Wisconsin, and Minnesota.

      On the other hand, Trump’s antipathy to illegal immigrants, his desire to build a wall, and his attitude on the military will probably give Hillary Clinton Florida, Virginia, and North Carolina. I also wouldn’t be surprised if Trump has pissed off lots of minorities and women to the point where former Republican strongholds with large minority populations like Georgia, Louisiana, Arizona, New Mexico, Nevada, and even Texas could not only become battlegrounds, but actually flip to the Democrats.

  63. I keep coming back to this post. The most insightful thing I have seen about Trump’s candidacy.

  64. What a load of horse shit.

    • Your reasons for disagreeing with me are certainly strong ones, Hector, and well-argued, but according to your email address your name is Robert Browning. Is there any reason you chose an Hispanic sounding pen name?

      • Do you still think the Trump camp isn’t filled with idiots, professor? Hector probably wants to make Trump supporters seem more inclusive but apparently doesn’t realize that the guy who manages the blog, well, manages the blog.

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