Wednesday, November 3, 2010

Populism

In a democracy, political success often depends on an appeal to populism, or the wisdom, as well as the fears and prejudices, of the common man.  Yesterday, the American public switched some of their populist allegiance from the Democrats to the Republicans.  Congress is now split: the Republicans with a majority in  the House of Representatives; the Democrats with a majority in the Senate.

That the party that loses the last Presidential election recovers to make gains in the succeeding mid-term election, is not new.  It's easier to criticize from without than to actually govern.  This is particularly true when money is no object, and you're not held directly responsible for your campaign statements.

The general rationale for the Democratic losses is that the economy still has not recovered from the economic downturn of 2008.  While this was brought on by unregulated and dishonest banking practices of the Bush years, the pain has been felt primarily under Obama's tenure.

The Democrats have tried to do all the right things to revive the economy, at least according to the textbooks. When I was at University in the 1960's, we were taught that the Great Depression was caused by  Herbert Hoover attempting to balance the budget, when (according to Keynesian Theory) fiscal stimulus and deficit spending were needed. The great populist Franklin Roosevelt presumably was on the right track with new government programs to create jobs and stimulate recovery.  Today, opinion is divided on how successful he was.

In the 1970's, Milton Friedman popularized a theory that the Depression could have been avoided by lowering interest rates, instead of providing Government stimulus.  "Monetarism" removed some of criticism of capitalism, and, importantly, from the Republican point of view, some of Roosevelt's lustre.

The Obama administration has now tried both approaches, unprecedented stimulus and bailouts, and cutting interest rates to near zero.  Yet the economy has not responded as quickly as anyone would like.  You reap the consequences of events, even when you do all the "right" things.

Canada, as compared to the U. S., has not suffered the same economic downturn, partly because of a more regulated banking system; partly because its resource base has largely recovered.  It is not immune to populist pressures, however.  The Conservative federal government has refused to approve the purchase by Australian-based  BHP Billiton (the world's largest mining company) of  Potash Corporation of Saskatchewan (the world's largest Potash company).  Despite the fact that both operate internationally (most of the shareholders of Potash Corporation are probably not Canadian), that the Canadian Government claims to support free markets and to oppose government interference in private business, and that the sale would provide an economic stimulus to Canada, a surge of economic nationalism in the West and the potential loss of some seats in Parliament  has caused the Government to compromise its stated principles.  At least until it can figure out how to pacify the populist objections.

5 comments:

  1. "Today, opinion is divided on how successful he was."

    Why do you suppose this is? This is ridiculous; your statement should be absurd. It should be common sense that Roosevelt was among the greatest presidents of all time; even Republican heroes such as Reagan idolized him. At one time, Roosevelt was untouchable as an American hero. Anyone who has spent a moment in reading a history book can see this.

    I think politics is being won by noise and by preying on the ignorant, see the Tea Baggers. A lot of them are among America's hardest pressed economically, the people Obama has actually been trying to help.

    Anyway, the separation between rich and poor is greater in the US than any other Western country. This is something Americans might want to consider in the downward spiral. Having said that, the US has great resources, an excellent education system (at least at the university level), a healthy rate of population growth (at least in Western terms; the birthrate is over two) and decent values when it comes to hard work and community. Hopefully, this will see us through on our abysmal voting habits.

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  2. Ronald Reagan and Milton Friedman were both supporters of Roosevelt's "New Deal", who changed their minds and built careers opposing his approach (and an expanded role for government management of the economy). Conservatives are happy to diminish Roosevelt's stature and not to have the public reminded that the Great Depression was caused by unregulated capitalism.

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  3. "Conservatives are happy to diminish Roosevelt's stature and not to have the public reminded that the Great Depression was caused by unregulated capitalism."

    As was the recent meltdown, with all of its property speculation and Wall Street's fancy footwork with the bundling of feeble and/or useless mortgages into bonds, which became known as toxic. This problem will be on our hands for some time to come. We saw history repeat itself; the lesson here is that we should study history more.

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  4. BTW, I keep hearing these Tea Baggers calling for "smaller government." But none of them seem to want to apply this to the American military, and its budget, which is through the roof. How can you have smaller government when spending on the military is more, I think I am right here, in the US than all other countries combined?

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  5. According to Wikipedia, the U. S. accounts for 40% of global arms spending, six times as much as China, which is number two.

    The Republicans say they want smaller government, but when CNN tried to pin them down (House minority leader Boehner and Senate minority leader McConnell), they couldn't come with anything specific, not even changes to health care, which they campaigned against.

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