How Populists Use Economics to Exploit Crisis

MIT Sloan Assistant Professor Emil Verner discusses his research into credit markets, and the role of economics in the rise of populism.

[@feelmiranda]

First, no mention of the effects of (loose) regulation over these credit expansions. It's amazing how people dedicated to studying financial economics simply overlook this factor (and avoid looking at authors that offer a pretty good explanation of how these systems work such as Minsky) and go straight to "market forces are at play". Then you wonder why the population screams at economists and their general blindness. Second, the "it takes two to tango" ignores the fact that credit demand was likely tied not just to optimism from lenders, but need as well. In a scenario of ever growing basic costs to households, and little to no gain in wages, how will you supplement the deficit in your budget? Well, the bank is offering very good conditions on my third mortgage, so why not do that instead? Third, borrowing in foreign currencies is not really commonplace in South America except for, maybe, Argentina. Even then that's a practice for high middle class people, who were not hurt the most by the financial crisis. Fourth, if you read any basic account of the madness of the European credit market during the 1990s and 2000s, you'll see how the big German and French banks were super-predatory towards households and states. We had the Greek financial debacle not too long ago but it seems that it's already been forgotten. Alas. Fifth, at least the guy recognises that populism is offering some proper solutions to the effects of establishment policies that are simply running its course, socialising losses and privatising profits. Even then you can feel how difficult it is for him to admit that. And to think this is what people at MIT are getting from their classes. What a shame.

[@nicolasm400]

On point! credit was a way to deal with the stagnation of wages & purchasing power of workers. back in the days nobody had to borrow that much to live... they had fought for decent lives, we have to do the same again. May I permit don't hesitate to check out Richard D. Wolff for economics, retired professor who today is doing a great job educating people on economics, very accessible

[@1nadjmi1]

your argument sorts of going in circle. when you say that there is no mention of loose regulation, you were wrong. listen towards the very end of the monologue, he addressed it ("the forces that push away regulation...") and as a matter of fact, this is mentioned shortly after the asst. Prof recognises that populism offering some proper solutions...

[@snowballeffect7812]

I don't understand. Is anything you're saying contradicting his points? You seem to just be talking about random tangents that don't really explain the topic at hand which is how crises are manipulated by populists.

[@snowballeffect7812]

@@nicolasm400 Welcome to neoliberalism and crony capitalism with a side of rent-seeking behavior.

[@1nadjmi1]

@@snowballeffect7812 , i mean he (Felipe Miranda) is complaining that the professor did not cover so many things he pointed out when in fact the professor covered it, he just missed it

[@bvkronenberg6786]

Never trust a guy whose income is dependent on turning college kids into life-time debtors. If you don’t know why populism and isolationism happened in the US, well get a commercial truck driver license and travel all the poor shit holes of America and you will learn more than MIT can teach you.

[@nicolasm400]

Industries can be managed by those who work in them instead of aristocratic shareholders

[@Paul-cp1lk]

Populist movements occur when people don’t have money. This is due to credit expansion that benefits a few to many.

[@nedim_guitar]

The reason that countries are borrowing in foreign currency is that the US Dollar is the currency used in international trade. You want to export something? You sell it for Dollars. Import? You need to trade your currency into Dollars and then you can but goods.

[@emmanuelameyaw6806]

Observe something in the data...build a theory for it using activities surrounding the period or time frame you want to study...

[@margaretliu3409]

That's just the natural progression of capitalism, chasing maximum profits. The gap between the have and have not is widening in China too. We will need many many think tanks and determined governments to sort things out. :)

[@terrythompson7535]

What is a "populist"? Is that someone who opposes caste systems? Call me "populist" then.

[@terrythompson7535]

@Cool Breeze Who is to blame for caste systems? Do they not require conquest and slavery to exist?

[@terrythompson7535]

@Cool Breeze It isn't a choice for people to be mercilessly dominated by people who are superior at warfare. That's a really ridiculous viewpoint. If you get jumped on the street by someone who is significantly more capable of combat than yourself, you will be defeated. People cannot decide not to be attacked, and not to be enslaved. People cannot decide who has a monopoly on force in the geographical location where they were born, where laws were established to enslave them BEFORE THEY WERE BORN. I never blamed Jews. You made a strawman. It's USURY, and fiat currency. There are some Jews that are to blame, and some Chinese, and probably some of every nationality and religion around the world, because none of those things matter. What matters is that they are all probably psychopaths, who see other humans as prey. Chinese invented fiat currency thousands of years before Jews ever used it.

[@terrythompson7535]

@Cool Breeze ..and people have NEVER been fine with caste system. They only ever cooperated when they had no choice, and when they did have a choice, they rebelled.. (aside from the ones who benefit from the caste system, of course). The existence of America is the result of one such revolution against monarchy.

[@terrythompson7535]

@Cool Breeze There is no such thing as "The Jews" as a single minded collective of people who all think the same. Some are right wing, others are left wing, some of them are devout followers of god, others are atheist. I don't care about any of that. The real oppressors are central banks, and that has nothing to do with Jews, other than some people who call themselves Jews might be running some of them.

[@terrythompson7535]

@Cool Breeze There is no such thing as a "xenophobe". No one is actually afraid of foreigners. A phobia is an irrational fear. People who are against low skilled immigration into the US are against it because it causes greater difficulty on the numerous people who are in poverty that are already competing for jobs. You'll never hear the people that you would call "xenophobe" rejecting the idea of ANY foreigner of high IQ immigrating into the nation, and in fact in America it has been facilitated through the H1B Visa. Also, it's pretty silly to assume that the majority of a given group of people are "bigots". Again, you cannot level the entire collective of a people against their worst representatives. It is manipulative to make caricatures out of people. The "left wing" and the "right wing" do not exist. Are Jews "left wing" or "right wing"? If they are right wing, then why are they responsible for communism? If they are "left wing" then why did they finance monarchies? You see, the entire narrative falls apart. These factions are for the subjects, not for the rulers. The two party system is a rigged coin toss. "Heads I win, tails you lose".

[@JimmyRochester2233]

Because of different schools of thought often not collaborating towards a shared public understanding of the world, the analysis of global phenomenon is too limited for my liking. For example, with the rise of populism, nationalism and ethnocentrism in Latin America, India, China and other parts of Asia, the problems this economist is pointing out could be regarded as deeper than being merely 'Western' problems. Yet there doesn't appear to me to be much in the way of a more global analysis.

[@nattygsbord]

Bolsonaro, Putin, Erdogan, Dueterte, the rise of nationalist populists in India, Chile, Peru, Argentina, Israel, Mongolia, the Baltics and the disastrous collapse of the mainstream left have already been covered by Steve Turley. The leftwing media is dying. Conservative families have high birthrates while progressive leftwing transgender families are dying off. So yes indeed, everything seems to point towards a coming global nationalist populist traditionalist conservative age.. while the lefts collapse seems unavoidable at this time. Brexit was not just a one time event, but Remain lost four elections in a row. And Trump seems almost guaranteed to win a 2nd term at this point. Macron and Merkel are on their way out. Countries which never had any nationalist party before have recently got one and it performed strongly in the last election in Spain. And meanwhile are the leftwing parties doing historically bad elections in UK, Germany, Sweden, France, Greece and Israel.

[@JimmyRochester2233]

​@@nattygsbord There is a lot to unpack here. 1. Thanks for proving my point by showing off how easy it is to rattle off so many countries where these problems exist. One doesn't need to perceive Western civilization as a myth to notice that, spite of sharing common Western origins, comparisons between Latin America and the United States, or between Hungary and Russia, might be more apt than comparisons between Hungary and the United States. 2. If leftist media is dying, start some more. 3. Those conservative families have higher birthrates wouldn't be surprising but the stuff about the leftist transgender families is a bunch of nonsense that plays into reactionary conspiracy theories that most of what actually constitutes 'the left' is literally out to destroy the nuclear family. Some kinds of communists or radical feminists might be trying to do that. Yet they're not particularly popular with the majority of leftist-identified populations around the world anyway. Many but not necessarily all or even most transgender people are drawn to leftist politics because it's progressive movements that stand up for them. Progressive movements have always succeeded by turning some of a population onto new ideas that defy the conservative environments they're immersed in. This is the reason there is anything left of 'the Left' in the 21st century. There are complicated factors that determine birth rates. One could argue that something about how some progressive movements change cultures contributes to declining birth rates but that' would be a different argument from the one you've made. Progressive movements don't make it so so many of their people and their children become transgender that it decimates the population. 4. We've already entered the age you're speaking of. It's time to fight back against it so as to turn the world

[@nattygsbord]

@@JimmyRochester2233 *"Thanks for proving my point by showing off how easy it is to rattle off so many countries where these problems exist"* I do think nationalism and populism are good things. But science deniers, fascists, and religious fundamentalists are people who I have nothing for contempt for. Bolsonaro, Erdogan and Dueterte are all fascists, while Bolsonaro is also anti-science, and while Erdogan is a religious fundamentalist who supports child marriage. And Indias Conservative party is the worlds largest political party - and they are for the Hindu version of sharia law. So there are lots of people who I do not consider to be my allies. Nor am I happy about immigration from backward places in the world, despite muslims and latin Americans are very religious and therefore would be pretty strong allies against much leftwing nonsense ideas. *"2. If leftist media is dying, start some more."* You cannot drive backwards into the future. There is no way to get the genie back into the bottle. People will not go back to the old media again. This is never going to happen. Even if they would be successful in killing the internet I will still never go back watching boring old media. I rather play flute, read books and play games instead. 3. *"the leftist transgender families is a bunch of nonsense that plays into reactionary conspiracy theories that most of what actually constitutes 'the left' is literally out to destroy the nuclear family"* Many leftists are so filled with biases against your political opponents that you always assume the worst about them, and jump to conclusions before you fact check things. This is perhaps why you take the comment I made so literal and fail to see that it is was written in an edgelord mannor with much sarcasm. Many leftwingers prioritize careers instead of children - like Macron, and Merkel, and many feminists like Charlize Theron and Emma Watson become female versions of incels because males thinks that feminism is unsexy and boring. And many beta male cucks ends up getting burned by open relationships... and women do not like feminine men in general. So I guess it is hard to find someone for them. Most academics vote republican, but if you look at people who have undergone a higher level or higher education then you see an over-representation of democrats instead. So I would guess there are many overeducated academics here who have choosen career over children. I am happy that Merkel and Macron never put any children into this world. But I can feel some pity for those models who just wasted their beautiful bodies for nothing and ending up childless, lonely and sad. *"4. We've already entered the age you're speaking of. It's time to fight back against it so as to turn the world"* I think this wave has only begun. Old leftwing media losses more viewers for each month. Likud has basically been wiped out in Israel. The socialdemocrats in Germany are doing their worst elections since 1945. Sweden they are doing their worst elections for 70 years or so (if I remember correctly). In Britain have labour lost strongholds that they have held for almost a hundred years, and they underwent their worst election result since the 1930s (if I remember correctly). And in countries where nationalist parties previously didn't exist they now do - as in Spain and Germany. And even the left has become nationalist. But while the right base their nationalism on civic values, customs, traditions and laws... so are the leftwing nationalism rather based around ethnicity like blacks in USA and muslims in Europe. And breaking countries apart and balkanization is a part of that etno-nationalism - as the independence movements for a free Scotland and Catalonia shows, and "Black lives matters" demands for giving blacks their own black etno-state inside America. Etno-nationalism is ugly and sounds like Hitlers ideas of blood and soil to me. Just like black person never could become a German in Hitlers eyes no matter if he spoke perfect German and drink litres of beer, do the identity politics left judge people upon their skin colour and not their ideas. But perhaps I shouldn't complain and welcome this wave of leftwing nationalism as it just further my cause lol. The Corona virus has shown the idiocy of open borders and sacrificing national self-sufficiency on the altar of free trade and reliance on the EU. But it turned out that Germany, France, and Czechia happily threw Italy and other EU countries under the bus by stealing face masks from them that they already had paid for. So much for all talk of solidarity of the EU and globalists like Macron and Merkel. So I am happy that the rise of nationalism has come - the EU is cancer and needs to die. And progressive left needs to get wiped out. Instead in its place should a new left rise. A left which cares about the workers instead of the urban middle class hipster sensitivities. A left which supports nationalism and the family instead of opposing it. And which supports welfare chauvinism and freedom of speech, and opposes islamic religious fundamentalism. And unlike the current left which taxes the countryside raise taxes for the poor, should the new do the opposite and raise taxes on the rich and the urban population so that housing prices do not start to skyrocket and in the long run harm both the countryside and the cities.

[@JimmyRochester2233]

@@nattygsbord Thanks for taking the time to respond. Regarding nationalism and populism, I'm for a kind of patriotism but I think those of us who care to preserve some kind of democracy going into the future are so few and far between that we'll need to find ways to build bridges internationally, lest isolationism and authoritarianism destroy democracy in every country. Regarding the question of immigration from 'backwards' countries, keep in mind that lots of people have been crying that this wolf is coming for generations, but each new generation of immigrants typically gets integrated into the new culture. Obviously, there are lots of injustices in the past and present of human migration. Yet nationalism led to the kinds of imperialism and fascism which have made some of the most atrocious periods and places in human history that came right out of the Western world. Cosmpolitanism shouldn't be naive but whereas many see it as a sucker's game I think it might be necessary to maintain a world where all of us can live lives of quality. While nothing in the Western world has so far risen yet to degree of the greatest historical threats fascism has posed, the last few years have if anything shown it could we could slide into conditions just as or more dire in the future. Regarding leftist media, I meant start new leftist media on new platforms, e.g., KZbin. Regarding your edginess, I didn't care if you were being edgy, because whatever joke you were trying to make didn't land and was ridiculous to try pulling off in the first place. Macron is a liberal who many consider centre-right and is at most centre-left. Merkel is a Christian Democrat, which if you know anything about Germany is not 'the left'. Regarding nationalism, if it's coming out of right-wing populism, especially at present, which I thought you had previously derided, they've shown themselves willing to either throw customs, laws, traditions and civic values right out the window. They're willing to do it as much as anyone else is. Black Lives Matter is not at all whatsoever seeking to establish a black ethno-state in the USA. The post-War history of Muslim immigration to Europe is marred by countless mistakes and the EU is not held accountable enough for their recent and ongoing failures. If leftists in Europe are capitulating to Islamism, that's a ludicrous shame. It can be tricky to tease out when that's what some leftists are doing and then when other leftists are just trying to defend Muslim communities from overzealous Islamophobia. The cases of separatist nationalism of Scotland and Catalonia are complicated but they can't be reduced to some plot by 'the left' to balkanize these states for mysterious, nefarious purposes. What's happening in the EU sounds awful and while, not being European, I don't know enough to weigh in on its future, I'm sympathetic to positions both supporting or critical of the EU. Bureaucratic neoliberalism has rendered social democrats largely toothless the world over but especially in Europe. Look to the general strikes in France from last year as a resurgence of a Left that genuinely cares about the working class. While I agree with some of the policies you're advocating, one thing to keep in mind regarding a 'nation' is the territory it's upon, the people who live upon it, and the governments that governs aren't the same thing. Nationalism from any point on the political spectrum can and is often used, in the past and the present, to hoodwink populations into having citizens serve the government at the expense of each other instead of banding together, without the government serving as the intermediary, to have it serve all the people who live there.

[@rodrigohernandezmijares9976]

That dude has no idea what populism really is. The ¨New Economic Thinking¨ is hardcore populism. That´s what they sell in reality. That´s why he hides the role of easy money and central banks creating the booms and busts that hurt people, and blames Economics instead of mass migration and European Union absolutism for the reactions in places such as Poland and Hungary. It was not Economics. It was top-down globalist policies that created them.

[@DirkPiddlemark]

Technocratic empty suits like this guy are more than half the problem

[@rhizomefriend]

Populism is essentially defined by any economic or cultural political policy which doesn't adhere to the dominant consensus of the last 40 years then? This analysis is very limited, it speaks as if the hegemony that has been established since the rise of neoliberalism is transhistorical.

[@amorfati7008]

I’m not afraid of people like trump, I’m afraid of the new amoral managerial class and elitists like this guy. Why is this talk framed in terms of populists, not market fundamentalists looting treasury during crisis - the same people who cry deficit when it comes to helping regular people?

[@TheLeksilijum]

Economists are so horrible at predicting human behavior. We get more credit cause we expect our income to rise, sure... It totally makes more sense to lose future money by paying interest on the credit, and before you try to say the word "investment" please shut that freaking economics textbook and look around. People that don't already own companies have no money to invest in them.

[@rodrigohernandezmijares9976]

Discover Austrian Economics and you will find they can predict human action regularities unlike this Keynesian and Neoclassical frauds. It´s a far superior School of Thought

[@kevinmahoney1995]

Right-wing populism isn't really populism if it ultimately sides with big business

[@DennisCambly]

A lot of words to say nothing related to reality

[@jimdoukas91]

Π

[@longnewton1]

Populism is often driven by conspiracy theories as well a false beliefs, for example that immigration is taking people’s jobs. Immigration almost always has a positive effect on an economy, but right wing politicians deliberately mislead people playing on their fears. They exploit the poor, when it’s the neoliberal capitalist economics of the right that is causing huge income and wealth inequality and rising poverty, especially in the US. The right wing populists nationalism appeals to the poor who believe that the Government will limit immigration and create lots of jobs for them. Sadly it doesn’t happen. They’ve been taken for a ride. The only people who have actually benefitted overall are the rich. Their wealth has increased hugely. Wake up people!

[@nattygsbord]

Euroskepticism existed long before 2008 as UKIPs popularity shows. Trump voters have a good median income so they are hardly trailerpark trash as some left-wingers believe. Front national in France have always had a strong support among the working class voters decades before 2008. The Sweden democrats are stronger than ever despite a relatively strong economy. So here is an idea: Maybe the rise of populism is not just about economics. Maybe people are fed up with a system which works less and less in their favor. I will never ever vote for an establishment party anymore, since there are no establishment party in Sweden that gives me the option of leaving the EU. The left no longer fights for me. They want more EU, more wars, more censorship, more neoliberalism. So why the hell should I vote for them?

[@SofaKingShit]

So like many, when you feel the establishment no longer served your interests you left the mainstream and chose a more periferal party. Interestingly some in this situation choose right wing parties. This happens especially among young men who can then effectively vent their anger, often at the more vulnerable in society. I'm not really sure how things are in Sweden but in Norway we have the Red Party who are far from neocon or war mongering and are even somewhat sceptical of EU. Of course they're Marxists so l bet you'd like to put on your brown shirt and fight them in the street but different strokes for different folks right?

[@nedim_guitar]

You're partly right. Right wing populists, like the National Front in France (they have since changed their name), or the Sweden Democrats who were straight up Nazis, were usually racists and/or Nazi/fascist. Today, they've toned down the racism, but it's still very much present. However, that's not the main issue with those parties. The reason that they've been growing these last 10-20 years is in fact economy. We have never been more rich as a society, but the wealth has been concentrated to the the wealthiest, to the one percent. The income of the middle class in the USA hasn't risen in the last 20 years. In Sweden, the story is similar. The county has never been wealthier, but at the same time the state, region and municipalities have had to cut their spending, thus more and more underfunding education and healthcare.

[@francismuller6285]

I am always puzzled by the framing of populism not being about economics but being about fighting a system which works less and less for the general people. I mean isn't the main point about the system not working in people's favor that it doesn't work in their favor ECONOMICALLY? If not, in which way is it? Do you mean that the system not working in the people's favor is rather a general feeling than an issue of specific policy?

[@nattygsbord]

@@SofaKingShit Our mainstream parties the greens and the left was anti-EU throughout the entire 1990's and for most of the early 2000's. So why is it now suddenly an extremist nazi-communist position to hate the EU? It is the political parties which have changed their opinions and not me. The EU have forever been a neoliberal anti-democratic project. As I sees it can some of the election results, like the EU parliament election in 2014 rather be seen as the collapse of the mainstream establishment parties than a rise of the far right. The number of people who voted for the "extremist" parties remained basically unchanged, but they got a larger percentage share of the total votes because the typically mainstream party voters stayed at home rather than going out and vote. The last Brexit vote in UK was also much an effect of typical labour voters staying home, while there was not much more people who switched over to voting tories or UKIP. *"Of course they're Marxists so l bet you'd like to put on your brown shirt and fight them in the street but different strokes for different folks right?"* I vote for a centrist party called "Landsbygdens oberoende" because it is anti-EU and share 90% of my political views. I could however understand that people vote for "dirty" extremist parties when the establishment refuses to represent their views, so people got no other alternative to express their discontent than to vote for parties which will atleast do something to solve the main problem.

[@nattygsbord]

@@nedim_guitar The Trump voters are richer than the average American. And the rise of the Sweden democrats took off before the financial crisis - which by the way was pretty mild in Sweden compared to southern Europe. So I think economics is a too simple reason for the rise of the populists. I think there are many factors at play, and they vary from country to country. Anti-EU feelings have always been strong in some European countries - like Italy and UK. Some countries have huge demographic problems and therefore do not like population replacement with immigrants - like Eastern Europe. Many western countries also see a revolt against identity politics and political correctness. In some countries are the nationalists hardcore market fundamentalists (like AfD), and in other countries are they more welfare chauvinist and leftwing in economic issues. UKIP voters are even more leftwing in economic issues than labour is in Britain or even in Sweden - but strangely enough is UKIP itself a party which is hardcore free market. All this make me think that UKIP voters vote like they do mainly for other reasons than economics - like anti-EU and anti immigration reasons. While the working class loves their country and their family. While the leftwing parties have become based on liberal values of the urban middle class which got not much in common with the roots of the labour left. The modern Swedish socialdemocracy is therefore more allied with neoliberals than what it is with the working class. Right now we have Social democratic government in Sweden that openly supports privatizing schools and healthcare, lower wages and the idea that it should become easier to fire people. This government also want the get rid of all price controls of housing. And it have also cut our already low corporate tax further so it is one of the lowest in the EU. This party is only left in name only.

[@derek3266]

12 minutes I’ll never get back. What is he talking about? His professorship should be taken back. Many countries have a simple rule not give professor titles to teenagers as would be wise in this case. I though he was going to talk about populism.

[@ChalrieD]

From the very beginning his young professor makes assumptions that are straight up opinion. Framing a debate is a bad idea professor, at least for those not grinding an agenda, you’ll learn as you mature.

[@disturbiannah]

He's an expert in economics. His opinion matters.

[@ChalrieD]

Shelly Stone not really. Lot of economic “experts” especially those from academia are grinding an ideology. Not many economists agree on much.

[@JohnMartin-jx1wz]

Bullshit.