Bank of England Governor Mark Carney said this week that British workers haven’t had things this bad since the 19th century.POOL/Reuters
Everywhere, powerful people are beating their breasts about the underclass: the weak, the overlooked, the underachieving. It's not just rowdies, like the American president-elect, who are banging the drum about "ordinary people."
In Liverpool this week, Bank of England Governor Mark Carney hung his hat on a left-leaning hook and told his audience that British working men and women had never had it so bad since the middle of the 19th century. He was talking about the stagnation in incomes. Over the past decade, real wages have grown at the slowest rate since the 1860s, he said. Those mid-Victorian years, he suggested, were a lost decade for workers, disrupted by new technology such as steam engines and the telegraph and disturbed by populist demagogues, such as Karl Marx.
The Communist Manifesto has a bit more intellectual content than Donald Trump's The Art of the Deal, but the parallels between mid-Victorian England and the early 21st century are well drawn. More interesting, however, is Mr. Carney's prescription: He admits that trade and globalization have not lifted smaller craft at the same rate as that of billionaire yachts. The economic advantage a country gains from free trade and from new and disruptive technology is unevenly spread in the population. The Governor wants a globalization that works for all, which means redistributing the gains from globalization. Why not harness technology to enable small and medium-sized companies to connect across borders and sidestep the power of big stateless, tax-avoiding corporations?
Who would have thought Mr. Carney was such a romantic? To be fair, the Governor is probably still smarting from the gratuitous (and unfair) attack by Prime Minister Theresa May on monetary policy which, she complained, just made richer those people who had financial assets and left everybody else poorer. He has been at pains to prove that rather than widening the wealth gap, low interest rates and quantitative easing saved millions from perdition. However, the point is that both the Prime Minister and the banker are not fighting their own corners; instead, they are fighting to occupy the same corner.
Everyone from far right leaders, such as France's Marine Le Pen and the erratic Mr. Trump through to old-fashioned Tories, such as Ms. May or touchy-feely liberals such as Justin Trudeau and on to the far left wing occupied by Britain. Labour Party's Jeremy Corbyn; all seem to agree that the solution to our current problems is more government intervention.
But there, the political consensus hits the intellectual quagmire. There are no new ideas on how to create a fair society within a liberal economy. Ms. Le Pen and Mr. Trump would shut the doors to foreign competition and the U.S. president-elect would also cut taxes, hoping that the laughable Laffer curve (the discredited theory that big tax cuts stimulate growth which more than replaces tax revenues forgone) makes us all rich. Alternatively, Jeremy Corbyn's far left would send us rocketing back to a Fidelist 1960s revolution, with nationalization of the commanding heights of the economy. Meanwhile, the dull centre occupied by Ms. May and Mr. Trudeau is utterly bereft of ideas other than a bit of public spending on roads, railways and airports.
What is missing from the agendas of these politicians is any recognition that our present dilemma may have natural causes. Could it be that the earnings stagnation we are now experiencing is not a conspiracy organized by elites but just a consequence of demographic change? Could it also be that technological change is not being harnessed fast enough to deliver the goodies it promises? We know that the labour force in Europe and America expanded hugely after the postwar baby boom while the collapse of communism brought another billion into the global capitalist work force. On its own, China's industrialization and work-force expansion would be enough to depress wages worldwide. We also know that the big profits from the digital revolution are not being recycled efficiently into new ventures or shareholder dividends but instead are being hoarded offshore in tax havens or stored uselessly in government securities.
The truth is we need elites (who wants a third-rate doctor or scientist?) and at least Mr. Carney offers some part-baked ideas. We know that quantitative easing did little to help small businesses and startups, which need the security of equity capital to expand. Why not create institutions that distribute seed capital in the way that the state distributes educational capital through schools and universities?
It might be expensive and inefficient but no more than public education. The young Mr. Trump had the boost of a million dollars from his father, an investment that might have been ten times as valuable had it been divided between 10 more enlightened entrepreneurs.