That’s the cry of populists everywhere. Fed up with self-satisfied elites who manage to feather their own nests even as they run their organizations or countries or businesses into nowhere, the average person decides, “No more.” No more consulting contracts that only tell us more study – with more fees – are needed. No more privatized gains and socialized losses, where taxpayers pick up the tab when pet projects don’t work out. No more million-dollar junkets and perks, while the rest of us struggle to make ends meet. No more.
Populists have a point. Experts are like the beautiful people in high school who set the rules but don’t have to live by them. They don’t have a clue. All they have are mathematical models built on theoretical foundations, sandcastles on the beach. It’s fine to project that self-driving trucks will likely end up like automatic teller machines, creating more jobs, not destroying them. ATMs didn’t eliminate bank tellers, they made them more productive, supporting higher wages. Self-driving trucks could do the same thing for truck drivers, too, but the designers and engineers and policymakers don’t have their own livelihood at risk, with the bulk of their personal net worth tied up in an 18-wheeler rig. Their skin isn’t in that game.
The populist urge is to take back the reins, to throw sand in the works before they tear us limb from limb. Like Charlie Chaplin tightening bolts on a giant gear-wheel in “Modern Times.”
Scene from “Modern Times.” Public Domain. Source: Museum of American Art
The problem with rejecting experts is that – for all their annoyance – they’re often right. The models they use may not be perfect, but they do correspond to something in the real world. When we throw out the elites because of their arrogance, we reject muchof the expertise needed for managing a large enterprise.
What follows is often self-limiting. Most populist economic policies are destructive, and people become distressed by the resulting economic chaos. There is one exception: when the elites have been too stingy, populist fiscal and monetary policies can be helpful. Much of FDR’s New Deal was counterproductive or inconsequential, but his dollar depreciation versus gold was so effective it outweighed policies like NIRA and the Agriculture Adjustment Act.
If the populists sweep into power in Europe over the next few years, they will likely reverse two decades of contractionary monetary policy by the ECB. That would be a good thing. But if that success allows the populists to take more radical actions, like selling off gold reserves to fund new spending, or enacting racially-charged immigration measures, that’s a problem.
The populists have a point: the cool kids are out of touch. But as Shakespeare’s Jack Cade and Dick the Butcher – both radical populists – learned to their sorrow, reality bites. It’s not enough for populists to be popular. They also need to be smart.
Douglas R. Tengdin, CFA
Charter Trust Company
“The Best Trust Company in New England”