In the aftermath of the financial crisis, no one would have thought that the quirky and not-very-well-known senator from Vermont would break out to become a national leader on income inequality and economic populism. The same can also be said for an anonymous academic named Elizabeth Warren. However, the 2008 financial crisis has revealed a rot at the core of the American economy and that has led to a pair of populist movements. The result is Donald Trump and Bernie Sanders.
Workers of America Unite?
Donald Trump and Bernie Sanders are the result of the same problem. Workers and those who derive their income from labor rather than capital have been left behind. There are multiple factors at play here. One of them is outsourcing and the other is automation. This has gutted thriving towns and cities throughout the midwest. Coastal cities were able to shift and adapt and took advantage of new industries, for those out in the middle of the country the gains have been hard to find. Because of this, people are demanding a new economic movement that represents workers, homeless, and others who are working towards solving economic inequality.
Let’s jump back to the world of the financial crisis.
Banks Got a Bailout While Americans Got the Bill
In the fall of 2008, Congress passed the $700 billion TARP legislation that gave the banks needed capital to keep operating. However, when it came to bailing out Americans from variable rate mortgages, there was political push back and little progress on that front occurred. President Obama instead, started a $1 billion dollar used car program to collect old cars and sell new efficient cars to people. “Cash-for-clunkers” only helped those who could afford a new efficient car. For those facing homelessness, there was little help. Rick Santelli’s famous speech on the floor of the Chicago Commodities Exchange not only sparked the Tea Party was seemed to reflect a certain zeitgeist of the time. No one really wanted to pay for anyone else’s mortgage. However, using the fear of total financial collapse, more people were ok with bailing out the banks, especially once the stock market began to free fall and people saw their retirement evaporating over night. It was the taxpayer who ended up footing the bill for the toxic assets. However, when it came time to help the tax payers, the government largesse was closed.
Enter Donald Trump and Bernie Sanders
The only reason we are having this conversation using the words like equality and the One percent is become occupy put those into the national vocabulary. People took to the public spaces of the world and demanded change, they demanded their portion of the profit that we all work to generate. This movement was in reaction to the idea that once someone has money, they don’t have to pay the system back any portion of their earnings or their wealth. That system is unsustainable. Occupy got us talking about why the system is the way it is, why people ploughed themselves into debt for degrees that didn’t earn them jobs and why 10 years later, the economy in its current form cannot provide for everyone.
Donald Trump offered to bring the jobs back. He offered to change US trade policy. He offered to reduce regulations to get companies to open up coal mines again which would mean jobs in places like West Virginia. He offered to reduce immigration both legal and illegal to almost zero. He spoke to the innate isolationism and protectionism that lays dormant in the American electorate.
On the opposite side, Bernie Sanders has offered democratic socialism. Extending benefits like Universal Healthcare, free college, and other benefits that would directly help people in need in this country. Although Sanders has not come out in favor of a universal basic income, he has certainly advocated for discussion of that idea. To his left is Andrew Yang who is running for president with that as a central issue. If you had told anyone that 10 years after the financial crisis that anyone would be seriously talking about giving everyone $1,000 a month, no strings attached, would be an idea talked about in mainstream discourse, no one would have believed you. However, here we are in 2019 having just that conversation.
Occupy vs. Tea Party
Both Occupy Wall Street and the Tea Party have generated different ideas on economic populism. Rather than merely filling the pockets of the rich with money in the hopes that it will “trickle down” through investment in jobs and business expansion, economic populism hopes to help everyday people in more direct ways. Donald Trump has attempted to do this with his legendary tax cut, however, thanks to a GOP led Congress, the middle class got little help from the tax cut and what little they did get was immediately eaten up with healthcare costs and inflation. Bernie Sanders wants to raise taxes on the rich “make them pay their fair share” and then use government means to redistribute those resources to regular people who need the money in their pockets. And it isn’t a wonder why. We live in a country where you can work a full time job and still be unable to get by.
This week, a freshmen congresswoman from California grilled JP Morgan Chase CEO Jamie Dimon on how someone who works at his bank branch cannot survive in Irvine, CA.
At one time in this country, someone working at a bank would have been able to support themselves and their child. Now, that is not the case. Someone making $16 an hour at a bank branch in his company cannot live where they work due to rent costs, food costs, and other factors. It isn’t a wonder why people are agitating for someone, anyone, to fix the economy. For regular people it is a matter of survival.
Populism Isn’t Going to Solve Real Problems
All of these policies sound nice on their face. Who doesn’t want universal healthcare or better education? Most people want to see their communities grow and thrive and to have good jobs where they can make money and build a life for themselves. However, this requires good wages for regular working people who can then spend that money in their communities. The policies of both Trump and Sanders feel good but they don’t solve the real problems facing the US economy.
Automation is coming for a variety of jobs including service jobs and middle management. This has already started. Millions of workers will be thrown out of work in the coming years as machines are simply able to work cheaper and faster than human workers. Automation is even happening in China where robot-helpers are slowly taking over in many areas of the manufacturing process.
Thanks to globalization, all workers, all over the world have to compete against one another. The reality is that production jobs are going to move to cheaper places. Labor is one of the few areas where corporations can shave off costs to produce the dramatic profits that keep investors interested in their stocks. For public companies today, the business is only as good as the next investor earnings call which happens every 13 weeks.
Globalization is so far reaching and has integrated the entirely of the world economy that no nation, not even one as dynamic as the United States can de-couple from the world economy. Thinking of the economy at a national scale isn’t even practical. Any economic conversation must start at the global scale. The economy is the living organism of everyone on this planet. Businesses and workers are constantly competing with one another which does not advantage workers because the cost of living in developed nations is higher and requires a higher wage which makes them uncompetitive.
Economic populism might feel good but the reality is that we need a new economy built from the ground up. An economy that is less dependent on consumerism and products and services and more dependent on helping actual people with actual problems. The economy of the present cannot be sustained into the future and populism is only going to paper over the reality that we face.