Angrynomics: a reply to Chris Dillow

Chris Dillow writes perhaps the most interesting economics blog I know. Its scope is considerable, and despite his declaration of bias – he self-identifies as a ‘marxist’ – he is typically empirical. His recent review of Angrynomics, a book I co-authored with Mark Blyth, raises a fundamental question which I have been reflecting on. It is encapsulated by the rhetorical question with which Chris ends his review:

“What chance do we have of such reform, given that our existing institutions serve extractive capitalism so well by diverting anger away from its proper target?”

Some context may help clarify this question. In Angrynomics we make a distinction between two forms of public anger: moral outrage and tribal rage. It is important to be clear that these are not subjective classifications that Mark and I have plucked out of thin air. They are empirically distinct phenomena. To observe their existence requires no assumption of relative merit. There seems to be two observable forms of anger which humans express publicly: anger at perceived injustice which I label the anger of angels, and the anger of tribal fans, or the anger of devils. To observe these forms of anger in play all that is required is a trip to a football match (there is always an angry minority) or attendance at an extinction rebellion protest.

In his review, Chris adheres to this typology of anger but argues that ‘extractive capitalism’ has hijacked tribal rage to serve its interests, and subdue the potential of legitimate indignation to create real reform. In a vein similar to that of Jonathan Hopkin and Lea Ypi of the LSE, in a fascinating discussion with Martin Sandbu, Chris sees power (specifically, capital’s power) and vested interests as acting to successfully neuter enlightened reform.

Mark and I argue, by contrast, that in the absence of competing ideology, the vested interests of the political class and the media (not ‘capital’ per se) have harnessed tribal rage to win elections and attract eyeballs. But the core of my counter-hypothesis to Chris, Lea and Jonathan is that significant reform of capitalism in the last twenty years reflects a failure of ideas. A vacuum of thought, specifically a coherent set of clear, effective and novel ways of tackling our core collective concerns, has created the space for myopic and eccentric vested interests to hijack our politics with a primitive but permanently latent motivator – nationalism.

My contention is that a widespread consensus exists across our society on three ethically-motivating concerns – making growth environmentally sustainable, tackling inequality in its many forms, and minimising the damage of recessions. What is patently lacking is a novel, off-the-shelf, and compelling manual on how to do this. There has been nothing comparable to Friedman’s blueprint for tackling stagflation in the 1970s or the Keynesian agenda for a mixed economy post-War. It is precisely because of this vacuum that the political class has sought power through populism and nationalism – not, as Chris implies, because the manual for reform is there to be implemented, but capital is obstructing it.

I should stress that my measure of a compelling manual of reform is specific: the ideas must be new, effective, simple, and not fit neatly on the tired one-dimensional political axis. To take the most striking example, the biggest failing of the environmental movement is that no one knows what it wants. We all agree on objectives, but how do we do it? Quickly, clearly, and effectively. If you don’t agree with this claim, try the following experiment: ask anyone what is top of the list of policies which we should implement to make our economy sustainable. This is not to say that making growth sustainable is simple. It isn’t. But the political challenge is to make it tractable, appealing and simple. Friedman’s intellectual power – his political intellectual power – was in no small part his ability to simplify.

Will the interests of capital obstruct a new software designing capitalism 4.0? It is hard to test this hypothesis. Jonathan Hopkin and Chris both argue that good ideas have been there for the taking. I disagree. I see a set of new policies emerging – but recognition of the various gifts created by negative real interest rates has only gathered momentum in the last few years (and Greta seems oblivious).

I should stress that it is incorrect to believe that vested interests do not act to protect their interests. But the specific interests of ‘capital’ at the current juncture of history are very unclear. Consider the lobbying of banks in the United States for further deregulation. Superficially, this presents itself as financial capital lobbying for its interests. But as an investor, I am totally unconvinced that this is in the interests of the shareholders of banks – regulations are barriers to entry (as Jamie Dimon has noted publicly). Deregulation usually results in credit booms, which are bad for the return on capital of the non-financial sector. As Mark and I argue in the book, the era of deregulation destroyed the bargaining power trade unions, but also set capital on a path of war with itself. Amazon, for example, is often presented as some evil capitalist semi-monopoly destroying our precious high streets (and who profited from these?). In practice, it operates as a marauding low-cost threat to all other capitalists with fat margins previously living in peace. Amazon’s valuation is treated as a scandal because it renders Jeff Bezos’s paper profits obscene. But what of the damage to other capitalists caused by a virtually zero cost of capital financing a maniacal blue sky investment philosophy? Warren Buffett correctly observed that the predictable winner from the internet was the consumer – that didn’t stop capital from throwing endless quantities of capital at it.

I would add that British capital has far more to fear from Brexit than any of the policies Mark and I advocate. But these are anecdotes. There is a broader point. In a de-regulated world, the interests of heterogeneous ‘capital’ are highly unclear, and it competes with an array of other interests. Moreover, there are a huge array of important policies where no one actually knows how their interests are affected (QE is a case in point). Mark and I specifically sought policies which promote that confusion. For me, this amounts to a political strategy.

I also fear that Chris’s perspective runs the risk of being self-defeating. If ‘extractive capitalism’ can effectively block all reform, how can we ever change it? If we need new institutions before policies to expand asset ownership, make growth sustainable and end recessions, will be introduced, from where will we get the support for those institutions?

My view of socio-political evolution is more arbitrary and chaotic than Chris’s Marxism or Lea Ypi’s power-based analysis. In our age, perhaps more than ever before, rapid change can occur before anyone has had time to work out what it means for them.

About The Author

Eric Lonergan is a macro hedge fund manager, economist, and writer. His most recent book is Supercharge Me, co-authored with Corinne Sawers. He is also author of the international bestseller, Angrynomics, co-written with Mark Blyth, and published by Agenda. It was listed on the Financial Times must reads for Summer 2020. Prior to Angrynomics, he has written Money (2nd ed) published by Routledge. He has written for Foreign AffairsThe Financial Times, and The Economist. He also advises governments and policymakers. He first advocated expanding the tools of central banks to including cash transfers to households in the Financial Times in 2002. In December 2008, he advocated the policy as the most efficient way out of recession post-financial crisis, contributing to a growing debate over the need for ‘helicopter money’.

3 Responses

  1. GrueBleen

    No comments so far, so let me try one. You say: “ask anyone what is top of the list of policies which we should implement to make our economy sustainable.:

    How about replacing all anti-climate means of energy generation (mostly involving combustion of something that increases the CO2 content of the atmosphere) by non-polluting forms of energy; primarily solar (photovoltaic and concentrated) and wind.

    If we cannot achieve this is fairly short order, then we’d better get used to a radically changed world.

  2. Brian Whitney

    So, my two cents. In my state TABOR (Tax payer’s Bill of Rights) was enacted in 1992, and we have a Devi of a time trying to undo it.
    Can I show a possible vehicle used by conservatives in my state?The TABOR limit is equal to the lesser of the prior fiscal year’s revenue limit plus the rate of inflation and population growth in Colorado or the current fiscal year’s revenue. Also, the TABOR Amendment requires voter approval for certain tax increases. ”
    So, a ratcheting down effect.
    Can something similar be applied to environmental and equity arguments at one go, and elicit the two public anger vectors at the same time, tribal and moral? For anything that increases taxes in our state, the first line that the voter sees is all in caps: A TAX INCREASE OF $…
    Voters vote no, over and over again, since 1992.
    Th idea that whatever they come up with that is both environmentally friendly AND tackles equality must beat what is current–and the next year a newer better thing can beat that. What about that? A ratcheting effect that everyone can grasp, where things get greener, more equitable for the entire world– or nothing. . That may be harder to undermine or obfuscate by opponents that want the status quo, or who in fact want to expand marketshare or the natural tendency to maximize profit, and socialize risk.
    Thought provoking article. Thanks.

  3. Brian Whitney

    [Please dont bother posting if off the mark,]. Part two:
    It sounds like what you are looking for is full spectrum democratic marketing, that rallies the people more effectively that a FoxNews flotilla (TV, radio, twitter, instagram, FB,, and micro targeting and a multi million dollar budget that yields billions in government tax restructure and extraction give-away )or a Brexit campaign.
    I am not an economist. I know nothing of Cambodia, but I can say the name Pol Pot, and tell you he had a ‘shining path’. FDR’s New Deal, OAC’s Green New Deal, Current president’s MAGA.
    The monied interests will OUTMARKET US 100% of the time. They have the money. They have the clear goals. That cannot be our only thrust. Maybe something that includes enthusiastic crowd sourcing.
    I don’t think we need a target 20 years from now. I think we need legislation put of that asks for 2% reduction every year of non-essentials. Every order of magnitude, from local business, to city and state, national. Take Heathrow airport: set a firm commandment of 5% reduction every year of carbon emissions, and exclude offsets, so they dont buy up farmland and claim it as a carbon sink. Firm definition of what counts, not to be rejiggered by the opposition. We do it every year, and base it on last year.
    Just thinking out loud. Dont publish if you dont want to…Apologies if I’m way off target.


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