Sub-prime politicians

Many economies around the world continue to grow or bumble along without much sign of crisis. (This article describes how such a “trend” might be enduring, using the example of a Japan whose aging and shrinking population is consuming and investing less.)

Without economic issues in the headlines, politicians are looking for ways to differentiate themselves and “get things moving.” This impulse worries me, as politicians are far less predictable than markets or economies.

Thus, I think that our next economic crisis will result directly from political mistakes rather than indirectly result from political regulatory failures.

Trump is already playing this game, pulling the market here and there with new larger forgotten back-again tariffs. His democratic opponents, many of them proposing radical change (e.g., wholesale reform of a “health industry” that absorbs 18 percent of GDP) have led some hedge funds to bet on big market losses after the Super Tuesday primaries, when Warren might perhaps win a lot of delegates.

Meanwhile in the UK, Corbyn and the Labour Party have proposed a strong return to state intervention, which could also have dramatic consequences.

Let me point out that I am not opposed to different political platforms or (often much needed) reforms. Nor am I a fan of Trump’s policy of destroying government from the inside and leaving the ruins to corporate cronies. Rather, I am worried that politicians are starting to forget the benefits of a strong diversified economy by taking existing economic stability for granted.

My one-handed conclusion is that politicians are at their most dangerous when they think they can implement radical policies without consequences.

Author: David Zetland

I'm a political-economist from California who now lives in Amsterdam.

2 thoughts on “Sub-prime politicians”

  1. So instead of implementing radical policies, we let the politicians incrementally improve health care, energy, environmental, or education policy ETC through deregulation. Then we end up with are free market solutions to everything, brought to us by the lobbying efforts paid for by the same corporations that profit handsomely from their monopolies. And damn the consequences.

  2. Yes. The American oligarchy is slightly less visible the than the Russian oligarchy.

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