Animal Spirits in Populism and Democracy — How Anger Feeds into Economic Animal Spirits

Published: 3/December/2016

Whether it may or may not have been noticed in the writings so far has been the reoccurring theme of Globalisation and the impacts it has had on the world over the last few decades in some form or another. This year alone (written in 2016) the effects of Globalisation have come to somewhat of a boiling point as two of the biggest political events of the year (Brexit referendum and US Presidential election) have highlighted the anger of the general population at being forgotten about through the Globalisation effort.

Globalisation has been a fantastic asset to humanity as it allows the marketplace to identify the areas to the world in which products can made cheaper and in more abundance. The mobile or laptop you are reading this on is a product of Globalisation or a quick look around the room you are in will showcase the goods you have purchased were more than likely made possible and made available through a supply chain, is what we can call a direct benefit of Globalisation.

But unfortunately the process of economics seems to observe the same rule a Newton’s Third Law of Motion where every action has an equal and opposite reaction. In this case what we can now purchase easier (through more inclusive trade agreements) and cheaper (through cheaper costs of production and labour) has opened an opposite reaction on the social side of Globalisation.

The openness of trade in the financial sector fed into the animal spirits of humans to push them to a sigma 10 probability which allowed us to observe a Black Swan of epic size and impact. When I say sigma 10 probabilities, it is using the concept of efficient market hypothesis (EMH) and fractal market hypothesis (FMH) to highlight how an incredibly low probability of some wayward event will happen to disrupt the everyday self-running machine that is the global economy In this case, such a seismic event was the Great Recession of 2008. The resulting meltdown decimated the majority of the population here in the Western World that has leaned away from labour and more to the services industries (tertiary sector) like Finance. The move away from labour intensive industries (primary and secondary sectors) has left people that have been employed in those sectors exposed to global competition and wage differences, and subsequently open to lose their jobs to cheaper labour forces in other countries. This combination has led to a mass psychological distrust of Globalisation due to the immediate effect it had on people’s livelihoods and the increased, mostly unwanted, dependence on the state to survive.

The anger derived from the effects of this rapid movement to Globalisation is possibly born from two points;

The first point being that anger that has come from not understanding the reasoning behind Globalisation along with no measures put in to allow re-education and upskilling for those most exposed, so this lack of transparency at the national and regional levels of Government have allowed for distrust and conspiracy to be born from poor long term decision making, and,

The second point is that there is a lack of Government policy to have the future sight to do the very basics of a SWOT like analysis and publically display said results of a country. This will help the citizens determine their place in an ever growing Globalised world and which industries are at risk. Re-education programmes can be given to allow workers become available for easy sectorial transfers from a dying weakening industry to a growing and strengthening industry to prevent loss of productivity. This will also help to attain a certain level of national autonomy to increase competition within the strong industries to contribute to fighting monopolies and possible collusions but to also spur innovation.

Animal Spirits in Democracy

The Keynesian concept of animal spirits played its role in the political outcomes of the year. The American election and Brexit stemmed from people’s anger and lack of understanding of what was at stake. (It could be argued that certain political influences from inner circles destroyed certain party’s chances of beating Trump, but there is no point now complaining about what could have been.) This anger that the masses had building up allowed them to get swept up in the extreme populist agenda and vote with their heart only and not their head. They were reinforced in their decision making with good memories of the past and led to believe that the past was better. A hope was seeded and this hope fed their animal spirit into irrational thinking because of the two points highlighted above. They were given a chance to relive the dreams of their past but the world has moved quickly beyond that and won’t be returning to it so unfortunately their dreams of going back to the past are just that, dreams.

Next year will be interesting on the political scene with national elections happening all over Europe. In places like France and Germany, the far right are energised by the wins in the UK and America. This could further feed the political animal spirits and we could possibly see the black swans of this world begin to wear brown shirts again. Constitutional reform in Italy could mark the start of mainland Europe’s descent back into Fascism through constitutional reform to dilute the powers of the senate and concentrate power to current leader, Renzi. Looking back through history, it does seem to be repeating itself (with modifications obviously) but the way Germany were treated after the first world war and the crash of 1929, the angered people taken advantage of by an political upstart opportunistic authoritarian, by espousing rhetoric of a better future by any means necessary, which ended up with that cost being way to high at the price of morality, found its pathway way to fruition through Hitler’s special blend of fascism.

By right the vast majority of people are angry with the status quo, but out of concern even with this understanding, be careful what you rise against and who you rise against for. It is this anger that feeds the animal spirit of humans and connects to our decision making on the day to day level which ascends up to the national level. The success of our society (and civilisation itself) can be boiled down to many things, but personally, it comes down to trust in those that run firms and hold office to do the right thing for the benefit of us all, but that trust has been vaporised by actions taken (or some would argue not taken). This anger can be vented in polling booths to dispense the current occupants of their seats at government, and it’s the people’s right to determine the route their country goes, from constitutional reform to any degree of legislative matter, but remember that all actions have consequences. The person telling you to get rid of the spread of power through a financial argument can be building up and consolidating power themselves to slowly drag your country into a dictatorship. Use your vote wisely and research yourself and think for yourself. Never allow someone else do that for you as that is dangerous. Democracy is beautiful but what it gives it can also take away and you only miss something once it’s gone.

Perhaps serious consideration needs to be given to the foundation of a Ministry for Future Affairs to allow a clear path to be set out for a country to manage resources accordingly and invest in infrastructure, for the benefit of future citizens, irrespective of who is in charge for that term, as these citizens will be living longer and draining resources for longer too. If not at least talked about, this lack of foresight and vision for the future (both short and long term) we can begin to constructively illuminate our trajectory or we will continue to fumble about in the darkness of the present.

Don’t be like the frog that is sitting in the pot of water to only have the water increase in temperature slightly over time and eventually die and not know it. However, as the pendulum swings, it can swing too far and see extremism between the political left and right with more conflict that does not see a synthesis between the ideologies (Hegelian Dialectics), but a winner takes all ultimatum type of scenario. This is a dangerous road we trundle down but the masses don’t want to see it.

About Author

Jonathan McEvoy is an Irish based border control post inspector for the Irish Government and Europe Union who took up his role in 2019 in response to British withdrawal of trade agreements, which was a position taken up after time spent working within the financial services sector in Dubai. He is an economics and finance postgraduate from Waterford Institute of Technology and a community stalwart in his home city of Waterford having been elected to serve on many boards of directors around the city in a voluntary capacity. His love of writing has a deep theme of economics in every published article which talk about history, philosophy, finance, politics, and society. His writings are grounded in practical observations away from the theoretical hypothesis of hypothetical potentials. If you are looking for a modern digestible viewpoint on modern economic ideas with a focus practicality and no holding back, he is a writer for you.

Find Jonathan on the social platforms @jonathanmcev0y

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Jonathan McEvoy

Jonathan McEvoy

It is good to be back on Medium. This is going to be the second home of all articles that have been written about and published. Get in touch @jonathanmcev0y

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