President Trump, the coronation and economic success...

The coronation and the economy

The inhabitants of the developed world are thought to be psychologically distinct.[1] Some speculate that this cognitive schism with the rest of humanity happened many centuries ago, a function of the rapid expansion of the catholic church following the collapse of the Western Roman Empire. The church of the time, needing a way to break allegiance to patriarchal clans in order to expand, enabled by the patchwork of competing European princelings, established draconian conditions for marriage. No longer could families simply marry each other, thereby establishing kin based social safety nets with the young tasked with caring for the old. New rules forced young romantics to marry beyond their 6th cousins.

This had all sorts of intended and unintended consequences.[2] The young were forced to travel far from home to set up their own families, leaving the old often without care. The state increasingly was asked to step in. Over time an increasingly robust safety net emerged to fill in where family no longer could. Meanwhile, far from the often-overbearing influence of the patriarch, women began to experience a boom in personal agency. Individualism and individual rights became ever more prized, as did the legal and other institutions that evolved to protect them. Many make the link from this unique focus on the rights and freedoms of the individual to ensuing economic take off, leading the world out of millennia of stagnation. The inference being that individual rights and sustained productivity growth are inextricably linked.

The coronation of King Charles last weekend was an important reference point in all this. The UK was famously one of the first countries to manage to shackle its ruler. The glorious revolution of 1688 is often cited as the key moment. James II (and VII) was deposed bloodlessly by ruler of the Dutch republic William of Orange and Mary on the conditional invitation of the English parliament. Religion had long since failed to confer the same degree of legitimacy on European rulers that we see in the Ottoman empire and its entangling with Islam.[3] In Europe, this left room for commercial interests to elbow their way into the equation to a greater degree.?

The return of President Trump?

This debate may (as usual) feel very distant from the week just gone. However, this is one way to link a seemingly dispersed and jarring news agenda, from the latest developments in Ukraine to an already infamous CNN townhall with Former (and maybe future) President Trump on to the continued ructions over China’s ascent. As described above, the success of the developed world plausibly hinges on a mixture of individual freedoms, allied to constraints on the power an individual ruler can wield. The contradiction here is individuals need the freedom to make mistakes, to learn by experimentation. However, that is not a luxury we can afford our rulers. That inherent fallibility of the individual is simply too dangerous to be allowed unguarded access to the tiller of an entire country (or even region). Checks and balances are key.

This model comes with extra, often more visible, turbulence at times. A free press, a key strut in durable liberal democracy, can be part of that. Meanwhile, the culture wars stirring such outrage at the moment are surely in some part derived from that ancient psychological split mentioned above. That these debates are conducted in public where (mostly) freely held views can be contributed, may ultimately be?important in ways that are hard to see from our current vantage point - Finding ways to accommodate those that look, feel, or sound different is potentially a central ingredient into productivity and innovation – as economist Jack Goldstone suggested “Technological progress requires above all tolerance for the unfamiliar and eccentric…”[4]

The point in all of this is to not get too absorbed by Western decline narratives (again). The next few weeks may contain plenty to feed the fire, particularly as US congress flirts with a devastating default. However, the economic winners of the last few centuries, and indeed the post-World War 2 period, have been the countries able to manage sustained productivity growth and the wealth and living standard increases that accompany it. Perhaps it is possible to manage this feat without the individual freedoms and restrained executive that were central in the ascent of Europe, the US, Japan, and others. However, it is a reminder of the dangers of extrapolating the development trends of the last few decades deep into the future. All this is particularly important in the context of the multiplying wonders (and threats) embodied in generative Artificial Intelligence. The next revolution is here, flexibility will be required.

Bank of England goes again

More broadly, we are surely close to the end of this punishing interest rate rising cycle following the 12 consecutive rise in the UK this week. (Figure 1) Inflation would seem to be back on its way into the box in the developed world. Some caution continues to be merited here, all the same. Every minute that inflation loiters above the 2% targets risks it leaching more durably onto our subconscious.?

We are still unsure of the economic price we will pay for all these interest rate rises - rarely has ‘it’s different this time’ been more apposite. The ongoing turbulence in small and medium sized banks in the US has some pulses racing. However, parallels with the Great Financial Crisis are mostly crudely drawn and wide of the mark. Slower growth is likely ahead for the world economy in the short run. However, the future beyond that slowdown is increasingly bright. The technological horizon appears to be expanding faster than we’ve seen in decades, suggesting attractive returns for those willing to take the many risks inherent in investing.

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[1] https://www.theatlantic.com/magazine/archive/2020/10/joseph-henrich-weird-people/615496/

[2] Jan Luiten van Zanden & Tine de Moor, 2006. "Girl Power: The European marriage pattern (EMP) and labour markets in the North Sea region in the late medieval and early modern period," Working Papers 6017, Economic History Society.

[3] Jared Rubin 2017– “Rulers, Religion, and Riches: why the West got rich and the Middle East did not?” Cambridge University Press, 2017

[4] Kwasnicki, W. The role of diversity and tolerance in economic development. J Evol Econ 31, 821–851 (2021). https://doi.org/10.1007/s00191-020-00715-2