Why we stopped trusting elites

The credibility of establishment figures has been demolished by technological change and political upheavals. But it’s too late to turn back the clock. By William Davies in The Guardian

For hundreds of years, modern societies have depended on something that is so ubiquitous, so ordinary, that we scarcely ever stop to notice it: trust. The fact that millions of people are able to believe the same things about reality is a remarkable achievement, but one that is more fragile than is often recognised.

At times when public institutions – including the media, government departments and professions – command widespread trust, we rarely question how they achieve this. And yet at the heart of successful liberal democracies lies a remarkable collective leap of faith: that when public officials, reporters, experts and politicians share a piece of information, they are presumed to be doing so in an honest fashion. 

The notion that public figures and professionals are basically trustworthy has been integral to the health of representative democracies. After all, the very core of liberal democracy is the idea that a small group of people – politicians – can represent millions of others. If this system is to work, there must be a basic modicum of trust that the small group will act on behalf of the much larger one, at least some of the time. As the past decade has made clear, nothing turns voters against liberalism more rapidly than the appearance of corruption: the suspicion, valid or otherwise, that politicians are exploiting their power for their own private interest.

This isn’t just about politics. In fact, much of what we believe to be true about the world is actually taken on trust, via newspapers, experts, officials and broadcasters. While each of us sometimes witnesses events with our own eyes, there are plenty of apparently reasonable truths that we all accept without seeing. In order to believe that the economy has grown by 1%, or to find out about latest medical advances, we take various things on trust; we don’t automatically doubt the moral character of the researchers or reporters involved.

Much of the time, the edifice that we refer to as “truth” is really an investment of trust. Consider how we come to know the facts about climate change: scientists carefully collect and analyse data, before drafting a paper for anonymous review by other scientists, who assume that the data is authentic. If published, the findings are shared with journalists in press releases, drafted by university press offices. We expect that these findings are then reported honestly and without distortion by broadcasters and newspapers. Civil servants draft ministerial speeches that respond to these facts, including details on what the government has achieved to date.

A modern liberal society is a complex web of trust relations, held together by reports, accounts, records and testimonies. Such systems have always faced political risks and threats. The template of modern expertise can be traced back to the second half of the 17th century, when scientists and merchants first established techniques for recording and sharing facts and figures. These were soon adopted by governments, for purposes of tax collection and rudimentary public finance. But from the start, strict codes of conduct had to be established to ensure that officials and experts were not seeking personal gain or glory (for instance through exaggerating their scientific discoveries), and were bound by strict norms of honesty.

But regardless of how honest parties may be in their dealings with one another, the cultural homogeneity and social intimacy of these gentlemanly networks and clubs has always been grounds for suspicion. Right back to the mid-17th century, the bodies tasked with handling public knowledge have always privileged white male graduates, living in global cities and university towns. This does not discredit the knowledge they produce – but where things get trickier is when that homogeneity starts to appear to be a political identity, with a shared set of political goals. This is what is implied by the concept of “elites”: that purportedly separate domains of power – media, business, politics, law, academia – are acting in unison.

A further threat comes from individuals taking advantage of their authority for personal gain. Systems that rely on trust are always open to abuse by those seeking to exploit them. It is a key feature of modern administrations that they use written documents to verify things – but there will always be scope for records to be manipulated, suppressed or fabricated. There is no escaping that possibility altogether. This applies to many fields: at a certain point, the willingness to trust that a newspaper is honestly reporting what a police officer claims to have been told by a credible witness, for example, relies on a leap of faith.

A trend of declining trust has been underway across the western world for many years, even decades, as copious survey evidence attests. Trust, and its absence, became a preoccupation for policymakers and business leaders during the 1990s and early 2000s. They feared that shrinking trust led to higher rates of crime and less cohesive communities, producing costs that would be picked up by the state.

What nobody foresaw was that, when trust sinks beneath a certain point, many people may come to view the entire spectacle of politics and public life as a sham. This happens not because trust in general declines, but because key public figures – notably politicians and journalists – are perceived as untrustworthy. It is those figures specifically tasked with representing society, either as elected representatives or as professional reporters, who have lost credibility.

To understand the crisis liberal democracy faces today – whether we identify this primarily in terms of “populism” or “post-truth” – it’s not enough to simply bemoan the rising cynicism of the public. We need also to consider some of the reasons why trust has been withdrawn. The infrastructure of fact has been undermined in part by a combination of technology and market forces – but we must seriously reckon with the underlying truth of the populists’ charge against the establishment today. Too often, the rise of insurgent political parties and demagogues is viewed as the source of liberalism’s problems, rather than as a symptom. But by focusing on trust, and the failure of liberal institutions to sustain it, we get a clearer sense of why this is happening now.

The problem today is that, across a number of crucial areas of public life, the basic intuitions of populists have been repeatedly verified. One of the main contributors to this has been the spread of digital technology, creating vast data trails with the latent potential to contradict public statements, and even undermine entire public institutions. Whereas it is impossible to conclusively prove that a politician is morally innocent or that a news report is undistorted, it is far easier to demonstrate the opposite. Scandals, leaks, whistleblowing and revelations of fraud all serve to confirm our worst suspicions. While trust relies on a leap of faith, distrust is supported by ever-mounting piles of evidence. And in Britain, this pile has been expanding much faster than many of us have been prepared to admit.

Confronted by the rise of populist parties and leaders, some commentators have described the crisis facing liberalism in largely economic terms – as a revolt among those “left behind” by inequality and globalisation. Another camp sees it primarily as the expression of cultural anxieties surrounding identity and immigration. There is some truth in both, of course – but neither gets to the heart of the trust crisis that populists exploit so ruthlessly. A crucial reason liberalism is in danger right now is that the basic honesty of mainstream politicians, journalists and senior officials is no longer taken for granted.

There are copious explanations for Trump, Brexit and so on, but insufficient attention to what populists are actually saying, which focuses relentlessly on the idea of self-serving “elites” maintaining a status quo that primarily benefits them. On the right, Nigel Farage has accused individual civil servants of seeking to sabotage Brexit for their own private ends. On the left, Jeremy Corbyn repeatedly refers to Britain’s “rigged” economic system. The promise to crack down on corruption and private lobbying is integral to the pitch made by figures such as Donald Trump, Jair Bolsonaro or Viktor Orbán.

One of the great political riddles of recent years is that declining trust in “elites” is often encouraged and exploited by figures of far more dubious moral character – not to mention far greater wealth – than the technocrats and politicians being ousted. On the face of it, it would seem odd that a sense of “elite” corruption would play into the hands of hucksters and blaggards such as Donald Trump or Arron Banks. But the authority of these figures owes nothing to their moral character, and everything to their perceived willingness to blow the whistle on corrupt “insiders” dominating the state and media.

Liberals – including those who occupy “elite” positions – may comfort themselves with the belief that these charges are ill-founded or exaggerated, or else that the populists offer no solutions to the failures they identify. After all, Trump has not “drained the swamp” of Washington lobbying. But this is to miss the point of how such rhetoric works, which is to chip away at the core faith on which liberalism depends, namely that power is being used in ways that represent the public interest, and that the facts published by the mainstream media are valid representations of reality.

Populists target various centres of power, including dominant political parties, mainstream media, big business and the institutions of the state, including the judiciary. The chilling phrase “enemies of the people” has recently been employed by Donald Trump to describe those broadcasters and newspapers he dislikes (such as CNN and the New York Times), and by the Daily Mail to describe high court judges, following their 2016 ruling that Brexit would require parliamentary consent. But on a deeper level, whether it is the judiciary, the media or the independent civil service that is being attacked is secondary to a more important allegation: that public life in general has become fraudulent.

Nigel Farage campaigning with Donald Trump in 2016. Photograph: Jonathan Bachman/Getty Images

How does this allegation work? One aspect of it is to dispute the very possibility that a judge, reporter or expert might act in a disinterested, objective fashion. For those whose authority depends on separating their public duties from their personal feelings, having their private views or identities publicised serves as an attack on their credibility. But another aspect is to gradually blur the distinctions between different varieties of expertise and authority, with the implication that politicians, journalists, judges, regulators and officials are effectively all working together.

It is easy for rival professions to argue that they have little in common with each other, and are often antagonistic to each other. Ostensibly, these disparate centres of expertise and power hold each other in check in various ways, producing a pluralist system of checks and balances. Twentieth-century defenders of liberalism, such as the American political scientist Robert Dahl, often argued that it didn’t matter how much power was concentrated in the hands of individual authorities, as long as no single political entity was able to monopolise power. The famous liberal ideal of a “separation of powers” (distinguishing executive, legislative and judicial branches of government), so influential in the framing of the US constitution, could persist so long as different domains of society hold one another up to critical scrutiny.

But one thing that these diverse professions and authorities do have in common is that they trade primarily in words and symbols. By lumping together journalists, judges, experts and politicians as a single homogeneous “liberal elite”, it is possible to treat them all as indulging in a babble of jargon, political correctness and, ultimately, lies. Their status as public servants is demolished once their claim to speak honestly is thrown into doubt. One way in which this is done is by bringing their private opinions and tastes before the public, something that social media and email render far easier. Tensions and contradictions between the public face of, say, a BBC reporter, and their private opinions and feelings, are much easier to discover in the age of Twitter.

Whether in the media, politics or academia, liberal professions suffer a vulnerability that a figure such as Trump doesn’t, in that their authority hangs on their claim to speak the truth. A recent sociological paper called The Authentic Appeal of the Lying Demagogue, by US academics Oliver Hahl, Minjae Kim and Ezra Zuckerman Sivan, draws a distinction between two types of lies. The first, “special access lies”, may be better termed “insider lies”. This is dishonesty from those trusted to truthfully report facts, who abuse that trust by failing to state what they privately know to be true. (The authors give the example of Bill Clinton’s infamous claim that he “did not have sexual relations with that woman”.)

The second, which they refer to as “common knowledge lies”, are the kinds of lies told by Donald Trump about the size of his election victory or the crowds at his inauguration, or the Vote Leave campaign’s false claims about sending “£350m a week to the EU”. These lies do not pretend to be bound by the norm of honesty in the first place, and the listener can make up their own mind what to make of them.

What the paper shows is that, where politics comes to be viewed as the domain of “insider” liars, there is a seductive authenticity, even a strange kind of honesty, about the “common knowledge” liar. The rise of highly polished, professional politicians such as Tony Blair and Bill Clinton exacerbated the sense that politics is all about strategic concealment of the truth, something that the Iraq war seemed to confirm as much as anything. Trump or Farage may have a reputation for fabricating things, but they don’t (rightly or wrongly) have a reputation for concealing things, which grants them a form of credibility not available to technocrats or professional politicians.

At the same time, and even more corrosively, when elected representatives come to be viewed as “insider liars”, it turns out that other professions whose job it is to report the truth – journalists, experts, officials – also suffer a slump in trust. Indeed, the distinctions between all these fact-peddlers start to look irrelevant in the eyes of those who’ve given up on the establishment altogether. It is this type of all-encompassing disbelief that creates the opportunity for rightwing populism in particular. Trump voters are more than twice as likely to distrust the media as those who voted for Clinton in 2016, according to the annual Edelman Trust Barometer, which adds that the four countries currently suffering the most “extreme trust losses” are Italy, Brazil, South Africa and the US.

It’s one thing to measure public attitudes, but quite another to understand what shapes them. Alienation and disillusionment develop slowly, and without any single provocation. No doubt economic stagnation and soaring inequality have played a role – but we should not discount the growing significance of scandals that appear to discredit the honesty and objectivity of “liberal elites”. The misbehaviour of elites did not “cause” Brexit, but it is striking, in hindsight, how little attention was paid to the accumulation of scandal and its consequences for trust in the establishment.

The 2010 edition of the annual British Social Attitudes survey included an ominous finding. Trust in politicians, already low, had suffered a fresh slump, with a majority of people saying politicians never tell the truth. But at the same time, interest in politics had mysteriously risen.

To whom would this newly engaged section of the electorate turn if they had lost trust in “politicians”? One answer was clearly Ukip, who experienced their greatest electoral gains in the years that followed, to the point of winning the most seats in the 2014 elections for the European parliament. Ukip’s surge, which initially appeared to threaten the Conservative party, was integral to David Cameron’s decision to hold a referendum on EU membership. One of the decisive (and unexpected) factors in the referendum result was the number of voters who went to the polls for the first time, specifically to vote leave.

What might have prompted the combination of angry disillusionment and intensifying interest that was visible in the 2010 survey? It clearly predated the toughest years of austerity. But there was clearly one event that did more than any other to weaken trust in politicians: the MPs’ expenses scandal, which blew up in May 2009 thanks to a drip-feed of revelations published by the Daily Telegraph.

Following as it did so soon after a disaster of world-historic proportions – the financial crisis – the full significance of the expenses scandal may have been forgotten. But its ramifications were vast. For one thing, it engulfed many of the highest reaches of power in Westminster: the Speaker of the House of Commons, the home secretary, the secretary of state for communities and local government and the chief secretary to the treasury all resigned. Not only that, but the rot appeared to have infected all parties equally, validating the feeling that politicians had more in common with each other (regardless of party loyalties) than they did with decent, ordinary people.

Many of the issues that “elites” deal with are complex, concerning law, regulation and economic analysis. We can all see the fallout of the financial crisis, for instance, but the precise causes are disputed and hard to fathom. By contrast, everybody understands expense claims, and everybody knows lying and exaggerating are among the most basic moral failings; even a child understands they are wrong. This may be unfair to the hundreds of honest MPs and to the dozens whose misdemeanours fell into a murky area around the “spirit” of the rules. But the sense of a mass stitch-up was deeply – and understandably – entrenched.

The other significant thing about the expenses scandal was the way it set a template for a decade of elite scandals – most of which also involved lies, leaks and dishonest denials. One year later, there was another leak from a vast archive of government data: in 2010, WikiLeaks released hundreds of thousands of US military field reports from Iraq and Afghanistan. With the assistance of newspaper including the New York Times, Der Spiegel, the Guardian and Le Monde, these “war logs” disclosed horrifying details about the conduct of US forces and revealed the Pentagon had falsely denied knowledge of various abuses. While some politicians expressed moral revulsion with what had been exposed, the US and British governments blamed WikiLeaks for endangering their troops, and the leaker, Chelsea Manning, was jailed for espionage.

 

Rupert Murdoch on his way to give evidence to the Leveson inquiry in 2012. Photograph: Ben Stansall/AFP/Getty Images

In 2011, the phone-hacking scandal put the press itself under the spotlight. It was revealed that senior figures in News International and the Metropolitan police had long been aware of the extent of phone-hacking practices – and they had lied about how much they knew. Among those implicated was the prime minister’s communications director, former News of the World editor Andy Coulson, who was forced to resign his post and later jailed. By the end of 2011, the News of the World had been closed down, the Leveson inquiry was underway, and the entire Murdoch empire was shaking.

The biggest scandal of 2012 was a different beast altogether, involving unknown men manipulating a number that very few people had even heard of. The number in question, the London interbank offered rate, or Libor, is meant to represent the rate at which banks are willing to loan to each other. What was surreal, in an age of complex derivatives and high-frequency trading algorithms, was that this number was calculated on the basis of estimates declared by each bank on a daily basis, and accepted purely on trust. The revelation that a handful of brokers had conspired to alter Libor for private gain (with possible costs to around 250,000 UK mortgage-holders, among others) may have been difficult to fully comprehend, but it gave the not unreasonable impression of an industry enriching itself in a criminal fashion at the public’s expense. Bob Diamond, the CEO of Barclays, the bank at the centre of the conspiracy, resigned in July 2012.

Towards the end of that year, the media was caught in another prolonged crisis, this time at the BBC. Horror greeted the broadcast of the ITV documentary The Other Side of Jimmy Savile in October 2012. How many people had known about his predatory sexual behaviour, and for how long? Why had the police abandoned earlier investigations? And why had BBC Newsnight dropped its own film about Savile, due to be broadcast shortly after his death in 2011? The police swiftly established Operation Yewtree to investigate historic sexual abuse allegations, while the BBC established independent commissions into what had gone wrong. But a sense lingered that neither the BBC nor the police had really wanted to know the truth of these matters for the previous 40 years.

It wasn’t long before it was the turn of the corporate world. In September 2014, a whistleblower revealed that Tesco had exaggerated its half-yearly profits by £250m, increasing the figure by around a third. An accounting fiddle on this scale clearly had roots at a senior managerial level. Sure enough, four senior executives were suspended the same month and three were charged with fraud two years later. A year later, it emerged that Volkswagen had systematically and deliberately tinkered with emissions controls in their vehicles, so as to dupe regulators in tests, but then pollute liberally the rest of the time. The CEO, Martin Winterkorn, resigned.

“We didn’t really learn anything from WikiLeaks we didn’t already presume to be true,” the philosopher Slavoj Žižek observed in 2014. “But it is one thing to know it in general and another to get concrete data.” The nature of all these scandals suggests the emergence of a new form of “facts”, in the shape of a leaked archive – one that, crucially, does not depend on trusting the secondhand report of a journalist or official. These revelations are powerful and consequential precisely because they appear to directly confirm our fears and suspicions. Resentment towards “liberal elites” would no doubt brew even in the absence of supporting evidence. But when that evidence arises, things become far angrier, even when the data – such as Hillary Clinton’s emails – isn’t actually very shocking.

This is by no means an exhaustive list of the scandals of the past decade, nor are they all of equal significance. But viewing them together provides a better sense of how the suspicions of populists cut through. Whether or not we continue to trust in politicians, journalists or officials, we have grown increasingly used to this pattern in which a curtain is dramatically pulled back, to reveal those who have been lying to or defrauding the public.

Another pattern also begins to emerge. It’s not just that isolated individuals are unmasked as corrupt or self-interested (something that is as old as politics), but that the establishment itself starts to appear deceitful and dubious. The distinctive scandals of the 21st century are a combination of some very basic and timeless moral failings (greed and dishonesty) with technologies of exposure that expose malpractice on an unprecedented scale, and with far more dramatic results.

Perhaps the most important feature of all these revelations was that they were definitely scandals, and not merely failures: they involved deliberate efforts to defraud or mislead. Several involved sustained cover-ups, delaying the moment of truth for as long as possible.

Several of the scandals ended with high profile figures behind bars. Jail terms satisfy some of the public demand that the “elites” pay for their dishonesty, but they don’t repair the trust that has been damaged. On the contrary, there’s a risk that they affirm the cry for retribution, after which the quest for punishment is only ramped up further. Chants of “lock her up” continue to reverberate around Trump rallies.

In addition to their conscious and deliberate nature, a second striking feature of these scandals was the ambiguous role played by the media. On the one hand, the reputation of the media has taken a pummelling over the past decade, egged on by populists and conspiracy theorists who accuse the “mainstream media” of being allied to professional political leaders, and who now have the benefit of social media through which to spread this message.

The moral authority of newspapers may never have been high, but the grisly revelations that journalists hacked the phone of murdered schoolgirl Milly Dowler represented a new low in the public standing of the press. The Leveson inquiry, followed soon after by the Savile revelations and Operation Yewtree, generated a sense of a media class who were adept at exposing others, but equally expert at concealing the truth of their own behaviours.

On the other hand, it was newspapers and broadcasters that enabled all of this to come to light at all. The extent of phone hacking was eventually exposed by the Guardian, the MPs’ expenses by the Telegraph, Jimmy Savile by ITV, and the “war logs” reported with the aid of several newspapers around the world simultaneously.

But the media was playing a different kind of role from the one traditionally played by journalists and newspapers, with very different implications for the status of truth in society. A backlog of data and allegations had built up in secret, until eventually a whistle was blown. An archive existed that the authorities refused to acknowledge, until they couldn’t resist the pressure to do so any longer. Journalists and whistleblowers were instrumental in removing the pressure valve, but from that point on, truth poured out unpredictably. While such torrents are underway, there is no way of knowing how far they may spread or how long they may last.

 

Tony Blair and Bill Clinton in Belfast in April. Photograph: Charles McQuillan/Getty Images

The era of “big data” is also the era of “leaks”. Where traditional “sleaze” could topple a minister, several of the defining scandals of the past decade have been on a scale so vast that they exceed any individual’s responsibility. The Edward Snowden revelations of 2013, the Panama Papers leak of 2015 and the HSBC files (revealing organised tax evasion) all involved the release of tens of thousands or even millions of documents. Paper-based bureaucracies never faced threats to their legitimacy on this scale.

The power of commissions and inquiries to make sense of so much data is not to be understated, nor is the integrity of those newspapers and whistleblowers that helped bring misdemeanours to light. In cases such as MPs’ expenses, some newspapers even invited their readers to help search these vast archives for treasure troves, like human algorithms sorting through data. But it is hard to imagine that the net effect of so many revelations was to build trust in any publicly visible institutions. On the contrary, the discovery that “elites” have been blocking access to a mine of incriminating data is perfect fodder for conspiracy theories. In his 2010 memoir, A Journey, Tony Blair confessed that legislating for freedom of information was one of his biggest regrets, which gave a glimpse of how transparency is viewed from the centre of power.

Following the release of the war logs by WikiLeaks, nobody in any position of power claimed that the data wasn’t accurate (it was, after all, the data, and not a journalistic report). Nor did they offer any moral justification for what was revealed. Defence departments were left making the flimsiest of arguments – that it was better for everyone if they didn’t know how war was conducted. It may well be that the House of Commons was not fairly represented by the MPs’ expenses scandal, that most City brokers are honest, or that the VW emissions scam was a one-off within the car industry. But scandals don’t work through producing fair or representative pictures of the world; they do so by blowing the lid on hidden truths and lies. Where whistleblowing and leaking become the dominant form of truth-telling, the authority of professional truth-tellers – reporters, experts, professionals, broadcasters – is thrown into question.

The term “illiberal democracy” is now frequently invoked to describe states such as Hungary under Viktor Orbán or Turkey under Recep Tayyip Erdoğan. In contrast to liberal democracy, this model of authoritarian populism targets the independence of the judiciary and the media, ostensibly on behalf of “the people”.

Brexit has been caused partly by distrust in “liberal elites”, but the anxiety is that it is also accelerating a drift towards “illiberalism”. There is a feeling at large, albeit amongst outspoken remainers, that the BBC has treated the leave campaign and Brexit itself with kid gloves, for fear of provoking animosity. More worrying was the discovery by openDemocracy in October that the Metropolitan police were delaying their investigation into alleged breaches of electoral law by the leave campaign due to what a Met spokesperson called “political sensitivities”. The risk at the present juncture is that key civic institutions will seek to avoid exercising scrutiny and due process, for fear of upsetting their opponents.

Britain is not an “illiberal democracy”, but the credibility of our elites is still in trouble, and efforts to placate their populist opponents may only make matters worse. At the more extreme end of the spectrum, the far-right activist Stephen Yaxley-Lennon, also known as Tommy Robinson, has used his celebrity and social media reach to cast doubt on the judiciary and the BBC at once.

Yaxley-Lennon has positioned himself as a freedom fighter, revealing “the truth” about Muslim men accused of grooming underage girls by violating legal rules that restrict reporting details of ongoing trials. Yaxley-Lennon was found guilty of contempt of court and jailed (he was later released after the court of appeal ordered a retrial, and the case has been referred to the attorney general), but this only deepened his appeal for those who believed the establishment was complicit in a cover-up, and ordinary people were being deliberately duped.

The political concern right now is that suspicions of this nature – that the truth is being deliberately hidden by an alliance of “elites” – are no longer the preserve of conspiracy theorists, but becoming increasingly common. Our current crisis has too many causes to enumerate here, and it is impossible to apportion blame for a collective collapse of trust – which is as much a symptom of changes in media technologies as it is of any moral failings on the part of elites.

But what is emerging now is what the social theorist Michel Foucault would have called a new “regime of truth” – a different way of organising knowledge and trust in society. The advent of experts and government administrators in the 17th century created the platform for a distinctive liberal solution to this problem, which rested on the assumption that knowledge would reside in public records, newspapers, government files and journals. But once the integrity of these people and these instruments is cast into doubt, an opportunity arises for a new class of political figures and technologies to demand trust instead.

The project that was launched over three centuries ago, of trusting elite individuals to know, report and judge things on our behalf, may not be viable in the long term, at least not in its existing form. It is tempting to indulge the fantasy that we can reverse the forces that have undermined it, or else batter them into retreat with an even bigger arsenal of facts. But this is to ignore the more fundamental ways in which the nature of trust is changing.

The main feature of the emerging regime is that truth is now assumed to reside in hidden archives of data, rather than in publicly available facts. This is what is affirmed by scandals such as MPs’ expenses and the leak of the Iraq war logs – and more recently in the #MeToo movement, which also occurred through a sudden and voluminous series of revelations, generating a crisis of trust. The truth was out there, just not in the public domain. In the age of email, social media and cameraphones, it is now common sense to assume that virtually all social activity is generating raw data, which exists out there somewhere. Truth becomes like the lava below the earth’s crust, which periodically bursts through as a volcano.

What role does this leave for the traditional, analogue purveyors of facts and figures? What does it mean to “report” the news in an age of reflexive disbelief? Newspapers have been grappling with this question for some time now; some have decided to refashion themselves as portals to the raw data, or curators of other people’s content. But it is no longer intuitively obvious to the public why they should be prepared to take a journalist’s word for something, when they can witness the thing itself in digital form. There may be good answers to these questions, but they are not obvious ones.

Instead, a new type of heroic truth-teller has emerged in tandem with these trends. This is the individual who appears brave enough to call bullshit on the rest of the establishment – whether that be government agencies, newspapers, business, political parties or anything else. Some are whistleblowers, others are political leaders, and others are more like conspiracy theorists or trolls. The problem is that everyone has a different heroic truth-teller, because we’re all preoccupied by different bullshit. There is no political alignment between figures such as Chelsea Manning and Nigel Farage; what they share is only a willingness to defy the establishment and break consensus.
If a world where everyone has their own truth-tellers sounds dangerously like relativism, that’s because it is. But the roots of this new and often unsettling “regime of truth” don’t only lie with the rise of populism or the age of big data. Elites have largely failed to understand that this crisis is about trust rather than facts – which may be why they did not detect the rapid erosion of their own credibility.

Unless liberal institutions and their defenders are willing to reckon with their own inability to sustain trust, the events of the past decade will remain opaque to them. And unless those institutions can rediscover aspects of the original liberal impulse – to keep different domains of power separate, and put the disinterested pursuit of knowledge before the pursuit of profit – then the present trends will only intensify, and no quantity of facts will be sufficient to resist. Power and authority will accrue to a combination of decreasingly liberal states and digital platforms – interrupted only by the occasional outcry as whistles are blown and outrages exposed.

To Save Western Capitalism - Look East

The East could have something to offer the mighty West, where we are seeing glimpses into capitalism's true nature. Antara Haldar (The Independent) on the rise and fall of civilisation as we know it

 

Photos Getty


Once upon a time, not so long ago, there was a place where peace and prosperity reigned. Let’s call this place the West. These lands had once been ravaged by bloody wars but its rulers had, since, solved the puzzle of perpetual progress and discovered a kind of political and economic elixir of life. Big Problems were relegated to either Somewhere Else (the East) or Another Time (History). The Westerners dutifully sent emissaries far and wide to spread the word that the secret of eternal bliss had been found –and were, themselves, to live happily ever after.

So ran, until very recently, the story of how the West was won.

The formula that had been discovered was simple: the recipe for a bright, shiny new brand of global capitalism based on liberal democracy and something called neoclassical economics. But it was different from previous eras – cleansed of Dickensian grime. The period after the two world wars was in many a Golden Age: the moment of Bretton Woods (that established the international monetary and financial order) and the Beveridge report (the blueprint for the welfare state), feminism and free love.

It was post-colonial, post-racial, post-gendered. It felt like you could have it all, material abundance and the moral revolutions; a world infinitely vulnerable to invention – but all without picking sides, all based on institutional equality of access. That’s how clever the scheme was – truly a brave new world. Fascism and class, slavery and genocide – no one doubted that, in the main, it had been left behind (or at least that we could all agree on its evils); that the wheels of history had permanently been set in motion to propel us towards a better future. The end of history, Francis Fukuyama called it – the zenith of human civilisation. 

Austerity in Athens: the eurozone crisis hit Greece not once but twice (Getty)

While liberal democracy was the part of the programme that got slapped on to the brochure, it was a streamlined paradigm of neoclassical economics that provided the brains behind the enterprise. Neoclassical economics, scarred by war-era ideological acrimony, scrubbed the subject of all the messy stuff: politics, values – all the fluff. To do so it used a new secret weapon: quantitative precision unprecedented in the social sciences.

It didn’t rest on whimsical things like enlightened leadership or invested citizenship or compassionate communities. No, siree. It was pure science: a reliable, universally-applicable maximising equation for society (largely stripped of any contextual or, until recently, even cognitive considerations). Its particular magic trick was to be able to do good without requiring anyone to be good.

And, it was limitless in its capacity to turn boundless individual rationality into endless material wellbeing, to cull out of infinite resources (on a global scale) indefinite global growth. It presumed to definitively replace faltering human touch with the infallible “invisible hand” and, so, discourses of exploitation with those of merit.

When I started as a graduate student in the early 2000s, this model was at the peak of its powers: organised into an intellectual and policy assembly line that more or less ran the world. At the heart of this enterprise, in the unipolar post-Cold War order, was what was known as the Chicago school of law and economics. The Chicago school boiled the message of neoclassical economics down to a simpler formula still: the American Dream available for export – just add private property and enforceable contracts. Anointed with a record number of Nobel prizes, its message went straight to the heart of Washington DC, and from there – via its apostles, the International Monetary Fund and the World Bank radiated out to the rest of the globe. 

It was like the social equivalent of the Genome project. Sure the model required the odd tweak, the ironing out of the occasional glitch but, for the most part, the code had been cracked. So, like the ladies who lunch, scholarly attention in the West turned increasingly to good works and the fates of “the other” – spatially and temporally.

One strain led to a thriving industry in development: these were the glory days of tough love, and loan conditionalities. The message was clear: if you want Western-style growth, get with the programme. The polite term for it was structural adjustment and good governance: a strict regime of purging what Max Weber had called mysticism and magic, and swapping it for muscular modernisation. Titles like Daron Acemoglu and James Robinson’s Why Nations Fail: The Origins of Power, Prosperity and Poverty and Hernando de Soto’s The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else jostled for space on shelves of bookstores and best-seller lists.

Another led to esoteric islands of scholarship devoted to atonement for past sins. On the US side of the Atlantic, post-colonial scholarship gained a foothold, even if somewhat limp. In America, slavery has been, for a while now, the issue a la mode. A group of Harvard scholars has been taking a keen interest in the “history of capitalism”.

Playing intellectual archaeologists, they’ve excavated the road that led to today’s age of plenty – leaving in its tracks a blood-drenched path of genocide, conquest, and slavery. The interest that this has garnered, for instance Sven Beckert’s Empire of Cotton, is heartening, but it has been limited to history (or worse still, “area studies”) departments rather than economics, and focused on the past not the present. 

As far back as the fifties ... the economy was driving the society, when it should have been the other way around (Getty)

Indeed, from the perspective of Western scholarship, the epistemic approach to the amalgam of these instances has been singularly inspired by Indiana Jones – dismissed either as curious empirical aberrations or distanced by the buffer of history. By no means the stuff of mainstream economic theory.

Some of us weakly cleared our throats and tried to politely intercede that there were, all around us, petri dishes of living, breathing data on not just development – but capitalism itself. Maybe, just maybe – could it be? – that if the template failed to work in a large majority of cases around the globe that there may be a slight design error. 

My longtime co-author, Nobel Prize winner in Economics and outspoken critic, Joseph Stiglitz, in his 1990 classic Globalisation and Its Discontents chronicled any number of cases of leaching-like brutality of structural adjustment. The best-selling author and my colleague at Cambridge, Ha-Joon Chang, in Kicking Away the Ladder, pointed out that it was a possibility that the West was misremembering the trajectory of its own ascent to power – that perhaps it was just a smidgen more fraught than it remembered, that maybe the State had had a somewhat more active part to play before it retired from the stage.

But a bright red line separated the “us” from the “them” enforcing a system of strict epistemic apartheid. Indeed, as economics retreated further and further into its silo of smugness, economics departments largely stopped teaching economic history or sociology and development economics clung on by operating firmly within the discipline-approved methodology.

So far, so good – a bit like the last night of merriment on the Titanic. Then the iceberg hit.

Suddenly the narratives that were comfortably to do with the there and then became for the Western world a matter of the here and now.

In the last 10 years, what economic historian Robert Skidelsky recently referred to as the “lost decade” for the advanced industrial West, problems that were considered the exclusive preserve of development theory – declining growth, rampant inequality, failing institutions, a fractured political consensus, corruption, mass protests and poverty – started to be experienced on home turf.

The Great Recession starting 2008 should really have been the first hint: foreclosures and evictions, bankruptcies and bailouts, crashed stock markets. Then came the eurozone crisis starting in 2009 (first Greece; then Ireland; then Portugal; then Spain; then Cyprus; oh, and then Greece, again). But after an initial scare, it was largely business as usual – written off as an inevitable blip in the boom-bust logic of capitalist cycles. It was 2016, the year the world went mad, that made the writing on the wall impossible to turn away from – starting with the shock Brexit vote, and then the Trump election. Not everyone understands what a CDO (collateralised debt obligation) is, but the vulgarity of a leader of the free world who governs by tweet and “grabs pussy” is hard to miss.

So how did it happen, this unexpected epilogue to the end of history?

I hate to say I told you so, but some of us had seen this coming – the twist in the tale, foreshadowed by an eerie background score lurking behind the clinking of champagne glasses. Even at the height of the glory days. In the summer before the fall of Lehman Brothers, a group of us “heterodox economists” had gathered at a summer school in the North of England. We felt like the audience at a horror movie – knowing that the gory climax was moments away while the victim remained blissfully impervious.

The plot wasn’t just predictable, it was in the script for anyone to see. You just had to look closely at the fine print.

In particular, you needed to have read your Karl Polanyi, the economic sociologist, who predicted this crisis over 50 years ago. As far back as 1954, The Great Transformation diagnosed the central perversion of the capitalist system, the inversion that makes the person less important than the thing – the economy driving society, rather than the other way around.

Polanyi’s point was simple: if you turned all the things that people hold sacred into grist to the mill of a large impersonal economic machinery (he called this disembedding) there would be a backlash. That the fate of a world where monopoly money reigns supreme and human players are reduced to chessmen at its mercy is doomed. The sociologist Fred Block compares this to the stretching of a giant elastic band – either it reverts to a more rooted position, or it snaps.

It is this tail-wagging-the-dog quality that is driving the current crisis of capitalism. It’s a matter of existential alienation. This problem of artificial abstraction runs through the majority of upheavals of our age – from the financial crisis to Facebook. So cold were the nights in this era of enforced neutrality that the torrid affair between liberal democracy and neoclassical economics resulted in the most surprising love child – populism.

The simple fact is that after decades on promises not delivered on, the system had written just one too many cheques that couldn’t be cashed. And people had had just about enough.

 

The Brexit vote in 2016 followed by the election of Trump ... and the world had finally gone mad (Getty)

The old fault lines of global capitalism, the East versus West dynamics of the World Trade Organisation’s Doha Round, turned out to be red herrings. The axis that counts is the system versus the little people. Indeed, the anatomies of annihilation look remarkably similar across the globe – whether it’s the loss of character of a Vanishing New York or Disappearing London, or threatened communities of farmers in India and fishermen in Greece.

Trump voters in the US, Brexiteers in Britain and Modi supporters in India seek identity – any identity, even a made-up call to arms to “return” to mythical past greatness in the face of the hollowing out of meaning of the past 70 years. The rise of populism is, in many ways, the death cry of populations on the verge of extinction – yearning for something to believe in when their gods have died young. It’s a problem of the 1 per cent – poised to control two-thirds of the world economy by 2030 – versus the 99 per cent. But far more pernicious is the Frankenstein’s monster that is the idea of an economic system that is an end in itself.

Not to be too much of a conspiracy theorist about it, but the current system doesn’t work because it wasn’t meant to – it was rigged from the start. Wealth was never actually going to “trickle down”. Thomas Piketty did the maths.

Suddenly, the alarmist calls of the developmentalists objecting to the systemic skews in the process of globalisation don’t seem quite so paranoid.

But this is more than “poco” (what the cool kids call postcolonialism) schadenfreude. My point is a serious one; although I would scarcely have dared articulate it before now. Could Kipling have been wrong, and might the East have something to offer the mighty West? Could the experiences of exotic lands point the way back to the future? Could it be, could it just, that it may even be a source of epistemic wisdom?

Behind the scaffolding of Xi Jinping’s China or Narendra Modi’s India, sites of capitalism under construction, we are offered a glimpse into the system’s true nature. It is not God-given, but the product of highly political choices. Just like Jane Jacobs protesting to save Washington Square Park or Beatrix Potter devoting the bulk of her royalty earnings to conserving the Lake District were choices. But these cases also show that trust and community are important. The incredible resilience of India’s jugaad economy, or the critical role of quanxi in the creation of the structures in what has been for the past decade the world’s fastest-growing nation, China. A little mysticism and magic may be just the thing.

The narrative that we need is less that of Frankenstein’s man-loses-control of monster, and more that of Pinocchio’s toy-becomes-real-boy-by-acquiring-conscience; less technology, and more teleology. The real limit may be our imaginations. Perhaps the challenge is to do for scholarship, what Black Panther has done for Hollywood. You never know. Might be a blockbuster.

The End of Enlightenment?

Pervez Hoodbhoy in The Dawn

I was invited to lecture on ‘Life, Liberty and the Pursuit of Happiness in the Age of Global Terrorism’ at Missouri State University. Missouri is Trump country — he had a 70 per cent majority there. Some essential points are excerpted below.

The first seven words of the title belong to the 1776 Declaration of Independence from Britain: “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the Pursuit of Happiness.”

America’s founding fathers derived these ideas of equalitarianism from Europe’s then-bubbling cauldron of the European Enlightenment. Thomas Jefferson’s phrase “all men are created equal” is perhaps one of the best-known and profound sentences in the English language.

But truths once self-evident to Americans are no more evident to very many today. They elected a president who sees differences between men as more important than their equality. Had America’s judiciary not struck down his executive order banning Muslims from setting foot on America’s soil, I could not have delivered the lecture. Europe — from where the Enlightenment sprang — is witnessing the emergence of exclusionists like Marie Le Pen and Geert Wilders. This phenomenon begs an understanding.

Some blame this on terrorist acts perpetrated by certain Muslims. Indeed one must not dismiss the importance of fear. Terrorism terrifies. Crazed fanatics piloting airliners into skyscrapers or driving trucks into holiday crowds scare everyone out of their wits. But how seriously should one take this threat, and where did these monsters come from?

Truthfully, we all stand guilty. All scriptures contain a radical strain but whether or not that tendency gets developed and amplified depends on political circumstances. A significant part of today’s organised terrorist groups — though by no means all — originate from the actions of the US and its allies. There would be no Taliban or Al Qaeda but for Ronald Reagan’s obsession with the ‘Evil Empire’, and no IS but for George W. Bush’s criminal invasion of Iraq.
Even so, terrorists — unless they somehow seize nuclear weapons — are not an existential threat to humanity. The number of victims of terrorism is small compared to wars, traffic accidents, killings by deranged individuals, etc. Terrorism alone does not explain why the US is drifting away from its wonderful Enlightenment ideals.

Among the real reasons is growing economic inequality. To profess equality of humans is one thing, to enforce and protect this principle is yet another. When differences of wealth and power become astronomically large, grand assertions lose meaning.

Example: A popular — but absurd — Urdu couplet tells of Mahmood (sultan) and Ayyaz (slave) magically becoming equals as they pray side by side. But could King Salman al-Saud — just back after traveling to Indonesia with 505 tons of expensive luggage — and a Javanese Muslim peasant become equals even if that poor chap somehow got within praying distance alongside the monarch?

The US is faced with an equally absurd situation. Extreme income inequality is imperiling its future, and a decent life for citizens is ever harder to achieve. American CEOs draw seven-digit salaries, workers just five-digit ones. University education is increasingly restricted to richer sections of society. Forty-eight years ago in Boston I could do a weekly average of 20 hours of menial labour and cover nearly half of my university education. Today the same number of hours would not pay for even an eighth.

The upsurge of angry populism is actually fuelled not by terrorism but by America’s losing out in the global race. This is the conclusion reached by a global investment firm (GMO) which recently carried out an extensive data-driven study of this phenomenon. The report details how neoliberal economic policies are leading the US towards disaster.

Arising in the 1970s, neoliberalism has four key economic signatures: the abandonment of full employment as a desirable policy goal and its replacement with inflation targeting; an increase in the globalisation of the flows of people, capital, and trade; a focus at a firm level on shareholder value maximisation rather than reinvestment and growth; and the pursuit of flexible labour markets and the disruption of trade unions and workers organisations.

The upshot: the US has increasingly become a winner-take-all society. According to Forbes, the combined net worth of the 2016 class of the 400 richest Americans is $2.4 trillion, up from $2tr in 2013. The New York Times reported that the richest 1pc in the United States now own more wealth than the bottom 90pc. An angry populace is vulnerable to hate-spouting demagogues who blame everyone — Chinese, Mexicans, and Muslims.

This is only going to get worse because the days of American hegemony are gone, as is its absolute dominance of the world’s economy. When crises threaten, people everywhere tend to retreat into their comfort zones. Resurgent tribalism, aggressive nationalism, and religious fundamentalism become more attractive. But these can only provide solace, not solutions.

It would be tragic if the US were to fail its own constitution. Many countries are not even formally committed to accepting the equality of their citizens, and many more sharply discriminate between them even while professing not to. Pakistan’s constitution explicitly distinguishes between Muslim and non-Muslim, Iran officially espouses vilayat-i-faqih (guardianship of Islamic jurists), Saudi Arabia prohibits all places of worship on its soil except mosques. Although Israel lacks a constitution because of a conflict between its religious and secular forces, legally, as well as in practice, it privileges Jews over non-Jews. And India, which was once committed to secularism, is now turning into a state for Hindus run by Hindus.

How can the future of humanity be protected against this return to primitivism? No magical force drives history; there is only human agency. We must therefore educate ourselves into rising above accidents of birth, think critically, examine facts before forming opinions, keep widening the scope of our knowledge and, above all, act compassionately. To fight for universal humanism, world citizenship, and for the Enlightenment spirit is the only option for a world where boundaries are increasingly irrelevant.

Populism is the result of global economic failure

Larry Elliott in The Guardian


The rise of populism has rattled the global political establishment. Brexit came as a shock, as did the victory of Donald Trump. Much head-scratching has resulted as leaders seek to work out why large chunks of their electorates are so cross.

The answer seems pretty simple. Populism is the result of economic failure. The 10 years since the financial crisis have shown that the system of economic governance that has held sway for the past four decades is broken. Some call this approach neoliberalism. Perhaps a better description would be unpopulism.

Unpopulism meant tilting the balance of power in the workplace in favour of management and treating people like wage slaves. Unpopulism was rigged to ensure that the fruits of growth went to the few not to the many. Unpopulism decreed that those responsible for the global financial crisis got away with it while those who were innocent bore the brunt of austerity.
Anybody seeking to understand why Trump won the US presidential election should take a look at what has been happening to the division of the economic spoils. The share of national income that went to the bottom 90% of the population held steady at around 66% from 1950 to 1980. It then began a steep decline, falling to just over 50% when the financial crisis broke in 2007.

Similarly, it is no longer the case that everybody benefits when the US economy is doing well. During the business cycle upswing between 1961 and 1969, the bottom 90% of Americans took 67% of the income gains. During the Reagan expansion two decades later they took 20%. During the Greenspan housing bubble of 2001 to 2007, they got just two cents in every extra dollar of national income generated while the richest 10% took the rest.


Those responsible for global financial crisis got away with it while those who were innocent bore the brunt of austerity

The US economist Thomas Palley* says that up until the late 1970s countries operated a virtuous circle growth model in which wages were the engine of demand growth.

“Productivity growth drove wage growth which fueled demand growth. That promoted full employment which provided the incentive to invest, which drove further productivity growth,” he says.

Unpopulism was touted as the antidote to the supposedly-failed policies of the post-war era. It promised higher growth rates, higher investment rates, higher productivity rates and a trickle down of income from rich to poor. It has delivered none of these things.

James Montier and Philip Pilkington of the global investment firm GMO say that the system that arose in the 1970s was characterised by four significant economic policies: the abandonment of full employment and its replacement with inflation targeting; an increase in the globalisation of the flows of people, capital and trade; a focus on shareholder maximisation rather than reinvestment and growth; and the pursuit of flexible labour markets and the disruption of trade unions and workers’ organisations.

To take just the last of these four pillars, the idea was that trade unions and minimum wages were impediments to an efficient labour market. Collective bargaining and statutory pay floors would result in workers being paid more than the market rate, with the result that unemployment would inevitably rise.

Unpopulism decreed that the real value of the US minimum wage should be eroded. But unemployment is higher than it was when the minimum wage was worth more. Nor is there any correlation between trade union membership and unemployment. If anything, international comparisons suggest that those countries with higher trade union density have lower jobless rates. The countries that have higher minimum wages do not have higher unemployment rates.

“Labour market flexibility may sound appealing, but it is based on a theory that runs completely counter to all the evidence we have,” Montier and Pilkington note. “The alternative theory suggests that labour market flexibility is by no means desirable as it results in an economy with a bias to stagnate that can only maintain high rates of employment and economic growth through debt-fuelled bubbles that inevitably blow up, leading to the economy tipping back into stagnation.”

This quest for ever-greater labour-market flexibility has had some unexpected consequences. The bill in the UK for tax credits spiralled quickly once firms realised that they could pay poverty wages and let the state pick up the bill. Access to a global pool of low-cost labour meant there was less of an incentive to invest in productivity-enhancing equipment.

The abysmally-low levels of productivity growth since the crisis have encouraged the belief that this is a recent phenomenon, but as Andy Haldane, the Bank of England’s chief economist, noted last week, the trend started in most advanced countries in the 1970s.

“Certainly, the productivity puzzle is not something which has emerged since the global financial crisis, though it seems to have amplified pre-existing trends,” Haldane said.


Bolshie trade unions certainly can’t be blamed for Britain’s lost productivity decade. The orthodox view in the 1970s was that attempts to make the UK more efficient were being thwarted by shop stewards who modeled themselves on Fred Kite, the character played by Peter Sellers in I’m Alright Jack. Haldane puts the blame elsewhere: on poor management, which has left the UK with a big gap between frontier firms and a long tail of laggards. “Firms which export have systematically higher levels of productivity than domestically-oriented firms, on average by around a third. The same is true, even more dramatically, for foreign-owned firms. Their average productivity is twice that of domestically-oriented firms.”

Wolfgang Streeck: the German economist calling time on capitalism

Read more

Populism is seen as irrational and reprehensible. It is neither. It seems entirely rational for the bottom 90% of the US population to question why they are getting only 2% of income gains. It hardly seems strange that workers in Britain should complain at the weakest decade for real wage growth since the Napoleonic wars.

It has also become clear that ultra-low interest rates and quantitative easing are merely sticking-plaster solutions. Populism stems from a sense that the economic system is not working, which it clearly isn’t. In any other walk of life, a failed experiment results in change. Drugs that are supposed to provide miracle cures but are proved not to work are quickly abandoned. Businesses that insist on continuing to produce goods that consumers don’t like go bust. That’s how progress happens.

The good news is that the casting around for new ideas has begun. Trump has advocated protectionism. Theresa May is consulting on an industrial strategy. Montier and Pilkington suggest a commitment to full employment, job guarantees, re-industrialisation and a stronger role for trade unions. The bad news is that time is running short. More and more people are noticing that the emperor has no clothes.

Even if the polls are right this time and Marine Le Pen fails to win the French presidency, a full-scale political revolt is only another deep recession away. And that’s easy enough to envisage.

How Steve Bannon captured America's spirit of revolt

Thomas Frank in The Guardian

 

Illustration by Matt Kenyon



So our billionaire president hangs a portrait of Andrew Jackson on his wall, spits on his hands, and takes a sledgehammer to the Dodd–Frank Act. The portrait is of the banks’ all-time arch-enemy; the reality is that the banks are going to be deregulated yet again. And in that insane juxtaposition we can grasp rightwing populism almost in its entirety: fiery verbal hostility to elites, combined with generous government favours for those same elites.

Donald Trump’s adviser Stephen Bannon presents an even more striking combination. A former executive at Goldman Sachs, Bannon is also the product of what the Hollywood Reporter calls a “blue-collar, union and Democratic family” who feels “an unreconstructed sense of class awareness, or bitterness – or betrayal”. Bannon is a founding member of the objectionable far-right website Breitbart and an architect of Trump’s unlikely victory, the man at the right hand of power. And yet almost no one in Washington seems to understand how he pulled this off.

Let me propose a partial explanation: that one of the reasons Bannon succeeded is because he has been able to unite the two unconnected halves of American populist outrage – the cultural and the economic.

Start with the latter. In a 2014 interview on the recent financial crisis, Bannon proclaimed: “The way that the people who ran the banks and ran the hedge funds have never really been held accountable for what they did has fuelled much of the anger in the Tea Party movement in the United States.”

Fair enough. I myself am outraged that financiers were not held responsible for the many obvious mistakes and even acts of fraud they appeared to commit.

But when we turn to the specifics of Bannon’s indictment, accountability gets a little blurry. In 2010 Bannon wrote, directed and produced a documentary film about the 2008 financial crisis called Generation Zero – a documentary that explicitly tries to get laissez-faire capitalism off the hook for this colossal capitalist disaster. Remember the roll-back of banking rules under Bill Clinton and George W Bush, or the hapless regulatory agencies filled with former bank officers and lobbyists? Evidently none of that really mattered. As one of the movie’s many experts intones, “Deregulation is not the problem.” The first sentence in the promotional copy on the back of the DVD case is just as blunt: “The current economic crisis is not a failure of capitalism, but a failure of culture.” 

What culture do you think Bannon means? The buccaneering culture of the Wall Street traders? The corrupt culture of the real estate appraisers or the bond rating agencies? The get-rich-quick culture of the mortgage originators?

No, no and no. He means … the counterculture of the 1960s. Bell bottoms. Drum solos. Dope. That’s the thing to blame for the financial crisis and the bailouts. Not the deregulation of derivatives in 2000. It was those kids having fun at Woodstock in 1969.

I am not joking. This really is Bannon’s argument, illustrated again and again in Generation Zero with 40-year-old footage of hippies dancing and fooling around, which is thrown together with stock footage of dollar bills being counted, or funny old cartoons, or vacant houses, or really mean-looking sharks, and then back to those happy hippies again.

One way of assessing this is that Generation Zero is the transition from the culture wars to Trumpism. What Bannon is doing is bringing the strands of outrage together. He’s saying that the culture wars and the financial crisis both share the same villain: the bad values that supposedly infected our society in the 1960s. The same forces that made the movies and pop music so vulgar also crashed the economy and ruined your livelihood. Here is how Roger Kimball of the New Criterion makes the case in Generation Zero:

“A lot of what we have just seen is a kind of a real-world dramatisation of those ideas that became popular in the 60s and 70s, and that had a dry run then. And that, I think, has been a prescription for disaster in some very concrete ways. Take, for example, the financial crisis. What we have just seen in the irresponsible lending by banks and the irresponsible leveraging by many hedge funds is an abdication of responsibility.”

That gives you a taste of how Bannon’s logic unfolds. The decade of the 60s supposedly introduced Americans to the idea of irresponsibility and self-indulgence, and now that we are suffering from an epidemic of irresponsibility and self-indulgence a mere 50 years later, it’s obviously the fault of people from that decade long ago. Blame is thus offloaded from, say, the captured regulators of the Bush administration to the pot-smoking college students of the Vietnam era. Unfortunately, just because something makes moral sense doesn’t mean it’s true. Take the phenomenon of “stated income” or liar’s loans, the fraud that came to symbolise so much of what went wrong in the last decade. One of the movie’s experts, Peter Schweizer (later the author of Clinton Cash), seems to blame this dirty business on … Saul Alinsky, an author and community organiser who died in 1972. Alinsky, he maintains, “applauded activists who used lying effectively. You end up where applicants lie on their applications, mortgage lenders lie when they pass that to the underwriters, and then these mortgages are sold as mortgage-backed securities on Wall Street ... It’s a chain of lie after lie after lie, which eventually undermines even the most effective system.”

Schweizer is right that loans based on lies undermined the system. By 2005 they had become an enormous part of the mortgage market, and the story of how that happened is a really fascinating one. Many books have been written on the subject. But filmmaker Bannon shows no interest in any of that. He makes little effort to find out who was issuing such loans, what kind of houses they were used to purchase (McMansions?), who packaged them up into securities, or why regulators didn’t do anything to stop it. Instead, the movie just implies that the diabolical Alinsky had some vague something to do with it and then walks away. This is not history, it’s naked blame-shifting.

In fairness, Bannon’s movie also makes plenty of valid points and has some fine moments. The director obviously cares about the working-class people who were ruined by the recession. He correctly portrays the Democratic party’s love affair with Wall Street in the 90s (although he downplays the amorous deeds of Republicans). He understands the cronyism between government and high finance, and one of his sources aptly describes the bailed-out system as “socialism for the wealthy but capitalism for everybody else”. Which kind of sounds like something that old 60s radical Bernie Sanders might say.

The putative moral of Generation Zero is that we all need to grow up and take responsibility for our actions; and yet as I watched it I was bowled over by how profoundly irresponsible this documentary is. Other than a single quote from Time magazine circa 1969 and the old TV footage of hippies doing their dance, Bannon doesn’t really try to nail down what “the 60s” stood for or meant. None of the leading participants in that decade’s bacchanals are interviewed. Skipping ahead to the financial crisis, we never learn whether it’s the dishonest home-buyers who were hippies, or the fly-by-night mortgage lenders or the Wall Street traders who were hippies. Which set of hippies are we supposed to crack down on? We never find out.

All we know, really, is that there was once a dreadful thing called the 60s, and then there was a terrible financial crisis four decades later, and because the one came before the other, it somehow caused it. The effort to bridge that evidence gap is almost nonexistent. In a typical moment, Bannon shows us Republican treasury secretary Hank Paulson desperately trying to stop the money haemorrhage in September 2008, and then cuts immediately to footage of the Black Panthers, holding a rally many decades ago. Why? What is the connection? Does Paulson, the devout Christian Scientist, the teetotalling college football star, have some secret affiliation with 60s radicalism?

Worst of all is the former presidential adviser Dick Morris (Bill Clinton’s Steve Bannon, come to think of it), who appears throughout Generation Zero blowing hard about this outrage and that. Here is what Morris tells the camera about the threat of hyperinflation, which loomed so large in the rightwing mind back in 2010: “The real catastrophe is going to come in about a year, a year and a half, or two years, when all of this money that the Fed has been printing comes out of hiding all at once and causes explosive inflation.”

The movie’s most far-fetched proposition is also its most revealing. Generation Zero asserts that history unfolds in a cyclical pattern, endlessly repeating itself. Historical crises (such as the Depression and second world war) are said to give rise to triumphant and ambitious generations (think Levittown circa 1952), who make the mistake of spoiling their children, who then tear society apart through their decadence and narcissism, triggering the cycle over again. Or as the movie’s trailer puts it: “In history, there are four turnings. The crisis. The high. The awakening. The unravelling. History repeats itself. The untold story about the financial meltdown.”

In a word, the theory is ridiculous. It is so vague and squishy and easily contradicted that the viewer wonders why Bannon included it at all.

And then it hits you. He included it because this rainy-day Marxism is pretty much the only way you can do what Bannon set out to do in this movie: get deregulated capitalism out of the shadow for the financial crisis and blame instead the same forces that the family-values crowd has been complaining about for years. Blame the hippies for what arch-deregulator Phil Gramm did 40 years later and call it a high-flown theory of history: the “fourth turning”, or some such nonsense. Of course Bannon’s fans believe it. It makes perfect sense to them.

A funny thing about Bannon’s stinky pudding of exaggerations and hallucinations: in the broadest terms, it’s also true. The counterculture really did have something to do with both our accelerated modern capitalism and the Democratic party’s shift to the right – it’s a subject I have written about from The Conquest of Cool to Listen, Liberal.

The Clinton administration really did strike up an alliance with Wall Street, and this really did represent a new and catastrophic direction for the Democratic party. Trade deals really did help to deindustrialise the US, and that deindustrialisation really was a terrible thing. The bankers really did get bailed out by their friends the politicians in 2008 and 2009, and it really was the greatest outrage of our stupid century. And there really is a lot of narcissism mixed up in modern capitalism. Just look at the man for whom Bannon presently works.

Generation Zero acknowledges these visible facts but connects the dots by means of a vast looping diagram of confusion and blame evasion. It is a fantasy of accountability that actually serves to get the guilty off the hook.

Then again, another way to judge this alternative theory, with its alternative facts, is to set it off against what the Democratic establishment was saying at the time. Which was pretty much nothing.

Centrist Democrats simply don’t talk about their alliance with Wall Street – it’s like the party’s guilty secret, never to be discussed in a straightforward way. Try asking former President Obama or former treasury secretary Geithner or former attorney general Holder why they were so generous with the bankers and why they never held them responsible, and see what kind of answer you get.

And that, in short, is the story of how the right captured the spirit of revolt in this most flagrantly populist period in modern times. Want to take it away from them, liberal? Start by understanding your history.