Rust Belt Populism: An Economic Analysis | Pia Malaney

Rust Belt Populism: An Economic Analysis |

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Americans understands very well what feels wrong – and there's a piece of U.S. economic policy that the establishment and educated elites haven’t been fully honest about, says Pia Malaney.The election of Donald Trump wasn’t business as usual – it was a message from the Rust Belt, who in some sense have lost their economic voice. Voters in the region used the ballot in November 2016 to attempt to regain control over financial policies that were not designed to benefit them. Inequality in the U.S. has increased dramatically, and economists like Pia Malaney understand that if you do a post-mortem on major financial policies like trade and immigration over the last few years, it exposes where the populist backlash has come from. There are winners and losers in every economic policy, and in recent years the U.S. has been skipping the crucial last step: wealth redistribution. Malaney gives a detailed insight into the system of winners and losers the U.S finds itself in, and emphasizes the importance of understanding the real implications that policies have in different regions.

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PIA MALANEY:

Dr. Pia Malaney’s research has focused on economic, biological, and sociological approaches to human welfare. Her dissertation written under Eric Maskin, established a new Gauge Theoretic foundation for welfare economics allowing biological and behavioral realism for dynamic economic agents. She has held positions at the Harvard Institute for International Development and the Center for International Development at Harvard’s Kennedy School where she worked in collaboration with Asian and African governments of the development of health care and economic policies. Dr. Malaney’s current research focus is the role of scientific realism in the foundations of economic theory and its expected effects on the economics of development, education, gender, and welfare. She received her BA from Wellesley College and her PhD from Harvard University.

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TRANSCRIPT:

Pia Malaney: Within our market economy we think of us as having the ability to vote through our dollars. So it’s one dollar, one vote. But we’ve seen inequality in this country increase so dramatically recently that we are in some sense hearing some voices much more loudly than others. If you look at the percent of income that is going to the top one percent of our population in the last 20 years it’s doubled from 10 percent to 20 percent. If you look at the pay of CEOs compared to the pay of the average production worker it went from being something like 24 times the pay of an average production worker to being closer to 200 times. In many ways the voice of our working class Americans is no longer being heard at the same level because they don’t have as much control within that economy.

So they’re looking to what we can think of as another economy, a separate place to hear their voice which is our ballot economy. And we’ve always believe that our ballot economy represents one person, one vote. Of course we’re seeing changes in that too. We have come to understand very clearly the effects of gerrymandering over the last several years. We have seen, in this last election, the impact of the electoral college and what that does to the voice of the majority. And we also understand that when you have two senators from a state like Wyoming or from Vermont and two senators from California that, in fact, we don’t really have one man, one vote. But we have enough equality within that system that we actually were forced to listen to the voices of people who have felt disenfranchised in our market economy.

So what are these policies that have caused people to react in this way? Well we can think of just a few of them if we think about finance, integration, trade. Very often we have been told by the establishment that immigration represents a win-win for America. The trade represents a win-win for America. Well, let’s delve a little deeper into that. Is that really true? As economists when we think about welfare we’re very careful to think about ourselves as technocrats. So we don’t want to decide for a society what distribution within a society should look like. And so we have this notion of welfare called Pareto welfare. And we think of something as a Pareto improvement if you can make at least one person better off by making nobody worse off.

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