James Livingston has a problem with Populism. Specifically, he has a problem with how (according to his perspective) Populism continues to serve as the "master text" of most American explanations of economic crises, including the Great Recession. As Livingston argues, this analysis has cannot be identified exclusively with either the Left or the Right. It's endemic to American political culture as such, the "common sense" of pundits and politicians across the ideological spectrum. The Populists may have been permanently defeated at the polls in 1896, but for better or worse their approach to analyzing the economy runs deep in the American grain.
The last few years of economic crisis have been terrible, but it's been nothing compared to the recurrent crashes, panics, and depressions that gripped the country in the last decades of the 19th century. It was during this time that the discipline of modern economics was founded, whose leading figures offered new theories of the business cycle built upon three central premises.
First, they "assumed that crisis was inevitable, even normal regardless of how scrupulously and rationally business decisions got made." (11) In contrast, Populists tended to look for incompetence or corruption on the part of politicians or bankers to explain the outbreak of crises.
Second, they argued that "rational decisions at the microlevel of the firm could contribute to disaster at the macrolevel of the economy as a whole," (11) which would result in overproduction - too much stuff with not enough people to buy it all. The Populists, by contrast, argued that the improper regulation of the money supply and the rise of corporate monopolies were bigger threats to economic order.
And third, they argued that a central bank was needed to engage in "ready lending" when crisis struck - "restoring liquidity to the banking system as a whole, so that a credit freeze would not bring all economic activity to an abrupt and catastrophic end." (13) If that third point sounds familiar, it should - that's what the bank bailouts were all about. And like the Populists of old, Americans across the political spectrum have ferociously denounced the bailouts as a dangerous encouragement of moral hazard in the financial system.
Livingston argues that more or less the same conflict on today, and that the most common explanations of the Great Recession "map onto the debates of a hundred years ago," (14) and to Livingston's chagrin the neo-Populists seem to be winning the battle of ideas. He reduces their analysis of the current crisis to what he calls the Four Ms: Mistakes, Monopoly, Money, and Morality. To continue the lame alliterative theme, he concludes that these each of these explanations are merde.
We'll take up each of the Four Ms next week. But for now, enjoy your weekend, and enjoy the holiday if you are so inclined!