A Pandemic in Search of an Establishment
(Bloomberg Opinion) -- It is a safe bet that Donald Trump would not have liked the fifth Marquess of Salisbury. In the 1950s, “Bobbety” Cecil, a descendant of Elizabeth I’s famous fixer, Robert Cecil, was the ultimate insider — the center of a “magic circle” of “grey men” who arranged Britain’s Conservative Party leadership (and thus usually the prime ministership). Across the Atlantic, the U.S. also had its cohort of WASP-y “wise men,” typified by W. Averell Harriman, the son of a railway tycoon. Whenever a problem emerged, the East Coast establishment called in the best and the brightest from academia and business — whether it was asking John Maynard Keynes to help redesign international finance, bringing in Henry Kissinger on foreign policy, or letting Bob McNamara’s “whiz kids” fix the Vietnam War.
Meanwhile in continental Europe, the organization that would become the EU was being quietly put together by an elite that, still recovering from the onslaught of populism in the 1930s, preferred not to consult voters about the process. As late as the 1990s, Eurocrats like Jacques Delors, the Machiavellian president of the commission in Brussels, were pushing toward a federal Europe. The first meaningful vote in France, one of the founding members in 1957, did not happen until 2005, when the French ungratefully rejected the integrationist Treaty of Nice that had been arranged for them.
In the West, the establishment, however you define it, has been in gradual decline since the mid-20th century — often for good reasons. The fixers’ track record was hardly perfect — unless you think the Vietnam War was a success and the European Commission a triumph of efficiency. The magic circle’s decision to give the Tory leadership to the 14th Earl of Home in the swinging ’60s resulted in a huge Tory defeat. Nowadays, it is not just that the meritocracy mercifully outweighs marquises; the nature of money is different. Silicon Valley barons have fewer ties to government than the railway barons did (and less guilt about how their money was made). And the modern media have made it harder for the Bobbetys, Averells and their cohort to fix things in private: In the age of Twitter, a modern Henry Kissinger could hardly sneak off to China.
However, over the past few years, distrust of the establishment has reached new heights. The American president hates insiders and fixers — whether they sit inside the Beltway, the Federal Reserve or the World Trade Organization. Bernie Sanders is barely less vocal in his fury, especially when it’s directed against a Democratic Party establishment that has thwarted his rise. As for the European Union, if the populists who rule many European countries had a battle standard, it would be the famous front page from London’s Sun newspaper: “Up Yours, Delors.”
For the populists in power, problems are solved by noisy confrontation, not stitch-ups by the elites and supranational bodies. They distrust scientists, with their pesky data about climate change, and economists, who put a price on the cost of Brexit. It is hard to imagine the West forming “a committee to save the world” comprised of unelected officials (and, by tradition, the head of the Federal Reserve and at least one former head of Goldman Sachs), as happened in the financial crises of the late 1990s and 2008.
Which is a problem — whatever you think of Goldman Sachs or Bobbety.
The crisis prompted by the coronavirus calls for a lot of behind-the-scenes collaboration and a willingness to listen to experts. A dozen years ago, as the last financial crisis began, the main finance ministers met in Washington and ushered in a global plan of simultaneous rate cuts, with both the U.S. and China pumping money into the system. This time, the first big response — the Federal Reserve decision’s to cut interest rates on March 3 — seemed unilateral. There were few signs of cooperation with either other central banks or the White House: Trump promptly criticized it as yet another mistake by Jay Powell, the Fed chairman whom he publicly regrets appointing. The market plunge continued.
Or look at the response to the virus itself. Trump has followed the populist playbook. He first ridiculed the technocratic reaction, belittling the World Health Organization’s numbers and the advice of his own Centers for Disease Control and Prevention (trusting instead his own “hunches” over the data). He took a few swipes at immigrants and foreign countries, cutting off travel to China. Above all, he did little to gather experts, prepare test kits and so on. Then this week, he changed course, condemning the “foreign virus,” banning incoming travel from the EU, and warning Americans against visiting some of their oldest allies — without apparently alerting those allies of his decision. Rather than leading international cooperation, the president’s message is “America First.”
Not that Europe’s response has been especially impressive. To begin with, populists rushed to blame immigration for the virus. Hungary started turning back asylum seekers. In Italy, Matteo Salvini of the League linked the crisis to the docking of the Ocean Viking, a humanitarian ship with a couple hundred African migrants aboard. He demanded an “armor-plated” border and called on Prime Minister Giuseppe Conte to resign “if he isn’t able to defend Italy and Italians.” More generally, the countries of the European Union have tended to compete rather than collaborate; with Germany grumbling about resources going to the south, there has been little attempt to marshal the power of the union to fight the crisis. At the European Central Bank, Christine Lagarde seems stuck in a game of chicken with her governments, publicly urging them to add fiscal stimulus even as they push her to loosen policy further. So much for collaboration.
As for business, self-interest is ascendant. Back in the days of Bobbety and Averell, the heads of commerce would have been summoned to Downing Street and the White House, and the military-industrial complex would have kicked into gear: Plans would have been laid and staff seconded. The fact that it is counted as triumph that Facebook and Google have taken down some fake-science sites says a lot about the current level of cohesion and awareness of the broader interest. The next challenge is liquidity: Without some kind of coordinated message, a credit crunch would seem inevitable.
Is the situation really that bad? Intelligence chiefs insist that cooperation between the main Western spookeries has never been better, partly because of the sheer childishness of their political bosses. Bankers say that, even while President Trump is attacking Chairman Powell, there is still a sub rosa dialogue taking place among the Fed, Treasury Secretary Steven Mnuchin and National Economic Council Director Larry Kudlow. Still, it’s pretty bad — with some mandarins going so far as to talk about a collapse being not just inevitable but justifiable, if it forces the populists to accept, as one central banker privately puts it, “the basic tenets of economics, science and modern diplomacy.” Nobody would claim that is an optimal solution.
One glimpse of a possible way ahead lies in Bobbety’s backyard. As the architect of Brexit, Prime Minister Boris Johnson has seldom been afraid to bang the populist drum. Yet so far Britain’s response to the crisis has been relatively measured.
Johnson has taken a two-track approach. On his country’s post-Brexit negotiations with Europe, he has been as loudly nationalist and unreasonable as usual. But on the coronavirus crisis and the credit crunch, he has handed over the television screen to experts, notably the government’s chief medical officer. Rather than fighting the Bank of England, he has been cooperating with it, even being generous to the outgoing governor (and anti-Brexiteer), Mark Carney; he has also given more room to his technocratic chancellor, Rishi Sunak. And he has reached out to other European leaders, taking their side in opposing Trump’s travel ban (even though the American president exempted Britain from his edict) and calling for greater international cooperation.
It is still not clear that Johnson and his scientific experts have got it right: Their strategy is notably different from other countries’. But, in style at least, Johnson is imitating Janus, the two-faced Roman god he studied as a young classicist. One moment he is the populist demagogue of the silent majority; the next, with a swivel of his head, he is an old Etonian establishment fixer. Somewhere Bobbety and Averell are smiling, and maybe even sensing a bit of a comeback.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
John Micklethwait is editor-in-chief of Bloomberg News.
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