Rage returns
A triumvirate of events last week illustrated the continued relevance of “The Politics of Rage,” a detailed study I wrote a decade ago on the origins, causes and future of populism.1[1] The first was the defeat of Hungarian Prime Minister Viktor Orbán, or rather the reaction to it. The second was an episode of The Rest Is Politics podcast that appropriated (without attribution) the title The Politics of Rage.2[2] The third was a Doomberg article debunking conspiracy theories about “paper barrels” in the crude oil market. But the examples also testify to increasing delusions that make inference increasingly difficult in a world already deep in both Uncertainty and information overload.
Stuck on The Politics of Rage
Before explaining the connection between these seemingly unrelated events, it is worth reviewing my findings in The Politics of Rage and the excellent subsequent book by anthropologist Heidi Larson, “Stuck: How Vaccine Rumors Start—and Why They Don’t Go Away.” In The Politics of Rage, I traced the rise of populism over 30 years across 22 advanced economies and isolated its causes. The critical driver is not rising inequality, as usually claimed, but the deepening political disenfranchisement that accompanied it as elites — elected representatives, academia, the press, business leaders, and the bureaucracy — ignore the preferences of “ordinary” citizens in favor of their own interests. Please forgive my arrogance, but my research remains the defining work on the topic and other than Professor Larson’s book, nothing I’ve read since has added to my understanding of populism (or predicted its path and implications as accurately).3[3]
Coping through delusion
Professor Larson’s book well describes and documents a strong corollary to the Politics of Rage: delusion as a coping mechanism for perceived loss of control. Her book focuses on vaccine denial, but is a far broader study of how humans resort to conspiracy theories to deal with circumstances they cannot control. From resistance to smallpox vaccinations in the 19th century through modern fears of vaccines, Dr. Larson examines the causes of vaccine denial over more than a century. Time and time again, across countries and cultures, she finds that a perceived loss of control by the rejecting group is responsible for their vaccine hesitancy. Troublingly, she finds that education (or lack thereof) is neither a cause nor a solution: anti-vaxers are not uneducated or unexposed to the evidence of their efficacy; they cling to conspiracy theories as a means of coping with a loss of control over their circumstances.
“I am not a witch”
From failed “Tea Party” candidate for US senate, Christine O’Donnell, who famously had to run a campaign ad denying she was a witch, to former-comedian-turned-Italian-politician Beppo Grillo’s vaccine denial and conspiracy theories about cover-ups of mass illness, over the last two decades the Politics of Rage has attracted a carnival cast of candidates who appealed to mass hysterical delusions. Even successful populist candidates like President Trump have participated in delusions like the Obama birth certificate hoax. Based on Professor Larson’s research into the causes of such delusions, their prevalence among populists and populist candidates perfectly fits with my analysis showing that the roots of the Politics of Rage is a sense of disenfranchisement and loss of political control. Yet, worryingly, these delusions appear to be spreading.
A funny kind of dictator
Which brings me to the reaction to Prime Minister Orbán’s loss in Hungarian elections last week. Am I the only one who finds it a little odd that the bête noire of European democracy, a man universally described in the Western press as a proto-fascist, immediately accepted defeat and a smooth transition from power without so much as a peep? Doesn’t that call into question whether he really represented the threat to democracy that his critics claim? Yet, the consensus reaction to his electoral loss was not a reconsideration of whether Prime Minister Orbán is a proto-fascist, anti-democrat but instead a jubilant cheer that democracy had been saved from his autocracy…by an election he presided over.
Meet the new boss, same as the old boss
Adding to the sense that the consensus is unwilling to let the facts get in the way of their received wisdom was the lionization of the election’s victor, Péter Magyar, as a champion of democracy. This framing asks you to forget that Mr. Magyar was a former acolyte of Mr. Orbán and member of his Fidesz party. It ignores as well that his stance on immigration is tougher than his former boss, that he calls for the revocation of work permits for all non-EU citizen and for Hungarians abroad to repatriate to Hungary to bolster its ethnic purity. Indeed, the only differences with Fidesz that Tisza, Mr. Magyar’s new party, campaigned on were a less confrontational stance with the EU and cleaning up alleged corruption under Fidesz.
Defenders of democracy
The conventional view of Mr. Orbán’s loss — as a victory for democracy over proto-fascism — was also apparent in The Rest Is Politics’ interview of former British Labour MP Liam Byrne about “the Politics of Rage.”4[4] Host Alastair Campbell and his guest, Mr. Byrne, repeatedly present themselves as “democrats” standing against anti-democratic “charismatic charlatans” who “seduce” voters with “false promises” that are “a myth…a fib…a lie.” It’s not difficult to see why voters across Western democracies have increasingly migrated away from center-left (and center-right) politicians like Mr. Byrne who describe them as gullible rubes that are easily mislead by “nostalgic tropes.” But the larger reason is that, contrary to Messrs. Byrne and Campbell’s assertions, populist leaders like President Trump and Prime Minister Orbán deliver on the issues their voters most care about, like immigration. That’s why Mr. Orbán lasted 16 years and was only supplanted by a leader who promised to do even more.
Powerful vested interests
Yet, the most fascinating part of the interview are Messrs. Campbell and Byrne’s self-contradictory delusions, often within a single sentence. Both admit they now believe that voters were right about the negative implications of globalization for their wages, but in the same breath insist that voters’ even longer-standing, more broadly held demands for less immigration are rooted in ignorance. Unironically, at a time when job seekers and markets are increasingly worried about AI and robotics taking humans jobs, Mr. Byrne insists that pro-immigration policies are necessarily “looking forward” to worker shortages while populist charlatans peddle nostalgia for a past when local high streets had less crime and more shops. Still more amusingly, in a single breath, Mr. Byrne accused populists of “always…blaming the outsider,” while advocating that “mainstream politics needs to define its enemies as the vested interest holding back our economy.” Who are these powerful, mysterious “vested interests”? Neither Mr. Byrne nor Mr. Campbell care to offer an example (perhaps because they’re too powerful).
Who’s losing control now?
“Vested interests” are the classic political boogeyman blamed for any unexplained — or unaccepted — adversity. The appearance of vague, nameless malefactors in center-left/right political discourse after two decades of steady losses in vote shares suggests they are becoming subject to the conspiratorial tendencies Professor Larson warns of. The potential for this to widen into a broader loss of trust among Western elites is an institutional (and ultimately market) risk that I’ve worried about for several years now. But here I’d like to focus on the more immediate issue of distilling signal in an increasingly noisy environment.
Who do you trust?
Broadening delusions is an increasingly worrying development not only for Western politics but also for market analysis. When it was only a number of fringe candidates who dabbled in witchcraft in their youth — haven’t we all done that? — information provenance and reliability was less of a problem. But as populist candidates became more sophisticated in their messaging and successful in winning office, the reliability problem, aka “fake news,” worsened. As traditional center parties, candidates and increasingly their “mainstream” press apparatus become trapped in delusions as their own sense of control winnows, the problem of sorting fact from fiction becomes infinitely more challenging. The signal processing problem is compounded further by the simultaneous expansion of noise from digitization of everything in the age of information overload.
The paper price for oil is a government-constructed lie
As though part of a chain reaction, the delusions appear to be spreading into realms like markets that previously were seen as “objective,” hence the “paper barrels” controversy Doomberg debunked. As the signal-to-noise problem expands, it facilitates a sense of loss of control among market participants, increasing their propensity for delusion. I am not surprised that in an age of Robinhood trading and spread betting that many non-commodity specialists were unaware that crude oil (and most other energy) futures require physical settlement, hence are not “paper” obligations but real contracts for delivery. But I never expected to see “backwardation” (a downward sloping futures curve), however extreme, described as a “government constructed lie” and taken seriously by anyone. Yet, this follows the “petrodollar” myth that contends that the dollar’s reserve status is upheld by $2 trillion to $3 trillion per year in cross-border petroleum trade in a world where the S&P 500 has combined revenue of nearly 10 times that amount and global foreign exchange markets trade $9 trillion per day.
Deluding oneself
These developments create a real problem for analysts and decision makers. Rapid expansion of information increases our potential for inference, but makes monitoring challenging. The expansion of delusions within those information sources requires complex filtering and redundant checks. The advent of AI isn’t necessarily helpful since it is trained on data that increasingly is delusional and is itself prone to self-induced hallucinations. My approach is to start from first principles: reduce the problem to is most elemental bases, apply known theory and use logical deduction to formulate a testable hypothesis, then compare it with reality. The problem is that definitions of reality appear to be evolutionary and their pace of change is accelerating.
Comments are available to paid subscribers only.