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Why This is an Age of Stagflation, and How it’s Destabilizing the World—Plus, The Election and the Economy

Why This is an Age of Stagflation, and How it’s Destabilizing the World—Plus, The Election and the Economy

I’m Umair Haque, and this is The Issue: an independent, nonpartisan, subscriber-supported publication. Our job is to give you the freshest, deepest, no-holds-barred insight about the issues that matter most.

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  1. This Whole King Trump Thing Is Getting Awfully Literal (NYT)
  2. Election officials in the US are under threat. A key county just faced a major test ahead of November (The Guardian)
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  4. Why experts say inflation is relatively low but voters feel differently (NPR)
  5. Far-right extremism spreads among young people in Central and Eastern Europe (El Pais)
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Hi! How’s everyone doing? Today, we’re going to talk the economy, the election, and more. Beginning with…

The U.S. economy grew by an annualized rate of 1.6 percent in the first three months of the year, a sharp slowdown from the previous quarter’s growth rate of 3.4 percent, according to the Bureau of Economic Analysis’s measurement of gross domestic product, the sum of all of the goods and services produced in the country.

The deceleration reflects swings in business inventory and trade, as well as weakening household and government spending.

Markets, though, were decidedly downbeat on the potential of lower economic growth and higher inflation, commonly referred to as “stagflation.”

Can I say…I told you so? We’re now in a very different economy. A stagflationary one. And that’s bad news, on many fronts.

How to Understand the Economy, and Why it Matters

Let’s talk for a moment about the sort of absurd game that gets played when we talk about the economy. My lovely wife, the doctor, is a really good doctor. The kind who makes patients cry with gratitude. That’s because she cleans up the messes left behind by other doctors. The sort who just look at test results, shrug, and don’t…think much harder than that.

Economics is sort of like this. There are three kinds of economists, and commentators on the economy, or three levels, if you like. Poor ones, mediocre ones, and good ones.

The problem is that the poor and mediocre ones are the loudest (and dare I say the white-guyest), so they get the lion’s share of coverage in newspapers and media. But because they don’t really investigate, they don’t fully grasp what’s going on beneath the surface. Hence, this sort of Kafkaesque situation we’re always in: the economy’s always doing “great” or “well,” according to these types, and of course mainstream media sort of slavers over their pronouncements.

All of which is well and good, except for one problem. They’re wrong.

So why are they so wrong? This is important for you to understand, so you, too, learn how to think about the economy well, which, as we’ll explore, is everything in this day and age.

Let’s go back to my bad doctor analogy. A bad doctor sees a patient, and orders the wrong test. They see the result, and everything looks fine, so the patient must be ok, right? Wrong. The patient, poor thing, meanwhile, goes on being neglected, their health worsening.

That’s exactly what happens in the case of the poor level of economists and commentators. They look at the wrong numbers entirely which are superficial ones, and conclude everything’s ok. So, for example, that means just looking at GDP. GDP by itself doesn’t tell us much, and just pointing to it as a sign of “growth,” for a quarter, here and there, is so much noise in the signal.

You have to go deeper—much deeper. For example, looking at what’s causing GDP to rise or fall, and in what sectors and fields such “growth” is concentrated in.  That’s the level mediocre economists and commenters hit, sometimes, and that’s better, but it’s still not really insightful, in the sense that they can predict much. Even this level of person is constantly surprised, shocked, startled, that…look, we’re in an age of stagflation, how did that happen?

Why Well-Being is the Most Powerful Idea in Social Science

So to be a really good economist, you have to look even deeper than that. Think about my lovely wife the doctor. What makes her so good at her job? It’s not just about ordering tests. She considers the patients’ well-being. And based on that, once she’s thought carefully about it, investigating the various possibilities, then she orders tests. So the patient she recently made cry with gratitude, it turned out, was feeling fatigued, because they had a rare sort of deficiency—which was brushed off by all the poor and mediocre doctors they’d seen, since the “tests” didn’t “confirm” it. But there really was a problem.

Really good economists look not just at “GDP” or whatever else sort of superficial indicator there is, but at what they’re supposed to represent. And to do that, for example, they often look at well-being.

Recently, such minds created a new measure of prosperity, called the CORE score. Ignore the semantics—just understand it as a measure of well-being. This breaks it down into four kinds—economic security, opportunity, health, and politics.

The Score advances a primary goal of the Commission: moving national focus from how the economy is doing to how Americans are doing. While the most widely used economic metrics – such as the GDP or the Dow Jones Industrial Index – measure economic growth, they do not capture the welfare of the vast majority of Americans. 

Rather than growth or stock price, the CORE Score focuses on well-being, offering a more holistic portrait of how Americans are doing. The data is provided at the county level, with each county’s Score drawn from 11 indicators across four categories: economic security, economic opportunity, health, and political efficacy. 

What did they find? That well-being in America is about 5, out of 10, or around half of what it should be. Worse, it’s been stagnant for the last 25 years.

And that feels much more real than dips and swings in GDP. Which sort of go up and down—but life, for most, isn’t getting any better, and when we de-average, it’s getting worse, fast, for example, for young people, or many other social groups.

That’s not just good economics, that’s good social science. Why? GDP is an outcome. In other words, it should be the dependent variable. What we want to do is explain it, over the long run, and predict it, and to do that, we need to understand the causal variables, or independent ones.

The mistake that poor and mediocre economists and commenters make, focusing obsessively on GDP, is thus a sort of both crushing and elementary one: they literally don’t understand that they’re misinterpreting as a dependent variable as a causal one

In other words, they’re sort of breathlessly perpetually speaking about GDP as if it’s the whole picture, the whole pie, when in fact, what we really want to understand is why it’s shrinking or growing, and if it’ll continue to, and what it all means.

That, by the way, is sort of the biggest mistake you can make in any kind of science. Not having a causal variable. Because then you’re not really “doing” any kind of science—but now you’re engaged in solipsism, which to my lovely wife, the doctor, who also has a philosophy degree, is the most lethal insult you can sling at someone. It just means: you’re going in circles without really explaining anything, because you don’t even know the mistake you’re making in thinking.

Why Plummeting Well-Being Predicts (Catastrophic) Destabilization

So. The CORE Score. Don’t worry about it in particular. It’s a great idea, and sorely needed in America, by the way. But the larger message it contains is backed up by every other sort of indicator of well-being we have—that well-being is stagnant or cratering. When we include other forms of “capital,” for example, that the CORE score doesn’t count, and that’s OK, it’s its own thing—like, say, social capital, or trust and relationships, or emotional capital, aka how people feel, their sentiments, sense of optimism or pessimism—then well-being is plummeting.

And that gives us something powerful, the thing we want, if we’re sciencing well: the power to predict and explain.

What does plummeting or stagnant well-being explain and predict? Much more than you might think. It tells us, for example, that even if GDP’s growing, but well-being’s not, then that “growth” isn’t really adding up to much, and that implies that either its concentrated in a tiny number of hands, or its a sleight-of-hand of accounting or finance, or that, even worse and more perverse, it might be something damaging that we’re counting as “growth,” that’s hurting people and families and society, like a form of pollution. Like, say, rampant inflation for the same old stuff that used to cost a lot less. Like we’re seeing right about now. So already, we’re learning a lot.

But it goes, much, much further than that. The CORE Score, which is a sort of rudimentary measure of well-being, includes, for example, economic security and opportunity. When those stagnate, what it predicts is…stagnant GDP. Why? Because of course people who are struggling to make ends meet, who aren’t seeing upward mobility, who feel sort of constantly thwarted in their quest for better lives—they’re going to have to pull back on spending. Just like they are now.

And it goes even further still. What else does stagnant or plummeting well-being tell us? It predicts sociopolitical destabilization, at a catastrophic level, and a civilizational one. We’ve discussed that a lot, so I won’t bore you with another long recitation of the details—suffice it to say that people who feel neglected and abandoned by their leaders turn to demagogues and fanatics who promise to literally maybe even storm the seat of government, attempt a coup, and shatter the failed system. Like Trump.

See how much more we learn—explain, predict, understand—when we do real economics and social science? Not just make the elementary, sorry-you-just-flunked-intro-to-grad-school, mistake of not even having a causal variable, and confusing your dependent variable with your independent one? Sorry if I sound kind of mean or irritated, by the way, but our economic discourse is unbelievably bad. We all know that, but I want to finally really teach you why.

The Election, or How Moral Universes Shape Leaders and Followers

All of that brings us right back to politics. Can we talk about Joe Biden for a second? At this point, he’s going to lose the election, and lose it badly, I reckon. I used to say that was because of all the above: the Democrats, foolishly, talked up the economy, when it was clear, if you understood the above, that, no, things are far from great, and no, there’s not going to be some sort of magical recovery to “normal.” This is the economy now, stagflation, and as climate change, the breakdown of global order, and the savage arc of downward mobility continue to bite, it’s only going to deepen.

But by now, there’s another very big problem that the Democrats face, yet again, of their own making. See that wave of student protests rolling across the country—and the world—over Gaza? See Biden’s absence from this issue almost entirely?

I used to say, sort of absent-mindedly, that Biden’s been a pretty good President. He has, but. But his…treatment…of what’s happened in Gaza is…astonishing…and it’s going to cost him the election, probably. If you’re a “white” person, you might not really understand why I say that, but let the “brown dude” in me put it to you bluntly: every minority looks at that and says to themselves, “this is what the Democrats really think of us. They value our lives this much, which is to say, not at all.” I doubt any minority hasn’t thought that more than once.

Biden appears to live in a kind of weird moral vacuum in this context. And it shows all too plainly. He genuinely appears not to give the slightest damn about a particular kind of life. And that might’ve even been OK, politically, a few decades ago, but now? Those very people make the difference. And by not valuing that kind of life, Biden’s losing young people too, because what it says is: I don’t value peace, justice, goodness, decency, international law, the post-war order, all the grand ideals we set the world up for after the last wave of world war.

Young people are idealistic enough to still value all that stuff, and in that sense, Gaza’s sort of woken up them up from a numb, traumatized slumber. More than half of them say “they’re too numb to function” on a daily basis and so on—but this is sort of shaking them out of the stupor of living in an age of polycrisis. 

And as they wake up, they look at what all this means, and they see it very clearly. It’s not just about Gaza, but the total contempt for the larger values, let me say it again, of peace, justice, decency, nonviolence, cooperation, prosperity, global order, equality, and so on. And when you have contempt for all that, good luck winning an election. 

Trump can get away with that contempt, because that’s what that side’s politics is based on. For. Exists to do. But for a leader of a democratic side of politics to not just express, but show, enact, embody, contempt for its deepest values and truest ideals? That’s shudder-inducing stuff, and that’s what’s driving young people into a frenzy, not to mention making minorities turn their heads and walk away.

In this case, the lesser evil isn’t so easy to even figure out. Sure, Trump wants to destroy democracy. But Biden doesn’t seem to feel that people like those in Gaza, which is 80% of the world, a hell of a lot of Americans, and supposed to be a set of universal values we build a world and civilization on…deserve it. That shocking betrayal is so grave that it’s even shaken traumatized young people into protesting, for the first time in their generation, really.

So Biden’s likely going to lose. Not just for economic reasons, which was what I used to predict not so long ago, but this time, also for moral reasons, too. It’s not so clear anymore that he, or the Democrats, really occupy any kind of moral high ground anymore, and for a side that’s supposed to the democratic one? There’s nothing more lethal than that.

The Don Draper in me calls that “brand suicide,” and it’s what the Democrats are doing to themselves now. A friend said to me the other day: “It feels like Blinken’s the real President, along with maybe a few advisors. Biden…he doesn’t seem in control of any of this anymore.” I can’t say that sounded too wrong to me. I say that with sadness, because this isn’t a mistake Biden should have made. But he did, and walking it back now, at this point? What would it take for young people or minorities or even women and so forth to really believe the Democrats care about them in a substantive way, or respect and cherish the ideals of democracy proper, versus just sort of flagrantly let everyone down, over and over again?

Maybe that sounds too strident, and too harsh. I don’t know. I’m just putting it like I see it, and that’s this: it’s not just the economy anymore, that’s going to cost Biden the election, but now, deepening moral injury is, too, the sense that the Democrats don’t really inhabit much of a moral universe at all, just one of power and expedience—and that’s the hardest thing of all to come back from, in those rare instances it’s possible at all.

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