Globalists and Nativists, Brahmins and Merchants in the 21st Century

In my introduction I talked about a political realignment underway. Just recently I read a new paper by French economist Thomas Piketty that gives a some empirical support for this shift: Brahmin Left vs Merchant Right: Rising Inequality & the Changing Structure of Political Conflict.

Briefly, based on post-election surveys from France, America, and the UK, he finds evidence in the data for two broad trends that haven't been much discussed. These map onto my own intuitions about the current political realignment, so it's encouraging to see a mainstream liberal economist addressing them.

• When he starts tracking the trends in the 60's, both high-income elites and high-education elites supported the political right, while low-income/low-education voters supported the left. Over the past half century, high-education elites have moved towards the left, leading to what he calls a "multiple-elite" system. (Picketty makes a colorful analogy to the Brahmins and Vaishyas of the Indian caste system. As an Indophile, I rather liked the comparison.)

• A new cleavage has emerged. Whereas in the past the cleavage was over wealth redistribution, with elites opposing and lower classes supporting wealth redistribution, the new cleavage is over immigration, with lower-income/lower-education voters opposing immigration. Piketty calls this rift "globalist-nativist."

Political scientist Justin Murphy at the University of Southampton aptly summarized what's surprising about Picketty's analysis: "In short, here you have a famous left-leaning economist converging with Moldbug (on the Brahmin faction) and Alex Jones (on globalism)."

What fed into the rise of the new globalist/nativist cleavage? Piketty identifies two factors. One is that globalization has made it easier for the wealthy to hide their income in international tax havens. This has led to the convergence of the parties on tax policy, to the point where "both the 'left' and the 'right' propose almost the same policy." This is how, for example, the top 10% of earners could shift to the Democratic Party, as they did in 2016, though Piketty is careful to note that this may be merely a Trump effect and not part of a long-term trend.

The Brahmin-Merchant convergence in action

The other factor is the rise of immigration beginning in post-war era in America and Europe and continuing to today's high levels. Piketty doesn't go far into why immigration is displacing redistribution as a central issue, but we can surmise it's because mass immigration disproportionately affects low-income and low-education citizens, especially low-skilled workers.

Piketty suggests his solution to this issue:

In the long run, the only way out is the development of a new platform and new internationalist-egalitarian policy tools making redistribution and globalization compatible – like for instance a global financial register and a coordinated wealth tax

I have to say this seems to me like wishful thinking from an old-guard, high-education elite leftist intellectual who resists the very conclusions that his own analysis confronts him with. Immigration is not going to go away as a divisive political issue. In fact, the anti-immigration camp is just now pushing into mainstream politics in a big way. And the low-income, low-education classes are not going to pull a metanoia and return to the high-minded egalitarian internationalist leftism of the kind Piketty and other old-guard leftist "Brahmins" favor.

That's because of something Piketty is apparently not prepared to acknowledge: the new globalist-nativist cleavage is actually a reemergence of the old class-based cleavage along a new political fault line. Piketty's "way out" is simply a return to the old bargain between the Brahmins and the working class. But the working class is not going to make a bargain that doesn't include the curtailing of immigration levels and exodus of jobs to cheaper foreign markets. It's now obvious that these are core political issues, and non-elite voters are going to insist on them.

Another point working against Piketty's solution is the birth of cryptocurrencies. Bitcoin transactions may be transparent and publicly available (though anonymous, they give plenty of information for law enforcement and tax departments to work with if they manage to link a public key on the blockchain to a real identity). But we're likely to see the widespread adoption of a privacy coin that allows untraceable transactions. Once that happens, wealthy elites won't need to offshore their money in order to hide it from the taxman. Their money will be stored on every full node. Piketty's global financial register cannot solve the new version of the problem.

So leaving aside whether such a thing is good or bad, the fact is our prospects for finding a solution to tax dodging by the uber-wealthy are becoming more slender by the day. This probably renders a new redistributionist protocol stillborn. Attempts to catch the money of tax dodgers will always be one step behind the technology. What we're likely to see instead is a new school of economic thought emerge that challenges the old free-trade, high-immigration paradigm. This will explore the deleterious effects of free trade and high immigration levels and provide intellectual backing to the emerging nativist blocs.

I have confided to a few friends that if a politician came along who combined the egalitarian politics of Bernie Sanders with the nativism of Donald Trump, an unstoppable populist movement would explode onto the scene. Obviously this would be a controversial combination, not least because of the common liberal view that nativism is basically fascistic. But Piketty's analysis suggests this is a likely outcome. Although Piketty himself does not explore it, it's more likely than his preferred outcome that low-income low-education voters rally behind a globalist egalitarian program. That would require that the globalism-nativism cleavage recede into the background. Simply put, these voters don't like the current levels of immigration and that fact isn't going to go away.