Economics against unity?

Posted by: Paul Donovan

22 Jan 2021

Weekly Updates

  • US President Biden’s inaugural address had a theme. “Unity” and “uniting” were mentioned eleven times. Unfortunately, economics is working against unity, in the US and elsewhere.
  • The pandemic is an extraordinarily disruptive event, but it is an overture to the greater disruption of the fourth industrial revolution. Industrial revolutions are, as the name suggests, revolutionary. Society is transformed in these periods of economic upheaval. Some people, through no fault of their own, experience a decline in their income or social status. What is worse, this decline can happen as their neighbour’s income or social status rise.
  • We live in a complex world, but prefer the illusion of simple solutions. “Scapegoat economics” seems to offer simplicity. Blaming your relative decline on another group in society is seductive; it is “their fault” not “your fault”. It offers a simple solution—remove their influence and restore your lost economic or social status. Social media magnifies this: scapegoat economics is easily tweeted, while complex reality is hard to summarise in 280 characters. All of these factors undermine unity and fuel prejudice.
  • Prejudice is both economically damaging and hard to counter. The cause is structural—a cyclical upturn or welfare payment does not make prejudice disappear. Unity is always an admirable aim. It will not be easily achieved.

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