FT subscribers can click here to receive Swamp Notes by email.
Over the past few years, we’ve grown so accustomed to being shocked that we’re no longer surprised when it happens. An event or a behaviour is described as unprecedented, and we don’t even blink any more.
And it feels like the frequency of unprecedented events has only accelerated further this year. We are just 50 days into 2021 and already we have seen an “unprecedented” attack on the US Capitol, an “unprecedented” frenzy of retail investors buying call options in companies such as GameStop, an “unprecedented” second impeachment of a US president, and now this week, an “unprecedented” cold snap across the middle of the US resulting in “unprecedented” power outages and surges in natural gas and electricity prices. Meanwhile, the new Biden administration is hoping to gain approval on an “unprecedented” $1.9tn stimulus package because of an “unprecedented” pandemic with an “unprecedented” K-shaped recovery?
From the looks of things, unprecedented is quickly becoming our new “new normal”.
That’s a problem. In my work as a behavioural economist, I spend my days focused on the linkages between confidence and decision-making. At its core, confidence requires perceptions of certainty and control — it is how we see ourselves faring in the future. And when things are routinely unprecedented, as they appear to be this year, we really struggle.
To be confident in what is ahead, we must be able to extrapolate past trends and memories. We need a way to somehow assume the future will be familiar — whether to invest, to hire new employees, to start a family or to go on vacation. Unprecedentedness precludes that. Not only do we not know what is coming, but we aren’t able to adequately prepare. Everyday life feels like a pop quiz where we’ve walked into class without doing the homework. We feel powerless.
Unprecedentedness overwhelms us cognitively, too. Bombarded with unfamiliarity, we must slow down to sort things out. Not surprisingly, our natural response is to revert to highly simplistic, black-or-white thinking. There is neither grey nor middle ground. And low confidence brings with it zero-sum thinking, where we feel others somehow gained at our expense, not to mention an insatiable willingness to consider alternative facts and conspiracy theories. When everything is unprecedented, truth is up for grabs.
As I listen to policymakers and financial market pundits talk about a return to normal after the pandemic ends, I am not sure they fully appreciate the extreme uncertainty and powerlessness now felt by many Americans because today’s environment feels so inherently unpredictable.
In comparable times in American history, we’ve turned to our biggest institutions, church and state, for comfort and strength — to bring us and hold us together. Today, our biggest institutions seem fragile and unwieldy. Like the power grid now under stress across the south-east, none seems strong enough to handle the mounting load.
The new Biden administration is hoping to fix that. I worry, though, that its ranks are heavy with economic wonks who view Americans’ greatest challenges today to be financial. They believe if we give consumers a $1,400 cheque and small businesses more funds through the Payroll Protection Program, the stimulus will carry us across the breach. Members of the administration speak in abstract terms about “investing in infrastructure” when people want to know what this means in terms of their own jobs and wages. It feels like the bigger the fiscal programmes have become, the less real they feel.
What main street needs isn’t just money, but a greater sense of certainty in what is ahead. And today there is no one offering a compelling and unifying vision of the future offering hope.
Rana, we’ve already seen the private sector rush in and help with the development and distribution of vaccines. Do you think business leaders and the private sector can step in and help fill the void created by Washington’s extreme partisanship? Or do you have other thoughts for how to best tackle the mounting unpredictability of it all?
Edward Luce is on book leave and will return in mid-March.
A lot of attention has been paid to investors who made money during the recent GameStop frenzy. Rachel Louise Ensign of The Wall Street Journal spoke to a few who lost big. Her story was powerful, especially knowing it was her first since she experienced the loss of her daughter.
As I was writing my thoughts about powerlessness, I was reminded of Claire Bushey’s beautiful column on loneliness for the FT Magazine. While it is from November, her thoughts seem even more fitting in this midwinter moment with so many limitations on our in-person interactions.
Finally, I was surprised by how many workers are now contemplating complete career changes — a point highlighted in Heather Long’s latest story in The Washington Post on the changing trends in US employment.
Rana Foroohar responds
Peter, I too am amazed by what’s happening in Texas (which I’ll touch on a bit in my own Monday note). But to answer your larger question, I do think we are at a tipping point in our economic paradigm. As I’ve written in past columns, the Biden administration wants to make fundamental shifts in the balance of power between labour and capital. I think the administration is also quite serious about moving beyond neoliberal economics.
I would actually disagree with you that this administration is filled with only the usual “efficiency theory” types. I think the stimulus money is about getting through an immediate crisis, and making enough working class Americans feel taken care of that Democrats can be assured victory in the midterms.
If you look closely, you can see that the Biden team is already making smart, strategic moves in areas that count — look, for example, at the way in which the White House is taking a more realistic approach to China. Or Janet Yellen’s plan to appoint the very pro-labour former Federal Reserve official and Obama alum Sarah Bloom Raskin to a new climate position.
These sorts of moves give me a lot of hope that the administration is going to try — to the extent that it is politically possible — to make good on its plans to “Build Back Better” with a focus on climate. As I’ve argued in the past, that’s the way to main street growth. We just have to get through this long winter first.
And now a word from our Swampians . . .
In response to ‘The China challenge’:
“I agree with Peter that it is a mistake to extrapolate Xi Jinping’s authoritarianism into the indefinite future. Agency exists in China, and no agent is forever. Moreover, no agent is an island. A deeper reason not to push the decoupling button is that China is only the largest part of a general relative growth of the developing world. Even if Biden could circle the wagons of the wealthy containment would eventually backfire.” — Brantly Womack, Charlottesville, Virginia