The Bitcoin Mania

Four years ago, I gave a talk to a London salon series on the future of money. Set in the basement of a bar in the Shoreditch district, I was in the heart of ‘Silicon Roundabout,’ addressing an audience filled with thirty-something tech entrepreneurs. I told them to keep an eye on Bitcoin.

I was too broke then to take my own advice, but I wish I could have. The relatively new invention was then selling on the Internet at $100. If I’d put money into it, my investment would have now paid me a hundred times over. But with Bitcoin now surging at rates one normally associates with a speculative fever, there’s talk of it soon crashing. What’s going on?

Amid the Great Recession that followed the 2008 Crash, there was a wave of experimentation with bold new forms of economic organisation. Unemployed young people, unable to afford rent or transportation or even groceries, began creating community gardens and found ways to stretch resources by sharing houses, cars and even clothes. Some launched new blogs or e-zines chronicling life in this new era, with Lena Dunham writing from her parents’ basement and radical publications like Jacobin and New Inquiry seeing the light of day. It was an exciting time of imagining a new future.

Amid all this experimentation, a mysterious hacker, or group of hackers, going under the name of Satoshi Nakamoto, created a digital currency called Bitcoin. Angered by the way the bankers who had caused the Great Crash walked away scot-free and cash-laden, they wanted to create a currency that would enable people to transact business without banks.

As Western governments rushed to save the banks by pumping money into the financial system, they managed to stave off the sort of crisis and revolution the young radicals had been hoping for. Some kept the dream alive, like the magazines still publishing. Others marched off to join the establishment, the inventors of Uber and AirBnB finding ways to turn the sharing-economy into a motherlode for venture capitalists, while Lena Dunham traded her parents’ basement for the Hamptons circuit.

And then there’s Bitcoin. The crypto-currency has gone from being the dream of visionaries to the darling of speculators, as everyone and his dog rushes in to take advantage of its meteoric rise – a tenfold increase this year alone. Along the way, it has gone from being the topic of basement salons, to fronting the headlines of the world’s business press. And the question on everyone’s lips is, is Bitcoin a bubble about to burst?

They were saying back in 2013, when I gave my talk. Nevertheless, the fact that Bitcoin has risen a hundredfold since then does not prove that it isn’t a bubble. But so what? The reason I told my audience to buy Bitcoin then was not that it was going to transform the global financial landscape and become the currency of the future. It may – and if it does, if Bitcoin begins getting used not merely as a store of value but as a means of transacting business, then it is probably undervalued even at these levels.

Yet even as a store of value, I could see Bitcoin was likely to rise well above $100. That’s because the way Western governments prevented the Great Recession from becoming another Depression was by debasing their currencies. By pumping trillions of dollars into the banking system, they flooded the market with money. And it doesn’t take a genius to figure out that if you increase the supply of money faster than the supply of goods and services, the prices of the latter will get bid up. With a supply fixed by its creators, Bitcoin had the possibility of becoming a more reliable store of value than the increasingly devalued currencies of the Western world. It would have to fall awfully far before anyone who bought it in 2013 felt otherwise.

So to call Bitcoin a bubble misses the point. The Western economies have become bubble economies, and governments and central banks are juicing growth with short term injections of cash, as I detail in my new book. Since the financial crisis, the total value of shares traded on the world’s stock exchanges has more than tripled, from under $30 trillion to just shy of $100 trillion today. But the total output of the world economy has grown by only a quarter. In other words, governments didn’t stimulate new investment and production, they inflated asset values by devaluing their currencies. The resulting ‘wealth effect’ led to an increase in consumption by asset-holders – enriching the asset-holders (i.e. the rich) at the expense of everyone else.

Bitcoin was a clever invention that took advantage of this. In effect, its creators engaged in a clever bit of subversion: they hacked into the global financial system to reveal the dirty little secret of the neoliberal age – namely, that this economy is increasingly built on illusions and conjuring tricks.


Britain’s Slow Suicide Sort of Makes Sense

The numbers are in and they aren’t pretty. Britain’s Chancellor of the Exchequer delivered his annual budget last week with a barrage of jokes aimed at sweetening a bitter pill. Britain is slowly strangling itself. The Chancellor himself estimated that reductions in future growth rates will knock several percentage points off the country’s cumulative growth, limiting the resources he has available to play with. In its own budget analysis, the Institute of Fiscal Studies calculated that once Brexit is done and dusted, Britain’s economy will be more than three percent smaller than it otherwise would have been, average earnings will be £1,400 lower, and public services, already badly strained, will be further cut back.

All of this can be laid squarely at the feet of Brexit – not necessarily Brexit itself, but the chaotic way it’s being done. Britain’s productivity has barely recovered from its pre-2008 levels. A key driver of labour productivity is investment, both in new technology and infrastructure, and in the human capital that operates it. But amid political instability, businesses are holding off investment plans. Why wouldn’t they? It makes little sense to plough money into new machines or staff-training if your business is going to lose access to its key markets in a couple years’ time. Until managers get some clarity about the future, such as what sort of relationship Britain will have with Europe or what other new trade deals will materialise post-Brexit, businesses will stand pat. That won’t change soon.

If productivity isn’t rising, then the only other way to raise economic growth is to increase labour supply. That requires immigration, the very thing the Brexit vote was designed to limit. So Britain finds itself in a bind, one of the Brexiteers’ making. In principle, this could all be resolved with a clear and decisive stance as to where the United Kingdom is heading. Good luck with that. From morning to evening, ministers in the government contradict one another, and there is enough plotting going on in backrooms to fill a spy novel. Theresa May is trying to hold her ship together, but it’s sprung so many leaks she spends most of her time just trying to keep it afloat.

On the face of it, you’d think this would all be turning the slender majority of Britons who voted to leave the European Union in last year’s referendum against Brexit. Certainly, the obstacles against Brexit are rising in parliament, and the possibility of it now being reversed are greater than they were just a few months ago. But even if the Brexiteers lied through their teeth to get people’s votes – didn’t Boris Johnson say we’d have another £350 million each week to put into the National Health Service, when in fact we’ve been cutting public services? – there is as yet little evidence of Bregret.

That’s probably because while Britain is self-harming, Brexit isn’t harming everyone equally. Those who, say, make their home in London but work in the global economy can see only bad news in the crazy course on which the country has embarked. But for the ‘left-behind’ people in small towns decimated by globalisation, bad news is merely being distributed more equally now, rather than being loaded all onto them. Besides, with immigration falling, wages are starting to tick upwards. Long-term, that will damage the economy, as rising wages amid stagnant productivity will weaken British competitiveness. But ask them how their lives have changed since the referendum, and many Britons can reasonably say they’ve experienced a modest improvement.

Moreover, the government has so far sheltered some of Brexit’s strongest supporters from its harsh consequences. Pensioners, for example, were far more likely to opt for Brexit than first-time voters. With their pensions ‘triple-locked,’ the’ve been sheltered from the flat wages and rising inflation now besetting the country. Instead, the government has shifted the burden of economic adjustment onto the shoulders of constituencies that traditionally prefer other parties, or don’t vote – in particular, young people.

That may not be sustainable, though. Economically, with austerity set to worsen, the government may eventually have no choice but to break the triple-lock and dip into its pension-kitty. Politically, the Tories know they face a bleak future if they don’t make some show of winning the hearts and minds of young people. The Chancellor tried a bit of that in his budget, something which won plaudits in his party. But if the enthusiasm doesn’t transfer to the electorate, he may have to find ways to do more – which would mean having to redistribute austerity.

Should that happen, the electoral calculus behind Brexit might well change. But even then, the Remain camp still needs to craft an inclusive narrative which makes those hurt by neoliberal globalisation feel there will be a place for them in a renewed Europe. Unless they can convince these people that what they offer is not a return to the status quo ante, they will probably find support for Brexit pretty stubborn.

Zimbabwe – The Jacaranda Revolution

Even in the worst of times, of which Zimbabwe has had its fair share of late, it’s hard not to feel hopeful during jacaranda season. As the warming sun of the southern spring draws the brilliant flaming colours into the leaves, just walking along tree-lined boulevards amid ineffable beauty can leave you feeling that a better world is still possible.

So despite all the suspicions that Zimbabwe’s ‘second independence’ won’t change a thing, spare a moment for the joy of the people. Last night, Harare looked like the country had just won the World Cup, a prospect that until last week most Zimbabweans would have probably considered only slightly more remote than their president’s peaceful departure. In a country with shortages of everything, somehow the city’s residents found enough fuel to put all its cars on the road, flashing lights, blowing horns, and bringing the city to a standstill as people danced in the streets alongside policemen and soldiers.

I know, we’re all swallowing deeply to break the bad news: these things usually end badly. And it’s true, we’ve had plenty cause for cynicism at revolutions in recent years. The Arab Spring saw generals replace generals and chaos erupt. Then, the Occupy movement it helped inspire back in the West, which arose to protest the bank bailouts and to call for a new dawn, was crushed by the police as bankers cashed their bonus cheques.

And we all know the generals and politicians behind the Zimbawean coup were not selfless crusaders. Take the hero of the moment, Emmerson Mnangagwa, known as the Crocodile. Under a heavy cloud of suspicion for having both blood on his hands and his hands in the till, he would hardly seem the type on which to hang any hopes of change.

Yet for all that, there are still reasons for cautious optimism that Zimbabwe’s uprising may do more than just swap one tyrant for another. First, things have got so bad, that just a little change will make a big difference. Get goods back into the shops, provide a currency that is stable, make foreign exchange available: measures like these are in the range of possibility, and would improve people’s lives noticeably.

Second, this was an extraordinary coup by any standard, one which gives Zimbabwe unusually favourable odds. Ponder the scenario. For years, Zimbabweans had been steeling themselves for the worst, anticipating a bloodbath, even civil war, once Robert Mugabe died – and his dying was the only way they could imagine their president ever leaving office. But instead, in the space of a few days, we’ve had an all-but-bloodless coup, the preservation of a constitution, and a formal transition. It could have easily gone off the rails and turned ugly, especially once Mugabe decided not to resign at the last moment on Sunday evening. Yet even then, everyone else stuck to the script, the generals going so far as to salute the President even as they prepared to impeach him since he was, even if only for a few more hours, still their President.

Third, assuming that Emmerson Mnangagwa does take the reins of power, the change at the top may amount to more than what football managers call a like-for-like substitution. Some Zimbabweans note that whatever his faults, as a political organiser and government minister, Mnangagwa got things done. History will reveal the extent to which this coup was his doing, and how much he merely got swept up in events. But it seems to have his fingerprints all over it, which says something, because this coup revealed exceptionally good planning and near-flawless execution. If he can run a country the way he runs a forceful transition of power, he could yet make a positive difference.

Fourth, and perhaps decisively, it is just possible that over the last few days, the country’s balance of power shifted in a meaningful way. For all Robert Mugabe’s despotism, Zimbabwe managed to preserve a surprisingly resilient civil society and opposition movement. In fact, the coup probably would have failed had it not been that the people arose to back the generals. The ruling party would have needed opposition support in parliament to impeach Mugabe. Moreover, Mugabe would have quite likely felt emboldened to hang on if he could have persuaded himself he could go over the generals’ heads. Once the streets of the country’s cities filled with protesters demanding he go, however, his position became untenable. All in all, this movement united the barracks to the street. Any future President will know the critical importance of retaining the street, because once Mugabe lost it, his fate was sealed.

In jaracanda season, Zimbabweans can feel about the future the way people in cold climates do in their spring: after a long hard winter, life is returning once more. So regardless of how realistic or not their expectations might be, let them have this celebration. Lord knows they’ve earned it.

The Weinstein Revolution Leaves No More Untouchables

It’s been a long time coming.

Back in the 1990s, I moonlighted as a journalist at the Jamaica Gleaner, writing a weekly foreign affairs column and sitting on the paper’s editorial advisory committee. This gave me a ringside seat at all the dramas unfolding in global politics. Late in the decade, when US President Bill Clinton was embroiled in an impeachment process over his affair with an intern, that meant we spent a lot of time talking about the sexual peccadilloes of the high and mighty.

When the Clinton scandal broke, I parted company with almost all my progressive friends. I believed, and still do, that Clinton should have either resigned, or been forced out of office by Congressional Democrats.

But mine was, to put it mildly, a minority opinion. The progressive narrative about Clinton’s affair with Monica Lewinsky rapidly took shape: it was a private matter between consenting adults, and the only people objecting to it were prudes jealous of a middle-aged man’s prowess. Yet I had observed a pattern in Clinton’s behaviour. Seldom were the targets of his ‘affections’ women that might be remotely equal in power to him, whether he was a state attorney general or President of the union. Over and over, they tended to be women whose power next to his was all but nil, and who often came from the working class.

For that made it possible for them to be isolated and stamped out in the event they dared go public with a complaint. It was always easy to destroy their reputations and make them look like fools. The few who went public became running-gags on late-night comedy shows; the rest, no doubt, were scared into silence. ‘Drag a $100 bill through a trailer park,’ said the arch-Clintonite James Carville, deriding one of his boss’s accusers, ‘there’s no telling what you’ll find.’ As if coming from a trailer-park somehow made you a lesser person.

Which, I suspected, was the point. At some stage in the evolution of American liberalism, the sexual revolution replaced the industrial one as the acid-test for progressive values. If you objected to the old dog’s behaviour, you were behind the times. But the under-examined subtext to Clintonian liberalism was an aristocratic view of social class. Clinton’s boomer-generation replaced a concern with class oppression, with one that targeted sexual repression.

Because class, to the New Democrats he led, was so passé. In the brave new world their variety of neoliberal globalisation was creating, everyone could rise on the tide being swollen by the opportunities new technology was yielding. Lose your job in a coal-mine? Learn to code, and get rich! ‘What you earn is what you learn’ was one of Clinton’s mantras during his term of office. Silicon Valley, a vital partner to the New Democrats, was going to lead the way into this new age of endless prosperity.

The flipside of this logic, though, was that if you remained poor amid all this new opportunity, it was your own fault. If you opted to remain in some slack-jawed Appalachian hoping the mine one day re-opened, well, you got what you deserved. Those who had prospered in this new era had earned the right to travel the world, pontificating at TED conferences and hob-nobbing at Davos. Those who opted to stay behind – why, they should practically have been thankful that the great men reached out to touch them.

Lèse-majesté. That’s what it was to object to the advances of those who had demonstrated their worth. It was a subtle form of class warfare, perpetrated by the educated middle class that was to be the backbone of the New Left. Abetted by late-night comedians and liberal intellectuals, it gleefully belittled the ‘white trash’ of the working class being pulverised by the neoliberal globalisation enriching this new base of the Democratic Party.

In the wake of the Great Crash of 2008, we’re re-evaluating this neoliberal catechism. In the wake of the Weinstein revolution, meanwhile, the left is re-visiting its defence of Bill Clinton. It was never about sex, many now admit. It was always about power, its abuse, and the devastation of women’s – and, let’s not forget, some men’s – lives for the indulgence of a powerful elite.

But let not Clinton become a sacrificial lamb. I won’t be satisifed if I see some of the people who once demonised his victims stop at a ‘he was wrong’ statement, as if he can take all their sins on some cross they’re finally building for him. Let every so-called progressive who rallied to his defence also issue their own mea culpa – an apology to those he victimised, and to the pool of prospective victims his economic economic policies created. Let liberals finally say: yes, we abandoned you, we failed you, we derided you, and you have every right to despise us.

Then, and only then, let the left then rebuild its shattered relationship with those it was meant to represent.


Like what you read? Follow me on twitter: @jarapley

How the Mighty Robert Mugabe Fell

In the end what was so surprising was how seamless the transition was. It may be that the old man was just too tired to put up much of a fight any more. And while the younger woman would have had the energy and motivation for a good brawl, in the end she proved to be as friendless as everyone said she was.

Grace Mugabe’s ride as first-lady of Zimbabwe was always going to be a bumpy one, given that she was following the much-loved Sally, who died in the 1990s. But she made things worse for herself by abusing the power that marriage to President Robert Mugabe gave her. Her successful moves to gradually remove her foes in the government and ruling party, and replace them with loyalists, may have persuaded her she was building her own power-base. But nobody really believed that she had any power beyond what her marriage brought her.

The final straw came with the dismissal of Vice President Emmerson Mnangagwa. With that move, Mrs Mugabe was heading into very deep water, and the risk was high that she would get swallowed by the tide. At first, though, her bold manoeuvre seemed to work. Mr Mnangagwa went into exile, Mrs. Mugabe’s supporters lined up behind her, and life in Harare went on as usual – which is to say, it was a daily struggle for most people that left them little time to give much thought to the shenanigans of their rulers.

But Mrs. Mugabe turned out to have made one enemy too many. Once Zimbabwe’s association of war veterans came out against her, the conflict moved onto a whole new level. The war veterans have long been a key pillar of Mr. Mugabe’s support, and even he cannot rule if he antagonises them. When they indicated their repudiation of this move, why, even Bob himself couldn’t save Grace from her fate. And given that Mnangagwa declared on the very same day as the war veteran’s statement that he would be returning shortly to Zimbabwe to right the situation, it was clear that preparations were well underway, and carefully coordinated.

That gave the military the go-ahead to make the move they did. Ordinary Zimbabweans were surprised on Wednesday morning to discover that their country owned all the military hardware that turned up on Harare’s streets. At that point, things moved quickly and efficiently. When South African President Jacob Zuma, speaking on behalf of regional governments, chose not to condemn the coup, it was clear neither Bob nor Grace were going to rally support outside the country (given her recent behaviour in South Africa, it would hardly surprise anyone if Pretoria were happy to see the back of her). Equally, the Chinese, who have become increasingly central to Zimbabwe’s economic fortunes, skirted around the issue, leaving the Mugabes to their own fate.

So within hours, things were largely stitched up. With almost everyone falling into line behind the military, and no signs of resistance in the capital’s streets, a fightback was obviously not going to occur. All that remained were the formalities of officially transferring power. The military wanted to preserve some veneer of constitutionality, insisting this was not a coup but a sweep against criminals around the president (read, Grace and her cronies). If Robert plays along, this will have turned out to be one of the most thoughtfully-planned and well-executed coups in memory. But if he decides to stand his ground in any way, the transition could get messy.

Assuming everything goes well, though, the bad news is that this really doesn’t change anything. For long-suffering Zimbabweans who have seen their lifestyles demolished by desperate shortages and chronic inflation, all that has happened is a palace coup: a change of a few names on the office doors, but everything else will be business as usual.

The good news, though, is also that this really doesn’t change anything. The very fact that the transition has notionally occurred within the framework of the constitution augurs well for Zimbabwe’s future. One can only hope that when push comes to shove, Mr Mugabe decides the institutions of the state he created matter more than his family’s business interests. The fact that Mrs Mugabe won’t get dragged through the streets to her death, as many Zimbabweans would no doubt have liked to have seen, testifies to the attachment to order the country’s institutions have shown.

For despite decades of spectacular economic mismanagement and grotesque corruption, many of those institutions – its civil society, its courts, its military, its press, its educational system, its civil service – have shown some resilience. Zimbabwe will not need to start from scratch. So even while there’s probably a very long way to go before ordinary Zimbabweans will see a real improvement to their lives, the way this coup was carried out at least did not lengthen that journey.


Twilight of the Money Gods is “a damn good read, and an easy one, even for those who would be usually daunted any prospect of ‘A History of Economic Thought’.” From a review of my latest book in Pambazuka, and now available in bookstores!

To Boost Your Productivity, Work Less

It’s been six years now since I Ieft the tropics, and each year at this time, when the nights lengthen and the days darken, I grow homesick for the island.

Under leaden skies, in the damp cold air, the north European winter encroaches. I’m lecturing in Germany this term, in a building whose heating system has bad-hair days. An hour into my Friday-afternoon class, I and my students are wrapped in scarves and hats. Desperate for comfort, we decide to continue the conversation in a more warming environment.

A handful of us head down the Biegenstrasse to the one place guaranteed to warm a heart in Germany – an old bar. We step through the door into a thick cloud of stale smoke. A tiny room, panelled top to bottom in dark wood, and bisected by a bar that runs diagonally down to the corner – it has to, or it would block the entrance – at which sits an older gentleman. I’m told he’s there every day, silently surfing his phone while the smoke from his steady stream of cigarettes curls its way to the low ceiling. ‘He and the bartender communicate wordlessly’ my student who knows this place well says. ‘He’ll place a few coins on the counter, the bartender will emerge from the back and reach into the fridge to top up his drink.’ An hour or so after we have arrived, he bids his farewells, and life goes on.

Nothing is rushed here. And while this is a small university town, even a city like Frankfurt, which most Germans would consider fast-paced, moves languidly by the standards of global cities. And yet Germany, where nobody seems anxious to prove they’re the keenest worker in the office, has one of the world’s highest rates of labour productivity.

That’s because one way to boost your productivity is to scrap the Protestant work ethic. Recently there was a national holiday here that fell on a Tuesday.  And, since all the stores are already closed on Sundays, that left Monday as the only option for both replenishing and stocking larders. Needless to say, the supermarket was packed. The checkout queues stretched into the aisles.

Still, they moved quickly. As soon as one customer paid, the cashier would start ringing up the next one’s purchases, opening a new channel down which to slide the wares and thus leaving the previous customer to pack up. In the end, I was out in ten minutes or so. Tally it up, and a relatively small number of workers moved a lot of stock in a little time. Output per hour worked was thus high.

It’s basic logic. If I’m told to fast for a day then given an hour at the buffet, I’m gonna go full-tilt. When I’m in London, by contrast, I live a more spontaneous life. If suddenly gripped with the urge for sushi or cherry bakewells at eleven on a Sunday night, I think nothing of dashing out to the local grocer. You see, in what you might call the Anglo-Saxon model, the customer is always right. Americans can even get fundamentalist on this point. One friend of mine railed against German closing-hours, declaring ‘What right do they have to tell me I must rest on Sunday if I’m not a Christian?’

In the economic model used in the US or Britain, you raise productivity through competition: if someone can offer a better service, shoppers will go there, and the laggard goes to the wall. If that means workers lose their quiet Sundays, well, they’ll make it back with the greater range of options they’ll now enjoy.

InTwilight of the Money Gods, I trace these two differing approaches to what was essentially a nineteenth-century theological dispute at the heart of economics. Karl Marx believed that we became fully human in our creativity. At heart, we were producers. He thus enshrined the labour theory of value in his doctrine, maintaining that the value of a good was determined by the labour expended to make it.

The so called marginalists, on the other hand, who would provide the basis of what became the neoclassical school, differed. They said price was determined by the interaction of supply and demand. Thus, it was our behaviour as consumers, not producers, which gave value to what we did.

The neoclassical position, which holds that we gain pleasure in utility-maximising – a central element of which is shopping – became the moral foundation of Anglo-Saxon capitalism. Continental capitalism, however, persisted in seeing humans as being primarily producers, and so provided a raft of legislation to protect their rights as workers – including providing lots of down-time.

It’s hard to say one approach is best. Either can work, or not. Labour-productivity is high in both Germany and the US, but low in Britain and Greece (which, like Germany, restricts shopping-hours). Among themselves, economists debate the science of productivity, different schools claiming their own approach demonstrably superior to the others. But in truth, deciding which system is best comes down to the life you want to live, and what you value more – time or money.


Image: Marburg market place, seen from the Rathaus


Could the Paradise Papers Kill Tax Reform?

I get that US Republicans are desperate to secure at least one major legislative achievement before the year is out. And sure, tax-cutting is in their DNA. Still, it’s odd that they’re pushing tax reform at this time.

Amidst the rising inequality of the last few decades, the trend across Western countries is increasingly away from tax-cuts, and more towards raising taxes on the rich to fund social welfare programmes. Trump’s working-class supporters have shown less enthusiasm for tax-slashing than the Republican Party. And although Republicans maintain that almost everyone in America will enjoy some kind of reduction in taxes, early analyses of this proposal suggest that the wealthy stand to gain more than most people.

Republicans don’t consider this a problem. Because they still believe that a rising tide will lift all boats, they are willing to trust that the future economic growth that results from this fiscal stimulus will raise everyone’s incomes. They dismiss any resentment that might result from some people seeing their incomes rise less than others as the ‘politics of envy.’ Given their atomistic view of humans, they believe we all assess our well-being relative to where we were individually last year: any net gain in income will thus leave us happier.

In fact, things are a bit more complicated than that. I have written elsewhere that the view of people as rational utility-maximisers that became canonical in neo-classical economics, is actually unsupported by the research. We do, in fact, assess our well-being largely by reference to others. As I point out in my recent book, many economists have updated the theoretical literature on income and happiness to capture some of these complexities, finding that the greatest gains in contentment often come only when our income rises faster than those of our peers.

Thus, no matter how much better off these tax cuts make Americans, resentment may well grow if they see a small number of ultra-wealthy people making off with most of the gains. In the short term, the actual boost in spending power may offset or merely mask such resentment. This was the experience of the 1990s, the most recent period in American history when incomes and inequality rose simultaneously. But as we’ve seen since, once incomes stop rising, latent resentment can explode, upending politics.

So the long-term political success of this tax-reform depends on it delivering the boost to growth its backers insist it will have. But how likely is that? Not very, as I predicted in a blog post late last year. I argued then that Trumponomics might cause a nice pop to the economy over the next couple of years – arguably, the run-up in the stock market since Trump was elected has been an anticipation of that. But after that, things could turn nasty.

The other peculiar thing about this tax-cut is that it is occurring at precisely the wrong time in both the business and political cycles. You’d normally try to deliver tax-cuts in a sluggish economy, not when things are heating up. Equally, the political wisdom in the US is that Presidents should try to get the painful reforms on their agenda out of the way early, so as to reap the benefits at the next election. If my analysis is correct, though, what may well happen is that we get a couple of boom years, followed by a painful reckoning.

Now, a narrative has begun to emerge, at least on the surging American left, that depicts the Trump cabinet as a band of billionaires out to use their power to deliver themselves perks and tax-cuts. To the extent the release of the Paradise Papers reinforces that narrative, it may complicate the progress of the bill among Congressional representatives who are sensitive to it. Not only could it energise Democrats, but it could also further embolden Republicans in marginal seats: as the the New York Times has reported, they are already wary about this package.

By trying to secure fast passage, Republicans are hoping they can secure a win on tax-reform before such opposition has a chance to build. Current betting reckons they may just pull it off. But a groundswell is building, and Democrats may win support for their call to slow down the process until the Paradise Papers have been fully studied. And even if the Republicans hold fast and pull of their Christmas tax-gift, the costs of this bill will probably come back to haunt them in a few years’ time.

So I wouldn’t be surprised if this tax-reform turns out to be one of the last major efforts at tax-cutting that we see in the Western democracies for some time. Tax-cutting was de rigueur back in the neoliberal era. But in a time which is growing more sceptical of the small-government mantra, any failures to deliver long-term benefits may seal the fate of future tax-cutters. History may well record this episode as one of the last gasps of neo-liberalism.


Image: Cambridge, the last breaths of autumn!