Liberalism’s Minsky Moment: How decades of peace, justice and prosperity sowed the seeds for populist revolt

by Thomas R. Wells

The end of history will be a very sad time. The struggle for recognition, the willingness to risk one's life for a purely abstract goal, the worldwide ideological struggle that called forth daring, courage, imagination, and idealism, will be replaced by economic calculation, the endless solving of technical problems, environmental concerns, and the satisfaction of sophisticated consumer demands…… Perhaps this very prospect of centuries of boredom at the end of history will serve to get history started once again. (Fukuyama, The End of History)

ScreenHunter_2459 Dec. 19 10.42Liberalism is facing its most severe challenge for 70 years. In country after country across the comfortable, safe, prosperous western world populist parties and movements dedicated to its overthrow have been advancing steadily towards power. How can this be? Politics is particular, and particular explanations have been given for the triumphs of Orban, PiS, Brexit and Trump. But while these may explain the timing and building blocks of each particular populist victory, they do not explain the pattern. Why do so many people around the world hate liberalism so much that a Trump election became possible?

Another class of explanations seek to pin the blame on the liberal order, most commonly by characterising populism as a revolt by the losers of globalisation. Except that globalisation has been a tremendous success. Of course there have been some losers, especially in countries like America and Britain with feeble policies for using the winnings from freer trade to compensate and retrain workers in unlucky industries, but not enough to win elections. And populism is riding high even in European countries with elaborate compensation and retraining schemes.

I have another explanation. Liberalism works just fine. It's just that the people got bored with it.


My analysis mirrors the mechanism Hyman Minsky identified in the evolution of financial crises: stability and prosperity permit excessive risk taking which create fragility and eventually a meltdown – at which point it is risk-management that becomes excessive and the economy freezes up. (Of course no one read him until 2007.) Of particular relevance to the case of liberalism is that the longer the period of stability and prosperity, the less people remember of what happened last time and the greater the risk-taking.

Similar mechanisms operate elsewhere. For example, wildfires are worse in countries that spend the most putting them out. It turns out that putting out more fires means that more and more flammable material builds up, so that the first fire that isn't quickly put out becomes an enormous raging inferno.

Liberalism tamed politics just as Alan Greenspan tamed the financial cycle and the United States Forest Service tamed forest fires. The taming of politics was a huge and long sought achievement. We wanted to build a political regime in which people would be bound by the obligations of citizenship and yet remain free live their own lives for reasons that only they found convincing. We wanted the political domain to be accountable to a higher moral law of justice and equality, instantiated by institutions, norms, and legal constraints that would ensure the basic fairness and efficiency of social and economic arrangements, impose compromise on moral extremes, and protect those on the wrong side of democratic majorities. While its achievements were hardly perfect or complete, the project of liberalism largely lived up to its promise (unlike its major competitor, socialism).

Yet the taming of politics created its own problems. Firstly, people objected that the liberalism part of ‘liberal democracy' trumped the democracy part. Politics within the constraints of liberalism became boring and pointless, dominated by tedious disputes about how people's feelings were being hurt by one thing or another. There was a revival of the idea of politics as a space in which everything should be up for dispute, including the rules. Secondly, because the safety, prosperity, and orderliness of liberalism was taken for granted, the risks of a turning politics into a bloodsport were forgotten.


Various examples can be given of how people became bored with playing politics in safe mode. Hostility to globalisation is a particularly salient case of a general impatience with the self-binding rules that cooperation with others requires, and with the technocrat's assurance that in the long run and on average the benefits of such cooperation exceed the costs. Such rules also reduce the freedom of governments to act on the expressed interests of their people. And if your government lacks the power even to change an EU rule about the shape of bananas, then what exactly is the point of it?

But in the aftermath of Trump, political correctness seems the most appropriate case to analyse.

The first thing to say is that political correctness doesn't really exist except as a term of abuse by its detractors. (It thus mirrors neoliberalism, which exists almost entirely in the minds of leftist critics.) But, just as in the case of neoliberalism, the fact that no one explicitly believes and argues for it doesn't mean that there isn't anything there. In particular, it is essential to liberalism that certain politically divisive issues are permanently excluded from the political agenda, such as whether black people should be allowed to vote or whether Muslims can be loyal citizens or whether Latinos are fit to hold public office. Hence the care that even president Bush took not to represent his foolish war on terror as a war on Islam. He might not have gotten the votes of many Muslim Americans, but he still wanted them to see his presidency as legitimate.

Liberal politicians have a first duty to preserve the equality of citizenship of the people they seek to rule. Populists like Trump have no such compunction. They say it like it is and pick up support for their courage in pricking the bubble of liberal pieties.

Besides controversial topics, another aspect of political correctness that got Trump a lot of attention was his controversial language. All societies have some words marked as obscene, which you use in public only at grave risk to your social status. Previously, those words had to do with sex and god, presumably reflecting the domination of conservative social mores. Now they have to do with political minorities: sexist, racist, disableist, etc. Presumably this reflects the rise of liberal social mores (taking political equality seriously makes sexism morally disgusting) as well as the increased role for empathy with the feelings of others that the safety and non-zero-sum character of a liberal society permit and encourage. Conservatives' complaints about suffering censorship in the name of politically correctness seem to come down to a resentment that their taboos have been displaced by others'.

Trump made a big deal of being against political correctness and trespassed on many of those taboos. But I don't think the appeal of this was to racists and sexists who wanted to go back to the good old days. (It was an unfortunate error of judgement that so many liberals assumed that his use of such language meant that he and all his supporters must be bigots.) Rather it was evidence of his general uninhibitedness: the fact that he didn't care about the rules. He was showing his supporters that he really was not a liberal politician and was therefore free to give them a chance to play at real politics, not the usual ‘colour-inside-the-lines' version.


The specific form of the revolt against liberalism is populism, a doctrine defined by its social divisiveness and authoritarian drift towards comprehensive failure (particularly spectacularly in Venezuela). It begins by demanding the rule of ‘the people', meaning the rule of someone in particular in the name of a symbolic construction of the true American people. This relationship is metaphysical though rather than electoral. Politicians who oppose the rule of ‘the people' are traitors to America; voters who vote incorrectly aren't true Americans; an election defeat is evidence of conspiracy; and so on. In power, it drifts further and further from any recognisable accountability to the actual rather than imaginary electorate. (See further, Jan-Werner Müller.)

Populism is exactly the kind of dumb idea that made us invent liberalism in the first place. Nevertheless it is upon us everywhere we turn. It seems to be one of those astonishingly bad ideas, like starting a land war in Asia, that societies return to over and over again when they should know better.

And this is where the very achievements of liberalism are turned against it. It is because liberal regimes seem so robust – so good at making sure things turn out ok no matter what we vote for – that people feel so free to vote against liberalism itself. ‘Screw Europe!' the Brexiteers demand, while trusting the pro-EU government to somehow figure out and achieve what they meant. ‘Screw the elite!' the Trumpers demand, while assuming that same elite would contain the worst effects of their tantrum (David Runciman). It is disappointing that the American election came down to an almost idea-free contest between anger and fear. But what is really worrying is that so many people were so ready to turn their collective rage over to someone who promised to tear down America's 200 year liberal project.


Liberalism has been an enormous moral, political, and economic success. But it has not achieved what seemed easiest of all: convincing those who grow up under it of its moral legitimacy and practical effectiveness in comparison to alternatives. Worse, it seems that those who grow up in the prosperous cocoon of a liberal society may be especially prone to political risk-taking. An uninhibited politics in which everything is permitted has a heady appeal, especially for those who have never had to worry about its risks.