PRINCETON – In today’s irrational world of fake news and bad-faith politics, a new mantra has emerged: It’s all about narratives. Power today lies in one’s ability to tell a story. As a case in point, consider Ukrainian President-elect Volodymyr Zelensky, a comedian whose only political experience is that he played a president on TV. Zelensky beat the incumbent, Petro Poroshenko, because he knew how to spin a yarn. Today’s performative politics represent a sharp break from a century in which social science drove governance. Until recently, policymakers sought to provide empirically compelling – albeit often simplified – assessments of problems such as poverty, disease, and violence, in order to build political support for evidence-based solutions. After the 1930s, this technocratic approach was shaped by economists who used national income accounting to manage macroeconomic conditions. Relying on a straightforward conceptual framework developed by the British economist John Maynard Keynes, they saw deficient demand as the root cause of underemployment and overcapacity. At the same time, they abided by an economic orthodoxy that linked monetary growth to inflation. In both cases, there was a simple causal mechanism, embodied in the Phillips curve, for controlling unemployment and prices. Keynesianism fell out of favor during the stagflation of the 1970s, when both unemployment and inflation rose simultaneously in the US and other advanced economies. And though the 2008 financial crisis occasioned what Keynes’s biographer, Robert Skidelsky, described as a “return of the master,” momentum toward a new Keynesianism proved short-lived. Instead, the world embarked on a massive experiment in monetary easing. Meanwhile, policymakers during the post-crisis years became deeply ambivalent toward fiscal deficits. On one hand, they worried that debt levels in some countries were unsustainably high; on the other hand, they took solace in the notion that a world awash in easy money should be able to finance its way out of anything. But this policy confusion and reliance on illusory arithmetic recalls the Soviet experience of the 1920s and 1930s. In the Soviet planned economy, prices were set by the state, and the interest on capital was effectively zero. This meant that the cost of financing was the same for a grandiose infrastructure project as it was for anything else. And so, in planning a railroad, engineers would pull out all the stops, proposing tunnels through mountains just to avoid ever having to go uphill. Needless to say, reality soon caught up with the authorities. As more and more projects went uncompleted, Soviet planners tried to cover up the failures by simply declaring them a success. But they looked clueless, and the result was a loss of confidence in technocrats generally. The 2008 financial crisis produced a similar loss of confidence. A deeply complex event with many causes, the only way to explain it was to tell a straightforward story. Hence, many people came to believe that the crash had discredited conventional economics in its entirety. The reality was more complicated. To be sure, economists in the lead-up to 2008 had neglected money and finance; but standard (and older) economic models are still enormously effective in assessing the impact of policy. What was discredited, then, was a specific analytical approach that relied on too little data when calculating risk. Humans are wired to be influenced by stories. Having finally recognized this fact, international bodies such as the World Economic Forum, the International Monetary Fund, and the World Bank now organize their annual meetings around the quest for a new “narrative” to replace neoliberalism. Historians, of course, have always understood the power of narrative. Ancient Rome owed its primacy to the poet Virgil as much as to Augustus Caesar; and seventeenth-century England derived more of its strength from Shakespeare and the King James Bible than from Queen Elizabeth. And yet, today’s new narratives may be too ambitious, tracing contemporary shortcomings to fundamental and ancient problems such as greed – a basic emotion that previously went by the name of avarice – and institutions that have existed for centuries. Unfortunately, this is one of the consequences of the financial crisis. The sheer depth of political and economic uncertainty turned historians into pundits whose critiques of conventional social science are overly biased toward random pet narratives. Worse, many historians have begun to lend their academic authority to policy prescriptions that are even more problematic than anything pre- or post-crisis economists ever proposed. For example, by peddling fallacious assertions about the centrality of sovereignty in Britain’s constitutional tradition, a number of prominent historians have played a devastating role in precipitating the Brexit crisis. They would have British voters believe that leaving the European Union is no different than Henry VIII’s declaration of sovereignty in opposition to the Roman pontiff. If historians are going to participate in high-stakes political debates, they should provide a broader context for understanding the issues. When they advance simple narratives that imply specific policy prescriptions, they are even more dangerous than social scientists. Partial historical knowledge pressed into the service of national myths – the Reformation or the 1992 Exchange Rate Mechanism crisis as a model for Brexit; the Battle of Poltava for contemporary Russia – causes confusion, sows discord, and inflicts harm. With a growing chorus of flimflam artists pushing such “scholarship,” it is incumbent on all sober and cautious commentators to set the historical record straight. The writer is professor of History and International Affairs at Princeton University and a senior fellow at the Centre for International Governance Innovation. Copyright: Project Syndicate.
