FT columnists on populism

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Hello, and welcome to "The Financial Times" in New York. I'm Gillian Tett, the US managing editor. And I am thrilled to be joined today by two of my fabulous female colleagues, Rana Foroohar, who is the business columnist for the Americas, and Merryn Somerset Webb, who is our investment and finance columnist. And can I just start by saying that it's great to have two other female economics and finance columnists, because when I started my--

Unusual!

--career, there were no female economic commentators out there, hardly at all. But it's great to have you here today. And we're going to be talking about an issue which has been gripping many investors and economists, which is the rise of populism.

You are both in a position to talk about this, because Rana was one of the few voices that expected Donald Trump to win last year. And Merryn predicted Brexit, and has come out very strongly saying that Brexit was a good idea. So I'd like to perhaps start with Merryn, and say, having predicted Brexit, how do you see populism in the UK and Europe right now, and should we be bracing for a Scottish exit as well?

Well, I don't think we should be bracing for a Scottish exit. And the first thing I want to say on Brexit is that we are in danger of making the vote for Brexit into a much, much bigger deal than it really is. The EU is not a particularly aged institution. I mean 40 odd years is not a huge amount of time for an institution to run. It started as a trade organisation, and what is going to happen in the end with the UK and the EU is a change to our trading arrangements.

And I suspect that in two years when the negotiations are done-- there's a lot of grandstanding on both sides at the moment, everyone's big into demands and ultimatums-- but over a two year period, there will be a sensible negotiation. And we will come out the other end, I'm all but certain, with a trade deal that feels remarkably similar to the one we have at the moment and with a free movement deal that feels remarkably similar to what we have at the moment.

So you're not going to see very obvious change in day to day stuff. What you are going to see is a shift in legal and democratic frameworks. So we're in danger of making this into a moral issue, when really it's just an administration issue.

So did you see Brexit as a sign of populism, and does it have as big an economic impact like people are saying?

It is. It's another symptom of something that goes right back to the financial crisis. And you and I have discussed this before. But once you get to a point in a debt cycle where a government can't do anything-- so since the financial crisis you've had governments-- and the EU and the UK relationship is very symptomatic of this-- where the government has been unable to do anything except for to try vaguely to spend less money.

And every time something big happens, it's down to a super national organisation of some kind. The UN says we have to do this. So the EU says we have to do this. The Central Bank says we have to do this.

And you see you government becoming less and less and less powerful, or feeling less and less and less powerful, using very little of what we think of the sovereign power we've given them by voting for them. And I think populism is a reaction against that, a desire to make governments make things better somehow. And that requires that they act.

And when they don't act, then you get what we call populism, which is really a demand for action. And Brexit is a symptom of that, of saying you have to do something. We need to see you acting. And one thing that you can do very obviously is stop making it all about the EU. Bring it back to the UK, and be responsible for yourselves.

Rana, how do you see the populism that we've seen in the US? I mean, do you think that's also a sign of people getting fed up with the [INAUDIBLE] crisis?

Yeah, I think it's fundamentally an economic issue here. And you can see it, because you had not just Donald Trump, but you had Bernie Sanders, right? There was a deep sense on both the right and the left-- and actually, interestingly, a lot of common ground from both the far right and the left-- that the conventional system was not working, that old line candidates were not working.

I think that on the Democratic side, the fact that you had Hillary Clinton so closely associated with her husband's economic policies, NAFTA, deregulation of the financial markets, that just didn't play well for her in the election. Now whether or not Donald Trump is a populist, you can argue about that. But I think that people were voting for this idea that they wanted change, and they wanted a capitalist system that worked for them. And there was a perception that it wasn't working. And I think that no matter what happens to Donald Trump's candidacy, that if the economic vectors don't change, particularly for those areas of the Rust Belt, parts of the South that were really hollowed out by globalisation and technology-related job displacement, I think if things don't change for those areas, you're going to see these same trends continue.

So we're looking obviously right now at the European elections, a lot of focus on Marine Le Pen, a lot of discussion about Germany. Do you think we're going to start seeing things invade or rather this trend invade, in fact, Europe as well?

It's interesting, because you could argue that in continental Europe, that populism has been at a high watermark. I mean Merkel seems pretty safe right now. Most people are not predicting that Le Pen's going to win.

But again, I think that the next time you see a wrinkle in the European debt crisis is when the rubber is going to hit the road. Because at some stage I believe that continental Europe, now without the UK, is going to have to decide fundamentally that it wants to be a political union with wealth transfers and all the things that go with it. You can't just have the good stuff and then not deal with the bad. And I think that, again, if the underlying economics don't change, you're going to see these same political trends play out, albeit with different candidates.

Why do you think the [? economists ?] have got it so wrong?

Well, first, not all have. I mean we're a little caught up in this idea that economists get everything wrong. And they don't necessarily. There's a lot of people who have been very right on things.

But you know, it's group think. And it's because most economists, government economists, people who work at the big banks, et cetera, they live in the same places. You know they really do, and location is very important. If you all live in London, and you all work in the same places, and you all start to think the same things.

You don't live in London, do you?

I don't live in London, no, I live in Scotland, which is another whole political story in itself. But I do think it is partly distance, partly distance.

I agree with that. I mean, I think that it's amazing how many economists and commentators really don't ever leave here, the Washington-Wall Street beltway. I grew up in the rural Midwest. My parents are both from immigrant families. So I had kind of a different view on this. I really did think that Donald Trump was going to win the election.

But I also think it's really difficult for economists to model human emotions. And populism is a very emotional thing. It's not something that you can plug into a model and come out with a perfect answer. And I think this, once again, sort of underlines this idea that there's a lot changing in the paradigm right now, economically and politically. And I think it's going to be very difficult for economists to make great predictions going forward.

I think it's very important when you remember back to the Brexit vote in the UK, and Project Fear, and the endless, endless telling us that it was going to be a disaster-- it would be a financial disaster, which it may still well be. I mean it's in its early days, right? But people weren't convinced by this, because they saw some things as being more important than money. And this is something that's discussed endlessly around the matter of Scottish independence as well.

If you speak to a lot of nationalists in Scotland, they will tell you that they know full well that Scottish independence would make Scotland significantly poorer in the short to medium term. But they don't mind. It's OK.

It's about a lot more than money. And whether they'd still think that five years after the vote is another matter. But it's a view that takes in a lot more than simply the financial consequences of something.

And as [? lovely ?] as my last question is, you know, given you both had slightly different backgrounds, given that you probably grew up being something of a minority in terms of there weren't many other female columnists or commentators, and you were actually a stock broker for a while, Merryn, in Japan, do you think there needs to be more female voices, more diverse voices in the commentariat, just to try and get to that sense of breaking the mould, breaking tunnel vision?

Well, absolutely. I mean I wouldn't necessarily go for just more female voices. More diverse is the key. We have to move away from having one group of economists that we take seriously who work in one group of institutions, educated in one group of universities, to having a much wider, wider voice listened to. Definitely we could use more women, but--

[INTERPOSING VOICES]

I agree. Right, it's not about gender. It's not about race. It's really about cognitive diversity, and I think that that's something that the economics profession in general realises it needs more of. And you see a lot of universities trying to push new ideas now, which is a great thing.

Right, well, I must say that it's something that I think we all three very strongly uphold. Thank you for coming in. Delighted to have a chance to chat to you both, and many thanks for watching.