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When, as a newly arrived backbencher, Benjamin Disraeli had the temerity to announce to the British Commons that "half the cabinet are asses”, he was immediately called to order by the speaker and informed that he owed the House an apology. Disraeli replied, "I withdraw my statement. Half the cabinet are not asses."
Disraeli's longest tenure as prime minister was from February 1874 to April 1880. Those are usually categorized as the dates that were when the late 19th century’s severe “great depression” began. That fact has led most historians to judge Disraeli and his American counterpart, President Grant, as failures as the chief executive managers of their countries’ economies. Yet, throughout the years of that “great depression”, both men were viewed by almost all the “common” people as being the heroes of their age. They were both praised for having raised their countries’ standards of living and financial standing. For Disraeli, in particular, one has to ask how, in the midst of a “great depression” could Britain have risen to become the greatest financial power in the world, with the largest empire and a navy that literally ruled the seas?
The simplest answer to this seeming paradox is that "Britain" as a country did not have an economic depression in the 1870s and 1880s; its owners of capital did. As A. E. Musson puts it, "the standard of living improved. Prices certainly fell, but almost every other index of economic activity-output of coal and pig iron, tonnage of ships built, consumption of raw wool and cotton, import and export figures, shipping entries and clearances, railway freight and passenger traffic, bank deposits and clearances, joint-stock company formations, trading profits, consumption per head of wheat, meat, tea, beer, and tobacco - all these showed an upward trend….(T)he wail of distress did not come from the mass of the people, who were for the most part better off, but mainly from industrialists, merchants, and financiers, who felt the pinch of falling prices, profits, or interest rates."
The one scenario that I have not seen predicted for the next decade is that the people of the United States will do well over the next two decades even as the country’s financial markets will do relatively badly. That would be a nearly complete reversal of recent experience. From the point of view of the rich and near rich, the years since 2015 have been a particularly marvelous time to be invested in America”:. As Julian Brigden of Macro Intelligence 2 Partners has noted, those last 7 years have seen US stocks outstrip the returns gained by the rest of the world.
In 1881, when Disraeli was dying of bronchitis, he received a card signed by “a workman.”. The card read: "Don't die yet, we can't do without you." It echoed the opinion of Alexander MacDonald, the founder of the National Miners Association, who told the Commons that "the Conservatives have done more for the working classes in six years than the Liberals had in 60." That paradox was at the heart of the political economy of Benjamin Disraeli’s supposed Depression.
As Joana Duran-Franch and Mike Konczal wrote in their recent essay at the Roosevelt Institute, “even with a period of higher-than-expected inflation, real hourly wages are increasing for those who most need a raise in our economy.” It may well be that U.S. stocks will continue to do as well as they have in the past; but my expectation is that the electorate in the U.S. for the next decade or more will vote themselves a Disraeli depression. Whether liberal, independent, or conservative by ideology, people will largely agree that the public’s money should be spent at home rather than abroad and that there should be greater rewards for everyone in what Wall Street calls “the labor force”. Corporate employees, independent workers and trades people will all expect the owners of capital to pay more than they have towards the financing of those rewards.
Whether this change is “good” for the country and the market seems to me completely irrelevant; what matters is what people are likely to do. Disraeli’s wonderful comment about “the future” is worth remembering: “What we anticipate seldom occurs; what we least expect generally happens.” The one future that neither public polling nor commentary is expecting is an American political economy in which the incomes of non-rich Americans will grow rapidly and that growth is paid, in large part, by a tariff on the returns to private capital in the U.S.
Stefan Jovanovich manages the portfolio for The NJT Company, Inc., a family office based in Nevada.
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