The Global Economy in Turbulent Times

CHAPTER 33 What’s Up Is Down¹

Yes, the United States Democrats are down. Back at Harvard recently, I witnessed the humiliating defeat of the Democrats at this November’s midterm elections. Most experts at Harvard and Wall Street were unconvincing in telling me why the Democrats lost so badly at a time when the economy is doing well, while Republicans had been so completely wrong about almost everything. Even my friend, Nobel Laureate Paul Krugman, was down; he could only say: “The Republican triumph surely lies in the discovery that obstructionism bordering on sabotage is a winning political strategy. This was, it turned out, bad for America but good for Republicans.” What most voters felt was that “the man in the White House wasn’t delivering prosperity—and they punished his party.”²

Studies show that mature stock markets don’t really care much about elections.³ So the stock market is up, just as down jackets are up from Boston’s Newbury Street to New York’s Fifth Avenue. Indeed, the puffer coat (not unlike the stock market) has now become a phenomenon—it’s flying off shelves the fastest ever, reflecting both function and high style—guys just want to look cool and stay warm, as do stock traders. Even traditional makers of the puffer jacket (a British term that has caught on in the United States to describe horizontally baffled down coats) have combined their technical knowledge with heightened design to produce jackets warm enough to brace the February Boston cold, but light ...