Angrynomics

1. Angrynomics: The Chasm Between Economic Models and Lived Reality

Economics as it stands can’t seem to explain why the pressures of life appear to be intensifying, at the same time as income per capita is rising.

A world of disconnects. "Angrynomics" describes the growing chasm between the comforting narratives of economic theory and the harsh realities experienced by ordinary people. While official statistics may show rising GDP and overall societal wealth, many individuals face increasing stress, tighter budgets, and stagnant real wages, leading to widespread anger. This disconnect fuels a sense of betrayal when elites, who benefit from the current system, fail to acknowledge or address these lived experiences.

Flawed economic maps. Traditional economic models, often used by central banks, rely on "representative agents" – ageless, sexless, emotionless entities – that bear little resemblance to real people. These models ignore crucial factors like politics, power dynamics, and the distribution of wealth, leading to a distorted "map" of the economy. The result is a system that works in theory but increasingly fails to describe the world most people inhabit, where CEO pay skyrockets while many workers see no real wage increases for decades.

Elites lose credibility. The "neoliberal map" of the past 30 years, emphasizing market efficiency and technocratic governance, has lost credibility. Politicians, once representing specific constituencies, converged on a "median voter" approach, leaving material concerns unaddressed. This created a vacuum where elites celebrated "the Great Moderation" while inequality soared, public services were cut, and financial crises were met with bailouts for the rich, paid for by the already squeezed. This profound disconnect is the fertile ground for angrynomics.

2. Public Anger Manifests as Moral Outrage or Exploitable Tribal Rage

The challenge for politics today is to listen carefully to, and redress, the legitimate anger of moral outrage while exposing and not inciting, the violent anger of tribes.

Two faces of public anger. Public anger, a powerful human emotion, presents itself in two distinct forms: moral outrage and tribal rage. Moral outrage is a legitimate response to perceived wrongdoing, unfairness, or a failure to be heard, seeking redress and justice. It's a call for recognition and action, often worn like a badge of honor, as seen in protests against corruption or austerity.

Tribal rage, a primitive reflex. In contrast, tribal rage is a primitive emotion that reinforces group identity, often at the expense of moral compass. It's about closing ranks against an "other," threatening to dominate or suppress. This form of anger is often exploited by cynical politicians and media to garner support, polarize electorates, and deflect from real issues. Examples include:

• Sports fans aggressively regulating their own tribe and threatening rivals.
• Nationalist movements like Brexit or Trump's rhetoric, which blame external groups for internal problems.
• The Irish folk singer pining for the "meaning" of past tribal antagonism.

Exploiting the identity vacuum. The decline of strong political identities (left vs. right) post-Cold War created a vacuum that tribal anger has readily filled. Politicians, facing increasingly close elections, have learned to tactically mobilize angry minorities, who are more likely to vote. This dangerous symbiosis between a competitive media landscape and opportunistic politicians amplifies fear, stereotypes, and fictitious enemies, turning tribalism into a weaponized political tool.

3. Legitimate Grievances Fuel Anger: Voice, Inequality, and Elite Disconnect

People are not just angered by discredited and unjust policies. They’re also quite-rightly upset because no one has listened to them, no one represents them, and because other people they perceive as part of this same elite are busy telling them what their interests “should” be.

The demand to be heard. Legitimate public anger, or moral outrage, stems from a profound sense of being ignored, unrepresented, and having one's voice taken away. This "status-injury" is a demand for recognition and a rejection of elites who impose policies without genuine consultation or accountability. The rejection of referendums (like Italy's constitutional reform) or major political shifts (like Brexit) often serves as an outlet for this pent-up frustration, regardless of the specific issue at hand.

Globalization's neutering effect. A key driver of this voicelessness is the perception that the nation-state has been neutered by globalization. As markets become global, democratic responsiveness remains local, creating a "political trilemma" where states lose control over their economies. This shift, particularly the free movement of capital while labor remains local, has eroded labor's bargaining power and contributed to a massive skew in income distribution, with the top 1% capturing as much income growth as the bottom 50% globally since the 1980s.

Post-crisis policy failures. The 2008 financial crisis and subsequent euro crisis brutally exposed the failures of technocratic governance. Instead of addressing the root causes, elites often blamed citizens ("you borrowed too much") and imposed austerity, causing immense suffering and unemployment, particularly in Southern Europe. This "socialism for the rich and bankruptcy for the poor" fueled a righteous anger, as ordinary taxpayers paid for the mistakes of a financial elite who faced no accountability, reinforcing the belief that the system is rigged.

4. Capitalism's Cycles: Hardware, Software, and Inevitable System Crashes

It tells us that at the end of the day you may have the perfect technical answer to an economic question, but if the politics are against you, you’re done.

Capitalism as a computer. Capitalism can be understood as a computer system with "hardware" (institutions like labor markets, capital markets, government) and "software" (ideas about how the economy should work). Different configurations of hardware and software produce different outcomes and periodically encounter "bugs" that lead to system crashes, generating immense public anger and necessitating a "system reset."

Version 1.0: The "fictitious commodity" bug. Capitalism v1.0 (19th century to 1930s) was built on the "fictitious" idea that labor is a commodity like any other. As Karl Polanyi argued, treating wages as merely a cost to minimize inevitably provokes a social backlash, because people are not sacks of potatoes. This bug, combined with the economic cataclysms of the 1930s, led to the system's collapse and the rise of fascism, communism, and the demand for market protection.

Version 2.0: The inflation bug. John Maynard Keynes's ideas provided the new "software" for Capitalism v2.0 (1945-1975), where government spending (G) was central to stabilizing demand and maintaining full employment. This system, which produced the postwar welfare state and widespread prosperity, had its own bug, identified by Michał Kalecki: sustained full employment would inevitably shift power to labor, leading to rising wages, falling profits, and an inflationary spiral. This "stagflation" of the 1970s ultimately crashed v2.0, paving the way for a new system.

5. Neoliberalism's Bugs: Inequality, Stagnant Wages, and Financial Leverage Led to Crisis

In short, Capitalism v.3.0’s combination of rising inequality and stagnant wages could be made to work so long as inflation was low (yes), interest rates were initially high but fell over time, encouraging further borrowing (yes), and the ability to borrow was unlimited.

Version 3.0: Price stability at all costs. Capitalism v3.0 (1980s-2008), driven by neoliberal ideas, was designed to restore capital's power and crush inflation. This involved fundamental "hardware" reconfigurations:

• Destroying organized labor's power.
• Opening up financial markets globally.
• Globalization of production.
• Empowering "independent" central banks with a primary target of "price stability."
  This system successfully controlled inflation and restored capital's share of GDP, but at a cost.

Three critical bugs emerged:

1. Trickle-up inequality: Despite promises of "raising all boats," wealth and income increasingly flowed to the top. The top 1% globally captured 27% of total growth, while the bottom 50% got only 12%.
2. Wage stagnation: For the majority of workers in developed nations, real wages stagnated or even declined, especially in the last decade of the regime. Wall Street bonuses in 2015, for example, were twice the total wages of 3 million minimum wage workers.
3. Financial leverage: To sustain consumption amidst stagnant wages and rising inequality, the system relied on massive borrowing. Banks, freed from regulation, became highly leveraged, turning household liabilities into their assets. This created a fragile system where a shock to the mortgage market could (and did) trigger a "credit-crunch" and systemic collapse.

The 2008 crash and its aftermath. The 2008 financial crisis exposed these bugs, revealing a system built on unsustainable leverage and extreme polarization. Instead of a fundamental "reset," the system was "bailed out" by central banks to the tune of $17 trillion, largely protecting the assets of the wealthy. This led to austerity for ordinary taxpayers, who bore the costs through unemployment and reduced services, fueling a deep, systemic anger that continues to destabilize politics globally.

6. Micro-Stressors: Uncertainty from Technology, Aging, and Competition Fuels Private Anger

Stress is primarily caused by things going wrong, but also by uncertainty and change.

Private anger, internal struggle. Unlike public moral outrage, private anger often signals internal struggle, stress, and a need for help. It arises from increased uncertainty and rapid changes in our daily lives, demanding constant cognitive effort and making habitual behaviors misfire. This micro-level stress contributes significantly to angrynomics as a personal, lived experience.

Three major causes of anxiety:

• Things going wrong (illness, job loss).
• Not knowing what's happening, especially the future.
• Unexpected environmental changes.
  Economists' narrow definition of "risk" (measurable probability) often ignores the profound "uncertainty" (unknowable outcomes) that truly worries people, such as when major life events like bereavement or accidents may strike.

Four key micro-level stressors:

1. Product market changes: Intense competition from deregulation and technology creates insecure work environments, making skills quickly redundant and career paths unpredictable.
2. Fear of technology: Hype around AI and automation replacing jobs, despite historical evidence of increased employment, creates anxiety. The "race against the machine" narrative, even if exaggerated, discourages investment in certain careers.
3. Aging populations: Developed countries face inter-generational transfers where the old (who vote more and hold most assets) benefit from policies (e.g., healthcare, tax cuts) at the expense of the young (burdened with debt, stagnant wages).
4. Immigration: Often a political lightning rod, immigration is a real stressor for those at the bottom of the income distribution, who perceive competition for scarce resources and feel their claims are delegitimized, even if the economic data is inconclusive.

7. The Illusion of Central Bank Impotence: Low Rates Offer Unprecedented Opportunities

It appears that the hitherto policy tool of choice – interest rates – may be hardware-dependent.

Central banks' perceived impotence. A critical problem in the post-2008 era is the perceived impotence of central banks due to persistently low, near-zero, or even negative interest rates. The traditional tool of cutting rates to stimulate the economy is no longer effective, leading to a crisis in the technocratic policy framework. This situation, however, is not a dead end but a profound opportunity for new, more effective policy tools.

The death of inflation. The policies of Capitalism v3.0 successfully "killed" inflation, a significant achievement. This structural change means that aggressive counter-cyclical demand management, once feared for causing inflation (stagflation in v2.0), is now much more feasible. Printing money to stave off deflation and prevent recessions can be done without igniting a wage-price spiral, a crucial lesson often overlooked by reformers.

Exploiting negative real rates. The current environment of negative real interest rates on government bonds presents an unprecedented opportunity. Governments can borrow at rates below inflation, meaning the private sector is effectively paying them to borrow. This "striking oil" moment allows for significant public investment and wealth creation without increasing net debt, challenging the conventional wisdom of "austerity" and opening new avenues for tackling inequality and climate change.

8. Redistribute Wealth Through National Funds, Not Just Taxes

By providing ownership of assets to those who have very few or even none we can insure against the change and risk that is built into our economy.

Addressing wealth inequality. Extreme wealth inequality is a core legitimate grievance of angrynomics, exacerbating health disparities, restricting social mobility, and undermining democracy. While higher taxes on the super-rich are a valid approach, they face immense political resistance and global tax avoidance. A more innovative, politically palatable solution is needed to broaden asset ownership and provide a collective inheritance.

National Wealth Funds (NWF). The proposal is to create National Wealth Funds (NWF), similar to existing sovereign wealth funds in Norway or Singapore, but without requiring large trade surpluses. Governments can issue long-term bonds at negative real interest rates (where the private sector pays the government to borrow) and invest the proceeds in diversified global equities, which yield positive real returns. This generates a substantial surplus over 10-20 years.

A national inheritance. This surplus, potentially equivalent to 20% of GDP every 15 years, can then be distributed as individual trust funds to the 80% of households with the fewest assets. These funds would be earmarked for critical needs like housing, education, healthcare, and business start-ups, providing a form of insurance against economic change and risk. This approach is prudent, as net government debt remains unchanged, and leverages a unique feature of today's financial landscape to tackle inequality without relying on politically contentious tax increases.

9. End Recessions with Direct Cash Transfers and Dual Interest Rates

If that is the case, there is absolutely no reason why there should be long-lasting recessions, for the very simple reason that to solve it you can give people money.

Recessions are a policy choice. In a low-inflation world, long-lasting or severe recessions are unnecessary and unforgivable. Recessions are fundamentally caused by insufficient spending, and central banks, with the ability to print money, can directly address this by creating spending on demand. The traditional approach of lowering borrowing costs to stimulate private sector debt accumulation is no longer effective at near-zero interest rates.

Direct support for consumption. The solution is to empower central banks to make direct cash transfers to households, often called "helicopter money." This bypasses the inefficient "wealth effect" of quantitative easing (QE), which primarily benefits asset holders. Instead of flooding the financial system and hoping it trickles down, direct transfers put money directly into people's hands, boosting consumption and ending recessions more quickly and equitably.

• The Czech central bank has explored this, and senior officials support it.
• The ECB could use "perpetual zero-interest loans" administered by commercial banks.
• The US Federal Reserve could transfer cash to the Treasury for distribution.

Dual interest rates for targeted investment. To further enhance monetary policy, central banks should adopt dual interest rates. This allows them to:

• Maintain modest deposit rates for savers (e.g., 0.5%), avoiding the "tax" of negative rates.
• Lend to commercial banks at steeply negative rates (e.g., -2%), conditional on those banks extending new loans for productive investments.
  This transforms low interest rates into an opportunity to turbocharge specific sectors, such as sustainable energy and regional development, by making investment effectively free or even profitable for borrowers.

10. Unlock Sustainable Investment with Smart Fiscal Rules and National Experimentation

Intelligent human progress involves lots of experiments about how to organize things, happening at the national level, and you observe the ones that are working best – and then you copy it.

Depoliticizing fiscal policy. To effectively counter recessions and address long-term challenges, fiscal policy needs an overhaul. This includes establishing independent fiscal councils that commit in advance to tax cuts or spending boosts during downturns, removing political bickering and ensuring timely action. This approach, exemplified by China's infrastructure spending post-2008, ensures that fiscal resources are deployed effectively when needed.

Flexible fiscal rule for growth. A smart fiscal rule should leverage the current environment of low interest rates. Instead of mechanically targeting a stable debt-to-GDP ratio, governments should expand borrowing whenever their cost of debt falls below nominal GDP growth. Given that government bond yields are likely to remain low due to demography and risk aversion, this rule unlocks potentially huge fiscal resources for productive investment.

• If the return on investment exceeds the cost of capital, value is created.
• Governments have a negative real cost of capital.
• Returns to green investments are positive, especially considering social returns.

Nationalism's unexpected upside. While tribal nationalism is destructive, the return to the nation-state as a unit of political organization offers an unexpected advantage: policy diversity and experimentation. Instead of a "one-size-fits-all" approach (like the EU's attempt to "iron flat" differences), smaller, more independent political entities can innovate and find unique solutions to common problems. Successful national experiments, like the Czech central bank's potential cash transfers, can then be copied globally, fostering dynamic policymaking and progress. This approach allows for addressing angrynomics' drivers without succumbing to its darker, isolationist instincts.

Last updated: January 15, 2026