Social media, populism, fake news will frame next US recession's story

Rising interest rates and market jitters are bringing out worries about what the next recession might look like. It really might be different this time, because of changes in politics and media since the last recession. President Donald Trump's recent comments criticising the Federal Reserve are just the start of what we could expect. 

The priority of the American political response to the financial crisis of 2008, under both the Bush and Obama administrations, was focused primarily on stabilising banks and the financial system. Soon after, the movement that became the Tea Party emerged, in part as a reaction against this.

A lot has changed since then. Social media has changed American political culture. Coverage of the 2008 financial crisis was fairly top-down, driven by mainstream news organisations and financial leaders, rather than populists and the outrage culture that has become pervasive on social media since then. My Bloomberg Opinion colleague Tyler Cowen has argued that extreme rhetoric like Trump's attacks on the Fed will outlast this president. Already, in the wake of Justice Brett Kavanaugh's confirmation, it's not uncommon to hear calls from the left seeking radical changes to the Supreme Court.

Whenever the next recession occurs, social media, populism, outrage culture and fake news will play a prominent role in telling its story.   

That story is also likely to include a more diverse group of voices. The oldest members of the millennial generation were still early in their careers during the crisis; now millennials have a much more prominent voice in media, particularly online. Women and people of colour are more influential online as well. It's unlikely that Wall Street-favouring white men will have anything close to the share of influence during the next downturn that they had in the last one. 

We've seen signs in recent years that corporations are becoming more sensitive to populist movements as well. Corporations have found themselves having to pick sides in some of the culture wars that have become amplified since Trump became president, and some of the minimum wage increases we've seen from large corporations have been precipitated in part by movements like Fight for $15. In the aftermath of the financial crisis corporations had no problem doing mass layoffs, and then a couple years later reaping big profits and using profits to do stock buybacks rather than hire more workers or give raises. It's unclear whether they'd be able to do the same in the next downturn, in a social and political climate more sensitive to worker demands.

When the next downturn comes, the biggest question will not be whether American institutions have the power to respond. The question will be whether those institutions can withstand the populist intensity they're likely to face.