“Can Democracy Survive Global Capitalism?” by Robert Kuttner
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“Can Democracy Survive Global Capitalism?” by Robert Kuttner

October 25, 2019


– Okay, I guess we’ll get started. This is another lecture that’s sponsored by the program in political economy here,
which has made a terrific contribution to the lives of people in the humanities and social
sciences here at Dartmouth. It’s a special pleasure
for me to introduce an old friend, Robert Kutner, Bob Kutner. We met originally, I think, in 1980, when I first moved to Boston. We were both lamenting the fact that our friendship began with
the Reagan administration, which from which we both
felt like internal exiles. I think both of us at
the time thought we were living through a Sinclair Lewis dystopia and obviously had no imagination for what kind of fictions could be produced. We were racketball partners at one point. I think we were the only
people in the Brookline Racket Club arguing not about
who scored the last point but whether Marx really owes the theory of surplus value to David Ricardo. (audience laughing) At the time, I was writing
mainly for the New York Review about Israel and Bob was
writing about everything else in the world, covering
the rest of the world for The New Republic. He was the economics
editor of The New Republic. In 1984, published a terrific book, whose title I suppose, speaks for itself, The
Economic Illusion False Choices Between Prosperity and Social Justice. He would go on and write yet another book, this time much more focused
on the democratic party, called it The Life of the Party, in 1987. During this time he was writing columns for The Boston Globe. That year in ’87, I went to work at the
Harvard Business Review. I called up Bob to ask
him what an IPO was. I thought it was the Israel
Philharmonic Orchestra. I think also a leveraged buy out, I think he taught me
about a leverage buy out. Anyway, I did my homework and Bob went on, in 1990, having had enough of The
New Republic’s regime, in 1990, 30 years he’ll be
celebrating 30 years this year to found the American Prospect, which gave both frame, definition, poignancy to
liberalism in this country. What we, I suppose, now
call progressive politics, which he founded in
1990 with Robert Reich, who would then go on to
become Labor Secretary and Paul Starr. Bob has been relentless. His latest book is Can Democracy Survive Global Capitalism, which will be the title of this talk. He’s the author of other
books, Everything For Sale, The Squandering of America, in 2008, a particularly
prescient and courageous book called Obama’s Challenge,
in which he began early to question whether the
Obama administration would live up to its own hype. While he was doing all of
this, he was also a regular columnist for the Huffington Post. This guy works hard. I remember once hearing Bill McGiven, who was asked what his
theory of change was and McGiven answered,
“I’ll write an article “and things will change.” Didn’t turn out exactly that way. Of course, he said it with some sad irony, but I think if there
ever will be a time when that is a theory of change,
when journalists will be able to relentlessly discuss important issues and things will change, it’ll
be Bob who makes it happen. So it’s a great pleasure
Bob and take it away. I see this is a university audience. You can see the front row is empty, because for some reason, people like to sit towards the back. But you have a mike and
I think if you stand down here you’ll be fine. – Well that was great
Bernie, thanks so much. It’s really a delight to be here. You know, if somebody had
published a book 30 years ago in the fall of 1989, whose
30th anniversary we’re also celebrating, is the fall of communism and the fall of the Berlin Wall, but with a title like Can Democracy Survive Global Capitalism, the response would have
been complete bewilderment. I probably couldn’t have found a publisher to publish that book in 1989
because the view was that capitalism had triumphed and
capitalism went hand in hand with liberal democracy. Here we are 30 years later
and that doesn’t seem to be the case at all. So before going into the
dynamics of what happened, let me take you back to
the period between 1933 and roughly 1973, which was unprecedented and unique in
the history of capitalism. First of all, the market
economy was harnessed in a broad public interest. Secondly, beginning in the
’40s, for a period of about 35 years, the economy not only
grew at an unprecedented rate but it grew more equal, something that has never
happened before or since. Thomas Piketty famously
computed that the economy wealth tends to concentrate
because the return on capital accrues at a faster rate
than the growth of GDP, therefore it’s simply a
matter of mathematics. Wealth tends to become
more concentrated over time and yet the period from
the ’30s through the ’70s was the great exception. Jeff Cowie, a historian has written a book about the New Deal, which he
titled the Great Exception, but really, this was an exceptional period for Western capitalism as a whole. So how did that happen? Well, it took a lot of luck because it’s not normal
for a capitalist economy where ownership is basically
private and the dynamics of the economy are basically capitalist, to allow itself to be harnessed
in a broad public interest so that ordinary people who are not of the entrepreneurial bent, can do well and can get a
reasonable share of GDP growth and productivity growth. There’s a famous chart originated by the Economic Policy
Institute, another left liberal organization that is
helped found in the 1980s, which shows productivity growth and median income, median
wages growing in lock step until the mid ’70s and then
the curves go like that. Productivity growth
slows down a little bit but it picks back up trend,
but wages just flat line. So something extraordinary
happened between the ’30s and ’70s and then
it reversed after about 1973. That’s the subject of my
book and this lecture. Now for starters, if you do
this as political history, which is really the only way to do it, the crash of 1929 and the
Great Depression that followed had a very different political effect than the collapse of 2008. It disgraced laissez faire as an ideology and it disgraced, I can’t quite
bring myself to use the word ruling class because I’m
not really a Marxist, so I use the word economic elites. It disgraced financial elites. Also, there was the happy
accident of Roosevelt. Roosevelt you know, came in
promising to balance the budget. He was kind of a moderately
liberal governor of New York and he became radicalized in office. That wasn’t quite supposed to happen. So you had a much tougher
harnessing of the market economy than anybody expected. You had the financial sector
in particular treated almost like a public utility. It was the single most important
aspect of the New Deal. The Securities Act of 1933 and
the Securities Exchange Act of 1934 and the Public
Utility Holding Company Act and the Investment Company Acts of 1940 and on and on and on and on. Four different acts almost
nationalizing the system of mortgage finance and
controls on interest rates through Glass-Steagall and the separation of investment banking
and commercial banking. Because the prevailing view,
and it was an accurate view despite a lot of latter day revisionism, was the conflicts of interest
in the financial industry, more than anything else,
had led to toxic speculation that in turn led to a great unwinding and the financial collapse,
not unlike what happened in 2008 after much of the
New Deal regulatory scheme had been undone. Funny thing, in the era
of the post war boom, finance was the servant
of the real economy rather than the master. The real economy did just great. In fact, for much of that period, real interest rates were negative. The war was every bit as
important as the New Deal because in order to finance the war, you could not let market
set interest rates. The war was financed
about 50/50 by surtaxes on high incomes and by public borrowing. But the public borrowing had
to be at affordable rates. You couldn’t let financial
markets set those rates. So there was a deal between
the treasury and the Fed, where interest rates
were pegged and the Fed, under the constraints of
the wartime emergency, agreed to buy whatever the treasury needed to unload on it at interest
rates that averaged about 2.25%. Now, if the most important
thing Roosevelt did was to leash finance, the
second most important thing he did was to empower labor. Again, this was the only
period in the history of capitalism where the
government was basically on the side of organized labor. That produced a kind of
equilibrium of power, what Galbraith would later
call countervailing power. There was a very brief period in the 1940s where industry concluded that
gee, unions are here to stay. We’d better get along with them. It wasn’t until the
Taft-Hartley Act of 1947 that industry took the gloves
off and started walking away from that social contract. So the strong form of that social contract really lasted maybe a decade,
but it had a long half life because the unions had an institutional inertial presence and the
banks remained leashed in a very salutary way
for another few decades. Now meanwhile, on the
other side of the ocean, something really interesting
was happening as well. In January of 1933, when
Roosevelt was assembling his cabinet in Washington, Hitler was assembling
his cabinet in Berlin. It shows you that social
unrest can either go democratic left or it
can go fascistic right. The result of the Hitler
regime in the 1930s, until he blew it all by making war, was very satisfying to most Germans. Hitler ran a very nice welfare state. The German economy, thanks to rearmament, was the first of European
economies to recover from the Great Depression. So you had this stark
choice of whether you recover from a depression
through a democracy or through totalitarianism,
and very much like today, the view of Mussolini and
Hitler and philosophers, like Carl Schmitt in Germany, was that liberal democracy was doomed. That maybe some countries
could go through the motions of democracy, as we see
in Hungary and Poland and Turkey today, but the
idea of liberal democracy, that was silly. Mussolini’s favorite
philosopher argued that the democracies were doomed
because they couldn’t solve the problem of membership, because they couldn’t solve
the problem of unemployment, because they couldn’t
solve the problem of either political security or economic security. Now, what happened of course, was that the democracies won the war. Mainly the United States won the war but democracy had a remarkable resurgence after World War II with
one important aspect, all of the great founders
of the post war era, whether they were social
democrats or Christian democrats or other kinds of democrats, and communists were part
of those early coalition governments in Italy and
Belgium and France in the ’40s, but everybody who tried to
put the world back together beginning in 1944 and
1945, was convinced that laissez faire economics were poison. That if you were going to
prevent another European war, not only did you need a
national and international security system that
would leash Germany inside a broader democratic alliance, but you needed a full employment economy. One of the great documents
of that era is the first of the two Beveridge
reports by Lord Beveridge who was the architect of
the British welfare state, that was the second report in 1944. His first report in 1942 was called Full Employment in a Free Society. He begins that document
with an epigraph borrowed from Charlotte Bronte, misery breeds hate. If you want to head off
another third fratricidal European war, you need a
full employment economy. The welfare state was
frosting on the cake. This was Beveridge’s great insight. People want to work. People don’t want to be on the dole. It’s shameful to be on welfare. If you have unemployment
of eight or 10 or 12%, the state goes broke
compensating people for the cost and the inconvenience of not working. If you have full employment,
that first of all, and I’m paraphrasing Beveridge here and it’s every bit as true today, that gives labor more
bargaining power vis a vis management but it also means
that you can use tax outlays and tax income on other things. You can build a national
health insurance system. You can have free higher education. You can have child care rather than spending all
that money to keep people from starving because
they don’t have work. So 1944 of course, was also the year of The Bretton Woods Conference. The chairman of the conference was Keynes. Now unlike most great historical figures, Keynes got a chance for a do-over. You may recall that
Keynes was her majesty’s or his majesty’s I guess in that era, special advisor to the
treasury at the Versailles Peace Conference of 1919,
which was the most catastrophic missteps in the history of the world. The victorious powers
who had lost horribly, they’d lost as the saying
goes, blood and treasure and the lives of flower
of a whole generation, in World War I and they
decided that this was all the fault of the Germans and
that the Germans would pay all the cost of the war
damage, known as reparations. Keynes, who was in his
mid 30s at the time, being a very fine economist,
calculated that there was no way that Germany could possibly pay and wrote very presciently
that if the Allies were to squeeze Germany in this fashion rather than helping Germany to recover, the result would be a second European war. So he left the Versailles
conference early. He resigned his post. He wrote a letter to Lord
George and spent several weeks feverishly writing a
book, which was titled The Economic Consequences of the Peace, warning what a catastrophe the Versailles Peace settlement was. But the catastrophe did not
just extend to the reparations that were wreaked upon Germany. It extended to the conservative economics that dominated the 1920s. There was no recovery plan for Europe, unlike after the second war. The economy was completely speculative. The war debts were refinanced
by private financiers who wanted to make as
much money as possible. The idea was to squeeze the Germans, both to pay back the debts as
well as to pay reparations. Right up until the election of 1933, which brought Hitler to power,
the predecessor coalition government had been pursing
the advice of the experts and the demands of the creditors and had been pursing austerity economics. So there are awful parallels here. In 1944, in June of 1944 at the
ski resort of Bretton Woods, when representatives
of 44 nations gathered to fashion the architecture of the postwar economic and trade and financial regime, Keynes was the chairman of the conference. He was 62 years old, he was
now Baron Keynes of Tilton, and the world’s most celebrated economist. Keynes had concluded, both
from the lesson of Versailles and from his own work in
the intervening 25 years, that culminated in his general theory, that not only did you
need a domestic economy with a bias towards growth
and full employment, but you needed an
international environment, an international financial
environment that allowed domestic full employment
economies to thrive. Also unprecedented in
the history of the world. So the architecture of Bretton
Woods was very deliberately intended to restrain the toxic influence of speculative finance globally. How did Keynes propose to do that? Well, first of all,
exchange rates were fixed. That meant that there was no speculation
in currency parities. Wiped out a whole category of speculation. Secondly, there were capital
controls that actually lasted well into the
1960s that were gradually taken off, but it meant that
during the crucial years of the postwar recovery,
a whole other category of speculation was just not on the table ’cause it wasn’t possible. Those were the two aspects
of the Bretton Woods architecture that endured. The other two aspects were too radical. They were too radical for the Americans, who had all the power and all the money. They were utopian. One was the idea that there
should be a global currency. Keynes called it bancor,
punning on the French words for bank and gold. The other idea was that there
would be an international monetary fund from which countries could just borrow at will. Keynes euphemistically
called these overdrafts. The idea was that if you
got into balance of payments difficulties, the IMF just
had to give you as much money as you needed to cover them. The core insight was right,
that instead of the creditor nations demanding that the
debtor nations contract, the debtor nations could
be allowed to expand so that the whole system would
have a bias towards growth. Well, in the event, neither
the design of Keynes nor the design of his
radical American counterpart, Harry Dexter White, was what was actually enacted at Bretton Woods. But the dollar was the
defacto global currency, so that was good enough for a while. The Marshall Plan, much
more than the World Bank, which was the other part of Bretton Woods, became the engine of capital transfers to help Europe recover. There as a third entity
that was still born, called the International
Trade Organization, really interesting historical artifact. It was the effort of the
radicals who were in charge in that era to reconcile relatively open trade with labor rights. One of the provisions of
the International Trade Organization, which was never
ratified by the U.S. Senate, was that if you were
trying to defend a regime of robust labor rights and
somebody else’s exports were undercutting that
because they didn’t have labor rights at home or they
didn’t allow free trade unions or they had subminimum wages, you had the right to levy
countervailing tariffs to prevent your system
from having to import the toxic labor standards
along with the products. Now that was actually
drafted and signed off on at Havana in 1948, ’49,
but it was never ratified by the U.S. Senate. But it gives you a picture
of what the aspirations of that era were like. Okay, that stuck to the wall as a regime until the early 1970s. I have one my favorite
chapters in this book is called a Tale of Two Socialists. So socialists number
one is Clement Attlee, the first member of
the British labor party to lead a majority government
that actually had the power to get things done. Attlee comes to power in July of 1945, beating Winston Churchill. Now you say wow, the British
people actually voted out Winston Churchill, he saved our country. Why’d they do that? Well, Britain during the
entire interwar period, because of the dominance
of austerity economics, never fell below 10% unemployment. Not only that, but the election of 1940, which was supposed to be
held on the 5th anniversary of the election of 1935, was never held because
of the wartime emergency. So there had not been an
election in Britain since 1935. People, as much as they admired
and appreciated Churchill, were just fed up with all
of the wartime privations. Even though Britain was never invaded, a million dwellings
were lost by the blitz. There was rationing throughout the war, right up to about 1950 and
Britain really suffered horribly. So the Brits were up for a change. Attlee came in with a
very big labor majority, democratic socialist,
promising a very robust welfare state as well as
a full employment economy. Attlee kept income surtax
rates on very wealthy people at their wartime level of 99%. But Britain comes out
of the war having lost many of its colonies and having lost 1/4 of its total national wealth and having a debt to GDP ratio of 240%. Now, if you were the IMF of 2019, the same good people
who have been advising what do to about Greece, you would have said to
brother Attlee, you know, your most important job
is to reassure creditors because you need private capital. So you can’t do any of this. In fact, you need to
run a budgetary surplus and you need to tighten your belt. Mercifully, there was
no such IMF in that era. So what did Attlee do? Well, he built a national
health insurance, national health service. He started down the road
of free higher education. He rebuilt the British
economy with extraordinary public works, nationalized banks and railroads and coal mines. Why didn’t the world’s
capitalists undo that, why? Because the rules of the game prohibited them from doing that. You could not drive the
pound into the ground because the rate of the
pound against the dollar was fixed and the various
parties to the Bretton Woods accord were pledged to
maintain that parity. In fact, the pound was
devalued somewhat in 1949 but for those crucial years,
you could not bet against the British economy ’cause the rules of the game prohibited it. So in my tale of two socialists, the other socialist is
François Mitterrand, who becomes elected as the
first socialist president of France with a working majority in 1981 with a program very much like Attlee’s. France debt to GDP ratio was very modest. France’s fiscal affairs
were in very good order. Mitterrand, this is 1981
after the really kind of rough decade of the ’70s, comes to office and he’s going to nationalize
some industries, some banks, going to cut the work week to 37.5 hours, promises all kinds of enhanced benefits. But since 1944, between 1944 and 1981, the rules of the game have been changed. The capitalists who had
been leashed in a very salutary way, had clawed
back most of their power. So most of the constraints
on international finance had been loosened. It took about a year and
a half for international financial markets, God bless ’em, to drive the franc into the ground. Mitterrand had it devalued three times. He had to do a humiliating
180, where he appointed Jacques Delors, who later
became the architect of the EU, to preside over what some
people called austerity with a human face. At least the socialists, if
we have to have austerity, maybe we can make it not quite so bad. So the difference between
Attlee and Mitterrand was simply the result
of changes in the rules of the international financial game. What happens after 1981, is
the ascendancy of neoliberalism and my other favorite chapter in this book is called the disgrace of the center left, where parties and leaders who were nominally center left, like Clinton in the United States or Schroder in Germany
or Tony Blair in Britain, decide you know, neoliberalism
is the next new thing and we’d better get with the program. So Clinton becomes an even
more passionate advocate of financial deregulation. Bob Ruben and Larry
Summers and the republicans who came before him. Schroder changes the rules
of the German economy, as a social democrat in
ways that conservatives would never have dared. There were tight constraints
on financial speculation. There were interlocks between
banks and large corporations that were very carefully
monitored by the government, which corporations had the
benefit of nation capital. Schroder, thinking that
neoliberalism was both sound economics as well as fashionable, wanted more speculation. Under Schroder, the
protections of German labor were loosened so that labor could become more like a stock market. Now because Germany was
such an export powerhouse, Germany itself did not
suffer the consequences because once the Euro came in, Germany had to kind of
permanently undervalued currency. If Germany had kept the deutsche mark, the deutsche mark would
have been revalued, revalued and revalued,
as it had been prior to the advent of the Euro. But Germany was typhoid Mary. Everybody else got sick. Germany did not get sick. So during this period in the late ’90s, when you had leaders
nominally of the center left, they really reinforced the
consensus of neoliberalism and let me say a word about neoliberalism. Some people use it as an epithet. I think it’s a very
useful descriptive term. It means simply, the belief
that the verities of free market economics, despite the
unfortunate experience of the Great Depression, turn
out to be true after all. The neo part is really who
is embracing the verities of 19th century classical economics and the fact that despite
the historic lessons of the Great Depression on the one hand and the success of the
postwar mixed economy, that somehow free market
economics turned out to be right after all. Now, let’s go back to
the verities of 1989. In that period, there was
a view that capitalism raw in tooth and claw,
manufacture like to say, and democracy naturally go together. Now anybody who has
studied history would raise an eyebrow at that. I mean for starters, capitalists
have just gotten along with dictatorships from Latin America, to plundering natural resources in Africa to China, just beautifully. Tragically, we see how
nicely capitalists get along with aspiring dictators in
the United States of America under Donald Trump. Secondly, the expansion
of democracy has gone hand in hand with the
leashing of capitalism, not with the unleashing of capitalism. There’s a favorite piece
of statuary of mine that is on the corner
of Constitution Avenue, where it meets Independence Avenue. It dates to about 1938
and it was commissioned when the Federal Trade
Commission building was built. It shows a wild horse being broken by a horseman and harnessed. That was the symbol in the
Roosevelt era of commerce being constrained in the
broad public interest. I’ve often thought that
if that statue had been commissioned today, it would
show the rider dragging the, the horse dragging the rider haplessly up Constitution Ave because that is the prevailing ethic. So what’s the globalization part? Let me take you now to 1973. Why did things fall
apart in the early ’70s? Well again, very much like
the historical accidents under Roosevelt and the
historical acts of who the founders of the
Bretton Woods system were. There were a bunch of
historical accidents that mixed with some structural factors. The other thing I meant
to mention was that… Well, I’ll save that for the Q&A. So the dollar succeeded in functioning as the defacto global currency in a fixed exchange rate
regime until the early ’70s. There was a very prescient
economist named Robert Triffin, Belgium born economist
whose career was mostly in the United States, who
warned that this could not continue indefinitely, that
if other economies are growing and we expect the United
States to provide them with enough dollars so that they can grow, at some point the inflationary
pressures on the dollar are going to become insurmountable and you’re going to get
inflation and the dollar is going to have to be devalued. Lyndon Johnson accelerated
that day of reckoning with spending for the Vietnam
War and his effort to have both guns and butter, as the
expression went in that day. Then of course, the timing of the 1973 war in the Middle East and the fact that Nixon
was otherwise engaged with trying to save his
own skin at Watergate, made it possible for the
oil exporting companies to form OPEC and jack up the price of oil. So you have this convergence
of events that translate into a period of
inflation and stagflation, something that’s not supposed
to happen at the same time. In the first phase of this it all proves too much for Bretton Woods. So in 1973, when all of the world’s major nations, central bank chairs and finance ministers are trying to figure out
how to have a graceful, stable transition from
the fixed exchange rate of Bretton Woods regime to something that would maintain the stability but involve more flexibility. Nixon is trying to save his own neck. So here is a scrap of tape
from the Watergate tapes of June 23 of 1973, as the
financial system is descending into chaos and its
exchange, Nixon of course, famously taped himself, bugged himself, between the president
and his chief of staff, HR Bob Haldeman and I
am not making this up. Haldeman: Did you get the
report that the British floated the pound? Nixon: No I don’t think so. Haldeman: They did. Nixon: That’s devaluation? Haldeman: Yeah, Flanagan’s
got a report on it here. Nixon: I don’t care,
nothing we can do about it. Haldeman: You want to run down? No, I don’t. Haldeman: He argues that
it shows the wisdom of our refusal to consider
convertibility until we get a new monetary system. Nixon: Good, I think he’s right. It’s too complicated for me to get into. Haldeman: Burns, the Fed
chairman, expects a 5% devaluation against the dollar. Nixon: Yeah, okay, fine. Haldeman: Burns is
concerned about speculation against the lira. Nixon: Well, I don’t give
a shit about the lira. So on such accidental convergences, history is made or unmade. What about the title of this talk and my book, Globalization? Well, what happens beginning
in the ’80s and the ’90s and the 2000s, is that the general agreement on tariffs and trade, which had been a fairly
benign standing diplomatic conference to negotiate
reciprocal reductions in tariffs. You cut your tariff, I cut my tariff. In the ’90s, mutates into a general wrecking ball to undermine
manage capitalism, country by country. In the Uruguay round
of trade negotiations, which lead to the creation of the WTO, World Trade Organization, which was the successor to the GAT, there are all of these new issues. Trade in services. Well, trade in services really means free trade in financial services, which really means deregulation of banks. You can go sector by sector by sector and point out how hyper liberalized trade and
hyper liberalized free movement of capital and goods and
services, leads to the undermining of the ability nation by nation to manage capitalism, which of
course had been Keynes’s goal at Bretton Woods in 1944. The Europeans, through the EU, had their own version of
this on one continent. The Maastricht Treaty,
which is the closest thing to fundamental constitution
of the European Union, its most fundamental
doctrine is free movement of capital, goods, services and persons, which means that whole
categories of perfectly normal regulation are hosed away. For instance, you may have
heard of the Davis Bacon Act. The Davis Bacon Act of
the United States provides that if you are a benefiting from federal money on a
public works contract, you have to pay prevailing wages. You can’t use that to bust unions. Well, the Germans have
their own version of it. It allows German states to demand decent wages on public
construction contracts. Well, that flies in the fact
of the Maastricht rules. So there was a famous decision, the European Court of
Justice, the Ruffert decision, where a German contractor wanted to use a Polish subcontractor
to pay substandard wages on a public works project
in one of the German states. German state said well
no, you can’t do that. You got to pay decent wages. The company appeals this to
the European Court of Justice and the ECJ says sorry,
that regulation is scrapped. There have been case after case after case where in the case of Sweden, a company comes in from Estonia that refuses to abide by Swedish
collective bargaining norms and the European Court
of Justice says sorry. Under the Maastricht
rules that’s their right. I have a whole couple of
chapters on all of the ways that this doctrine of free
movement of capital goods, people and services undermines the ability of European member states
to have manage capitalism. Then there’s also another
aspect of globalization, which is refugees. It’s really, and there
are two faces of this. I mean, there are the kind of
refugees from Syria or Africa, who are causing one set of pressure, but there’s another category,
which is economic refugees from Eastern Europe, who
ware coming into countries and don’t have the same
labor rights as the locals, making the locals very unhappy. So you know, it’s hard
enough to expect local people to open their hearts or
their borders to people who are culturally different
when times are good. When unemployment is 10%,
which is the fruit of austerity economics in Europe, then
you’re really playing with fire. The great profit of how this all works is less Karl Marx than Karl Polanyi. Who’s read Karl Polanyi? Judas Priest! Who’s heard of Karl Polanyi? Okay. No, it’s Polanyi, Polanyi. Yeah, okay. One more time, who’s
heard of Karl Polanyi? Okay, that’s better. So in that same year, 1944, Polanyi wrote his master work,
The Great Transformation. Marx had expected that
when things got really bad the workers of the world would unite. What Polanyi appreciated was
no, the workers of the world don’t unite, they turn
to ultra nationalists and they turn to neofascists. That’s exactly what’s
happened in much of Europe as times have gotten bad since 1989. Certainly what happened
in the United States, where economic predictability
and living standards have been either flat or declining for ordinary people for 40 years. Both parties have colluded
in the resurrection of the supremacy of, and again, I’m really trying hard
not to sound Marxian, but the world has gotten the more Marxian, in the resurrection of
the power of finance. So at some point, when
Hilary Clinton is running against Donald Trump and
taking $500,000.00 honorarium from Wall Street, the average
person says it really isn’t any difference between the two parties. I can take my poison this way,
I can take my poison that way and maybe it’s time just
to vote for somebody who’s going to blow the whole thing up. That’s, I think, the main
reason that we got Trump and Araban and Erdogan, and the whole gang of aspiring neofascists. In conclusion, and my
mentor, Professor Galbraith said, you always have to say in conclusion to give the audience
hope. (audience laughs) In conclusion, to answer my own question, can democracy survive
globalization capitalism, yes it can. But it will take a lot more democracy and a lot less capitalism. Thank you very much. (audience clapping) – We’re going to move to
questions and as the convener I’m going to take a crack
at the first one, just to give you all a chance to
follow the stupid one. There isn’t, in your schema, much analysis of any technological
changes that we may have lived through in the last two decades. I know you have opinions about this. I’d like you particularly,
to focus on the distinction between unemployment and unemployability. We’ve been talking about
this for a long time, even wrote in the American
Prospect about this a long time ago. We have now a different kind of crisis and that has to do with the incapacity of many people to qualify for the kinds
of jobs that are actually, potentially available to them
in this part of the world. ‘Cause there’s an aspect
of globalization of course, which has to do with the way corporations work today, globally. What do you see as relevant to them, you know,
the I’m speaking now about the crisis of those parts
of America where you know, you had two, 3% of people on
disability 10, 15 years ago now 12% on disability. People who seem to see
their local communities falling apart. There are quite a few people
in the current presidential race who are raising these questions and I’m wondering how you see what you, I think correctly say,
about the ’40s and ’50s and see what you can say to
apply to the peculiar crisis that you see today. – We didn’t rehearse this. As we say at the Passover, I’m very glad you asked that question. So I’m something of a radical on this, so let me just say what I think. I’m quoting Robert Frank here, technology is not the cause of this. Technology is the excuse for
not doing anything about it. Let me begin this sort
of counter narrative by invoking some history. 1940, eight years of Roosevelt, the unemployment rate is
13.8% and there are a lot of mainstream and even left
of center economists saying you know what, it’s automation. This is the best a
capitalist economy could do, we’d better get used
to it, we’d better find ways of subsidizing these people or maybe teaching them some
other way to make a living, but this is just a chronic problem. Then the Japanese were kind
enough to bomb Pearl Harbor. In the course of six months, the war department enters
orders of 50 billion dollars and unemployment disappears. In fact, there’s over full employment. They have to rely on
women and negroes to work on war production lines with
men and with white people. A lot of the people who
were trained to work on war production lines
hadn’t graduated 6th grade. They were illiterate, but
they were trained on the job. So that’s point number one. Ah, but you will say, that
was the factory economy. This is the post industrial economy. So there is a parable
that the Nobel Laureate, Facilite Liontiev liked
to tell, and this is 1975. Liontiev said what do we
do when the entire economy is so productive that
there is one human worker and her job is to flip the switch? Then the only questions
become who gets the benefit of all that productive wealth
and what does everybody else do for a living. So, the practical question
becomes, since factory jobs are not coming back, either
because of outsourcing or because of automation or both, what does everybody do for a living and who owns all that productive wealth? Now, one of the benefits of the so-called Green New Deal, the massive public infrastructure program, part of that is that it
creates a ton of jobs. Some of those are blue collar jobs. Some of them aren’t. Some of them are jobs that help create new technologies,
which in turn produce new employment, as
happened during the war. I mean, the Green New Deal
is really World War II without the war, but inevitably, most of the jobs in the
economy are going to be service sector jobs. I think a focus on human capital is a complete cop out by
political’s interests, who don’t want to take on the deeper structural
problems of capitalism, because that makes it
the fault of the worker. You invest heroically in human capital and then hey, where are the jobs? The jobs are still not
there and the jobs are still not paying decently. Hyman Minsky, who was another
great descending economist, always argued get to full employment first with decent wages, and
then do the training. That’s better than somehow assuming that if you train these
people that will somehow cycle through into the creation of jobs. There was a wonderful piece
that Arlie Hochschild, the sociologist, wrote
about thee months ago now in the New York Times called
Silicon Holler, H-O-L-L-E-R, as in West Virginia and Kentucky. She said, and she’s
worked with a congressman, Silicon Valley, weirdly enough, has a lefty congressman named Roe Conn. Roe Conn has worked with
republicans and his idea is hey, let’s spread the tech around. So there was a pilot
project, which trained kids in Kentucky and West Virginia,
to learn how to be coders so that instead of aspiring
to work at Wal-Mart for seven bucks an hour, they could get jobs for $60.00 an hour that can just as easily go to Kentucky as they can go to Bangalore. So I think if we can commit
the sin of economic planning, which we did during the war
and which we’ll have to do under the rubric of a Green New Deal, we can spread some of the wealth around. The original New Deal, among all of its other accomplishments, was a regional economic
development program. TVA was a regional economic
development program. I’m a big fan of pork barrel. I mean, about 10 years ago
the idea was that we should get rid of earmarks because
earmarks are corrupting. The great thing about pork
barrel is that you spread the wealth around, excuse me, and congress people of both parties vote for extensive public works. That still leaves the
question of what about the rest of the service economy. It’s very possible to stipulate,
if you have the votes, that anybody who works
taking care of old people or young people or sick people, shall make at least $40,000.00 a year. We will provide training
as necessary to make sure that that happens. In France, they have a requirement that… They have the world’s best
early childhood program. They have a requirement
that a teacher in a (speaking in foreign language), the very, very early childhood program, has to have more academic
credentials in child development and public health than
a kindergarten teacher because the work is more intense. So they get more money than your average school teacher. When Jacques Delors, to his great chagrin, was presiding over the partial dismantling of the French welfare state,
one of the things he took great pride in was he
didn’t let them throw that one on the fire. So I think, if most jobs are
going to be service jobs, then that’s really a question
of redistribution of wealth. Thank you for asking that. – In your description of the decline of the postwar mixed economy, as it hit the 1970s, inflationary
pressure back in the ’70s, you suggest that the rules of the game can be set by governments,
as governments please. I’m just curious, do you
think a government could just set an exchange rate as
it pleases and just say that it’ll be five pounds to the dollar and fix exchange rates? Could we go back and fix exchange rates at a kind of fiat basis? – No, but we could take
a lot of the profit out of speculation. So governments did not
have to allow credit swaps. Governments did not have to allow LBOs. Governments did not have to allow Goldman to play these games where
you better not prohibit us from doing this, (voice cuts out) London. You know, the Tobin Tax, a very small tax on
financial transactions, Tobin came up with this in 1972, when Bretton Woods was falling apart, as a way and actually used the phrase, which is sort of the
ultimate sin in economics, of throwing sand in the gears. That’s the last thing you want. You want smooth equilibrium. But Tobin’s point was that when it comes to financial markets, you need
a little sand in the gears to keep financial markets
from just running wild and taking over everything. So no, you can’t fix
exchange rates by fiat, I agree with you, but you
can take a lot of the profit out of the speculation and damp
down the purely speculative aspect of the financial economy. But by Simon Johnson, who was the former chief economist of the IMF,
calculated that by 2007, on the eve of the financial collapse, about 45% of the profits
in the entire U.S. economy were going to the financial sector. Now, that’s not because
the financial sector was providing that much benefit. That was pure monopoly rents. You can shrink it back down to a size where you can understand it
and then you can regulate it. Then floating exchange rates become less destabilizing for the system. That was Tobin’s view. I don’t think anybody
thought after ’73 or ’74 that you could rescue fixed exchange rates and you had this whole period of trying to experiment with different
kinds of managed flows, which finally ended with the Euro, which didn’t really work
out all that well either. – First of all, thank you for coming, but I wanted to ask you
about the world today. In my reading group with Professor Clark, we’re learning that the world,
particularly in the last 30 years since neoliberalism has become the dominant economic force, the world’s gotten a lot better. Poverty rates have plummeted. Education rates, vaccination rates, all of these have skyrocketed. The countries however where,
that are not democratic, the countries that are
failing while most countries are growing, are the
countries with low economic freedom that leads to authoritarianism. You see Russia, China, Belarus, Venezuela is the perfect example. I don’t understand how
you can equate capitalism with the fall of democracy
when you see that countries with heavy economic freedom are often countries with
a lot of personal freedom, whereas countries with
low economic freedom often are run by
authoritarian governments. – Well, that’s the received
wisdom and you summarized it very well, but let’s unpack that. So most of the, statistically,
most of the decline in extreme poverty has
occurred in one country and of course, that’s China. Sorry? – [Man] And India. – To some extent but China, more so. China is, it’s a one party state. It’s an authoritarian country
run by the communist party and yeah, there is a capitalist sector but the capitalist sector dare
not fall afoul of government. There’s no press freedom. There are no Western
style democratic freedoms. China, and to a lesser
extent Korea and Japan, which are democracies,
have broken all the rules of free market capitalism. They have been state lead, mercantilists, manage capitalism in a different way. Not changing welfare state, but cartels, with government planning
and government capital and a great deal of protectionism
against other people’s exports and a financial sector that you know, ought to be
completely dysfunctional but somehow soldiers
on and provides capital to the rest of the economy. So India… India is a quite corrupt,
increasingly one party country. I don’t think India is
what Western advocates of liberal democracy exactly had in mind. The fact of the matter is
that the Western heartland of liberal democracy of
maybe a trillion people, has become both less
democratic and less prosperous in the past 15 years, 20 years,
the years of neoliberalism and the wealth has become
hyper concentrated. So even if economic growth
has not been all that bad on average, at its terrible
on average in Europe. It has gone to a tiny,
tiny fraction of people. So I think you know,
depending on your priors, you can look at the world and tell a story that the countries that
have done well have been the countries that have
unleashed free markets. I just don’t think that
corresponds to the facts. – So India, grew 2004, you got 38.9% of the population in poverty. 2011 it’s 21.2%. I mean, you adjust for a country that big, that’s a lot of people. – And you attribute that
to what kind of economics? – In the 1990s it opens up. It’s a very insular state
from independence to 1990, with their currency prices. They have no choice but to open up. They can sell their stuff
to the rest of the world. That’s just the world bank data, that’s actually not my question. My question is, so France, and
this is an honest question, so France would cue more
closely to many of the policies you would advocate. So you still want to unionize labor force, you have a shorter work week,
(voice cuts out) and so on. Yet the French appear to be as unhappy or unhappier than everybody else. So what is going on in France? – You know Daniel Bell, the sociologist, once said something very wise. He said for example is not an argument. So I think what’s happened
throughout the West is we’ve had a slow
down in economic growth, certainly since 2007. We’ve had a hyper concentration
of growth that exists. I think in this environment of global or European neoliberalism, it becomes harder and harder and harder to maintain any kind of a
mixed economy in one state. If you want somebody who
is a better credential economist than I am to
really make this argument with all the algebra
and all the statistics and all the bells and whistles,
I commend Danny Roderick, who does this just flawlessly. You look at Scandinavia, which managed to square that circle for maybe 50 years, where you had very high
rates of unionization. You had free trade. You did not have state planning. A lot of this was just bargain between the unions and management. It was very decentralized and happiness survey
shows that Scandinavians were among the world’s happiest people. That’s been blown to smithereens. You can’t do that anymore
because of the rules of the EU. So I’m just saying that under
the best of circumstances, this kind of social contract,
where you have a balancing act between the entrepreneurial
part of the economy and the social part of the economy. That’s very difficult to do economically. It’s even harder to do
politically because wealthy people don’t like to be constrained
and sooner or later they get back the power that’s
been taken away from them. But paradoxically, even though
the EU was supposed to be a blend of markets and social protections, the austerity mongers and the free movement of
everything uberalis people, have gotten so tight control
of the rules of the EU that countries that want
to pursue a continuing kind of managed capitalism
can’t do it anymore. So it was hard under the
best of circumstances and it’s even harder now. Polanyi once again, this is what has bred the ultra nationalists reaction. It’s not a coincidence that
in country after country after country after country you have a nationalist far
right that doesn’t really care about democratic niceties,
that is rekindling nationalist animosities that were supposedly
buried in the good years after the war, that is anti-Brussels because they see Brussels
bringing in a kind of globalization that they don’t like. But that doesn’t have any kind
of a coherent counter story or counter ideology, other
than hating foreigners and hating cosmopolitans, and
I think this is a reaction to what Danny Roderick
calls hyper globalization. So in a sense, democracy is
being narrowed on both flanks. On the one hand, decisions
that used to be able to be made democratically by nation states and by citizens are now
made by market forces and by financial elites. On the other flank, the
rise of neo fascism has made it harder and harder and
harder for mainstream parties to govern. If you have a splitter, not a splinter, but if you have a powerful
party on the far right with 20, 25% of the vote, then you never get a governing party that is strong enough to govern. You have weak coalition
governments very much like what happened in the ’20s
and so you muddle along and kick the can down the road. None of these problems get solved. That produces even more
support for neo fascists, ultra nationalist parties. I don’t, anyway, that’s enough. – Yeah? I’m going to head for you. – So earlier you kind of mention that a lot of people want jobs. Some of you kind of drags on capitalism and the current
dictatorship left far right, where capitalists basically call a country by dictators. I was wondering when did the revaluate and to have a free enterprise
and market you create more jobs so people will get jobs. Arugue that maybe just flicking the switch and us meaningless. Let’s say you have a
government going to push the Green New Deals and
you guarantee everyone to get a job, well then the
job would be as meaningless, just like in Soviet Union when it was the ideas of one person digging a hole and six person supervising. So when you’re putting all
the power into the state, you are essentially trying to
push out private enterprise and how are you going to protect the ideas that the far right, the people
who are for deregulation are actually the one that are sneaking everyone off, when they actually give you more freedom? – Okay, let me take each
piece of that one at a time. If you had a program of upgrading of public infrastructure. Everything from the electrical
grid to decent public transit, that would not
be like the Soviet Union where you have a person digging a hole and six people supervising. That would be useful
work, modernizing systems. If you traveled by rail
from Boston to Washington, you pass through a museum of
19th century infrastructure. I looked it up, the fastest
train from New York to Chicago, which is now called
the Lake Shore Limited, was called the 20th
Century Limited in 1908 and it was an hour faster in 1908. You go to Germany or you go to Beijing or lots of other parts of
China, you see a country that’s modernized its infrastructure. We haven’t done that. So that’s low hanging fruit. That’s easy to do and it
creates lots of good jobs. By the way, if you look at
what happened in World War II, where the government had more
power than its ever had before or since, that was really
good for private enterprise because private enterprise
got all those contracts. It wasn’t the war department
that was building the planes and the tanks and the guns. It was contractors. After the war, all those
plants were sold back to private companies very cheap. So I don’t think the
United States will ever be like Soviet Russia because
I think there’s a residual amount of support for private industry. We’re talking about partnerships
between public purposes and private industry where
the actual work is done by private industry and private
industry gets the benefit of all that capital to innovate. So that’s point one. You look at the countries
that are doing this well, they are anything but traditional
free market countries, China being the prime example, where they’re building incredible
amounts of high speed rail. They are not only building
coal fired electrical plants, but they’re building more solar plants. This is not catch up technology. This is leading technology. Yeah, there are some
private companies in China but the whole show is state led. I don’t hold up China as a
model of liberal democracy but I do hold up China as a
model of what’s possible to do with public planning. – Do you think that the
United States institutions are an insurmountable barrier
to having more democracy? Like when we think about the
Supreme Court for example, in the last couple of
years with Citizens United and with decisions that
have curbed unions, political rights and
empowered corporations. We also then about the
Senate, but I read that like if trends continue by
2040, half the population will be in eight states,
so the other half will have 84 senators compared to 16. So will these trends get in the way? Even if we have like eight
years of President Warren and eight years of
President Ocasio-Cortez, will these institutional values make it impossible for there to be an increased democracy to the
extent that we can go back to what’s happened in the past? – That’s a great question. So some of this goes
back to the Constitution. The framers were very
skeptical of government and they created a kind of a constitution that made it very hard for
government to be activists because of all the checks and balances. Then since really World War II, we had a number of assaults on democracy that culminated with President Trump. We had an expansion of executive power. We had a weakening of civic institutions. We had money crowding
out citizen activism. We’ve now had the federal
government go from a champion of expanding the right to
vote to the federal government and the states under
Trump trying to construct the right to vote. We’ve got a reactionary Supreme Court. However, there are historic
moments when the pendulum swings and you can get majorities in Congress that are big
enough to overcome that. The two great examples
on the progressive side are of course, the Roosevelt coalition and the period of Johnson
great society before he blew it all on Vietnam,
where you had working majorities in favor of really drastic social reform. The example on the
conservative side is Reagan and Trump’s two years,
although I wouldn’t really call Trump a conservative. So in order for someone
like Elizabeth Warren to get elected, which is the easy part. Governing is the hard part
and be able to govern, the democrats would have
to take back the Senate. That’s possible. There are 11 vulnerable republican seats. The democrats only need three or four, depending on whether they off at Alabama. There are eight more
vulnerable vacancies in 2022. But you’re right, everything
would have to break right. That requires a lot more than luck. It requires a huge amount of mobilization. It requires Wall Street
not to put up Bloomberg as a 3rd party spoiler, which I think could very well happen. If that happens and Trump has
a hard core 40% of the vote, Bloomberg as an independent candidate, could end up electing Trump. This is by no means a slam
dunk and it’s very difficult. But I don’t think it’s quite impossible. – [Man] To kind of add
on to that question, assuming that all of
those things happened, what could be done to
ensure nothing goes before state employees on the
previous, like the ’70, ’80s, when those bad (voice cuts out) that could really be done. – I recommend to you a
book recently written by my colleague Paul Starr,
which looks at the question of why some reforms
stick and others don’t. The epic example of a
reform that has stuck is social security because
too many people depend on it. Social security, call
the 3rd (voice cuts out) of politics and it is. Even right wingers don’t dare mess with it except by stealth and
it endures to this day. Another wonderful example is
the Alaska Permanent Fund, which is also a model of how
you spread the wealth around. In 1972, oil is discovered on Alaska’s north shore. The governor at the time
is a maverick republican, who says gee, you know
what, instead of giving away all these royalties to the oil companies, why don’t we just put
them on contract to drill for the oil, why don’t
we take their royalties. So every year, every man,
woman and child in Alaska gets a check from the Alaskan government that in some native villages,
equals more than half of their total cash income. Depending on the price
of oil any given year, it’s five, six, seven
thousand dollars a person. A lot of money. Now, the oil companies have
tried to claw this back. Conservative governors have
tried to claw this back. Good luck. If you got a check from
the government every year of three or four or five or six or seven thousand dollars of free money, no politician’s going to
take that away from you. There’s a wonderful book and I’m going to in a moment
think of the name of the author, but his point is let’s use
the Alaska Permanent Fund as a model for spreading
the wealth around so that besides extractive industries, economic funds where the
government plays a role, patents, trade marks,
copyrights, the internet, NIH, NSF funded stuff, the citizenry ought to get a cut of that. Everybody ought to get a
check from the government as their share of economic
wealth that was extracted from the commons, either
literally or figuratively. The author’s name is
Peter Bries, B-R-I-E-S. To go back to the Lioniev’s parable, this is something we’re
going to have to figure out because if few do go to
a world where there are fewer and fewer manufacturing jobs, we’re already almost there
and where some service sector jobs are taken over by machines, we’re going to have to
figure out how to distribute that productive wealth more equitably so we don’t get to a world
where 50 billionaires own half the wealth and that’s the world that we’re heading towards. Which by the way, which by the way, is incompatible with democracy. – I’m wondering how you see the world, capitalism and democracy,
managing the enormous changes that will need to happen
to enact and make progress with the Green New Deal,
especially considering the massive power of the oil industry. – Well, you know, Roosevelt
famously in his second acceptance speech when he was nominated for a second term in 1936, said of bankers, they hate me
and I welcome their hatred. This is a fight and this is
a fight with bare knuckles against some of the most
powerful people in the world. Once in a great while ordinary
people get sufficiently mobilized to take on
powerful economic interests and sometimes they actually win. So I’m not saying this is easy. It’s very, very difficult
but unless ordinary people are mobilized politically, which is what Warren is
particularly good at I think, it doesn’t stand a prayer. I mean, Joe Biden is
not going to take on any of the oil companies or the banks. I think people who think that
the problem in America is that all we need is reasoned moderation and we can fix what’s broken, really has missed what happened
during the past 40 years. – [Man] I wanted to follow up
on the idea about universal basic income or you mention
Alaska Permanent Fund, which by the way peaked
at $2,000.00 a person and usually between one and two thousand. – In the earlier years
it was more than that. But recently you’re right. Recently, as the price
of oil has come down, it’s fluctuated between
the thousand, but okay. – Alaska, well they got a lot of oil and very few people, so
I’m wondering in two hours we’re going to have a debate. I’m just, I’d like to hear
you comment on pick two of the more dramatic proposals out there. Warren’s talking about a wealth tax and Yang’s talking about UVI, which he wants to
finance, his main vehicle would be a value added tax. So very different visions
of how you would finance a lot of redistribution. I’m just kind of curious
as to which of those two resonates with you more. – I’m not a huge fan of
a UVI, universal tax. I think most people want jobs and I think as a supplement,
some kind of a check from the government is fine,
but it’s not a subsidy. I think a wealth tax, given
the degree of concentration of wealth, if you start
at, what is it 50 billion or 50 million dollars, I
mean that just touches so few people and it actually
raises a lot of money, which is a reflection
of just how concentrated wealth has become in this country. I think that’s probably
a political winner. I think going back to an
idea which was not seen as the least bit radical
for 120 years of free public higher education, I think that’s smart and that’s a political winner. What’s interesting to me
about Warren and to a lesser extent, Sanders, is that
ideas that were ridiculed as recently as five years
ago as hopelessly radical and hopelessly, I think impractical, have become mainstream and
that’s a very nice reflection of ordinary people starting
to connect the dots that hey, it doesn’t have to be like this. I’m not worried about
how you pay for this. I mean, I think so-called modern monetary
theory is a fantasy. You can’t just print money. On the other hand, republicans
have suddenly decided that deficits don’t
matter and have given away a two trillion dollar tax cut. If you claw that back and reprogram it, you could do a lot of good
stuff with two trillion dollars. It’s also possible to do what the fed did during World War II and during the financial crisis, which
is to expand the fed’s own balance sheet and
use some of that debt for productive economic
purposes rather than to bail out banks. So there is a fair amount of running room for expansive policies. – [Man] Thank you for
coming to speak today. I just have a question about how we can better curb financial speculation. You mentioned that Keynes
saw financial speculation as the main driver of economic inequality across the world. – Instability is what. – And he offered a lot
of global solutions, such as fixing currencies
against each other. But to me it would seem
pretty politically infeasible to offer global solutions today. You mentioned curbing LBOs
or for it default two months earlier, but do you
think there are any real, those seem to be domestic solutions. Do you think there are
any real global solutions we can find to that problem? – No, in fact most of the
changes in the rules of the game that have been initiating
globally have been mischief, have been efforts to undermine the ability of the country to manage
a capitalism economy. But the United States of
America, because it’s still such a very large player, could
have taken a very different course beginning in the late ’70s. When the first wiseguy said hey, I’m going to borrow money and
I’m going to collateralize the debt with the assets
of the target company and then I’m going to take over. A minnow’s going to take over a whale, that’s Paul Steinberg, reliance loosened. You know, the treasury
and the fed and the SEC could have said oh no you’re not. You can’t do that. That’s a conflict of interest. That violates this that
and the other thing. But they let this cancer grow. It metastasized into private
equity and hedge funds, most of which contribute
absolutely nothing to real economic welfare,
whose main function has been to loot retailing and to upstream cash flow from operating
companies into the pockets of the partners. Private equity only exists
because of a loop hole in the 1940 investment company act. Credit to false swaps and
a whole bunch of other toxic stuff, only exist
because the regulators said hey, what the hell,
go ahead, have a party. They didn’t have to do that. If different people were in charge, you could have a very different set of ground rules for finance. Now I’m not talking about
the genuinely entrepreneurial part of the economy. I’m just talking about
the power citic financial part of the economy. That was once very, very nicely regulated, thank you very much. Funny thing, the real
economy just thrived. – Can I just ask a final
question to follow up just on that because I’m
still stuck on one part of your analysis. Let’s say, I mean all of
these things are arguable, but let’s say you’re compelling on the question of
regulating financial markets, compelling on the problems of austerity and so forth, I’m still
sort of stuck on the image of putting up barriers to flows of capital, intellectual capital and particularly components
in a global system. You mentioned before you know, people haven’t had a wage
increase in 40 years. Well, that maybe true,
but you know, 40 years ago television set was 365 bucks, which was about 6% of your annual income. Today a television set is
.6% or your annual income and you can stream anything
from anywhere in the world. And will last forever, you know. I guess, I feel like there
are advantages to what’s been happening in the development of stuff in the global system. Advantages to the movement of people and intellectual capital
in the global system. When you talk about
countries putting up tariffs to protect their own
industries, I must say, I get a little queasy and I feel like I’m not even sure you envisioned that. I wish you’d sort of come
back to it and say more specifically how you envision it. – Thank you for another great question. So stuff is exactly the right word. So stuff has gotten cheaper,
thanks to global supply chains and free capital movement
and free movement of you know, stuff because
there’s quite very cheap labor. So here’s the paradox. – [Man] Cheap labor, let’s be clear. It’s not just cheap labor. It’s a global–
– System. – A global strategy for
the production of stuff. One part of which makes– – Fair enough. So here we have this paradox
where stuff is cheaper and cheaper and cheaper and that’s supposed to make us happier. At the same time, the most
fundamental aspect of what most people would consider
a good life have gotten away from more and more people. So you know, when Trump
talks about make America great again, he’s conflating economics and loss of status and racism. So his image of make America great again is the era when a man
could earn a good living on one paycheck and
bring that paycheck home to a little wife who
served him a hot supper and afford a house in a
community with decent schools and a vacation house
maybe and one or two cars. That’s been blown to hell. So the problem is over
here you have cheap stuff and over there you have
can’t afford a house, schools are a mess, have to
go into debt to go to college unless I have rich parents, my job horizon is kind of fragile in that you know, if I’m a computer geek great man. I’m going to go to the moon. But if I’m anybody else, unless I’m a graduate of an elite college, from anybody else, here’s the gig economy, which is like a combined
fantasy of Milton Freedman and Karl Marx, where all
workers are in a spot market competing against all
other workers all the time to see who’ll work for the lowest wage. So this is this weird mash up of utopia with all this great cheap
stuff and dystopia where people can’t get a foot in the American dream. So somehow you have to square that circle and we’ll do that in Bernie’s
class tomorrow morning or over at dinner, and figure out, can we keep some of the cheap stuff and maybe keep some of the dream. That’s a good note to end on. (audience clapping)

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