Krystal Ball interviews Author Anand Giridharadas on his book “Winners Take All.” Anand explains how the same billionaires who undermined the American Dream now want us to be dependent on them as our saviors.
Before going to the White House, Donald Trump demanded that the Fed raise interest rates despite high unemployment and low inflation. Now he’s demanding rate cuts, even though the unemployment rate is much lower and inflation at least a bit higher. To be fair, there is a real economic argument for rate cuts as insurance against a possible slowdown. But it’s clear that Trump’s motives are and always have been purely political: he wanted the Fed to hurt President Obama, and now he wants it to boost his own reelection chances.
It’s not surprising, then, that Trump is also trying to stuff the Federal Reserve Board with political allies. What may seem surprising is that many of his would-be appointees, like Stephen Moore and now Judy Shelton, have long records of supporting the gold standard or something like it. This should put them at odds with his efforts to politicize the Fed. After all, one of the supposed points of a gold standard is to remove any hint of politics from monetary policy. And with gold prices rising lately, gold standard advocates should be calling for the Fed to raise rates, not lower them.
But of course both Moore and Shelton have endorsed Trump’s demand for rate cuts. This creates a dual puzzle: Why does Trump want these people, and why are they so willing to cater to his wishes?
Well, I think there’s a simple answer to both sides of the puzzle, which involves the reason some economic commentators (not sure if they deserve to be called “economists”) become goldbugs in the first place. What I’d suggest is that it usually has less to do with conviction than with cynical careerism. And this in turn means that goldbugs are, in general, the kind of people who can be counted on to do Trump’s bidding, never mind what they may have said in the past.
Let me start with what might seem like a trivial question, but which is, I believe, crucial: What does it take to build a successful career as a mainstream economist?
The truth is that it’s not at all easy. Parroting orthodox views definitely won’t do it; you have to be technically proficient, and to have a really good career you must be seen as making important new contributions — innovative ways to think about economic issues and/or innovative ways to bring data to bear on those issues. And the truth is that not many people can pull this off: it requires a combination of deep knowledge of previous research and the ability to think differently. You have to both understand the box and be able to think outside it.
I don’t want to romanticize the mainstream economics profession, which suffers from multiple sins. Male economists like me are only beginning to comprehend the depths of the profession’s sexism. There’s far too much dominance by an old-boy network of economists with PhDs from a handful of elite institutions. (And yes, I’ve been a beneficiary of these sins.) Many good ideas have been effectively blocked by ideology — even now, for example, it’s hard to publish anything with a Keynesian flavor in top journals. And there’s still an overvaluation of mathematical razzle-dazzle relative to real insight.
But even for people who can check off all the right identity boxes, climbing the ladder of success in mainstream economics is tough. And here’s the thing: for those who can’t or won’t make that climb, there are other ladders. Heterodoxy can itself be a careerist move, as long as it’s an approved, orthodox sort of heterodoxy.
Everyone loves the idea of brave, independent thinkers whose brilliant insights are rejected by a hidebound establishment, only to be vindicated in the end. And such people do exist, in economics as in other fields. Someone like Hyman Minsky, with his theory of financial instability, was, in fact, ignored by almost everyone in the mainstream until the 2008 crisis sent everyone scurrying off to read his work.
But the sad truth is that the great majority of people who reject mainstream economics do so because they don’t understand it; and a fair number of these people don’t understand it because their salary depends on their not understanding it.
Which brings me to the gold standard.
There is overwhelming consensus among professional economists that a return to the gold standard would be a bad idea. That’s not supposition: Chicago’s Booth School, which surveys a broad bipartisan group of economists on various topics, found literally zero support for the gold standard.
The events of the past dozen years have only reinforced that consensus. After all, the price of gold soared from 2007 to 2011; if gold-standard ideology had any truth to it, that would have been a harbinger of runaway inflation, and the Fed should have been raising interest rates to keep the dollar’s gold value constant. In fact, inflation never materialized, and an interest rate hike in the face of surging unemployment would have been a disaster.
Thank God we weren’t on the gold standardCreditFederal Reserve of St. Louis
Image
Thank God we weren’t on the gold standardCreditFederal Reserve of St. Louis
So why did gold soar? The main answer seems to be plunging returns on other assets, especially bonds, which were the product of a depressed world economy. What this means is that in practice pegging the dollar to gold would mean systematically raising interest rates when the economy slumps. Not exactly a recipe for stability.
Why, then, does goldbuggery persist? Well, some billionaires — such as Robert Mercer, also a big Trump supporter — have a thing about gold. I’m not entirely sure why, although I suspect that it’s just a plutocratic version of the Fox News syndrome — the angry old white guy ranting about big-government types inflating away his hard-earned wealth to give it away to Those People. And these billionaires give a lot of money to libertarianish think tanks that peddle gold standard derp.
Now imagine yourself as a conservative who writes about economics, but who doesn’t have the technical proficiency and originality needed to get a good job in academia, an economic policy institution like the Fed, or a serious think tank. Well, becoming a vocal gold-standard advocate opens a whole different set of doors. You’ll have a much fancier and more lucrative career, get invited to a lot more stuff, than you would if you stayed with the professional consensus.
What I’m suggesting, in other words, is that gold-standard advocacy is a lot like climate change denial: There are big personal and financial rewards for an “expert” willing to say what a few billionaires want to hear, precisely because no serious expert agrees. In the climate arena, we know that essentially all climate deniers are on the fossil-fuel take. There may be some true believers in the monetary magic of gold, but it’s hard to tell; what we do know is that prominent goldbugs do very well relative to where their careers would be if they didn’t buy into this particular area of derp.
And that, in turn, brings us back to Trump.
Why would Trump expect goldbugs to abandon their principles and back his demands to fire up the printing presses? Why is he, in fact, apparently finding it easy to get goldbugs willing to turn their backs on everything they claimed to believe?
The answer, I’d submit, is that it was never about principles in the first place. Many, perhaps most prominent goldbugs advocate a gold standard not out of conviction but out of ambition; they sold their principles a long time ago. So selling those pretend principles yet again in order to get a nice Trump-sponsored job is no big deal.
His conference in Bahrain hears of big dream plans divorced from reality.
The slick promotional publication, titled “Peace to Prosperity,” described a $50 billion investment surge in the Palestinian economy over the next decade, like a fantastical New York real estate promotion. Palestinians certainly could use the investment and jobs in their economically depressed communities, where unemployment last year was 31 percent.
The publication touted what was supposed to be an economic foundation for peace between Israel and the Palestinians, presented at a conference in Bahrain this week by Jared Kushner, presidential son-in-law, senior adviser and, formerly, New York real estate developer.
Mr. Kushner invited participants to “imagine a new reality in the Middle East.”
But except for its patronizing tone, there’s little new about the plan, which relies heavily on the construction of much-needed infrastructure projects that are retreads of proposals the World Bank, the United States and others made in previous failed peace efforts.
The most ambitious undertaking would be a $5 billion transportation corridor from the West Bank to Gaza that could link the two Palestinian territories with a major road and possibly a modern rail line. To facilitate the flow of Palestinian people and goods with Israel, Egypt, Jordan and other countries in the region, facilities at key border crossings would be upgraded, new cargo terminals would be built, old ones would be refurbished and new security technology would be installed.
Although it deals only in generalities, the plan also envisions investing in upgrades to Palestinian electric grids, the Gaza Power Plant and renewable energy facilities. In an effort to double the water supply in five years, new desalinization and wastewater treatment facilities, wells and distribution networks would be built. Financial incentives would encourage private Palestinian businesses to expand the limited existing digital capabilities by developing high-speed telecommunications services.
Other proposals focus on expanding educational opportunities, jobs, housing, tourism and the rule of law.
While tantalizing, the plan as it stands is, to be gentle, unrealistic.
Israel controls the economic life of the Palestinian territories, meaning none of the proposals are possible without its concurrence. Yet the plan makes no demands on Israel and its prime minister, Benjamin Netanyahu. Gulf states, along with European nations and private investors, are expected to help finance the plan, but there have been no actual commitments, and the idea that the Arabs would bankroll a peace plan that sidesteps a Palestinian state is unlikely.
Making the whole initiative even more surreal, it arrives after the administration in which Mr. Kushner serves sharply cut funds for programs that support Palestinian schools and health care.
The fact that officials of the Israeli and the Palestinian governments, whose futures are most at stake, were absent from the two-day conference in Bahrain, and that many Arab and European countries sent only lower-level representatives, underscores the broad international discomfort with Mr. Kushner’s economic proposals and the promised plan for resolving Israel-Palestinian political issues that is supposed to follow it.
Team Trump is betting that dangling lucrative investments will cause Palestinians to abandon their aspirations for an independent state, a goal the United States supported as part of a negotiated peace since 2002, until President Trump voiced a more fluid view. If it were that easy it would have happened years ago.
Palestinian leaders, who halted contact with Washington months ago, rejected Mr. Kushner’s economic blueprint out of hand. Saudi Arabia and the United Arab Emirates, allies with Israel against Iran, were supportive but made clear that the plan needed to be combined with a political solution.
The one truly enthusiastic cadre appeared to be billionaire investors who, seemingly for the first time, were seeing economic potential in a long-ignored part of the world. Many of them expressed such eagerness about eventually underwriting projects promoted by the plan that Treasury Secretary Steven Mnuchin said, “It’s going to be like a hot I.P.O.”
Mr. Kushner is right when he says the “old way hasn’t really worked.” However, by presenting a plan that ignores Palestinians’ aspirations for statehood and their demands for ending Israeli occupation of Palestinian territories, he is making success even less likely. “If we are going to fail,” he has said, “we don’t want to fail doing it the same way it’s been done in the past.”
What happens next is anybody’s guess. Secretary of State Mike Pompeo admitted in a recent closed-door meeting with Jewish leaders that the plan may be “unexecutable.” But if Mr. Kushner can mobilize powerful investors and international businesses as cheerleaders for Mideast peace, he could make a real contribution.
The latest brainstorm from the New York freshman: The New Deal was racist.
But SXSW’s 2019 rock star was Rep. Alexandria Ocasio-Cortez, who filled 3,200 seats in the Convention Center Saturday. Notably, the Green New Deal advocate didn’t arrive in a Prius or on one of the ubiquitous scooters that clog Austin’s streets during the festival. She came instead in a gas-guzzling SUV.
.. Ms. Ocasio-Cortez dealt at length with America’s pervasive racism, declaring, “The effort to divide race and class has always been a tool of the powerful to prevent everyday working people from taking control of the government.” America’s leaders also helped “racial resentment to become legitimized as a political tool.”She and Ms. Gray agreed that Mr. Trump is a racist, of course. But so was President Reagan, who in 1976 criticized a Chicago woman for bilking the welfare system for $150,000 a year. That attack was “rooted in racism,” according to Ms. Ocasio-Cortez, even though the woman in question was white.
Even more astonishing, the New York freshman representative declared Franklin D. Roosevelt a bigot, saying “the New Deal was an extremely economically racist policy that drew literal red lines around black and brown communities and basically it invested in white America.”
According to Ms. Ocasio-Cortez, the New Deal “allowed white Americans to have access to home loans that black and brown Americans did not have access to.” By doing so, it “accelerated . . . a really horrific racial wealth gap that persists today.” Yet studies show that FDR’s Home Owners’ Loan Corp. did not discriminate against African-Americans, and the gap between black and white homeownership remained around 20% from 1900 to 1990, though ownership levels increased for both groups.
This attack on FDR exhibited another theme of Ms. Ocasio-Cortez’s appearance—the ubiquity of conspiracy. Just as FDR’s New Deal secretly discriminated against “black and brown Americans,” dangerous forces are subverting our country today.
For example, Ms. Ocasio-Cortez told the crowd America’s “norms and systems and electoral system” are “dominated by special interests and dark money and rules of seniority.” Because the rich have “taken away all the guardrails of a responsible society,” Ms. Ocasio-Cortez said, “it doesn’t feel good to live in America today.”
Furthermore, “We should be scared right now because corporations have taken over our government.” Nor do these businesses want to help themselves and the community; under capitalism, “we seek and prioritize profit and the accumulation of money above all else and we seek it at any human and environmental cost.”
Our economic system is also “based on scarcity,” which corporations have made “artificial.” So “we are driven to work 80 hours a week when we are being the most productive at any point in American history.” If the profits weren’t “skimmed off and given to a billionaire,” we would “be working the least amount we’ve ever worked”—Marx’s promise of old. The crowd applauded as she excoriated the 540 American billionaires who stole our money.
She acknowledged that her policy responses—the Green New Deal, Medicare for All, guaranteed jobs, universal basic income—constitute socialism, but insisted “this isn’t radical. This is what we’ve always been.” America has always been socialist? Believe it. “It’s just that now,” she told the SXSW crowd, “we’ve strayed so far from what has really made us powerful and just and good and equitable and productive.”
Ms. Ocasio-Cortez implied that Democratic colleagues who oppose her are both cowards and hypocrites, complaining, “No one’s ever said to me, ‘I’ve got these really big donors and to be honest with you, this is why I can’t do that.’ ” How lonely to be that rare righteous member of Congress!
Ms. Ocasio-Cortez offered grace notes that explain her appeal, as when she urged the audience to work toward “ambitious acts of vision,” saying, “We are capable of so much as a country.” But these were few in her more than hourlong interview spent bludgeoning America, its values, history, leaders and accomplishments. That was what the SXSW crowd wanted. It will be far less attractive to the rest of America.
