it’s useful to understand how the systemworks and the key turning point is avery remarkable period it’s WilliamJennings Bryan William Jennings Bryan in1896 was a fairly young 36 year oldNebraskan who got up in the middle ofthat particular I guess you could sayAssociation of then the Democratic Partyand it was the one of thoseextraordinary events which turnspolitics around the Democratic Party wasa highly conservative party prior tothem and essentially it’s characterizedby presidents who thought that the leastgovernment the best it was essentiallylazy fair he got up Bryan got up andmade this extraordinary speech which isnow historical and then cross of goldspeech about the American worker and theAmerican farmer of being crucified on across of gold called being the goldstandard and that propelled himstrangely enough into the head of theparty he got nominated he never becamepresident because he kept losingyou think he went three times and failedeach time but left a very majorindelible stamp which led to WoodrowWilson and all the way through toFranklin Roosevelt and I you know Ilooked at Bryan as the root of FranklinRoosevelt’s New Dealthat’s fascinating cause I think mostpeople that part of it’s often beingobscured in history it’s again one ofthe reasons why this book is sointeresting is it throws up thesecreating the existing tax pattern [M]yview is that that’s the right thing todo provided you funded the result ofthat is a bit of variance is going to bea very large federal budget deficit andfederal budget deficits invariably downthe road out qualification in genderinflation at the moment we have thetightest labor market I have ever seenthat is the number of job openings issignificantly greater than the number ofpeople looking for work and that mustinevitably begin to push on wages italways has and always will but it’salways delayedand my told you that is something hasgot to give and that’s I don’t knowwhere it all comes out well your blyatcomes out with inflation well theproblem basically is if we do nothingwe’re going to end up with probablystagflation which is an inflation rate Ishould say it’s partly stagnation whichas mentioned was very significantlyslowed output per our output per hournow which used to be 3/4 percent peryearback in the early post-world war iiperiod it’s now well under 1% whichbrings me very nicely on to the nextquestion from the audience which issomeone has asked for you to share yourthoughts about president Trump’s recentcriticism of Jay Powell and the Fed Ilike him to answer that with all theanswers I think it’s very short-sightedthe issue of the Federal Reserve isrequired by the Congress to maintain astable currency which means no inflationno deflation and the policy they’reembarked upon at the moment seems verysense it will be caused as I mentionedbefore the wage rates are beginning toshow signs of moving and you cannot havereal wages rising without it ultimatelythink if they continue on the road wouldthat we willgoing Pretlow I should say that thepresident wants to go we’re gonna end upwith a very significant budget deficitand very significant inflationultimately not not in the short termthat it takes a whilepolitical system doesn’t care aboutdeficits what they do care about isinflation when the inflation rate was 4%in the 1970sPresident Nixon imposed wage and pricecontrols were nowhere near there yet butit’s wrong our wayif we are though heading towards apotential rise in inflation rise in debtat a time of growing populism do youthink there’s a chance that the FederalReserve will lose independence I’mtrying to follow you which I mean wellcheating is a chance at Congress or thepresident will try to control theFederal Reserve or take away some of itsindependence I really don’t know one ofthose forecasting aspects which isdifficult another question from theaudience as the Federal Reserve’s reachgrows do you think that leged ofoversight will become necessary againthat’s above my pay gradeor do you think that Congress shouldexert more control or oversight of theFed I think the Federal Reserve is bystatuteremember the Federal Reserve Act of 1913which essentially did something veryunusual we had a long period wediscussed this in the book in whichfinancial crises kept surging up andthen collapsing which is a typical cyclewithwhich went on to a decade upon decadeand the populism that evolved as aconsequence of this looked atever-increasing lead to find a way tosolve the problem of why the crisesoccur and the general solution was ifthe economy is accelerating and it’srunning out of gold species and you’regoing to get into a situation in whichthey are always going to be crises sowhat the Federal Reserve Act actuallydid was very very interesting itsubstituted the sovereign credit of theUnited States for gold and then if no westayed on the gold standard technicallythat was a major change in Americanfinancial history and debate the basicconsequence of that is that FederalReserve determines what in effect is asensible level of money supply expansionand one of the reasons the FederalReserve Act was actually passed was toprevent the political system whenbecoming so very dominant in determiningmonetary policy which is exactly whatyou don’t want to happen and I mean Iwas you know eighteen and a half yearsas you mentioned getting letters fromeverybody who won very littlecongressmen or otherwise who wants it’sa the issue of and don’t worry about theissue of inflationand nobody was well when I would begetting people who say we want lowerinterest rates I got tons of that mail Inever got a single letter saying pleaseraise them and it tells you that thereare some views which go against realityand reality always wins but if you lookat that the history of populism some ofthe worst populism you got was in the1970s some of the work that the angerthat was generated by inflation in thenineteen seventies were roiled right theway through the political systemeventually leads to the rise of ofRonald Reagan because and who comes inand then you know crushes crushesinflation so inflation is is not asolution to populism it drivers it makespeople very angry do you think thecurrent populism is going to get worsechairman Greenspan well let’s rememberwhere populism comes from it’s I don’tknow whether this is a generalproposition but I find it’s difficult toget around the answer that when theinflation rate or that must theinflation ratings as much as the levelsof income slow down when you getproductivity for example which is thatthe major determinant of income and youget productivity slowing down you get amuch lower increase in JD GDP and grossdomestic income and wages and salariesalike and there’s a great deal of uneasein the population which is saying thingsare not good somebody come help us andsomebody necessarily on the white horsebecause comes up and says I’ve got a wayto handle this and if you look at LatinAmerica the history ofgoodly part of Latin America is aremarkable amount of people like Peroncoming in and all the subsequent postWorld War two governments in LatinAmerica and it’s really quiteunfortunate and surprising it’s not thatthey try it and it fails which it doesalways it always fails but it doesn’teliminate the desire to do it in otherwords of Peru Brazil and like they’veall undergone very significant periodsof huge inflation and collapsing andnobody wears a lessonyeah well we’re almost out of time butthere’s one other question from theaudience which I think cuts to the heartof a lot of what we’re talking aboutright now which is this does the successof capitalism come at the cost ofenormous wealth disparity is it possibleto have this vision of creativedestruction of capitalism of dynamismwithout having massive income inequalityI doubt it and I doubt it for the reasonI said earlier namely that we’ve got theproblem that human beings don’t changebut technology as it advances and it’sembodied in the growth of an economy isalways growing and when you havesomething that’s growing and the otherthing that’s flat you get obviouslyinequality and the politicalconsequences of that can I qualify thatjust a little bit I mean there – thereare different sorts of inequalitythere’s a there’s the inequality thatyou get from suddenly like Bill Gates orSteve Jobs producing a fantastic newinnovation and idea which means thatthey reap a lot of rewardfor that but which means that society asa whole gets richer and better off andthere’s the inequality that comes fromcrony capitalism from people usingpolitical influence blocking innovationand and sucking out and do rewards forthemselves so I think we need to beabsolutely very very sensitive to thewrong source of inequality whilecelebrating the right sort of inequalityand also had that Joseph Schumpeter thatgreat man once said that the the natureof capitalist progress doesn’t consistof Queens having a million or twomillion pairs of silk stockings itconsists of what used to be theprerogative of a queen being spreadthroughout the whole of society silkstockings you know that become somethingthat go from being very rare and onlyworn by Queens to being worn by allsorts of people all over the place soit’s the nature of capitalism is tocreate new innovations which are atfirst rare but spread throughout thewhole of society and everybody uses soif you think think of the the iPhone orsomething like that some that wassomething that was incredibly rare and afew people had those sort ofcommunications vais now everybodycarries them around all the time and thegreat capitalists the Bill Gates theSteve Jobs don’t get rich by selling onereally really good iPhone to one purposeand they get into selling their productsto all sorts of people so there’s asense in which there is no realtrade-off between very rich peoplegetting very rich and the rest ofsociety getting getting better off youknow they only get rich because theycreate things which everybody mostpeople want to have and buy you knowit’s it’s it’s it’s the Silk Stockingquestion really I you know I accept thatqualifications let me just say one thingyou going back to his mentioning hereWalter Isaacson’s book on innovation hewrote that book and I remember readingit and my final conclusion was and Iasked him why is it that most innovationis in the United Statesit’s American and he said you know I’venever thought of that I don’t think hewas aware of the fact that he here andall these innovationto developers and they all turned out tobe American which leads me to concludethat there’s something fundamental inthe psyche of American history in theAmerican public which creates it it’snot an accident which is why I won in itwho too often so which is what you ofcourse you sought to explain the book soif you had a chance to take this bookinto the Oval Office today or into theTreasury and give it to the Presidentand say this is a history of Americahere are the key lessons what is a topbit of advice that you would give to theadministration today to keep capitalismgrowing in America well you know we dohave we haven’t mentioned that there’san underlying financial problem which wehaven’t addressed in the best way todiscuss it as when I first became awareof itI would haven’t been looking at data andaccidentally created a chart whichshowed the relationship betweenentitlements spending which is socialbenefits in the rest of the world andgross domestic savings and I’m from 1965to the current period the ratio ofentitlements to the sum of those two isflat as a percent of gross domesticproduct which means or at least impliesthat one is crowding out the other andwhen you look at the individuals theyare actually looking different andenable one goes up the other goes downand so forth and I think that’ssuggestively the fact that there issomething in the sense of when we saythat entitlements by which a rising andthe baby boom generation is essentiallycrowding out gross domestic savingswhich in turn coupled withthe borrowing from abroad is how wefinance our gross domestic investmentwhich is the key factor in productivityright so entitlement reform well I lookforward to a tweet about entitlementreform I look forward to this veryimportant book being part of thediscussion about how to keep AmericaAmerica’s economy great and growing butin the meantime thank you both very muchindeed for sharing your thoughts it isindeed a fascinating book and quite anachievement and best of luck in gettingthis very important message out so thankyou both very much indeed[Applause]
BERN, Switzerland — Secretary of State Mike Pompeo is on a weeklong trip to Europe where he is raising sensitive issues with national leaders — from Iranian missiles to Chinese technology to the economic collapse of Venezuela — but the most colorful conversations could take place this weekend out of public earshot in a secretive conclave at a Swiss lakeside resort.
In Montreux, on the eastern shore of Lake Geneva, political and business leaders from Western nations are gathering for the 67th Bilderberg Meeting, an annual forum in which participants agree not to reveal exactly what was said or who said it. It is a shadow version of Davos, the elite annual winter conference in the Swiss Alps that President Trump has attended once but has also criticized.
The State Department has not even put the Bilderberg Meeting on Mr. Pompeo’s public schedule, though a senior official confirmed he was attending Saturday.
.. No doubt those culinary treats will be on hand at venues in Montreux, to fuel discussion on 11 central topics now hotly debated in countries around the globe:
- the future of capitalism,
- the weaponization of social media,
- artificial intelligence,
- Russia and so on.
Jared Kushner, Mr. Trump’s son-in-law and Middle East adviser, is another top administration official planning to attend. The 130 or so participants also include King Willem-Alexander of the Netherlands; Stacey Abrams, the American politician; Henry Kissinger, the former senior American foreign policy official; Eric Schmidt, the former chief executive of Google; and David H. Petraeus, the retired general. Some top bank executives are on the list, too.
On at least one subject, climate change, many of the participants are expected to have radically different views than Mr. Pompeo. In early May, the American secretary, speaking at a meeting of the Arctic Council in Finland, praised the changes caused by the melting of ice in the Arctic Circle.
“Steady reductions in sea ice are opening new passageways and new opportunities for trade,” Mr. Pompeo said, while noting the abundance of undiscovered oil and gas, uranium, rare-earth minerals, coal, diamonds and fisheries in the Arctic.
What Mr. Pompeo, Mr. Kushner and the other Bilderberg attendees actually say to each other will be a mystery to most of the public, thanks to the meeting’s use of the Chatham House Rule, which states that although attendees can tell the public what was discussed, generally, participants must not reveal who said what.
Have you wondered why politicians aren’t what they used to be, why governments seem unable to solve real problems? Economist Yanis Varoufakis, the former Minister of Finance for Greece, says that it’s because you can be in politics today but not be in power — because real power now belongs to those who control the economy. He believes that the mega-rich and corporations are cannibalizing the political sphere, causing financial crisis. In this talk, hear his dream for a world in which capital and labor no longer struggle against each other, “one that is simultaneously libertarian, Marxist and Keynesian.”DNA has degenerated it is rather becauseone can be in government today and notin power because power has migrated fromthe political to the economic spherewhich is separate indeed I spoke aboutmy quarrel with capitalism if you thinkabout it it is a little bit like apopulation of predators that are sosuccessful in decimating the prey thatthey must feed on that in the end theystarvesimilarly the economic sphere has beencolonizing and cannibalizing thepolitical sphere to such an extent thatit is undermining itself causingeconomic crisis corporate power isincreasing political goods are devaluinginequality is rising aggregate demand isfalling and CEOs of corporations are tooscared to invest the cash of theircorporations so the more capitalismsucceeds in taking the demons out ofdemocracy the taller between peaks atthe greater the waste of human resourcesand humanity’s wealth clearly if this isright we must reunite the political andeconomic sphere and better do it withAdiemus being in control like in ancientAthens except we are the slaves or theexclusion of women and migrants now thisis not an original idea the marxist lefthad that idea 100 years ago and itdidn’t go very well did the lesson thatwe learned from the soviet the battleis that only by a miracle with theworking poor be rien powered as theywere in ancient Athens without creatingnew forms of brutality and waste butthere is a solutioneliminate the working poor capitalism isdoing it by replacing low-wage workerswith automata androids robots theproblem is that as long as the economicand the political spheres are separateautomation makes the Twin Peaks tallerthe waist loftier and the socialconflicts deeper including soon Ibelieve in places like China so we needto reconfigure we need to reuniteeconomic and the political spheres butwe better do it by democratizing thereunified sphere less to end up with asurveillance mad hypocracy that makesthe matrix the movie look like adocumentary so the question is notwhether capitalism will survive thetechnological innovations it is spawningthe more interesting question is whethercapitalism will be succeeded bysomething resembling a matrix dystopiaor something much closer to a startrek-like society where machines servethe humans and the humans expend theirenergies exploring the universe andindulging in long debates about themeaning of life in some ancient Athenianlike high-tech Agora I think we canafford to be optimistic but what wouldit take what would it look like to havethis star trek-like utopia instead ofthe matrix like dystopia
We can save our broken economic system from itself.
Despite the lowest unemployment rates since the late 1960s, the American economy is failing its citizens. Some 90 percent have seen their incomes stagnate or decline in the past 30 years. This is not surprising, given that the United States has the highest level of inequality among the advanced countries and one of the lowest levels of opportunity — with the fortunes of young Americans more dependent on the income and education of their parents than elsewhere.
But things don’t have to be that way. There is an alternative: progressive capitalism. Progressive capitalism is not an oxymoron; we can indeed channel the power of the market to serve society.
In the 1980s, Ronald Reagan’s regulatory “reforms,” which reduced the ability of government to curb the excesses of the market, were sold as great energizers of the economy. But just the opposite happened: Growth slowed, and weirder still, this happened in the innovation capital of the world.
The sugar rush produced by President Trump’s largess to corporations in the 2017 tax law didn’t deal with any of these long-run problems, and is already fading. Growth is expected to be a little under 2 percent next year.
This is where we’ve descended to, but not where we have to stay. A progressive capitalism based on an understanding of what gives rise to growth and societal well-being gives us a way out of this quagmire and a way up for our living standards.
Standards of living began to improve in the late 18th century for two reasons:
- the development of science (we learned how to learn about nature and used that knowledge to increase productivity and longevity) and
- developments in social organization (as a society, we learned how to work together, through institutions like the rule of law, and democracies with checks and balances).
Key to both were systems of assessing and verifying the truth. The real and long-lasting danger of the Trump presidency is the risk it poses to these pillars of our economy and society, its attack on the very idea of knowledge and expertise, and its hostility to institutions that help us discover and assess the truth.
There is a broader social compact that allows a society to work and prosper together, and that, too, has been fraying. America created the first truly middle-class society; now, a middle-class life is increasingly out of reach for its citizens.
America arrived at this sorry state of affairs because we forgot that the true source of the wealth of a nation is the creativity and innovation of its people. One can get rich either by adding to the nation’s economic pie or by grabbing a larger share of the pie by exploiting others — abusing, for instance, market power or informational advantages. We confused the hard work of wealth creation with wealth-grabbing (or, as economists call it, rent-seeking), and too many of our talented young people followed the siren call of getting rich quickly.
Beginning with the Reagan era, economic policy played a key role in this dystopia: Just as forces of globalization and technological change were contributing to growing inequality, we adopted policies that worsened societal inequities. Even as economic theories like information economics (dealing with the ever-present situation where information is imperfect), behavioral economics and game theory arose to explain why markets on their own are often not efficient, fair, stable or seemingly rational, we relied more on markets and scaled back social protections.
We are now in a vicious cycle: Greater economic inequality is leading, in our money-driven political system, to more political inequality, with weaker rules and deregulation causing still more economic inequality.
If we don’t change course matters will likely grow worse, as machines (artificial intelligence and robots) replace an increasing fraction of routine labor, including many of the jobs of the several million Americans making their living by driving.
The prescription follows from the diagnosis: It begins by recognizing the vital role that the state plays in making markets serve society. We need regulations that ensure strong competition without abusive exploitation, realigning the relationship between corporations and the workers they employ and the customers they are supposed to serve. We must be as resolute in combating market power as the corporate sector is in increasing it.
If we had curbed exploitation in all of its forms and encouraged wealth creation, we would have had a more dynamic economy with less inequality. We might have curbed the opioid crisis and avoided the 2008 financial crisis. If we had done more to blunt the power of oligopolies and strengthen the power of workers, and if we had held our banks accountable, the sense of powerlessness might not be so pervasive and Americans might have greater trust in our institutions.
The neoliberal fantasy that unfettered markets will deliver prosperity to everyone should be put to rest. It is as fatally flawed as the notion after the fall of the Iron Curtain that we were seeing “the end of history” and that we would all soon be liberal democracies with capitalist economies.
Most important, our exploitive capitalism has shaped who we are as individuals and as a society. The rampant dishonesty we’ve seen from Wells Fargo and Volkswagen or from members of the Sackler family as they promoted drugs they knew were addictive — this is what is to be expected in a society that lauds the pursuit of profits as leading, to quote Adam Smith, “as if by an invisible hand,” to the well-being of society, with no regard to whether those profits derive from exploitation or wealth creation.