For many years now we have had Negative GDP so we were not Growing in the absence of Debt

wipe out over three years yeah speaking
70:54
of kind of bad situations we are not at
the end so we don’t have complete
clarity of the hindsight but there’s
been a lot of what I’ll just call bad
behavior in the market that led to a lot
of this so whether it’s the
over-leveraged of corporations or even
hedge funds at the key talks right at
one point a lot of the debt fueled
buybacks the CEO departure is kind of at
the top all of these things what’s your
take at this point in time right so
we’re kind of going into this situation
we’re not out of it but like how do you
view a lot of that be
right now so I got it I got an email
this morning actually from my prime
broker so hedge funds were at 99 to a
hundredth percentile of their historical
max leverage literally February 20th and
now we’re at you know the 20th to 30th
percentile historically so you know we
were probably at 7 or 8 turns of
leverage and now we’re probably down to
one and a half to two or three I think
that this next go-around you’re going to
have to realize government will have to
realize that in 2008 all they did was
allow financial institutions to pass the
buck they were able to take the leverage
off balance sheet and when you subtract
out debt as a function of GDP for many
years now we have had negative GDP so we
were not growing in the absence of
people issuing debt and most of that
debt unfortunately was not towards R&D
but it was towards things that
superficially propped up stock prices
which really only benefited a handful of
people and I do think we have to
restrain people from being able to do
that in the future I don’t think it
makes a lot of sense and I don’t think
it adds a lot of value and I think that
it’s not that it was obviously
responsible for the coronavirus but I do
think that when you look at how much
devastation we are encountering and when
we do the final tally on the amount of
buyback oh sorry the amount of bailouts
we need the bailouts are directly
correlated to how stupidly run and badly
run these companies were you know why is
it that California is legally mandated
and you’ll say oh because it’s a
nonprofit but legally mandated to have a
rainy day fund but a company isn’t and
then the company is the first one to
knock on the door of the government and
we’re just waiting for the next shoe to
drop or California Mississippi Alabama
Louisiana to all do the same thing and I
would much rather see the money go to
the states and the cities in an in an
fair even
then the money go to a private company I
think that those private companies
should be wiped out the equity should be
wiped out and they should need to
restart it’s one thing I’m a hundred
percent in alignment with you on this
but the part that I don’t understand is
how do you continue to benefit from the
elements of capitalism if you take out
the risk moving forward it everyone
knows I can quote unquote take this like
fake risk and if anything goes wrong I
can just run to the government and get a
bailout you changed the dynamic of what
happens and I actually think you
incentivize even more bad behavior right
it’s almost like there was bad behavior
and then there was no punishment for it
and therefore you just encouraged that
to continue you know when we get out of
this thing well I it depends on what you
view capitalism as I think if you view
capitalism as a game of risk I think
you’re right I’ve always viewed
capitalism as money becomes a fulcrum
instrument for change what do you want
to see in the world okay
money is your lubricant you decide and
the person with more money or the person
who’s willing to put more money into
something and who can be more clever
basically has the opportunity to win so
I I think it’s a game that puts
ingenuity and money at the forefront
that’s what to me that’s what capitalism
is and so when companies are doing
things that are fundamentally not
advancing that forward they should
disqualify themselves from them being
able to run to the government so it
would be a different thing entirely if
all the airlines had invested let’s just
say 96% of free cash flow dollars on
supersonic flight failed and then came
to the government and said look I took a
big bet on the future to help advance
humanity it didn’t work and I need a
bailout I would be the first one to say
okay but when 96% of free cash flow
dollars go back to buying back shares
and then you basically claim the same
thing I think you should be punished and
punished financially so you know you you
you took the money that you had you
refused it you refused to multiply it by
a good smart bet on the future and I
think that there should be consequences
for that
yeah I don’t disagree with you at all
last question for you
been incredible kind with your time here
if you were the president over the next
six months
what’s your playbook so president Shamus
got full control can do whatever was it
within the presidential powers what’s
your playbook to kind of weather the
storm and get us out of this
I would first stand up every single
voting site that we would use in the
November election
and I would schedule every single man
woman and child to come through all of
those testing facilities and I would
basically deploy a rapid test to figure
out whether they had coronavirus in that
moment okay and families could come you
know 10 minutes apart so that you could
get back into your car and go etc etc in
step number one if you didn’t have
Corona so you weren’t shedding the RNA
in that moment you go to a second and
you get administered a finger prick
and you get tested for the antibodies
and within 15 or 20 minutes and you’re
held in an isolation
77:06
you know booth area where you you know
77:08
you’re on Instagram and when you’re done
77:11
you’re given a wristband and that
77:15
wristband basically says one of three
77:18
things well if you had tested positive
77:21
you get a red band you go home and you
77:23
isolate if you test negative and you
77:26
have the antibodies you get a green one
77:28
and if you test negative and you how
77:30
don’t have the antibodies maybe you get
77:31
a blue one green and blue are allowed to
77:35
go back to work right away red self
77:38
isolates you contact trace etcetera etc
77:41
that’s sort of the frontline of getting
77:44
the economy back to work and you have
77:48
some combination of the National Guard
77:50
and sort of like a whole infrastructure
77:54
then separately I think you introduced a
77:57
massive massive massive infrastructure
78:00
bill that starts to drive the
78:03
refactoring
78:04
of the supply chain back in
78:06
to the United States and part of that is
78:09
incentives and part of that is
78:10
government spending and it has to cut
78:13
across many categories from you know
78:16
semiconductors in silicon all the way to
78:20
clean energy to actual physical
78:22
infrastructure like you know bridges and
78:24
and tunnels and roads and in that what I
78:28
think you’re mandating is a certain
78:30
percentage of things to be made
78:32
domestically in the United States and
78:35
you start to get people back to work so
78:37
the short term path I think is to kind
78:39
of baseline the disease and get the
78:42
people who are allowed to be working
78:43
back into a green zone of every city
78:45
every town where people with these green
78:49
and blue bands are allowed inside and
78:52
the red banded people have to stay and
78:54
quarantine themselves so that we can
78:56
start to restart this economy and then
78:59
longer-term is an infrastructure build
79:01
that basically resets incentives towards
79:03
resiliency towards inefficiency away
79:07
from efficiency I think that’s a pretty
79:10
solid plan I’m shot I’m actually shocked
79:13
that some of this hasn’t been instituted
79:14
already the lack of testing just blows
79:16
my mind I mean the stats I saw on
79:19
Saturday 895 thousand people I think
79:22
I’ve been tested at a 330 million in the
79:24
United States I think the other
79:25
reckoning that we have to do maybe just
79:27
to finish on this is that we’ve
79:29
politicized things that should never
79:30
have been politicized health should not
79:33
be politicized you know the problem is
79:36
that starting with Obamacare health
79:38
became something that was about the
79:40
Democrats versus the Republicans and you
79:44
can see how that’s sort of like you know
79:46
flowed into things like the FDA and the
79:48
CDC and history will tell what they
79:52
could have done better history will tell
79:54
what the w-h-o should have done
79:56
differently
79:57
but I think what we can see is that
79:59
there are many points along the
80:02
evolution of this disease where logic
80:05
and open-mindedness and iteration ran
80:09
into bureaucracy and bureaucracy one and
80:14
I think that’s probably the most
80:16
generous way of describing it and we
80:19
need to figure out
80:20
where there are almost constitutional
80:23
level provisions you know you have the
80:26
right to bear arms great what about the
80:29
right to basically not you know not die
80:32
in a preventable scenario what does that
80:35
mean for how these organizations should
80:37
run you know we at a very basic level
80:41
have told the healthcare infrastructure
80:44
that we must do no harm and I think it’s
80:47
time to say look with 8 billion people
80:48
in the world and a 90 trillion dollar
80:51
economy that supports those eight eight
80:53
eight billion people do no harm doesn’t
80:56
work anymore it doesn’t scale we need to
80:59
do our best and there’s a lot of rules
81:02
that could change in a scenario where
81:04
you embrace do your best and I think
81:08
that that that has to happen but the
81:11
failures of the political infrastructure
81:14
and the healthcare infrastructure to use
81:16
bureaucracy as the thing that that
81:18
drives decision making I think is also
81:20
the a domino that has to fall after this
81:24
and we need to revisit because it’s a
81:25
you know we’ve we’ve done a lot of
81:27
unnecessary damage to ourselves and some
81:34
of this some of these self-inflicted
81:35
injuries we should figure out how to
81:37
prevent for the next time because it’s
81:38
gonna come again yeah I think we’re
81:40
living in incredibly uncertain in
81:42
chaotic times and you know one just
81:45
thank you for your time today but uh too
81:47
is uh think I speak for a lot of people
81:49
in that we’d love to see you go public
81:50
and kind of be along for the journey so
81:53
you’re doing an incredible job and I
81:55
just appreciate you uh
81:56
kind of going out there and sticking
81:58
your neck out there frankly because a
81:59
lot of people who they they’re gonna all
82:01
be the armchair quarterbacks right okay
82:03
two three years from now like I said I
82:04
told you that we should have done X or Y
82:06
but right now they’re they’re kind of
82:07
quiet so we’ll see how it plays out well
82:10
I really appreciate the fact that you
82:11
had me on and I just want to say that I
82:13
think you’ve been a really good person
82:16
in being out there in this moment the
82:19
reality is like in moments like this you
82:21
need people to be coalescing opinions
82:24
and I think that you’ve done that that’s
82:26
a really important service because it
82:28
allows people to get to ground truth so
82:31
I just want to say thank you for doing
82:32
that
82:32
thanks for including me
82:34
no problem at all all right sir well
82:36
thank you a teacher
82:37
all the best talk to you soon right bye

Marc Andreessen on the Need for Growth to Prevent Zero Sum Thinking

Many skeptics thought the internet would never reach mass adoption, but today it’s shaping global culture, is integral to our lives–and this is just the beginning. In this conversation, Kevin Kelly (Founding Executive Editor, WIRED magazine) and Marc Andreessen (Cofounder and General Partner, Andreessen Horowitz) sit down to discuss the evolution of technology, the new “Space Race,” and how measuring prosperity on a global scale is the key to our collective success. Learn why they share an optimistic view on the possibilities of the future.

HIGHLIGHTS
Discussion on closing the digital divide [3:00]
The many possibilities of voice technology as an interface [9:59]
Moore’s Law vs. Eroom’s law [14:14]
Looking at 5G Technology as the next global driver [20:38]
New models for VC and company models [27:05]
How long-term thinking can be applied in Silicon Valley [29:53]
Measuring prosperity on a global scale [34:00]
The potential impact of cyber technology on global conflict [38:45]
The foundation of Marc’s optimism [41:05]
M

34:11
introspection about government but also
34:12
about capitalism and capitalism so far
34:17
has depended on growth and growth is
34:19
something that VC’s pay attention to but
34:24
we’re now wondering if what’s the
34:27
minimum amount of growth that you might
34:28
need to have prosperity can you have
34:30
prosperity with low growth can you have
34:31
prosperity with fixed growth do you have
34:36
any insights about about that at the
34:38
civilizational scale yes I think in
34:40
actually I don’t even say that the issue
34:42
is even more intense these days because
34:43
there’s now very prominent people in
34:44
public life arguing that growth is bad
34:46
right and in fact it’s it that it that
34:49
it in fact is ruinous and destructive
34:50
and that the right goal might actually
34:51
be they have no growth or to actually go
34:52
into negative growth then especially in
34:54
a very common view in the environmental
34:56
movement so I’m a very strong proponent
34:59
a very strong believer that growth is
35:00
absolutely necessary and I’ll come back
35:02
to environmental thing in a second
35:03
because it’s a very interesting case of
35:04
this
I think growth is absolutely necessary
and I think the reason growth is
absolutely necessary is because you can
fundamentally have two different mindset
views of how the world works
right one
is positive some which is you know
rising tide lifts all boats we can all
do better together and the other is is
is a zero-sum right where for me to win
somebody else must lose
and vice-versa
and reason I think economic growth is so
important at cores because if there is
fast economic growth then we have
positive some politics and we start to
have all these discussions about all
these things that we can do as a society
and if we have zero some grow if we have
if we have a flat growth or no growth or
negative growth all of a sudden the
politics become sharply zero-sum and in
the most in the most the most you just
kind of see this if you kind of track
you know kind of the political climate
you just basically it’s the wake of
every recession right it’s just in the
wake of every economic recession the
politics just go like seriously negative
on in terms of thinking about the
world’s is zero-sum
and and then when
you get a zero-sum outlook Impala
six that’s when you get like
anti-immigration that’s when you get
anti trade
that’s when you get anti tech
if the world’s not growing then all
that’s left to do is to fight over what
we what we already have and so my view
is like you need to have economic growth
you need to have economic growth for all
of the reasons that I would say right
wingers like economic growth which is
you want to have higher levels material
prosperity more opportunity more job
creation all those things you want to
have economic growth for the purpose of
having like sane politics like a
productive political conversation and
then I think the kicker is you also want
economic growth actually for many of the
things that left-wing people want one of
the best books this year new books this
year is a guy Andrew McAfee I was
reading a book called
I think more from less it’s actually a
story of a really remarkable thing that
a lot of people are missing about what’s
happening with the environment which is
globally carbon emissions are rising and
resource utilization is rising in the
u.s. carbon emissions and resource
utilization are actually falling and so
in the u.s. we have figured out to grow
our economy while reducing our use of
natural resources which is a completely
unexpected twist right to the plot of
what kind of if you lose
environmentalists in six years of
seventies like nobody predicted that and
it turns out he talks about this in the
book but it turns out basically what
happens is economies when economies
advanced to a certain point they get
really really good at doing more with
less right they get really really good
efficiency and they get really good at
energy efficiency they get really isn’t
about you use environmental resources
they really go to recycling in lots of
different ways and then they get really
good at what’s called dematerialization
which is what is happening with digital
technology right which is basically
taking things that used to require atoms
and turning them into bits weight which
inherently consumes consumes less
resources and so what you actually want
like my view unlike the environmental
issues is like you’ve got a global
problem which is you have too many
people in too many countries stuck in
kind of mid amid the Industrial
Revolution they’ve got to grow to get to
the point where they’re in a fully
digital economy like we are precisely so
that they can start to have declining
resource utilization right right I mean
the classic example energy like you know
the big problem of the energy emissions
global a huge problem of emissions and
with health from emissions is literally
38:05
people burning wood like in their houses
38:07
right to be able to eat and cook and
38:09
what you want to do is you want to go to
38:10
like hyper efficient solar or ideally
38:12
nuclear right you want to go to these
38:13
like super advanced forms of technology
38:14
so actually it so you want
38:16
that and by the way if you want like a
38:18
big social safety net you know and all
38:20
the social programs you want to pay for
38:21
that stuff
38:22
you also want economic growth because
38:23
that generates taxes of pace of that
38:24
stuff and so like growth is the single
38:27
kind of biggest form of magic that we
38:28
have right to be able to like actually
38:30
make progress and hold the whole thing
38:31
together and you know to your point
38:33
about the developing countries I think
38:36
the idea of leapfrog and technology is a
38:37
myth it doesn’t really work you actually
38:39
have to if you want to have a high-tech
38:42
infrastructure you actually need the
38:43
intermediate roads clean water you can’t
38:46
skip over that and so they all need to
38:48
be built out in order to have that
38:50
prosperity at the end so you know the
38:53
simplest you know seems like you don’t
38:55
worry about much I don’t worry about
38:56
much but one thing I do worry about this
38:58
cyber conflict cyber war partly because
39:01
I think we have no consensus about
39:03
what’s allowable does this worry you at
39:06
all so I think there there’s a lot of
39:08
unknown as to it I think people are
39:09
trying to figure this out but it’s it’s
39:11
a complication to grapple with I will
39:14
make an optimistic argument which is
39:16
going to sound a little strange if you
39:20
kind of project forward what’s happening
39:21
with with generally cyber with
39:23
information you know operations of
39:25
different kinds but also with drones
39:27
you know UAVs and then also with you
39:30
know unmanned you know unmanned fighter
39:32
jets right um and you know ships
39:34
increasingly being built
39:36
it’ll be unmad submarines at some point
39:39
if you projected stuff forward you start
39:42
to get this very interesting potential
39:43
world in which basically the way I think
39:46
about it it’s like all human conflict
39:47
between peoples are between
39:49
nation-states up until now has been
39:51
basically throwing people at each other
39:52
right throwing soldiers at each other
39:54
and like letting them make the decision
39:56
of who to shoot and like hoping they
39:57
don’t get shot like with very serious
39:58
repercussions of all those individual
40:00
human decisions you do have the prospect
40:02
of basically a new world of both offense
40:04
and defense it’s like completely
40:05
motorised completely mechanized
40:06
completely software driven and
40:08
technology driven and a lot of people
40:09
it’s just immediately like oh my god
40:10
that’s horrible
40:11
you know Terminator like you know Skynet
40:13
like you know this is just the worst
40:14
thing ever there’s a novel called kill
40:16
decision if you wanted to snow Pinsky
40:18
okay there’s a novel called kill
40:19
decision by daniel suarez dinosaurus
40:21
then extrapolates the the drones forward
40:23
and a little it’ll keep you up late at
40:25
night but the optimistic view would be
40:26
like boy isn’t it good that there aren’t
40:29
beings involved isn’t it good like if
40:31
the machines are shooting at each other
40:32
like isn’t that good isn’t that better
40:34
than if they’re shooting at us by the
40:36
way and by the way yeah I would go so
40:37
far as to say like I don’t know that I’m
40:39
in favor of like the machines making
40:41
like kill decisions like decisions on me
40:43
to shoot but like the one thing I know
40:44
it’s humans do that very badly like very
40:46
very very badly I’m the opposite of
40:48
pearl war I don’t want to see any of
40:49
this stuff actually play out but if it
40:50
has to play out there maybe having it be
40:52
software machines it’s gonna be actually
40:53
better outcome right I mean this kind of
40:55
weird that we don’t allow we don’t want
40:58
machines to kill humans we want other
41:00
humans to kill you but we want 18 year
41:01
olds we want to take 18 year olds out of
41:04
their homes right we want to put a gun
41:05
in their hand and send them someplace
41:06
and tell me decide who to shoot like it
41:08
that that is gonna go down to history’s
41:10
haven’t been a good idea okay it just
41:12
strikes me as like unlikely so we have
41:14
only time for one last question which is
41:16
I’m usually I claim to be the most
41:18
optimistic person in the room but with
41:20
you sitting across to me I don’t think
41:22
that may be true what is your optimism
41:26
based on so my optimism okay so get
41:30
cosmic for a second why not I guess
41:32
we’re here it’s the last question last
41:33
question so the science fiction author
41:36
science fiction science fiction authors
41:37
always talking about was good they
41:39
called the singularity this constant
41:40
singularity answer it’s a singularities
41:42
basic what happens when the machines get
41:43
so smart than all of a sudden everything
41:45
goes into exponential mode and all of a
41:46
sudden you know the entire world changes
41:48
so I am I reading history is actually we
41:51
actually were in the singularity already
41:53
and that it actually started 300 years
41:56
ago mm-hmm and if you look at basically
42:00
if you look at basically any chart of
42:01
human welfare over time and you can look
42:03
at no child mortality is an obvious one
42:05
but like there’s you know there’s many
42:06
many many others and you just look at
42:08
progress on that metric so your telomere
42:09
tality as an example and it’s just
42:11
basically flat flat flat flat flat flat
42:12
flat for only fifty thousand years right
42:14
is everything and you know if this is
42:15
the family offices at Thomas Hobbes you
42:17
know life is you know nasty brutish and
42:19
short right it was just like the thing
42:20
like everything was terrible everywhere
42:22
all the time forever the end until 300
42:26
years ago when all of a sudden there’s
42:27
this me and the curve and then all the
42:29
indicators of human welfare not
42:31
uniformly across the planet but in
42:33
societies that we’re making progress the
42:37
societies weren’t making progress first
42:38
all of a sudden all those indicators of
42:39
human welfare went up into the right
42:40
right I don’t know of course bonded by
42:42
the way to economic growth but it was
42:44
also right it was the Enlightenment it
42:45
was the rise of democracy it was the
42:47
rise of markets was the rise of
42:48
rationality of the scientific method by
42:51
the way human rights free speech free
42:53
thought right and they all kind of
42:55
catalyzed right around around around 300
42:57
years ago and and they’ve been making
42:58
their way into the world you know in
42:59
sort of increasing concentric circles
43:01
kind of ever since and so we have you
43:04
know I would argue like we have the
43:05
answer it’s like we actually don’t need
43:07
new we don’t need new discoveries to
43:08
have the future be much better we
43:10
actually know how to do it is to apply
43:11
basically those systems and and and
43:15
basically contra the sort of constant
43:17
temptation from all kinds of people to
43:19
try to you know compromise on these
43:20
things or subvert these things you know
43:22
basically double down on these systems
43:23
that we know work right so double down
43:25
economic growth double down on human
43:26
rights double down on markets on
43:29
capitalism double down on the scientific
43:31
method fix science like we got as far as
43:34
we did with science actually being
43:35
pretty seriously screwed up right now
43:37
with the replication crisis like so we
43:39
should fix that and then science will
43:41
all of a sudden start to work much
43:42
better technology right used to yeah use
43:45
of technological tools so we should we
43:48
literally have the systems like we know
43:49
how to do this we know how to make the
43:50
planet much better in every respect and
43:52
so what we just need to do is is keep
43:53
doing that and then what I try to do
43:55
when I read the news is notwithstanding
43:58
everything’s going on is basically try
44:00
to look through whatever’s happen at the
44:01
moment try to look underneath and kind
44:02
of say okay are those fundamental
44:04
systems actually still working like is
44:07
the world getting more democratic or
44:08
less right this is free speech spreading
44:10
or receiving right or markets expanding
44:12
or falling right are more more people
44:14
able to participate in a modern market
44:15
economy or not and you know those
44:17
indicators generally are all or all
44:18
still up into the right mm-hmm
44:20
so let’s go out and make the world
44:22
better yeah thank you
44:23
thanks everybody
44:25
[Applause]

The Best Economic News No One Wants to Talk About

Something’s happening to wages that neither Democrats nor Republicans care to acknowledge.

Stop me if this sounds familiar: For most American workers, real wages have barely budged in decades. Inequality has skyrocketed. The richest workers are making all the money. Earnings for low-income workers have been pathetic this entire century.

These claims help drive the interpretation of breaking economic news. For example, the Labor Department yesterday reported that the unemployment rate fell to a 50-year low, while wage growth stalled. “The wage numbers here are INSANE,” the MSNBC host Chris Hayes tweeted. “The tightest labor market in decades and decades and ordinary working people are barely seeing gains.”

So, let’s play a game of wish-casting.

  • Imagine a world where wage growth was truly stagnant only for workers in high-wage industries, such as medicine and consulting.
  • Imagine a labor market where earnings growth for low-wage workers, such as those who work in retail and restaurants, had doubled in the past five years.
  • Imagine an economy where wages for the poorest Americans were rising twice as fast as hourly earnings for high-wage earners.

It turns out that all three of those things are happening right now.

According to analysis by Nick Bunker, an economist with the jobs site Indeed, wage growth is currently strongest for workers in low-wage industries, such as clothing stores, supermarkets, amusement parks, and casinos. And earnings are growing most slowly in higher-wage industries, such as medical labs, law firms, and broadcasting and telecom companies.

Bunker’s analysis is not an outlier. A Goldman Sachs look at data from the Bureau of Labor Statistics found growth for the bottom half of earners at its highest rate of the cycle. And even among that bottom half, the biggest gains are going to workers earning the least. A New York Times analysis of data from the Federal Reserve Bank of Atlanta found that wage growth among the lowest 25 percent of earners had exceeded the growth in every other quartile.

In fact, according to Bunker’s research, wages for low-income workers may be growing at their highest rate in 20 years.

What’s happening here? Donald Trump hasn’t sprinkled MAGA pixie dust over the U.S. economy. In fact, his trade war has clearly diminished employment growth in industries, that are sensitive to foreign markets, such as manufacturing. Rather, a tight labor market and state-by-state minimum wage hikes have combined to push up wage growth for the poorest workers. The sluggishness of overall wage growth is concealing the fact that the labor market has done wonderful things for wages at the low end.

One reason you haven’t heard this economic narrative may be that it’s inconvenient for members of both political parties to talk about, especially at a time when economic analysis has, like everything else, become a proxy for political orientation. For Democrats, the idea that low-income workers could be benefiting from a 2019 economy feels dangerously close to giving the president credit for something. This isn’t just poor motivated reasoning; it also attributes way too much power to the American president, who exerts very little control over the domestic economy. Meanwhile, corporate-friendly outlets, such as The Wall Street Journal’s editorial pages, have reported on this phenomenon. But they’ve used it as an opportunity to take a shot at “the slow-growth Obama years” rather than a way to argue for the extraordinary benefits of tight labor markets for the poor, much less for the virtues of minimum-wage laws.

Democrats don’t want to talk about low-income wage growth, because it feels too close to saying, “Good things can happen while Trump is president”; and Republicans don’t want to talk about the reason behind it, because it’s dangerously close to saying, “Our singular fixation with corporate-tax rates is foolish and Keynes was right.”

But good things can happen while Trump is president, and Keynes was right. “Tighter labor markets sure are good for workers who work in low-wage industries,” Bunker told me. “This recovery has not been spectacular. But if we let the labor market get stronger for a long time, you will see these results.”

George Monbiot: How to Really Take Back Control

Every successful movement relies on a restoration story.

In 2008, no one had a new restoration story.

Globalization (no capital controls) has made Keynesian impossible. (25 min)

A growth-based system can not be sustained (27 min)

(28 min) A New Restoration Story

Modern Monetary Inevitabilities

ALEXANDRIA, VIRGINIA – In a recent Project Syndicate commentary, James K. Galbraith of the University of Texas at Austin Modern Monetary Theory and corrects some misunderstandings about the relationships among MMT, federal deficits, and central-bank independence. But Galbraith does not explore what is perhaps the most important issue of all: the political conditions needed to implement MMT effectively.

MMT owes its newfound relevance to the fact that deflation, rather than inflation, is becoming central banks’ main concern. For a high-debt, high-deficit economy like the United States, deflation is an especially serious threat, because it delays consumption and increases debtor anxiety. Consumers forego major purchases on the assumption that future prices will be lower. Homeowners with mortgages cut back their spending when they see home prices falling and the equity in their homes declining. These cutbacks worry the Federal Reserve, because they add to deflationary pressures and could trigger deeper spending cuts, stock-market declines, and widespread deleveraging.

The Fed’s inability so far to reach its 2% target for annual inflation suggests that it lacks the means to overcome persistent disinflationary forces in the economy. These forces include increased US , which diminishes aggregate demand by weakening employee bargaining power and increasing income inequality; population aging; inadequate investment in infrastructure and climate-change abatement; and technology-driven labor displacement. Making matters worse, US political gridlock assures continued commitment to economically exhausted strategies such as tax cuts for the rich, at the expense of investment in education and other sources of long-term growth. These conditions cry out for significant changes in US government spending and tax policies.

MMT is seen as a way to accomplish the needed changes. It holds that a government can spend as much as it wants if it borrows in its own currency and its central bank can buy as much of the government’s debt as necessary – as long as doing so doesn’t generate unacceptably high inflation. Both tax-cut advocates and supporters of public investment find little not to like.

MMT has been roundly criticized by economists across the political spectrum, from Kenneth Rogoff and Lawrence H. Summers of Harvard University to Paul Krugman of the City University of New York. All contend that it is a political argument masquerading as economic theory. But Galbraith and Ray Dalio of Bridgewater Associates see MMT differently. Dalio argues that MMT is real and, more to the point, it is an inevitable policy step in historically recurring debt-cycle downturns.

In his book Principles for Navigating Big Debt Crises, Dalio documents the steps that central banks have historically taken when faced with a booming economy that suddenly crumples under the weight of debt. The first step (Monetary Policy 1, or MP1) is

  1. to cut overnight official rates to stimulate credit and investment expansion. The second (MP2)
  2. is to buy government debt (quantitative easing) to support asset prices and prevent uncontrollable waves of deleveraging. If MP1 and MP2 are insufficient to halt a downturn, central banks take step three (MMT, which Dalio calls MP3) and
  3. proceed to finance the spending priorities that political leaders deem most essential. The priorities can range from financing major national projects to “helicopter money” transfers directly to consumers.

Achieving political agreement on what to finance and how is essential for implementing MP3 effectively. In a financial meltdown or other national emergency, political unity and prompt action are essential. Unity requires a strong consensus on what should be financed. Speed requires the existence of a trusted institution to direct the spending.

In the early 1940s, when the US entered World War II and winning the war became the government’s top priority, the Fed entered full MP3 mode. It not only set short- and long-term rates for Treasury bonds, but also bought as much government debt as necessary to finance the war effort. MP3 was possible because the war united the country politically and gave the Roosevelt administration near-authoritarian rule over the economy.

The core weakness of MP3/MMT advocacy is the absence of an explanation of how to achieve political unity on what to finance and how. This absence is inexcusable. Total US debt (as a share of GDP) is approaching levels associated with past financial meltdowns, and that doesn’t even account for the  associated with infrastructure maintenance, rising sea levels, and unfunded pensions. For the reasons Dalio lays out, a US debt crisis requiring some form of MP3 is all but inevitable.

The crucial question that any effort to achieve political unity must answer is what constitutes justifiable spending. Alexander Hamilton, America’s first Secretary of the Treasury, offered an answer in 1781: “A national debt,” he wrote, “if it is not excessive will be to us a national blessing.” A government’s debt is “excessive” if it cannot be repaid because its proceeds were spent in ways that did not increase national wealth enough to do so. Debt resulting from tax cuts that are spent on mega-yachts would almost certainly be excessive; debt incurred to improve educational outcomes, maintain essential infrastructure, or address climate change would probably not be. Accordingly, it will be easier to achieve political unity if MP3 proceeds are spent on priorities such as education, infrastructure, or climate.

The political test for justifying MP3-financed government spending, is clear: Will future generations judge that the borrowing was not “excessive”? Most Americans born well after WWII would say that the debt incurred to win that war was justified, as was the debt that financed the construction of the Interstate Highway System, which literally paved the way for stronger growth.

As the 1930s and 1940s show, MP3 is a natural component of government responses to major debt downturns and the political crises they trigger. We know much more about what contributes to economic growth and sustainability than we did in the first half of the twentieth century. To speed recovery from the next downturn, we need to identify now the types of spending that will contribute most to sustainable recovery and that in hindsight will be viewed as most justified by future Americans. We need also to design the institutions that will direct the spending. These are the keys to building the political unity that MMT requires. To know what to finance and how, future Americans can show us the way; we need only put ourselves in their shoes.

After Neoliberalism

For the past 40 years, the United States and other advanced economies have been pursuing a free-market agenda of low taxes, deregulation, and cuts to social programs. There can no longer be any doubt that this approach has failed spectacularly; the only question is what will – and should – come next.

The neoliberal experiment – lower taxes on the rich, deregulation of labor and product markets, financialization, and globalization – has been a spectacular failure. Growth is lower than it was in the quarter-century after World War II, and most of it has accrued to the very top of the income scale. After decades of stagnant or even falling incomes for those below them, neoliberalism must be pronounced dead and buried.
Vying to succeed it are at least three major political alternatives:
  1. far-right nationalism,
  2. center-left reformism, and the
  3. progressive left (with the center-right representing the neoliberal failure).

And yet, with the exception of the progressive left, these alternatives remain beholden to some form of the ideology that has (or should have) expired.

The center-left, for example, represents neoliberalism with a human face. Its goal is to bring the policies of former US President Bill Clinton and former British Prime Minister Tony Blair into the twenty-first century, making only slight revisions to the prevailing modes of financialization and globalization. Meanwhile, the nationalist right disowns globalization, blaming migrants and foreigners for all of today’s problems. Yet as Donald Trump’s presidency has shown, it is no less committed – at least in its American variant – to tax cuts for the rich, deregulation, and shrinking or eliminating social programs.

By contrast, the third camp advocates what I call , which prescribes a radically different economic agenda, based on four priorities. The first is to

  1. restore the balance between markets, the state, and civil society. Slow economic growth, rising inequality, financial instability, and environmental degradation are problems born of the market, and thus cannot and will not be overcome by the market on its own. Governments have a duty to limit and shape markets through environmental, health, occupational-safety, and other types of regulation. It is also the government’s job to do what the market cannot or will not do, like actively investing in basic research, technology, education, and the health of its constituents.
  2. The second priority is to recognize that the “wealth of nations” is the result of  – learning about the world around us – and social organization that allows large groups of people to work together for the common good. Markets still have a crucial role to play in facilitating social cooperation, but they serve this purpose only if they are governed by the rule of law and subject to democratic checks. Otherwise, individuals can get rich by exploiting others, extracting wealth through rent-seeking rather than creating wealth through genuine ingenuity. Many of today’s wealthy took the exploitation route to get where they are. They have been well served by Trump’s policies, which have encouraged rent-seeking while destroying the underlying sources of wealth creation. Progressive capitalism seeks to do precisely the opposite.
  3. This brings us to the third priority: addressing the growing problem of concentrated . By exploiting information advantages, buying up potential competitors, and creating entry barriers, dominant firms are able to engage in large-scale rent-seeking to the detriment of everyone else. The rise in corporate market power, combined with the decline in workers’ bargaining power, goes a long way toward explaining why inequality is so high and growth so tepid. Unless government takes a more active role than neoliberalism prescribes, these problems will likely become much worse, owing to advances in robotization and artificial intelligence.
  4. The fourth key item on the progressive agenda is to sever the link between economic power and political influence. Economic power and political influence are mutually reinforcing and self-perpetuating, especially where, as in the US, wealthy individuals and corporations may spend without limit in elections. As the US moves ever closer to a fundamentally undemocratic system of “one dollar, one vote,” the system of checks and balances so necessary for democracy likely cannot hold: nothing will be able to constrain the power of the wealthy. This is not just a moral and political problem: economies with less inequality actually perform better. Progressive-capitalist reforms thus have to begin by curtailing the influence of money in politics and reducing wealth inequality.3

There is no magic bullet that can reverse the damage done by decades of neoliberalism. But a comprehensive agenda along the lines sketched above absolutely can. Much will depend on whether reformers are as resolute in combating problems like excessive market power and inequality as the private sector is in creating them.

A comprehensive agenda must focus on education, research, and the other true sources of wealth. It must protect the environment and fight climate change with the same vigilance as the Green New Dealers in the US and Extinction Rebellion in the United Kingdom. And it must provide public programs to ensure that no citizen is denied the basic requisites of a decent life. These include economic security, access to work and a living wage, health care and adequate housing, a secure retirement, and a quality education for one’s children.

This agenda is eminently affordable; in fact, we cannot afford not to enact it. The alternatives offered by nationalists and neoliberals would guarantee more stagnation, inequality, environmental degradation, and political acrimony, potentially leading to outcomes we do not even want to imagine.

Progressive capitalism is not an oxymoron. Rather, it is the most viable and vibrant alternative to an ideology that has clearly failed. As such, it represents the best chance we have of escaping our current economic and political malaise.