Capitalism in America: Alan Greenspan and Adrian Wooldridge in Conversation with Gillian Tett

it’s useful to understand how the system
works and the key turning point is a
very remarkable period it’s William
Jennings Bryan William Jennings Bryan in
1896 was a fairly young 36 year old
Nebraskan who got up in the middle of
that particular I guess you could say
Association of then the Democratic Party
and it was the one of those
extraordinary events which turns
politics around the Democratic Party was
a highly conservative party prior to
them and essentially it’s characterized
by presidents who thought that the least
government the best it was essentially
lazy fair he got up Bryan got up and
made this extraordinary speech which is
now historical and then cross of gold
speech about the American worker and the
American farmer of being crucified on a
cross of gold called being the gold
standard and that propelled him
strangely enough into the head of the
party he got nominated he never became
president because he kept losing
you think he went three times and failed
each time but left a very major
indelible stamp which led to Woodrow
Wilson and all the way through to
Franklin Roosevelt and I you know I
looked at Bryan as the root of Franklin
Roosevelt’s New Deal
that’s fascinating cause I think most
people that part of it’s often being
obscured in history it’s again one of
the reasons why this book is so
interesting is it throws up these
creating the existing tax pattern [M]y
view is that that’s the right thing to
do provided you funded the result of
that is a bit of variance is going to be
a very large federal budget deficit and
federal budget deficits invariably down
the road out qualification in gender
inflation at the moment we have the
tightest labor market I have ever seen
that is the number of job openings is
significantly greater than the number of
people looking for work and that must
inevitably begin to push on wages it
always has and always will but it’s
always delayed
and my told you that is something has
got to give and that’s I don’t know
where it all comes out well your blyat
comes out with inflation well the
problem basically is if we do nothing
we’re going to end up with probably
stagflation which is an inflation rate I
should say it’s partly stagnation which
as mentioned was very significantly
slowed output per our output per hour
now which used to be 3/4 percent per
year
back in the early post-world war ii
period it’s now well under 1% which
brings me very nicely on to the next
question from the audience which is
someone has asked for you to share your
thoughts about president Trump’s recent
criticism of Jay Powell and the Fed I
like him to answer that with all the
answers I think it’s very short-sighted
the issue of the Federal Reserve is
required by the Congress to maintain a
stable currency which means no inflation
no deflation and the policy they’re
embarked upon at the moment seems very
sense it will be caused as I mentioned
before the wage rates are beginning to
show signs of moving and you cannot have
real wages rising without it ultimately
think if they continue on the road would
that we will
going Pretlow I should say that the
president wants to go we’re gonna end up
with a very significant budget deficit
and very significant inflation
ultimately not not in the short term
that it takes a while
political system doesn’t care about
deficits what they do care about is
inflation when the inflation rate was 4%
in the 1970s
President Nixon imposed wage and price
controls were nowhere near there yet but
it’s wrong our way
if we are though heading towards a
potential rise in inflation rise in debt
at a time of growing populism do you
think there’s a chance that the Federal
Reserve will lose independence I’m
trying to follow you which I mean well
cheating is a chance at Congress or the
president will try to control the
Federal Reserve or take away some of its
independence I really don’t know one of
those forecasting aspects which is
difficult another question from the
audience as the Federal Reserve’s reach
grows do you think that leged of
oversight will become necessary again
that’s above my pay grade
or do you think that Congress should
exert more control or oversight of the
Fed I think the Federal Reserve is by
statute
remember the Federal Reserve Act of 1913
which essentially did something very
unusual we had a long period we
discussed this in the book in which
financial crises kept surging up and
then collapsing which is a typical cycle
with
which went on to a decade upon decade
and the populism that evolved as a
consequence of this looked at
ever-increasing lead to find a way to
solve the problem of why the crises
occur and the general solution was if
the economy is accelerating and it’s
running out of gold species and you’re
going to get into a situation in which
they are always going to be crises so
what the Federal Reserve Act actually
did was very very interesting it
substituted the sovereign credit of the
United States for gold and then if no we
stayed on the gold standard technically
that was a major change in American
financial history and debate the basic
consequence of that is that Federal
Reserve determines what in effect is a
sensible level of money supply expansion
and one of the reasons the Federal
Reserve Act was actually passed was to
prevent the political system when
becoming so very dominant in determining
monetary policy which is exactly what
you don’t want to happen and I mean I
was you know eighteen and a half years
as you mentioned getting letters from
everybody who won very little
congressmen or otherwise who wants it’s
a the issue of and don’t worry about the
issue of inflation
and nobody was well when I would be
getting people who say we want lower
interest rates I got tons of that mail I
never got a single letter saying please
raise them and it tells you that there
are some views which go against reality
and reality always wins but if you look
at that the history of populism some of
the worst populism you got was in the
1970s some of the work that the anger
that was generated by inflation in the
nineteen seventies were roiled right the
way through the political system
eventually leads to the rise of of
Ronald Reagan because and who comes in
and then you know crushes crushes
inflation so inflation is is not a
solution to populism it drivers it makes
people very angry do you think the
current populism is going to get worse
chairman Greenspan well let’s remember
where populism comes from it’s I don’t
know whether this is a general
proposition but I find it’s difficult to
get around the answer that when the
inflation rate or that must the
inflation ratings as much as the levels
of income slow down when you get
productivity for example which is that
the major determinant of income and you
get productivity slowing down you get a
much lower increase in JD GDP and gross
domestic income and wages and salaries
alike and there’s a great deal of unease
in the population which is saying things
are not good somebody come help us and
somebody necessarily on the white horse
because comes up and says I’ve got a way
to handle this and if you look at Latin
America the history of
goodly part of Latin America is a
remarkable amount of people like Peron
coming in and all the subsequent post
World War two governments in Latin
America and it’s really quite
unfortunate and surprising it’s not that
they try it and it fails which it does
always it always fails but it doesn’t
eliminate the desire to do it in other
words of Peru Brazil and like they’ve
all undergone very significant periods
of huge inflation and collapsing and
nobody wears a lesson
yeah well we’re almost out of time but
there’s one other question from the
audience which I think cuts to the heart
of a lot of what we’re talking about
right now which is this does the success
of capitalism come at the cost of
enormous wealth disparity is it possible
to have this vision of creative
destruction of capitalism of dynamism
without having massive income inequality
I doubt it and I doubt it for the reason
I said earlier namely that we’ve got the
problem that human beings don’t change
but technology as it advances and it’s
embodied in the growth of an economy is
always growing and when you have
something that’s growing and the other
thing that’s flat you get obviously
inequality and the political
consequences of that can I qualify that
just a little bit I mean there – there
are different sorts of inequality
there’s a there’s the inequality that
you get from suddenly like Bill Gates or
Steve Jobs producing a fantastic new
innovation and idea which means that
they reap a lot of reward
for that but which means that society as
a whole gets richer and better off and
there’s the inequality that comes from
crony capitalism from people using
political influence blocking innovation
and and sucking out and do rewards for
themselves so I think we need to be
absolutely very very sensitive to the
wrong source of inequality while

celebrating the right sort of inequality
and also had that Joseph Schumpeter that

great man once said that the the nature
of capitalist progress doesn’t consist
of Queens having a million or two
million pairs of silk stockings it
consists of what used to be the
prerogative of a queen being spread
throughout the whole of society silk
stockings you know that become something
that go from being very rare and only
worn by Queens to being worn by all
sorts of people all over the place so
it’s the nature of capitalism is to
create new innovations which are at

first rare but spread throughout the
whole of society and everybody uses so
if you think think of the the iPhone or
something like that some that was
something that was incredibly rare and a
few people had those sort of
communications vais now everybody
carries them around all the time and the
great capitalists the Bill Gates the

Steve Jobs don’t get rich by selling one
really really good iPhone to one purpose
and they get into selling their products
to all sorts of people so there’s a
sense in which there is no real
trade-off between very rich people
getting very rich and the rest of
society getting getting better off you
know they only get rich because they
create things which everybody most
people want to have and buy you know
it’s it’s it’s it’s the Silk Stocking
question really I you know I accept that
qualifications let me just say one thing

you going back to his mentioning here
Walter Isaacson’s book on innovation he
wrote that book and I remember reading
it and my final conclusion was and I
asked him why is it that most innovation
is in the United States
it’s American and he said you know I’ve
never thought of that I don’t think he
was aware of the fact that he here and
all these innovation
to developers and they all turned out to
be American which leads me to conclude
that there’s something fundamental in
the psyche of American history in the
American public which creates it it’s
not an accident which is why I won in it
who too often so which is what you of
course you sought to explain the book so
if you had a chance to take this book
into the Oval Office today or into the

Treasury and give it to the President
and say this is a history of America
here are the key lessons what is a top
bit of advice that you would give to the
administration today to keep capitalism

growing in America well you know we do
have we haven’t mentioned that there’s
an underlying financial problem which we
haven’t addressed in the best way to
discuss it as when I first became aware
of it
I would haven’t been looking at data and
accidentally created a chart which
showed the relationship between
entitlements spending which is social
benefits in the rest of the world and
gross domestic savings and I’m from 1965

to the current period the ratio of
entitlements to the sum of those two is
flat as a percent of gross domestic
product which means or at least implies
that one is crowding out the other and
when you look at the individuals they
are actually looking different and
enable one goes up the other goes down
and so forth and I think that’s
suggestively the fact that there is
something in the sense of when we say
that entitlements by which a rising and
the baby boom generation is essentially
crowding out gross domestic savings
which in turn coupled with
the borrowing from abroad is how we
finance our gross domestic investment
which is the key factor in productivity
right so entitlement reform well I look
forward to a tweet about entitlement
reform I look forward to this very
important book being part of the
discussion about how to keep America
America’s economy great and growing but
in the meantime thank you both very much
indeed for sharing your thoughts it is
indeed a fascinating book and quite an

achievement and best of luck in getting
this very important message out so thank
you both very much indeed
[Applause]

Why Should Immigrants ‘Respect Our Borders’? The West Never Respected Theirs

Immigration quotas should be based on how much the host country has ruined other countries.

There is a lot of debate these days about whether the United States owes its African-American citizens reparations for slavery. It does. But there is a far bigger bill that the United States and Europe have run up: what they owe to other countries

  • for their colonial adventures,
  • for the wars they imposed on them,
  • for the inequality they have built into the world order,
  • for the excess carbon they have dumped into the atmosphere.

The creditor countries aren’t seriously suggesting that the West send sacks of gold bullion every year to India or Nigeria. Their people are asking for fairness:

  • for the borders of the rich countries to be opened to goods and people, to Indian textiles as well as Nigerian doctors.
  • In seeking to move, they are asking for immigration as reparations.

Today, a quarter of a billion people are migrants. They are moving because the rich countries have stolen the future of the poor countries. Whether it is Iraqis and Syrians fleeing the effects of illegal American wars, or Africans seeking to work for their former European colonial masters, or Guatemalans and Hondurans trying to get into the country that peddles them guns and buys their drugs: They are coming here because we were there.

Before you ask them to respect our borders, ask yourself: Has the West ever respected anyone’s borders?

A vast majority of migrants move from a poor to a less poor country, not a rich one. Immigration quotas should be based on how much the host country has ruined other countries. Britain should have quotas for Indians and Nigerians; France for Malians and Tunisians; Belgium for very large numbers of Congolese.

And when they come, they should be allowed to bring their families and stay — unlike the “guest workers” who were enticed to build up the postwar labor force of the colonizers and then asked to leave when their masters were done exploiting them.

The Dominican Republic, where the United States propped up the dictator Rafael Trujillo for three decades, should be high on the American preference list. So should Iraq, upon which we imposed a war that resulted in 600,000 deaths. Justice now demands that we let in 600,000 Iraqis: for each death we caused there, someone should get a chance at a new life here.

Some 12 million Africans were enslaved and carried across the Atlantic by European powers. Should not 12 million people from Africa be allowed to live in the countries enriched by the toil of their ancestors? Both will be better off: the African still suffering from what slavery has done to his country, and the host country that will again benefit from African labor, but this time without enormous pain and for a fair wage.

Just as there is a carbon tax on polluting industries, there should be a “migration tax” on the nations who got rich while emitting greenhouse gases. The United States is responsible for one-third of the excess carbon in the atmosphere; Europe, another one-quarter. A hundred million refugees fleeing hurricanes and droughts will have to be resettled by the end of the century. The United States should take a third, and Europe another quarter.

A huge bill would come to the West, but it is one it should look forward to paying. Without immigration, America’s economic growth would have been 15 percent lower from 1990 to 2014; Britain’s would have been a full 20 percent lower. Immigrants are 14 percent of the American population, but

Martin Gilens – “Affluence and Influence: Economic Inequality and Political Power in America”

Martin Gilens, professor of politics at Princeton University and a member of the executive committee of the Center for the Study of Democratic Politics, discussed his new book as part of the Wilson School’s “Talk of 2012: The Upcoming Presidential Election” thematic lecture series. The discussion was co-sponsored by the Center for the Study of Democratic Politics and the Department of Politics.

 

so in the mid-1960s in my
quantitative analysis
was a period of very low association
between public preferences and policy
outcomes the opposite set of political
conditions and the strongest period of
association between public preferences
and policy outcomes was much to my great
surprise during the early years of the
george w bush first term and when i did
that analysis and saw that not only
where the policy is adopted in 2001 and
2002 consistent with what affluent
Americans wanted but we’re also the most
consistent with what the middle class
and the poor wanted from any period of
in my data set it was fairly certain
there must be some sort of error there
in coding or something must have gone
wrong so like you know a good social
scientist that Ike scoured the data to
see like where this error had emerged
but the fact of the matter is that there
was no error there and the policies that
were adopted during those early Bush
years were in fact quite popular across
the income spectrum so so let me remind
you that you know Bush ran in 2000 as a
compassionate conservative right he
talked about his bipartisan work with
Texas Legislature and and so on and you
know I think a lot of people on the Left
kind of dismissed that as kind of a
cynical posturing but the truth is that
when Bush came into office you know
after a very close election and after
having lost the popular vote the the
most prominent policies that were
adopted were broadly supported centrist
policies in some cases bipartisan
policies adopted that he worked with
Democratic legislators so I’m thinking
of things like the Medicare drug benefit
a long-standing Democratic Party
priority No Child Left Behind education
reforms which whatever you may think of
them now was a bipartisan
policy that you know senator Kennedy
worked with the administration on Bush’s
faith-based initiative very popular
across income levels his compromise on
stem-cell funding which contrary to
widespread views actually increased the
like the range of stem cells that were
eligible for federal funding and even
his tax cuts which clearly provided most
of the benefits in terms of dollars to
the most well-off Americans were
strongly supported across the income
spectrum so so a lot of what happened
then was very consistent with what the
public wanted including what the middle
class and the poor wanted but it’s not
because of any sort of particular
commitment on the part of Bush or his
administration to you know serving as
advocates for the poor but it was
political circumstances so Congress in
2001 was more closely divided than it
had been at any time in half a century
right you may remember when Bush came
into office the Senate was split 50-50
with the vice president serving as a
deciding vote the Republicans had a very
slim majority in the house they lost
even that sort of you know deciding vote
majority in the Senate after Jim
Jeffords abandoned at the Republican
Party a couple months into the Bush’s
first term so it was a very closely
divided Congress with control being up
for grabs at the next election right and
this is the opposite of what we saw in
the mid-1960s and this these two periods
represent a consistent pattern within my
data that when control of government is
divided and uncertain you get policy
outcomes that more strongly reflect the
Preferences of the public and more
equally reflect the Preferences of low
and high-income Americans and when one
party has dominant control then you see
responsiveness to any group
the public decline and in fact that’s
exactly what happened when the
Republicans increased their control of
Congress so if you compare the
preference policy Association in the
first two years of Bush’s first term
with the first two years of Bush’s
second term right when Republicans for
the first time in half a century had
unified control of the national
government and strong majorities fairly
strong majorities in Congress not like
the 1960s but but relative to recent
years then what you saw is that the
responsiveness to the public plummeted
now I should mention if you are
concerned that 9/11 and the war on
terror and the wars in Afghanistan and
Iraq are responsible for these
relationships I was concerned about that
too I redid these analyses after
excluding all the policy questions
having to do with defense and terrorism
and in the wars and so on and when you
see the same pattern so that is some of
what was popular about the early years
of Bush’s first term was things like the
war on terror and some of what was less
popular in Bush’s later years but the
patterns remain the same even if we’re
only looking at domestic policy and
excluding things like on terror okay so
so the point here is that political
conditions right make a difference and
that’s one of the perhaps few sort of
hopeful findings from what for people
concerned about sort of normative
democratic concerns is in general and
not particularly hopeful or optimistic a
research project but but control of
government does matter and that means
parties can be constrained to pursue
policies that are more consistent with
what the public wants under the right
circumstances so there’s there’s a ray
of hope there you might expect if there
if that political circumstances to say
the tenuous nature of government control
makes a difference well so might some
other ..