G.O.P. cynics have been coddling crazies for a long time.
One striking aspect of the Capitol Hill putsch was that none of the rioters’ grievances had any basis in reality.
No, the election wasn’t stolen — there is no evidence of significant electoral fraud. No, Democrats aren’t part of a satanic pedophile conspiracy. No, they aren’t radical Marxists — even the party’s progressive wing would be considered only moderately left of center in any other Western democracy.
So all the rage is based on lies. But what’s almost as striking as the fantasies of the rioters is how few leading Republicans have been willing, despite the violence and desecration, to tell the MAGA mob that their conspiracy theories are false.
Bear in mind that Kevin McCarthy, the House minority leader, and two-thirds of his colleagues voted against accepting the Electoral College results even after the riot. (McCarthy then shamelessly decried “division,” saying that “we must call on our better angels.”)
Or consider the behavior of leading Republicans who aren’t usually considered extremists. On Sunday Senator Rob Portman declared that we need to “restore confidence in the integrity of our electoral system.” Portman isn’t stupid; he has to know that the only reason so many people doubt the election results is that members of his party deliberately fomented that doubt. But he’s still keeping up the pretense.
And the cynicism and cowardice of leading Republicans is, I would argue, the most important cause of the nightmare now enveloping our nation.
Of course we need to understand the motives of our homegrown enemies of democracy. In general, political scientists find — not surprisingly, given America’s history — that racial antagonism is the best predictor of willingness to countenance political violence. Anecdotally, personal frustrations — often involving social interactions, not “economic anxiety” — also seem to drive many extremists.
But neither racism nor widespread attraction to conspiracy theories is new in our political life. The worldview described in Richard Hofstadter’s classic 1964 essay “The Paranoid Style in American Politics” is barely distinguishable from QAnon beliefs today.
So there’s only so much to be gained from interviewing red-hatted guys in diners; there have always been people like that. If there are or seem to be more such people than in the past, it probably has less to do with intensified grievances than with outside encouragement.
For the big thing that has changed since Hofstadter wrote is that one of our major political parties has become willing to tolerate and, indeed, feed right-wing political paranoia.
This coddling of the crazies was, at first, almost entirely cynical. When the G.O.P. began moving right in the 1970s its true agenda was mainly economic — what its leaders wanted, above all, were business deregulation and tax cuts for the rich. But the party needed more than plutocracy to win elections, so it began courting working-class whites with what amounted to thinly disguised racist appeals.
Not incidentally, white supremacy has always been sustained in large part through voter suppression. So it shouldn’t be surprising to see right-wingers howling about a rigged election — after all, rigging elections is what their side is accustomed to doing. And it’s not clear to what extent they actually believe that this election was rigged, as opposed to being enraged that this time the usual vote-rigging didn’t work.
But it’s not just about race. Since Ronald Reagan, the G.O.P. has been closely tied to the hard-line Christian right. Anyone shocked by the prevalence of insane conspiracy theories in 2020 should look back to “The New World Order,” published by Reagan ally Pat Robertson in 1991, which saw America menaced by an international cabal of Jewish bankers, Freemasons and occultists. Or they should check out a 1994 video promoted by Jerry Falwell Sr. called “The Clinton Chronicles,” which portrayed Bill Clinton as a drug smuggler and serial killer.
So what has changed since then? For a long time Republican elites imagined that they could exploit racism and conspiracy theorizing while remaining focused on a plutocratic agenda. But with the rise first of the Tea Party, then of Donald Trump, the cynics found that the crazies were actually in control, and that they wanted to destroy democracy, not cut tax rates on capital gains.
And Republican elites have, with few exceptions, accepted their new subservient status.
You might have hoped that a significant number of sane Republican politicians would finally say that enough is enough, and break with their extremist allies. But Trump’s party didn’t balk at his corruption and abuse of power; it stood by him when he refused to accept electoral defeat; and some of its members are responding to a violent attack on Congress by complaining about their loss of Twitter followers.
And there’s no reason to believe that the atrocities yet to come — for there will be more atrocities — will make a difference. The G.O.P. has reached the culmination of its long journey away from democracy, and it’s hard to see how it can ever be redeemed.
The right has made irresponsible behavior a key principle.
America’s response to the coronavirus has been a lose-lose proposition.
The Trump administration and governors like Florida’s Ron DeSantis insisted that there was no trade-off between economic growth and controlling the disease, and they were right — but not in the way they expected.
Premature reopening led to a surge in infections: Adjusted for population, Americans are currently dying from Covid-19 at around 15 times the rate in the European Union or Canada. Yet the “rocket ship” recovery Donald Trump promised has crashed and burned: Job growth appears to have stalled or reversed, especially in states that were most aggressive about lifting social distancing mandates, and early indications are that the U.S. economy is lagging behind the economies of major European nations.
So we’re failing dismally on both the epidemiological and the economic fronts. But why?
On the face of it, the answer is that Trump and allies were so eager to see big jobs numbers that they ignored both infection risks and the way a resurgent pandemic would undermine the economy. As I and others have said, they failed the marshmallow test, sacrificing the future because they weren’t willing to show a little patience.
And there’s surely a lot to that explanation. But it isn’t the whole story.
For one thing, people truly focused on restarting the economy should have been big supporters of measures to limit infections without hurting business — above all, getting Americans to wear face masks. Instead, Trump ridiculed those in masks as “politically correct,” while Republican governors not only refused to mandate mask-wearing, but they prevented mayors from imposing local mask rules.
Also, politicians eager to see the economy bounce back should have wanted to sustain consumer purchasing power until wages recovered. Instead, Senate Republicans ignored the looming July 31 expiration of special unemployment benefits, which means that tens of millions of workers are about to see a huge hit to their incomes, damaging the economy as a whole.
So what was going on? Were our leaders just stupid? Well, maybe. But there’s a deeper explanation of the profoundly self-destructive behavior of Trump and his allies: They were all members of America’s cult of selfishness.
You see, the modern U.S. right is committed to the proposition that greed is good, that we’re all better off when individuals engage in the untrammeled pursuit of self-interest. In their vision, unrestricted profit maximization by businesses and unregulated consumer choice is the recipe for a good society.
Support for this proposition is, if anything, more emotional than intellectual. I’ve long been struck by the intensity of right-wing anger against relatively trivial regulations, like bans on phosphates in detergent and efficiency standards for light bulbs. It’s the principle of the thing: Many on the right are enraged at any suggestion that their actions should take other people’s welfare into account.
This rage is sometimes portrayed as love of freedom. But people who insist on the right to pollute are notably unbothered by, say, federal agents tear-gassing peaceful protesters. What they call “freedom” is actually absence of responsibility.
Rational policy in a pandemic, however, is all about taking responsibility. The main reason you shouldn’t go to a bar and should wear a mask isn’t self-protection, although that’s part of it; the point is that congregating in noisy, crowded spaces or exhaling droplets into shared air puts others at risk. And that’s the kind of thing America’s right just hates, hates to hear.
Indeed, it sometimes seems as if right-wingers actually make a point of behaving irresponsibly. Remember how Senator Rand Paul, who was worried that he might have Covid-19 (he did), wandered around the Senate and even used the gym while waiting for his test results?
Anger at any suggestion of social responsibility also helps explain the looming fiscal catastrophe. It’s striking how emotional many Republicans get in their opposition to the temporary rise in unemployment benefits; for example, Senator Lindsey Graham declared that these benefits would be extended “over our dead bodies.” Why such hatred?
It’s not because the benefits are making workers unwilling to take jobs. There’s no evidence that this is happening — it’s just something Republicans want to believe. And in any case, economic arguments can’t explain the rage.
Again, it’s the principle. Aiding the unemployed, even if their joblessness isn’t their own fault, is a tacit admission that lucky Americans should help their less-fortunate fellow citizens. And that’s an admission the right doesn’t want to make.
Just to be clear, I’m not saying that Republicans are selfish. We’d be doing much better if that were all there were to it. The point, instead, is that they’ve sacralized selfishness, hurting their own political prospects by insisting on the right to act selfishly even when it hurts others.
What the coronavirus has revealed is the power of America’s cult of selfishness. And this cult is killing us.
The marshmallow test is a famous psychological experiment that tests children’s willingness to delay gratification. Children are offered a marshmallow, but told that they can have a second marshmallow if they’re willing to wait 15 minutes before eating the first one. Claims that children with the willpower to hold out do much better in life haven’t held up well, but the experiment is still a useful metaphor for many choices in life, both by individuals and by larger groups.
One way to think about the Covid-19 pandemic is that it poses a kind of marshmallow test for society.
At this point, there have been enough international success stories in dealing with the coronavirus to leave us with a clear sense of what beating the pandemic takes. First, you have to impose strict social distancing long enough to reduce the number of infected people to a small fraction of the population. Then you have to implement a regime of testing, tracing and isolating: quickly identifying any new outbreak, finding everyone exposed, and quarantining them until the danger is past.
This strategy is workable. South Korea has done it. New Zealand has done it.
But you have to be strict and you have to be patient, staying the course until the pandemic is over, not giving in to the temptation to return to normal life while the virus is still widespread. So it is, as I said, a kind of marshmallow test.
And America is failing that test.
New U.S. cases and deaths have declined since early April, but that’s almost entirely because the greater New York area, after a horrific outbreak, has achieved huge progress. In many parts of the country — including our most populous states, California, Texas, and Florida — the disease is still spreading. Overall, new cases are plateauing and may be starting to rise. Yet state governments are moving to reopen anyway.
This is a very different story from what’s happening in other advanced countries, even hard-hit nations like Italy and Spain, where new cases have fallen dramatically. It now looks likely that by late summer we’ll be the only major wealthy nation where large numbers of people are still dying from Covid-19.
Why are we failing the test? It’s easy to blame Donald Trump, a man-child who would surely gobble down that first marshmallow, then try to steal marshmallows from other kids. But America’s impatience, its unwillingness to do what it takes to deal with a threat that can’t be beaten with threats of violence, runs much deeper than one man.
It doesn’t help that Republicans are ideologically opposed to government safety-net programs, which are what make the economic consequences of social distancing tolerable; as I explain in today’s column, they seem determined to let crucial emergency relief expire far too soon. Nor does it help that even low-cost measures to limit the spread of Covid-19, above all wearing face masks (which mainly protect other people), have been caught up in our culture wars.
America in 2020, it seems, is too disunited, with too many people in the grip of ideology and partisanship, to deal effectively with a pandemic. We have the knowledge, we have the resources, but we don’t have the will.
Opening the economy too soon can backfire, badly.
Last week the Bureau of Labor Statistics officially validated what we already knew: Just a few months into the Covid-19 crisis, America already has a Great Depression level of unemployment. But that’s not the same thing as saying that we’re in a depression. We won’t know whether that’s true until we see whether extremely high unemployment lasts for a long time, say a year or more.
Unfortunately, the Trump administration and its allies are doing all they can to make a full-scale depression more likely.
Before I get there, a word about that unemployment report. Notice that I didn’t say “the worst unemployment since the Great Depression”; I said “a Great Depression level,” a much stronger statement.
To understand why I said that, you need to read the report, not just look at the headline numbers. An unemployment rate of 14.7 percent is pretty horrific, but the bureau included a note indicating that technical difficulties probably caused this number to understate true unemployment by almost five percentage points.
If this is true, we currently have an unemployment rate around 20 percent, which would be worse than all but the worst two years of the Great Depression. The question now is how quickly we can recover.
If we could get the coronavirus under control, recovery could indeed be very rapid. True, recovery from the 2008 financial crisis took a long time, but this had a lot to do with problems that had accumulated during the housing bubble, notably an unprecedented level of household debt. There don’t seem to be comparable problems now.
But getting the virus under control doesn’t mean “flattening the curve,” which, by the way, we did — we managed to slow the spread of Covid-19 enough that our hospitals weren’t overwhelmed. It means crushing the curve: getting the number of infected Americans way down, then maintaining a high level of testing to quickly spot new cases, combined with contact tracing so that we can quarantine those who may have been exposed.
To get to that point, however, we would need, first, to maintain a rigorous regime of social distancing for however long it takes to reduce new infections to a low level. And then we would have to protect all Americans with the kind of testing and tracing that is already available to people who work directly for Donald Trump, but almost nobody else.
Crushing the curve isn’t easy, but it’s very possible. In fact, many other countries, from South Korea to New Zealand to, believe it or not, Greece have already done it.
Bringing the infection rate way down was a lot easier for countries that acted quickly to contain the coronavirus, while the rate was still low, rather than spending many weeks in denial. But even places with severe outbreaks can bring their numbers down if they stay the course. Consider New York City, the original epicenter of the U.S. pandemic, where the numbers of new daily cases and deaths are only a small fraction of what they were a few weeks ago.
But you do have to stay the course. And that’s what Trump and company don’t want to do.
For a while it seemed as if the Trump administration was, at long last, willing to take Covid-19 seriously. In mid-March the administration introduced social distancing guidelines, although without actually imposing any federal regulations.
But lately all we hear from the White House is that we need to reopen the economy, even though we’re nowhere close to where we’d need to be to do so without risking a second wave of infections.
At the same time, the administration and its allies are apparently dead set against providing the financial aid that would let us sustain social distancing without extreme financial hardship. Extend enhanced unemployment benefits, which will expire July 31? “Over our dead bodies,” says Senator Lindsey Graham. Aid to state and local governments, which have already laid off a million workers? That, says, Mitch McConnell, would be a “blue-state bailout.”
As Andy Slavitt, who ran Medicare and Medicaid under Barack Obama, puts it, Trump is a quitter. Faced with the need to actually do his job and do what it takes to crush the pandemic, he just gave up.
And this retreat from responsibility won’t just kill thousands. It might also turn the Covid slump into a depression.
Here’s how it would work: Over the next few weeks, many red states abandon social-distancing policies, while many individuals, taking their cues from Trump and Fox News, begin behaving irresponsibly. This leads, briefly, to some rise in employment.
But fairly soon it becomes clear that Covid-19 is spiraling out of control. People retreat back into their homes, whatever Trump and Republican governors may say.
So we’re back where we started in economic terms, and in worse shape than ever in epidemiological terms. As a result, the period of double-digit unemployment, which might have lasted only a few months, goes on and on.
In other words, Trump’s search for an easy way out, his lack of patience for the hard work of containing a pandemic, may be precisely what turns a severe but temporary slump into a full-blown depression.
Yves here. Get a cup of coffee. Another meaty chat with Michael Hudson, who focuses here on the role of finance in rent extraction.
An important theme here that Hudson has stressed before is the mistaken perception of home “ownership”. Only about 1/3 of homes in America are owned free and clear. For the rest, the banks, or mortgage trusts, hold a senior position as mortgage lenders. And over the decades, they have become far less accommodating when homeowners are late even on a single payment. Even worse, insiders have reported that mortgage servicers will even hold payments to assure that they are late, which typically leads to compounding charges that virtually assure a foreclosure. Borrowers also face Kafkaesque obstacles to clearing up errors when they unquestionably paid on time.
To put it another way, as Josh Rosner put it in the early 2000s. “A home with no equity is a rental with debt.” That can be generalized to homes with little equity.
Radical Imagination host Jim Vrettos interviews Professor Michael Hudson, Economist, Wall St. Analyst, Political Consultant, Commentator and Journalist; who offers his views in the way finance works
Welcome, welcome once again to the Radical imagination. I’m your host, Jim Vrettos. I’m a sociologist who’s talked at John Jay College of Criminal justice and Yeshiva University here in New York. Our guest today, on the Radical Imagination, is one of only eight economists named by the Financial Times who foresaw the credit crisis and ensuing great recession erupting in 2008. It was conventional wisdom at the time to say that no one saw the gravity of the crisis coming, including almost every leading economist and financier in the world.
In fact, many had seen it coming. It was seen by everyone except economists from Wall Street; as our guest put it. They were ignored by an establishment according to then, the Federal Reserve chairman Alan Greenspan that watched with innocent quote-unquote shock disbelief as its whole intellectual edifice collapsed in the summer of 2007.
Official models missed the crisis not because the conditions were so shockingly unusual, they missed it by design because the world they lived in was not a world of how finance really works. They missed it because their mathematical models made it impossible to warn against a debt-deflation recession.
Their innocent model worlds were worlds where debt simply did not exist. It’s a world that most of our economic policymakers still live in, and it’s no wonder that everyday people see most economists far removed from their practical economic concerns and interests their everyday concrete reality. Our guest today is an internationally renowned economist who’s followed a much different path of interest and concern.
Michael Hudson is a distinguished research professor of economics at the University of Missouri, Kansas City, a researcher at the Levy Economics Institute at Bard College, a former Wall Street analyst; political consultant to governments on finance and tax policy, a popular commentator sought after speaker and journalist.
He identifies himself as a Marxist economist. But his interpretation of Karl Marx that differs in most other major Marxists. He believes parasitical forms of finance have warped the political economy of modern capitalism. History has regressed back to a neo- feudal system. He’s also a contributor to the Hudson report, a weekly economic and financial news podcast produced by Left Out.
His many books include Killing the Host, J is for Junk Economics,The Bubble and Beyond, Super Imperialism, and “… and Forgive Them Their Debts.” Michael has devoted his entire scientific career to the study of debt —both domestic and foreign, loans and mortgages, and interest payments.
In 2006 he argued that debt deflation would shrink the real economy, drive down real wages and push our debt-ridden economy into a Japan-style stagnation or worse. And just for reference, the typical American household now carries an average debt of over $137,000 up from $50,000 or so in 2000. The average American has about $38,000 in personal debt, excluding home mortgages.
The average credit card debt per U.S. household is $8,500, and outstanding student loans are at an all-time high, in 2019, of $1.41 trillion, a 33 percent spike since 2014, and a 6 percent increase from 2018. Only 23 percent of the population say they carry no debt. As Hudson presciently puts it, debts grow and grow, and the more they grow, the more they shrink the economy.
When you shrink the economy, you shrink the ability to pay the debts. So, it’s an illusion that the system can be saved. The question is, how long are people going to be willing to live in this illusion? Every day people have to face reality. Our economic policymakers urgently need to get it too.
So welcome Michael to The Radical Imagination. Thank you very, very much for coming here and being with us. Your work is so interesting; it’s so new and different. You’re a Marxist economist and yet…
[Michael] I’m a classical economist…
[Jim] You are classical, ok.
[Michael] Marx was the last great classical economist. Classical economics basically runs from the French Physiocrats through Adam Smith via John Stuart Mill to Marx.
[Jim] Along with Ricardo.
[Michael] Yes, they were all talking about the rentiers. In their time the landed aristocracy were the main rent recipients. But Adam Smith also talked about monopoly rent. And finance was the major monopoly. And today, the role of the landlords played in the 19th century of stifling industrial capitalism is being played by the banks and the rest of the financial sector. Right now the collectors of land rent, which was the main focus of the labor theory of value to isolate what was unnecessary, is being paid to the banks as mortgage interest.
[Michael] So, we no longer have a small privileged private landlord class when you have 80 percent of the European population and two thirds of the American population being homeowners. However, they have to pay the equivalent of the rental value of their housing to the bank, in the form of mortgage interest.
[Jim] To the banks, right!
[Michael] My analysis follows from classical economics, as did Marx’s analysis. So Marx is simply the last great classical economist. They were all talking about how industrial capitalism sought to free itself from unnecessary costs of production, and hence how its political fight was against the landlord class and other rent extractors. Where Marx went beyond his predecessors was in looking at the laws of motion of industrial capitalism. He saw these as leading toward socialism. Later, Rosa Luxemburg said that if it’s not towards socialism, it will be toward barbarism.
[Jim] So capitalism would evolve into the possibility of socialism.
[Jim] Did he foresee the sort of predatory financial system that you worked out?
[Michael] No one described it better in his time than Marx, in Volume III of Capital.
[Jim] Volume III. Ok!
[Michael] Marx analyzed the “real” economy’s circular flow between employers and wage labor buying the products they produced. But then, in Volume III, he said that rentier debt claims by the financial sector was a separate dynamic, independent from the economy of production and consumption. This industrial capitalist economy is wrapped in a financial sector composed of debt and property claims. These are external to the economy. They slow it and ultimately cause a crash. Marx was one of the first to talk about business cycles of about 11 years and the internal contradictions that led to a market collapse. He pointed out that the financial sector had different mathematics of growth – the mathematics of compound interest. These are exponential and inherently unsustainable. In Volume III of Capital and also of his Theories of Surplus Value– which was Marx’s history of economic thought and the theories leading up to him – he collected everything from Martin Luther to other analyses pointing out that debts grew so rapidly at compound interest that it is impossible to pay them.
[Jim] You have a great chart where you talk about compound interest, a penny that was invested at 5% interest from Christ’s time to 1776.
[Michael] Richard Price was an actuarial accountant. He calculated that a penny saved that at the time of Jesus’s birth at 5% interest would become a solid sphere of gold extending from the sun out to the planet of Jupiter.
[Michael] Obviously, many people did save pennies at the time of Christ, and the annual interest rate then in Rome was 8 1/3%, one twelfth per year. But of course nobody has a sphere of gold extending out to Jupiter. That’s because debts that can’t be paid, won’t be.
That’s basically my motto: Debts, that can’t be paid, won’t be paid, because there’s no way of paying out of current income that grows much more slowly, tapering off.
[Michael] So debts have to be written down. It usually takes the form of a financial crash. Nobody before Marx explained crashes in terms of the financial claims growing and causing a break in the chain of payments. The actual break could be a result of fraud or embezzlement, or a bad crop, because crashes happened in the autumn when the crops were moved and there was a drain of money from the banks to pay for moving the crop and paying the harvesters. But at least a crash wiped out debts, and then the debt buildup could begin all over again.
[Jim] But in pre-industrial civilizations that didn’t occur did it? We want to play a short little clip from your book, “… and Forgive Them Their Debts,” in which you talk about the debt phenomenon in primitive or pre-industrial civilizations, very different than what we’ve experiencing today, correct?
[Michael] That’s right. You mentioned the Financial Times report of the economists who did see the crash coming. I was the only one who actually made a chart showing why the break had to come. The Financial Time review was by Dirk Bezemer, who showed the chart that I published in a Harper’s magazine, based on an earlier paper I’d given at the University of Missouri at Kansas City for one of our Minsky Conferences.
[Jim] Let’s play this. It’s a two-minute clip on what you talking about, and debt within pre-industrial societies.
[Michael] Economists don’t talk much about religion or society, or how these concerns shape markets. Theologians for their part act as if religion is all about heaven and sex, so debt is left out. Yet it used to be at the core of Judaism, Christianity, and earlier Near Eastern religion.
[Host] Why is that? If religious leaders are interested in social justice, as Jesus was, it you have to talk about economics.
[Michael] I think part of the reason is that when they translated the Bible into English, German and the vernacular, they didn’t know what many of the words originally meant, like deror (for the Jubilee Year), or how to distinguish between “sin” and “debt” as originally a reparations payment for sin. They didn’t understand that most of the Bible was redacted by the returnees from the Babylonian captivity, who brought back this concept of debt cancellation, “andurarum” – Clean Slate. The Hebrew word was “deror.” In the Bible, you’ll have other words or terms for the Clean Slate, the Jubilee year of Leviticus 25, such as “Year of the Lord” in Jesus’s first sermon.
They didn’t realize that the word “gospel” was the “good news.” That good news was that there was going to be a debt cancellation. They didn’t realize that the Ten Commandments were very largely about debt; that “one shall not covet the neighbor’s wife,” that means you don’t make a loan to the guy so he has to pledge his wife as a debt slave to her so that you can have your way with her.
[Jim] But ordinarily that just gets translated as adultery.
[Michael] Yes, but they didn’t realize that the vehicle for this immorality was largely debt bondage. “Thou shalt not take the Lord’s name in vain” meant that a creditor couldn’t swear that so-and-so owes you money if he didn’t. All of this had to do with fact that the great destabilizing factor in society in the first millennium BC was debt beyond the ability to be paid, leading to bondage of the debtor, and ultimately forfeiture of land to wealthy creditors eager to grab it and do as Isaiah accused, join plot to plot and house to house until there were no more people left in the land.
[Jim] “No more people left in the land.” This is an incredible narrative. Please flesh out the narrative so that we can understand what was going on at that time.
[Michael] In order to explain the dynamics of debt in early times, you have to explain how the overall economic system worked as part of the social system. Most people ran into debt not by borrowing, but simply by not being able to pay the taxes or other payment obligations that accrued. These debts weren’t the result of loans. Most personal debts in Sumer and Babylonia were owed to the palace, so when the crops failed or there was a military fighting they couldn’t pay what they owed to the bureaucracy of tax collectors or for public services.
[Jim] Who were working for the palace.
[Michael] Yes. The rulers had a choice at this point: Either they could let the debtor fall into bondage when he couldn’t pay the tax collectors or the palace. If that happened, he’d owe the crop surplus to the creditor, not the palace.
He owed his payment in labor. That was the scarce resource in antiquity. He’d owe his labor to the creditor, so he couldn’t serve in the army, or do corvee work to build infrastructure or palace walls.
So rulers canceled these personal debts to regain control over agrarian labor and its crop surplus. Every new ruler who took the throne in Sumer and Babylonia started the reign with an amnesty, a Clean Slate to start from a position of balance in Year One. During their subsequent reign, if the crops failed or if there was a military conflict, the ruler would cancel consumer debts (but not commercial debts among businessmen for foreign trade or similar enterprise). That’s in the laws of Hammurabi, cancelled Babylonian debts four times. It’s obvious that if you’re at war or if the crops are hurt, cultivators can’t pay the loans.
What early modern scholars could not believe, until our Harvard group began to compile the economic history of antiquity, that canceling such debts actually was what maintained stability. We began our Harvard group in the 1990’s , and we’ve published five colloquia volumes of the origins of economic enterprise in the ancient Near East, on land tenure, urbanization, debt, and debt cancellation.
Our researches showed that as soon as you had interest-bearing debts (mainly in the commercial sphere), you had debt cancellation for the personal agrarian debts. Business debts were not canceled because the merchants were also citizens, so no matter what, all citizens had their designated self-support land. So only the barley debts were canceled; not the personal debts. We showed that rulers canceled the debts because number one, they were canceling debts owed to themselves. It’s politically easy to forgive a debt if it’s owed to you. But it’s more difficult if there is an oligarchy and debts are owed to private creditors.
Canceling crop debts was what maintained economic stability without mass bankruptcy, which would have meant that a lot of debtors would have ended up as bond servants to their creditors. It also maintained demographic staility, because otherwise, debtors would have run away and joined another community. Many did run away after Babylonia fell in 1600 BC. Four centuries later we find them joining the hapiru, which many people connected to the Hebrews. They were sort of gangs of laborers who also would do a little bit of piracy or serve as mercenaries. Their own groups were very egalitarian, just as pirates were egalitarian in their own ranks in the 18thcentury West.
With the hapiru you find for the first time an ideology saying that they were not going to let themselves fall into debt to the rich or to landlords. Their ranks were joined by fugitives walking out. Of course, that’s how Rome came to be settled under its “kings,” and what the Roman commoners did 594 BC after the kings were overthrown. The oligarchy took over, and tried to reduce the Roman population to bondage. You had numerous Secessions of the Plebs, for instance, again when the oligarchy broke its word by 449 BC.
[Jim] the aim was to forgive all the debts, just as in the Bible, right?
[Michael] When the Bible really was edited and put together by the Jews who were coming back from Babylonia, they brought back with them many Babylonian practices.
[Jim] So, they had learned from that experience . . .
[Michael] At that time all the Near Eastern kingdoms, even the Neo-Assyrian and Neo-Babylonian empires had rulers who continued to proclaim Clean Slates.
[Jim] The Persians and so on. But that tradition didn’t survive into modern times, although it became a tradition within the old Judaism.
[Michael] And also the original preachings of Jesus. Leviticus 25 projected the practice all the way back to the commandments of Moses. But there’s not very much documentation of Judaism after the compilation of the Jewish Bible, because the Judeans didn’t write on clay tablets, they wrote on perishable materials that haven’t survived. The little that did survive was the sacred library of Jerusalem, which became the Dead Sea Scrolls. When the Romans came, they took the library and they put it in pots. We now have many of these scrolls. One was a midrash, a collection of all of the biblical passages about debt cancellation, including those of the prophets.
[Michael] So we know that by the time of Jesus, there was an active popular demand for another Jubilee. But meanwhile, within Judaism itself, the wealthiest families became the rabbinical school. Luke’s description of Jesus in the New Testament said that the Pharisees loved money. They became the rabbinical school of Hillel. Luke said that Jesus went back to the temple in his hometown to give a sermon, and unrolled the scroll of Isaiah to read the passage about the Year of the Lord – meaning the Jubilee Year – and said, that he had come to proclaim this year. That was his destiny.
Early translators of the Bible just read “the Year of the Lord” without realizing that this meant the Jubilee Year, deror, a debt cancellation. Luke immediately says a lot of families got very angry and chased Jesus out of town. They didn’t like his message. The Pharisees in particular got upset, and complained to the Roman that Jesus wanted to be King. Well, the reason they said was that they knew that Rome hated kingship. Roman tradition as written by Livy and by Dionysius and Halicarnassus described Servius as cancelling the debts, and most other kings of trying to keep the oligarchy in its place. Rome grew by making itself a haven for immigrants, whom they attracted precisely by keeping the oligarchy in its place.
[Jim] But they also had an empire. . .
[Michael] We are talking before the eighth to sixth centuries BC. But then the oligarchs took over and throughout the rest of Roman history down to the empire, the great fear was that somebody would do what the kings did: cancel the debts and redistribute the land to the poor. Julius Caesar was killed for “seeking kingship,” meaning that the Senate worried that he was going to cancel the debts after decades of civil warfare over this issue and the assassination of Catiline and other advocates of debt cancellation.
[Jim] And people will be free from their economic bondage
[Michael] Yes. Even many rich people were behind Catiline, who led the revolt a generation before Caesar, who actually seems to have been an early sponsor of Catiline. We’re talking about 62 to 64 BC; Caesar was killed in 44 BC.
So to make a long story short, what made the West “Western” was that it was the first society notto cancel the debts. It was to prevent this that oligarchies opposed a central authority. We don’t find any sign of debt in Greece and Rome until about 750 B.C. It was brought by near Eastern traders, along with standardized calendrically based weights and measures, ritual and religious practices. They set up temples as trading vehicles. For thousands of years, traders had set up local temples to act as a sort of Chamber of Commerce, to negotiate trade. In Greece, and Rome at that time there were chieftainships, which began to adopt the patronage practices of extending loans to the population, and then taking the payment and labor.
These dependency relationships are what made Western civilization different from what went before. There was no palatial economy, no state authority to override the oligarchy, cancel debts, redistribute land or liberate citizens who had been reduced to bondage as a result of their debt.
[Jim] You’re talking about the Middle Ages as well, feudalism?
[Michael] No, I’m talking about Greece and Rome in contrast to the Near Eastern mixed economies that were palatial as well as private. There was much private mercantile enterprise in Sumer. Its foreign trade was largely left to private enterprise (with the palace being a major customer, to be sure), so, these were mixed economies, as the five volumes that our Harvard group published have shown.
[Jim] This is all contained in your book “… and Forgive Their Debts.”
[Jim] So this is what is crucial to understanding lending, foreclosure and redemption from the Bronze Age finance to the Jubilee.
[Jim] This is a fascinating history. Can we bring it up to date, including issues of militarization and empire and imperialism in the 20thcentury, World Wars I and II? What are some of the things that occurred, the inception of the World Bank and the IMF? How did America control and attempt to defend its empire by using debt leverage?
[Michael] Already in Greece and Rome there was a linkage between debt and militarization. A Greek general, Tacticus in the third century BC, wrote a book of military tactics. He said that if you want to conquer a town, the way to take it over is to promise to cancel the debts. The population will come over to your side. And conversely, he said, if you’re defending a town, cancel the debts and they’ll support you against the attacker. So that was one of the reasons that debts tended to be canceled by one group or another. It’s what Coriolanus did, and then he went back on his word in Rome. That’s what Zedekiah did in Judea. Well, today it’s different. Here you have the imposition of a military force – really NATO – to enforce debt collection, not only from individuals but on debt entire countries. The job of the World Bank and IMF is to impose such heavy debt service on countries, and indeed to impose it in dollars, that countries have to earn these dollars to pay their debts. They can’t simply print the money to pay these debts like America can do. They have to obtain dollars by steadily lowering the price of their labor. But as yet there is no debt revolt.
[Jim] Because, when we went off the gold standard the American dollar became all powerful.
[Jim] And we control 75% of the gold reserves?
[Michael] By the end of World War II, we controlled 75%, right.
[Jim] These are tremendous transformations in the world economy. The IMF and World Bank have supposedly developed through the UN for development, but as you argue, it’s more to create dependency.
[Michael] The World Bank is effectively part of the Defense Department. Their heads are usually former Secretaries of Defense, from John J McCloy, the first president, to McNamara and subsequent heads. What the United States discovered is that you don’t need to go to war to control other countries. If you can have them accept the assumption that all debts should be paid, they will voluntarily submit to austerity, which is class warfare against their own labor force. They will continue to devalue their currency …
[Jim] And create puppet governments that will support that as surrogates.
[Michael] Yes. What the free market boys at the University of Chicago discovered is that you can’t have a pro-financial free market – free of government regulation and its own public infrastructure and credit system – unless you’re prepared to assassinate everyone who wants a strong government. When they went to Chile and supported Pinochet, U.S. officials provided a list of who had to be killed –
- land reformers,
- labor leaders,
- socialists, and
- especially economics professors.
They closed down every Economics Department in the country, except for the one at Catholic University, the right wing economics department teaching Chicago School neoliberalism. So, you have to be totalitarian in order to impose a free market pro-financial style – which, under today’s circumstances, means pro-US.
[Jim] It’s occurring across Latin America, right?
[Michael] Yes. A free market means libertarianism and totalitarian government. What the Chicago boys and the so-called New Institutional Economics school calls the rule of contracts. You have the history of Western civilization now being taught almost everywhere as if what created civilization was the rule of contracts, not canceling the debts. So, you’ve created an inside-out view of history. Its aim is to deny the fact that the only way that you can prevent the kind of economic slowdown that we’re having in America now is to write down the debts. If you don’t write down the debts, you’re internal market will shrink and you’re going to end up looking like Greece, or like France with all the riots that they are having there, or like the other countries that are rioting because they don’t want to be turned into a Neo-feudal society.
[Jim] This seems to be occurring in Puerto Rico as well. So what becomes more profitable for American economy is the military and the armaments that we ship and use in all these adventurers wars that we have in the 800 hundred US military bases around the world.
[Michael] The difference is that in the past when you had militarism, you actually had to fight a war. Soldiers had to go in. You know the old joke about wine that’s being sold in an auction. It’s a hundred-year-old bottle and is very, very expensive. A rich guy buys it and pours it out to impress his friends, but it tastes like vinegar. He complains to the auction house, but is told, “Oh, that’s not wine for drinking! That’s for trading!” That’s what most U.S. arms are for: not really to use. You’re never again going to get Americans to be drafted and go into the army to actually, use them. These arms are not for fighting; they’re for making profits. Seymour Melman explained that in Pentagon Capitalism.
[Jim] The permanent war economy.
[Michael] That’s right. Meaning more profits for the military industrial complex. You don’t actually use the arms. You just pay to produce them and throw them away. It’s like what Keynes talked about, building pyramids in order to create domestic purchasing power.
[Jim] And you can’t, as Melman tried to do, use economic conversion to more civilian uses. That never happened.
[Michael] Seymour Melman explained that the U.S. government decided to make a different kind of a contract with the arms manufacturers. It’s called cost-plus. As he summarized it, the government guarantees them a profit, but to prevent monopoly rents, they determined the prices to be paid at, say, ten percent over the actual cost of production. This led the arms-makers to see that if their profits were going to rise in keeping with the cost of production, they wanted as high of a cost of production as possible.
So, the engineers working on the American military industrial complex aimed at maximizing costs. That’s how we got toilet seats that cost $650.
Countries that don’t have Pentagon capitalism, like Russia or China, are able to produce weaponry that outshines America. Even broke Iran, can make missiles that apparently get right through the U.S. defenses in Syria and Iraq, because they don’t have cost-plus. They’re trying to be efficient, not just to have an excuse for making money via a cost-plus contract.
[Jim] How do we turn this around? You’ve made the connections to show that everyday people and their lives are profoundly impacted by the unreal world that the financial predators are creating.
[Michael] Reality isn’t the aim of their economic models. For instance, just today I saw Paul Krugman on Democracy Now. He said that the reason we’re in a depression is because President Obama did not run a large enough budget deficit! He’s a Keynesian, but goes so far as to insist that debt has no role to play in deflating the economy. That’s largely because Krugman serves in effect as a bank lobbyist – not only here, but in Iceland and other countries. To me, the current economic squeeze is that Obama didn’t let the banks collapse. He kept the bad he debts on the books instead of treating them as bad loans to be absorbed by the banks that wrote the junk mortgages and lost in their speculative gambles.
[Jim] And ate the homeowners!
[Michael] Yes. He kept their bad, outrageously priced loans on the books and evicted 10 million families. He called them “the mob with pitchforks,” and Hillary called them “deplorables.” That shows you where the Democratic Party is at, and why it was so easy for Donald Trump to make a left wing run around the Democratic Party. That is how right wing Obama was. His legacy was Donald Trump, via Hillary Clinton.
[Jim] Krugman is the most well-known so-called Keynesian economist in the country, right?
[Michael] The reason he’s so well-popularized by the pro-financial class is precisely because he doesn’t understand money. So bank lobbyists love him and he’s popularized by the right-wing New York Times. He had a wonderful debate with Steve Keen that anybody can see on Google, where he says that it’s impossible for banks to create money and credit. He thinks that banks are savings banks, and they’re just relending deposits. Steve Keen explained what endogenous money is. That’s what we talk about in Modern Monetary Theory.
[Jim] And the Wall Street Journal.
[Michael] And the Washington Post. They go together. They don’t want economists to be popular who talk about debt and why the debts can’t be paid or the need for a debt write down. Krugman attacks Bernie Sanders as if he is an unbelievable radical for backing public medical care.
[Jim] On February 17, Krugman wrote a column “Have Zombies eaten Bloomberg’s and Buttigieg Brains?” He said “My book is arguing with zombies.” And one of the zombies is his obsession with public debt and the belief that we should be terribly scared of government debt, can’t do anything because of deficits. Eeek! And that’s the way Buttigieg talks. The very moment when mainstream economics, if you like centrist economics, has concluded that these debt worries, were way overblown. The president of American Economic Association gave this presidential address saying that debt is not nearly the problem people think it is. It’s not a constraint, and of course, Republicans have pulled off one of the greatest acts of policy hypocrisy in history – you know, the existential deficit threat. I don’t want to see a democratic centrist bring us into this deficit scaremongering. That would be a really bad thing that would block any kind of initiative.
So, what does the everyday person make of this debate? And what’s the attraction of Trump his message to people who feel that their real-world needs are being addressed?
[Michael] I think the reason people voted for Trump’s was mainly Hillary. She said that voters should vote for the lesser evil. There was no question who the “lesser evil” was. It was Donald Trump. Did you want World War III, or Donald Trump? It’s not a very nice choice, but Hillary’s viciously right-wing, especially where Russia is concerned. The Democratic National Committee and deep state are all about Russia, Russia, Russia! And calling Trump Putin’s puppet.
Then finally the Mueller report came out and found nothing there! So you can view the Democratic Party as the political arm of the military industrial complex and the banking complex.
[Jim] And Obama totally propped them up. But now, Bernie! What about him? The Democratic establishment is against him, and so is the Republican establishment.
[Michael] If the enemy of my enemy is my friend, then Bernie’s enemies are the Democratic Party establishment and the Democratic National Committee. So of course a lot of people are going to love him.
[Jim] Yup. He wants to cancel student debt! He is talking your language!
[Michael] If the student debt is not canceled, you’re going to have a generation of graduates unable to get the mortgage loans to buy homes, because they’re already paying their income to the banks.
[Jim] They’re living at home!
[Michael] That means that you’re going to have a shrinking economy. So of course you have to write down student debt, and also other forms of debt – credit card debt and other debt. The economy cannot recover if you don’t write down the debt overhead.
The good thing about writing down the debts is that you wipe out the savings on the other side of the balance sheet. Some 90 percent of the debts in America are owed to the wealthiest 10 Percent. So the problem is not only the debt; it’s all these savings of the One Percent! The world is awash in their wealth. If you don’t wipe out their financial claims – which are the basis of their wealth – they’re going to take you over and become the new financial Lords, just like the feudal landlords. The banks are the equivalent of the Norman invasion. and the conquering landlords that reduce the economy to a peonage!
[Jim] But the moral argument is made that they’re the best. They’ve survived, right? I’m playing devil’s advocate here. So they serve a purpose, don’’ they? Their wealth is a sign that the system is working.
[Michael] That’s not what Adam Smith and John Stuart Mill said, or Ricardo and the entire 19th century classical economic school. They said that economic rent is unearned income. So the aristocracy (“the best”) doesn’t earn it. It is a result of privilege, which almost always is inherited wealth or monopoly privilege, that is, the right to appropriate something that really should be public. Land ownership and mining should be public wealth, as are mineral resources in much of the world. Education should be public. People shouldn’t have to pay for it. The idea initially in the United States was that education should be free as a human right. Medical care is also, as Bernie says, a human right, as it is in a lot of the world. So America, which people used to think was the most progressive capitalist country, suddenly becoming the most neo-feudal economy.
[Jim] How about Max Weber and the Protestant ethic as the spirit of capitalism? The argument is made that those who are productive are rewarded by heaven, while those who are poor deserve it. Wealth was a sign that God had bestowed his grace on its owner.
[Michael] That sort of the patter talk a century ago hasn’t stood up very well. The wealthy claim to be wealthy because God loves them. If they can convince other people that God loves them and hates the rest of the people, they make God into the devil. They make him hate the working class, and make them dependent on this unnecessary class of parasites. That’s crazy! But that’s what happens if you let the wealthy take over religion. Of course, they’re going to say that religion justifies their wealth.
That’s what makes modern religion the opposite of the religion that I described in the Bronze Age. Upon taking the throne, rulers took a pledge to the gods to restore equity and cancel the debts. That included restoring lands that had been forfeited, giving it back to the defaulting debtors to re-establish order. That was the idea of religion back then. But today’s religion has become a handmaiden of wealth and privilege, and of “personal responsibility” to make people pay for education, health care, access to housing and other basic things that should be a public right.
[Jim] Which is what preoccupies the average American, when seventy percent of their earnings are going to these sorts of things, and for taxes and rent. I have a brief quote here from Martin Luther King, who I think represents the sort of religious tradition you’re advocating. He had been deeply influenced by the theologian, Walter Rauschenbusch and his 1907 book, Christianity and the Social Crisis.
[Michael] Read it, so that so they can hear it.
[Jim] Here’s the main quote: “The gospel at its best deals with the whole man; not only his soul, but his body; not only the spiritual well-being, but his material well-being.” King wrote in an inspired passage, “any religion that professes to be concerned about the souls of men and is not concerned about the slums that damned them, the economic conditions that strangled them and the social conditions that crippled them is a spiritually moribund religion awaiting burial.”
[Michael] That’s right. Religion was about the whole economy. Not just a part of the economy. Today they’ve separated religion, as if only spiritual and has nothing to do with the economic organization of society. Religion used to be all about the economic organization of society. So, you’ve had a decontextualization of religion, taking away from analyzing society to justify the status quo by teaching that if things are the way they are, it’s because God wants it this way. That’s saying that God wants the wealthy and privileged to exploit you, especially by getting you into debt. And that’s just crap!
[Jim] And that gets us away from the classical tradition, which does try to see this as social.
[Michael] And that’s why Christian evangelicals hate Jesus so much.
[Jim] There you go! But we love Bernie! Can he win? We’ve only got about a minute to go …
[Michael] Of course he can.
[Jim] You think he will be able to withstand the onslaught that he’s going to get?
[Michael] A year ago I was pretty sure that the Democratic National Committee was going to put the super delegates in to sabotage any attempt that he was going to make to get the nomination. Now it’s clear that the Democratic Party will be torn apart, and this means the end of it if he’s not the nominee.
[Jim] All right! Well, from your mouth to God’s ears! Thank you, Michael. This has been so enlightening.
[Michael] Thank you.
[Jim] I’m so blessed that we are in the audience here too on the Radical Imagination. So happy to have had you here. I hope you’ll come back again. This is your most recent book, “… and Forgive Them Their Debts.” Thank you very much! This is Jim Vrettos for the Radical Imagination. See you next week. Thank you, Michael!
Let me summarize the Trump administration/right-wing media view on the coronavirus:
- It’s a hoax, or anyway
- no big deal. Besides,
- trying to do anything about it would destroy the economy. And
- it’s China’s fault, which is why we should call it the “Chinese virus.”Oh, and epidemiologists who have been modeling the virus’s future spread have come under sustained attack, accused of
- being part of a “deep state” plot against Donald Trump,
- or maybe free markets.
Does all this give you a sense of déjà vu? It should. After all, it’s very similar to the Trump/right-wing line on climate change. Here’s what Trump tweeted back in 2012: “The concept of global warming was created by and for the Chinese in order to make U.S. manufacturing noncompetitive.” It’s all there: it’s a hoax, doing anything about it will destroy the economy, and let’s blame China.
And epidemiologists startled to find their best scientific efforts denounced as politically motivated fraud should have known what was coming. After all, exactly the same thing happened to climate scientists, who have faced constant harassment for decades.
So the right-wing response to Covid-19 has been almost identical to the right-wing response to climate change, albeit on a vastly accelerated time scale. But what lies behind this kind of denialism?
Well, I recently published a book about the prevalence in our politics of “zombie ideas” — ideas that have been proved wrong by overwhelming evidence and should be dead, but somehow keep shambling along, eating people’s brains. The most prevalent zombie in U.S. politics is the insistence that tax cuts for the rich produce economic miracles, indeed pay for themselves, but the most consequential zombie, the one that poses an existential threat, is climate change denial. And Covid-19 has brought out all the usual zombies.
But why, exactly, is the right treating a pandemic the same way it treats tax cuts and climate change?
The force that usually keeps zombie ideas shambling along is naked financial self-interest.
- Paeans to the virtues of tax cuts are more or less directly paid for by billionaires who benefit from these cuts.
- Climate denial is an industry supported almost entirely by fossil-fuel interests. As Upton Sinclair put it, “It is difficult to get a man to understand something when his salary depends on his not understanding it.”
However, it’s less obvious who gains from minimizing the dangers of a pandemic. Among other things, the time scale is vastly compressed compared with climate change: the consequences of global warming will take many decades to play out, giving fossil-fuel interests plenty of time to take the money and run, but we’re already seeing catastrophic consequences of virus denial after just a few weeks.
True, there are may be some billionaires who imagine that denying the crisis will work to their financial advantage. Just before Trump made his terrifying call for reopening the nation by Easter, he had a conference call with a group of money managers, who may have told him that ending social distancing would be good for the market. That’s insane, but you should never underestimate the cupidity of these people. Remember, Blackstone’s Steve Schwarzman, one of the men on the call, once compared proposals to close a tax loophole to Hitler’s invasion of Poland.
Also, billionaires have done very well by Trump’s tax cuts, and may fear that the economic damage from the coronavirus will bring about Trump’s defeat, and hence tax increases for people like them.
But I suspect that the disastrous response to Covid-19 has been shaped less by direct self-interest than by two indirect ways in which pandemic policy gets linked to the general prevalence of zombie ideas in right-wing thought.
First, when you have a political movement almost entirely built around assertions than any expert can tell you are false, you have to cultivate an attitude of disdain toward expertise, one that spills over into everything. Once you dismiss people who look at evidence on the effects of tax cuts and the effects of greenhouse gas emissions, you’re already primed to dismiss people who look at evidence on disease transmission.
This also helps explain the centrality of science-hating religious conservatives to modern conservatism, which has played an important role in Trump’s failure to respond.
Second, conservatives do hold one true belief: namely, that there is a kind of halo effect around successful government policies. If public intervention can be effective in one area, they fear — probably rightly — that voters might look more favorably on government intervention in other areas. In principle, public health measures to limit the spread of coronavirus needn’t have much implication for the future of social programs like Medicaid. In practice, the first tends to increase support for the second.
As a result, the right often opposes government interventions even when they clearly serve the public good and have nothing to do with redistributing income, simply because they don’t want voters to see government doing anything well.
The bottom line is that as with so many things Trump, the awfulness of the man in the White House isn’t the whole story behind terrible policy. Yes, he’s ignorant, incompetent, vindictive and utterly lacking in empathy. But his failures on pandemic policy owe as much to the nature of the movement he serves as they do to his personal inadequacies.
60:42thank you what is the most persistent60:45zombie idea on the left and is there one60:47is there an idea to what you have60:50subscribed in the past which you now60:51kind of put into that category oh boy I60:55mean the trend the left is not nearly as60:58good at maintaining zombie ideas partly61:03because there there are in fact not that61:07many leftist billionaires and and61:09billionaires there are some but not very61:12leftist and so I mean well let me put61:20this way we were talking about climate61:22and environment and and climate change61:25and economic growth I’m running to a lot61:27of people still who are now this is61:30telling you that there I don’t think61:31there are a large part of the electorate61:33but there are61:34but the circles I move in I run into61:36people who are sure that to fight61:39climate change we have to stop living61:41the way we’re living and a much more61:43austere back-to-nature lifestyle is the61:47only way to deal with climate and that’s61:49an idea that it’s just clearly wrong if61:53we actually asked by we know enough61:55about the technological and economic61:57solution to climate change that ASUS a62:00green society that does not burden the62:02planet would almost certainly be a62:04society that looks a whole lot like what62:06we have now in people with the driving62:08cars they’d be using electricity but the62:10cars with the electric and the62:12electricity would be generated by solar62:13and wind and it but the actual rhythm of62:16daily life could look very much like62:18what we we have we don’t have to go back62:20to to an agrarian pastoral Eden to to to62:25deal with the issue but it’s it’s62:26something that sounds again it sounds62:29serious from a different point of view62:30it sounds like if you’re serious about62:31climate change you must be serious and62:34believing that we have to give up on62:35this consumer oriented society and and62:38all of these these comforts that we take62:40for granted but in fact it’s not true so62:43that would here that would be an example62:44of a kind of a left-wing zombie in other62:46countries in the belief that you can62:49just dictate all prices and you know you62:53can put price controls on everything and62:54not and never face shortages that’s not62:58something we see in the US but they62:59Venezuela clearly there’s some refusal63:02to face reality going on but that would63:05be these house but again zombies mostly63:08flourished because their big money63:10behind them not all of them but mostly63:12and and and the no.4 for every George63:17Soros there are 50 quiet billionaires63:21supporting extremely reactionary causes63:23and what about the question the question63:25of an idea you’ve changed your mind oh63:27so most of my changes have been in the63:33in the other direction look at minimum63:36wages no no a piece of economic research63:41has has shaken my views as much63:46actually I’m gonna give you two and and63:50me at this this is a great risk of63:52turning into a Monty Python routine63:54amongst the issues three okay so64:00actually so I’ll give you two one64:01minimum wages up until sometime in the64:05mid 1990s I believe that clearly64:09increases in minimum wages would cost64:11jobs they might be desirable otherwise64:13but econ 101 said that that’s what64:15happened and then we got this amazing64:17body of empirical research because we64:19get in the United States we get a lot of64:21natural experiments when one state64:22raises its minimum wage and the64:24neighboring state does not and the64:26overwhelming evidence says that minimum64:28wage increases at least within the range64:30we see in the US do not cost jobs and64:33that changed my view has said labor64:34markets are very different from where I64:35thought it actually moved me towards64:38emphasizing the role of power and in64:40labor relations and so on another one I64:43used to think that it was always64:44possible just by printing money to get64:47full employment and and the experience64:50of Japan in the late 1990s when despite64:54a very easy monetary policy they slid64:56into deflation changed my views totally65:00I there was a there was a group of us65:03actually of when I when I arrived at65:05Princeton in 2000 was a bunch of Japan65:07warriors who were really very shaken by65:10the Japanese experience because we we65:12looked at it said you know this could65:13happen to us so with me people you65:16wouldn’t have heard of but very65:17influential in the professional arts65:18Vince and Mike Woodford and the fourth65:21was Bernanke Ben Bernanke don’t know65:24what happened to him he disappeared I65:26think yeah so we so that but no the the65:31Japanese Japan’s Lost Decade65:33changed my view and basically made me65:36much more Keynesian much more believer65:38that there are times when you really65:40need to have the government do the65:41spending yes how do you successfully65:45regulate the financial markets while not65:50scaring the business community in sort65:53of trying to65:55in the middle of a class that any form65:58of common sense reform or tax is not66:01Marxist Leninist and it’s not going to66:03take away all their assets and money66:05okay you know we’ve done this before66:10right we imposed extensive bank66:14regulation in the 30s which didn’t66:17obviously cripple the economy we the66:19post-war generation was was the best66:22generation in in in certainly in US66:24economic history the the the only I66:29would say the problem is not scaring66:31people not looking Marxist the problem66:33with regulating financial markets is66:35first of all they’re the financiers have66:39a lot of clout but but beyond that it is66:45hard to keep up with financial66:49innovation which very often is not66:53innovating in the sense of you know66:55doing things better but as is innovating66:58a way of finding ways to set things up67:01that evade the regulations so you67:04regulate banks and then people create67:06something that is functionally a bank67:07but doesn’t technically meet the67:09definition of a bank and evades the67:11regulations it’s hard to keep up with67:13that and and if it’s not a well solved67:16problem in the we had a significant67:21financial reform in the US under Obama67:24not everything you I would have wanted67:26but it was significant but on many of67:29the issues it depends upon this67:31Financial Stability Council which has to67:34define systemic lis important67:37institutions that they’re mean and67:40there’s no clear definition it’s kind of67:43like pornography you know when you see67:44it which is not a stupid way to do it67:47but it depends upon having honest people67:51of goodwill in charge and now we have67:55the Trump administration so so the67:58dodd-frank is not a very effective tool68:00and it always depended upon upon good68:04leadership and68:06we have not found I haven’t come up with68:08a way to the thing about doing a regular68:10old-fashioned commercial banks is that68:15that system works the regulations work68:18the the guarantees work without68:21requiring that there be smart leadership68:23or good judgment calls at the top and68:25unfortunately everything we try to do to68:27deal with more modern financial68:29institutions is requires both goodwill68:34and sophistication which are both the68:36now and very short supply question from68:39the balcony please thanks very much so68:41we’ve mostly discussed zombi ideas in68:43the kind of domestic policy context i68:45wanted to ask about zombie ideas in the68:47international context in the sense of68:50the Washington Consensus and trade68:51liberalization and specifically I want68:54to ask what your thoughts are on the68:56extent to which countries can still68:58develop by exporting I has the impact of69:02technology and the scale of China made69:06it essentially impossible for a trade69:07liberalization to facilitate development69:10okay that’s a good question69:13I think empirically it’s just the69:16premise is wrong so we all know about69:19China and we know that China occupies69:21this huge space and China is a unique69:25success story nobody else has matched69:27their rates of growth but it’s not the69:31only success story so when I took I like69:34to talk about the the unfamiliar cases69:39Bangladesh Bangladesh is a desperately69:43poor country and and compared with69:46working conditions and in in the first69:49world it’s it’s is horrible and they69:51have factories that collapse and kill69:53hundreds of workers and all of that but69:56Bangladesh is actually they’ve they’ve69:59tripled their per capita income and70:03there there are very poor country but70:06they were a country that was right on70:07the edge of Malthusian starvation and70:11it’s all because of the ability to70:13export if the the ability basically70:17clothing labor-intensive70:19that they’ve been steadily gaining70:21market share at China’s expense because70:23China has been moving upscale and that’s70:26that’s showing that you can get yeah70:28that’s that’s major development that’s a70:29major change it’s it’s not it’s a long70:32way from from turning into into Western70:35Europe but it’s it’s it’s a very big70:37deal and it’s showing that the70:39globalization can still work for for70:41poor countries so I that’s that’s what70:45the line Bangladesh is not a it’s not a70:48banana republic it’s a pajama republic70:51but but that you know they can make fun70:54of it but in fact their use that’s a70:56very large number of people who are70:57lifted at least some ways above71:00starvation level by globalization and71:03another question from the balcony please71:06looking at it as a economist with a71:08mathematical mind what impact do you71:11think a shift a proportional71:12representation would have over time as71:15you compared to the electoral colleges71:18and first-past-the-post which we have in71:19the UK other British Commonwealth71:22countries which tend to over time have71:24led to two party states so what if we71:26shifted the proportional representation71:28okay I mean firstly the u.s. the the71:33u.s. electoral college system is71:35monstrosity that’s a that’s not about71:38first-past-the-post it’s about a system71:40that at the presidential level gives71:42disproportionate representation to to71:45some states with small populations and71:48at even more important we have the71:50Senate which where half the Senators are71:53elected by 16 percent of the population71:55so this is a that that’s crazy71:58that’s a deeply basically we’ve we’ve72:00evolved into a rotten borough system for72:03half of the US government and that’s72:05that’s a clear monstrosity as for the72:08rest I mean I don’t know I mean this is72:13not I’m not a political scientist I talk72:16to political scientists which by the way72:18is rare for economists we actually talk72:20I actually talk to these goods to other72:21social sciences and take them seriously72:24and but what I would say is that the the72:29there are places with proportional72:31representation72:32that also managed to be very72:34dysfunctional so you know Israel I72:38believe has proportional representation72:39and I would not say that Israeli72:44politics these past 15 years have been a72:47model of good ideas and wisdom72:50prevailing in fact they I mean every72:52system has its problems and one of the72:54problems with proportional72:55representation is it sometimes causes72:57small factional parties with with very73:01antisocial goals to to be kingmakers so73:06that’s not an easy solution either I73:08don’t really know what the answer is73:10except to say that that you know people73:13people are both generally clever and73:19often nasty and they can find a way to73:21screw up any system question trip down73:24here hi73:25you said earlier that the American73:26economy is in a pretty strong position73:28so I was wondering how much he thought73:30Trump could legitimately claim73:32responsibility for that and then73:33alongside that what are the strong II73:35cannot strongest economic arguments to73:37voters for voting against him okay the73:41reason that we’re in a relatively strong73:43economic position is that it’s basically73:47deficit spending after years and years73:49of saying no debt this is an existential73:52threat then we must have austerity which73:54really hobbled the US recovery under73:58Obama as soon as Trump was in office for74:00Republicans said oh we don’t care about74:02that I mean the last two State of the74:04Union speeches have not so much as74:06mentioned the deficit and that even74:09though it’s badly done it does give a74:13boost to demand so I guess you could say74:16the Trump has gets some credit in the74:19sense that by getting elected he caused74:22congressional Republicans to stop74:24sabotaging the economy that’s not a you74:27know vote Republican and and and and the74:29and the economy won’t be undermined by74:31by our sabotage efforts so that’s not a74:34great electoral slogan but it might win74:36in the election I have to say and I lost74:40the room what the rest of that was but74:42the74:44was one of the strong strongest economic74:46arguments to voters to vote against him74:48oh the thing about Trump is that he’s74:50managed to preside over a economy that74:55by sort of aggregate measures74:58unemployment rate is low GDP growth has75:02been pretty good not spectacular but75:04pretty good but which is is showing75:08increased hardship for many people75:11despite that I mean we were making huge75:13progress in reducing the number of75:15people without health insurance that has75:17now gone into reverse the number of75:19people who say that their that they are75:23that they are postponing or not75:27undertaking necessary medical treatment75:29because of expense has skyrocketed75:32and the America like the UK there’s75:38tremendous regional divergence we have a75:43large part of the large parts of the the75:47heartland which are in severe economic75:50decline as social collapse and that has75:53just accelerated you know despite the75:55low overall unemployment rate the state75:58of affairs in Eastern Kentucky is76:01terrible and life expectancy I guess it76:06rose slightly this past year but you76:07know mortality rates are rising and it’s76:11as in case an Angus Deaton say deaths of76:14despair people dying from from opioids76:19alcohol and suicide have been rising76:22despite the strong economy so this is76:25actually that earlier question about GDP76:27you know the GDP growth not saying that76:31the that it’s false but under under the76:34surface of that good GDP growth is76:36actually a substantial increase in76:38misery just a one final question from76:43thanks bull great to see you here my76:48question is about the u.s. minimum wage76:50obviously it’s very very low compared76:53it should be you know from visiting the76:55US for last 25 years it seems P and76:57getting no three jobs to make ends meet77:00what do you think the minimum wage77:02should be and one of the reasons other77:05than you know losing jobs that perhaps77:07people have been keeping it down the77:09minimum wage suppressed oh so I asked77:12that in Reverse I mean the reason the77:14minimum wage has been held down is77:15because employers want chief labor and77:20they have a lot of clout the question of77:24how high to go is an interesting one77:26and it’s the so even the the big move in77:34the u.s. is for $15 and that’s a I’d say77:39even $15 an hour even Alan Krueger who77:43was one of the key researchers on that77:45revelatory work was a little nervous77:48about 15 and that the problem is77:52regional the the state of New York the77:55state of California no problem you have77:58a $15 minimum wage and and there’s78:00absolutely no reason to think that78:02that’s economic difficulty we’re talking78:05about Mississippi or Alabama places with78:08much lower productivity you might start78:10to have some job loss at that level I78:12think that the preponderance of the78:14evidence says that $15 is okay that78:18there might be some minor job loss in78:21some of the least productive parts of78:22the US but but overall not a big deal I78:26think 20 I would start to make me really78:28nervous78:29that then you start to really be a78:30problem in in potentially problematic78:33territory but it’s it’s why they see78:36actually in this case I think a federal78:38minimum wage of 15 and then higher wages78:40and in in in appropriate States it makes78:44sense this is one of these cases where78:45federalism works to our advantage and78:47and it’s interesting by the way Alan78:49Krueger did do at one point he he went78:52to to Puerto Rico which part of the u.s.78:55is subject to the u.s. minimum wage and78:57much lower productivity and said there78:59we should be able to see clear evidence79:01that the minimum wage cost jobs and he79:03couldn’t find it he said I don’t really79:05believe this by79:06I can’t find the evidence so so for the79:09moment I say let’s let’s go for 15 and79:11see what happens and then maybe maybe79:15look for the high productivity states to79:20to go beyond that great I’m so sorry to79:24have to draw it to a conclusion but you79:27will have the opportunity to meet ball79:29and and get the book signed for now79:32please join me in thanking him for79:34really fascinating today all right