Mark Blyth ─ Global Trumpism

Thanks everyone for coming. This is the second in a seven part series on a bi-weekly basis at the slightly unusual time at 7:00 to 8:30 PM. It takes place on Tuesdays, including election night. The idea was to have an intimate participatory discussion. Except, for Mark Blythe bigger rooms are necessary and will be [INAUDIBLE]. In a couple weeks, we'll have Margaret Weir talking about inequality and Democrats and Republicans. But today, it's Mark Blythe talking about global trumpism, as you know. Mark is professor of political economy and political science and International public affairs at the Watson Institute and the Department of Political Science. He has studied in his native Scotland a couple of degrees before he came to the US and has a PhD from Columbia and a series of faculty appointments at Johns Hopkins and has been here for seven years at Brown University. How time flies. He's got a lot of deep scholarship on matters of global economy. He's done lots of thinking about this campaign and the global impact and the global precedents of the campaign as well. So he's the perfect person for right now. Even though he didn't watch all of the debate last night, he might be pressured to these scholarly topics and will be unsullied by all the noise that's going on since 10:37 last night. Mark's gonna have about a half hour presentation. We'll have about an hour of Q&A and have you out of here by about half past 8:00. And I think it's moment. My mo? My moment has arrived. Marvelous. Can I move the slides with this, because this is wireless? Yes, you can. So I can do this? Great. OK. Good. Lovely, lovely. See? Win, win for everybody. This is my clicker. It is rather large, as you can see. So they micced me up so I can move around. Unfortunately, you can't do this. You can't do this now because it's blinding. So I'll be over here. All right, let's get started, global Trumpism. This is a mini meme. It was even a hashtag at one point. So when I was in Greece at the start of the summer, and they were expecting Greece to blow up again, I did an interview with often Athens Live, which is a news outfit down there. And they took a segment, four minute segment in the interview, in which I basically said the Brits are out and all that sort of stuff about Brexit. And it actually went viral. It got 1.2 million Facebook shares. Which is insane. It's since been reported on Youtube. It's about 100,000 views, etc. And I obviously said something that resonated with people. One of the things I said was "Trumpism's global." It's not just about him. And it's also not just about the right. It's also about the left, and it's about the fragmentation of political parties in Europe and elsewhere. So without further delay, let me get into it. So this is the first one. This is not unique. Let me show you. Can you name the Trumpets? Top left Trumpet. Just do it by political party rather than name. Top left Trumpet? Marine Le Pen. Yes, exactly. Marianne Le Pen, the younger. Le Pen the younger. And then next up? Swedish Democrats. Although, they're not democrats and they like being very, very Swedish. Guy down below? The True Finns, who actually hold the balance of power in Finnish parliament and are actually quite powerful in the country as a whole. Next to him? Must be Lega Nord. Lega Nord, exactly. Didn't [INAUDIBLE] Lombardy? Used to be. Used to be. That's Lega Nord. That is Lega Nord. OK. So that's the Italian version. Then the bottom left? I think that's the Golden Dawn leader. I'm pretty sure that is. That's the Greek one. And then on the right, that's? Viktor Orban. Viktor Orban, leader of Hungary, the guy who basically is a dictator inside the EU. So there's a lot of this going on, because if you take Trump's policy pronouncements and racial stunts and so on and so forth, these guys, they make Trump look normal, some of them. They're hardcore, and they're actually in power in some countries. So that's pretty scary. Now what if I told you there was a left wing version of this? Would you believe me? Let's do the lefty version. Who's at the top? Alexis Tsipras. Alexis Tsipras, who's prime minister of Greece. And who's next to him? Pablo Iglesias, leader of Podemos, who regularly poll between 20% and 25% of the Spanish electorate, which is part of the reason why Spain can't form a government. And then next? Co-Leader of Die Linke in Germany. What's her name, Katerina? Katja Kipping. Katja Kipping, right. Basically, German politics for the longest time has been organized around an axis of whatever you do, the center right and the center left must stop the red-red-green axis. And that's basically the left bit of the red-red-green access. Next up. [INAUDIBLE] Yes, exactly. Co-Leader of the Five Star Movement in Italy, who also poll between 20% and 25% of the vote and have done so two elections. And then down at the bottom? Comrade Corbyn, who basically is doing an internal putsch on the Labour Party and is about to clear all the blairites and turn it once again into a proper left wing party in his image. And then Nicola Sturgeon, who makes a virtue of our government being the anti-austerity government. Now, the big difference between these ones of course, we can say that they're similar in the sense that they've come up now, the different expressions of voter discontent. But they're very different on their politics. One of them is avowedly racist. The other one is avowedly anti-racist. So there's actually a variation there. But is it simply racism? Or is there something deeper going on? Now, here's the problem with dissecting global Trumpism. There's a mini-culture war going on about how you or rather what you think Trump is. And if you think, well, it's all just racism, then we've got some evidence for that. But probably to that, the story for Trump went something like this. And this is my version of Trumpism, in a sense, in a nutshell. So I like to tell the story this way. There's a guy called Gary. Gary lives in Gary, Indiana. And Gary's 10 years in the union. In 1989, he gets seniority. So he's a line supervisor with seniority. He's turning 30, gets married. Everything's going great. And he's getting 30 bucks an hour real. Now, who knows why, but they've been moving the plant and equipment down South for a long time. I mean, China didn't take most of the industrialization. The South did. Texas did. North Carolina did. So they've been losing a lot of the industrial base. He didn't worry about that. But then they signed this thing called NAFTA. The plant disappeared, the supplier plants disappeared. And the town takes an enormous economic hit. So a lot of people move out. The tax base goes down. The schools get worse. And he bootstraps himself, says, I've never relied than anybody. I'll get another job. They were meant to retrain him as a computer programmer. That was what everybody said. But the governor at the time really just gave a shit about tax cuts. So they just cut the budget for that and handed it out to people. So then he ended up getting a job in a call center. So he went to 15 bucks an hour. And then five years later, the call center went from Indiana to India. And now Gary works in his dotage, very hard, long hours, for 11.67 an hour for the largest employer in the United States. Who is? Wal-mart. Wal-mart. You know the story. You know the narrative. And every day, Gary reads in the papers how him and all his mates are about to be replaced by robots. Because you do, every day. Whatever sector you're in in the low end of the labor market. Automation, robotation is going to happen. And the guys in Wall Street who got bailed out with everybody else's money? They love this. They're going to make a fortune off this, all these entrepreneurs, Uber guys, all the rest of them, they're the ones who'll own the patents on the robots. And he'll be thrown on a scrap heap with his mates. And the only person that actually seems to articulate anything he gives a shit about is this guy Trump. Now, he knows he's a buffoon. He knows he's a reality TV star. But he's had politician after politician after politician, every four years, showing up saying, "Vote for me. Better jobs. Vote for me. More security. Vote for me." And life's got crappier, and crappier, and crappier. So he has no reason whatsoever to believe a word they say. So he has a liar on one side and a bullshit artist on the other. Which one gives you more possibilities? Now, that's Trump's narrative. That's all about economics. There's nothing about race in there. So then people started to investigate the preferences of Trump supporters. And there's a lot of scientific research on this, and I started to go through all of that. So here's a few bits. Partly, let's get out of the Trump area. Let's look at Brexit. So that was a really interesting case there. And one of the things that people said was, "oh, this is the revolts of the have-nots." These are the people who've been economically deprived, all the rest of it. But when you decompose the vote, the narrative of taking back control is the one that people mentioned the most. But right behind it is anti-immigration sentiment. They don't like immigrants. Rich areas and poor areas both voted for Brexit. So if it was simply a case of the poor, and benighted, and the ones that have been done over by trade deals and globalization, then that would be the story. But it's not. It's rich and poor. So that implies there's someone else driving this. What else? The old voted more. And when you poll them, old people are more racist, right throughout Europe, than young people. So they show more, and they're more anti-immigrant. And that seems to be basically not about economics. Anti-immigrant and anti-Muslim sentiment in particular, poll after poll is rising across Europe. We saw the recent humiliation of Angela Merkel's party in Germany, the rise of other party called AFD, the Alternative Fuer Deutschland, who are basically an anti-immigrant single issue party in that regard, maybe two issues. The rise of the authoritarians, when you really start polling these people, both here in the United States and in Europe, you find that they have very authoritarian preferences. So if you give them the standard questions about how do you think kids should be reared, or what do you think of this social situation, they stack up time after time as liking hierarchy, patriarchy-- women should be in a certain place-- very gendered identities. And there's a very positive association in a lot of the social psychological literature that underpins this, the micro-foundations, on this notion of loss of status. So it's not about how poor you've because. It's the factor that at one point, you were top dog. And now you're not. And it's partly blame, but it's partly an aggression response, and that leads into a very much more racial and also gendered coding, is what's going on. So actually, it's all racism, really. But then the economists started to come back on this and went, hang on a minute. Let's think. What's the counter-factual here? The 25 years of stagnate if not declining real wages, the shuttering of entire cities, the hopelessness, the opiate addiction, the collapse of the lower middle class and upper working class life expectancy and life chances has just no effect whatsoever? Because if it's all racism, that's an incredibly strong claim about the lack of efficacy of economic issues. I mean, surely there must be something going on here. And once you start to figure out that economics isn't just about income, you get into a very interesting space. Trumpet support, as I like to call it, right across Europe correlates incredibly strongly with areas that are subject to Chinese import competition. So areas that are basically exposed to trade with China, where they can do what you can do, either in services or in trade, very, very high support for these types of parties and these types of policies. Correlates with health inequalities. So if you're basically poor or non-healthy, the chances are you're going to vote for one of the right wing parties and also, though, the left wing parties. There's two sides to this one. It correlates incredibly well with job insecurity. So it's not the fact that you're being paid less and less. It's you have no control. So of one example of this from surveys of Brits, if you do ABCD classifications of jobs, basically lower manual, upper manual, professional, if you look at the Cs and the Ds, as recently as 10 years ago, 30% of respondents said that they had a good deal of control over their jobs. And now it's 9%. So it's just an astonishing feeling of being disempowered and being out of control. And you've heard all the stories about this, like walking Amazon warehouses where you walk for 11 miles a day. You're strip searched on the way in and strip searched on the way. I mean, these are horrible working conditions. Correlates with low income over time. I'm going to show you a slide on this one. And it also correlates with exposure to technological disruption. So the areas, the jobs that have been the most affected by technology are the ones that tend to be the least secure. And all of that feeds together in the same way. So I'm trying to find a way to understand Trump on a global scale that encompasses the left and the right and is actually attuned to both of these. Because I have no doubt that a large number of people who support the National Front or the True Finns are racist. I mean, they're pretty straightforward about it. Trump maybe doing more of the dog whistle version of this, but it's the same thing. But the economy matters. So how do they both drive each other? What's going on there? How does it fit together? So here's the first one. When the Brexit vote came out, the panel on the left, those dots are local authorities. So North Providence, East Providence, Providence, that sort of stuff and basically change in real earnings. So is it the poor people or the areas that are voting for Brexit? There's no correlation whatsoever. So this went viral. Because this proves that it's not the economics, right? The weird thing is, in the same paper on the next page there's this one. And what does this one show? If you're earning eight quid a year, you're 70% or 80% likely-- eight quid an hour-- to vote for Brexit. And if you're at the top end of the income scale, 18 pounds an hour, so 35, $40 an hour, you've got a 30% chance of voting for it. So if you look at it not as a snapshot but as an over time problem whereby some areas of the country have chronically low wages, yeah, the economics did matter. So why are we so desperate to pin it on race and exclude economics or vice versa? That just seems weird to me. The only reason I can really think that people want to do this is because it allows the soft left, who have been implicated in basically, I will call the defenestration of working class prospects over the past 25 years, a get-out excuse. And I'll get back to that when we go on. This is another one looking at this. If education and skills are a proxy for income, then the economics are still in the mix. So this is percentage voting to leave the EU, and then the number, the percentage, that has level four or higher qualifications, that being equivalent to community college or above. So massively strong correlation with education level. And again, over here, no qualifications at all, the exact mirror opposite, exactly what you'd expect. So if you are highly educated, you're probably earning more. You live in an area that's got less health inequalities. You can see how these things will snowball and hang together. An illustrator could put up chart, after chart, after chart, but it shows there is something in this. Now, what about that left wing claim that I made, that there's a left wing variant of this one? So this is the kind of a narrative that's flying around in the background of all the economic stories-- we're going to go back to the '30s. There's going to be another Hitler. There's going to be another war, the rise of the authoritarians, right? This is the [? meta-meme ?] in the [? bag ?] of the economic [? arrows. ?] And it's a very straightforward story. Back in the '20s, we had financial crises and very deep recessions. Lots of people got hurt and injured. At that period, they basically decided that democracy was not doing well, that politicians were all liars, they were all bought and paid for. And who did they vote? They voted for the authoritarians, Mussolini being the classic. The guy made Life Magazine. Tell you how in-house this became during in the 1930s. When the United States did its first New Deal, the National Industrial Recovery Act, the number one visitor to the White House in 1934 was Mussolini's son, in terms of frequency of visits. Because he was busy cartelizing the whole of northern Italian industry to protect it against economic shocks. What did they try and do in the [? NRA? ?] Cartelize American industry, set prices and wages. We were stealing from the fascists. Now what happens? Is it true that this is more of the same, a wonderful Mussolini-Trump juxtaposition? The left is losing. The Democrats are. And I mean that right across the world. Democrats are losing. Democracy is in crisis. We've got these authoritarians. Oh no. We're going back to the 1930s. Is that the case? Well, no, Soren Kierkegaard tells you why. So all the philosophy buffs in here immediately start laughing on that one, because why have you got a Soren Kierkegaard slide? That's really weird. Kierkegaard has this wonderful way of thinking about the future, which is, it's always a process of becoming. So you cannot experience it except in the moment. And once you do, you close off possibilities of what other future moments can be. So the fact that you've lived the past means that, really, you cannot relive the past. It's actually impossible to do so. So if we take that away, then you're left with, all right, but is there something similar going on that we can make sense of that will tell us the directionality, if not the exact sort of amplitude of what these changes mean? And I think there is. So let's talk about regimes. So the first one is a diet regime. Some of you might have tried that at some point. They all fail. There is Gaddafi as a classic political regime. They all fail. There's Kate's 22,000 pound beauty regime, which may be a success. I don't know. I can't really judge. and then there's a skin care regime. And I'm not talking about any of that. I'm talking about macroeconomic regimes. So what are macro-economic regimes? They are basically the way that economies are built institutionally. And it varies across the world. Now, for those of you who do some of this type of work or are in political science, economics, there's a whole literature called "varieties of capitalism." And basically, some countries look a bit like the US, and some countries look more like Germany. And that means that the way that they do skills is one way, and the way that they do training is another way. And so for example, in the US, training is done to a general skills level, and then firms do most of it in-house. Unions aren't involved. Germany, unions run the training system. It's heavily integrated. Big firms, big labor, blah, blah, blah. Now, that's partly what I'm getting at, but what I'm going at is a more basic way of thinking about this. Which is how is it that these different institutions finance skills, training, retirement, corporate governance, infrastructure, [INAUDIBLE]? How do you do all that? How does it fit together? What's the plumbing of an economy? And think of this in a sense as a bit like a computer. How is the hardware assembled? Because once the hardware is assembled in a certain way, you can write different software on it. So if you think about it, capitalism as a set of institutions is very different from the 1940s to the 1970s. From the 1970s till now, it's also very different. But what's also changed are not the institutions, not the way that it's organized so much as the software that's written on it, the ideas, the programming, the way that we run the system. So with that in mind, let's think about how regimes change over time. So think of that as the hardware. What's the software at work in the system? So let's go back to the 1940s, 1943, 1944. So the Allies are winning the war. There's a commitment clearly to full employment after the war, primarily because if you don't do it, the Soviets will. And there was an economics that went for it. They rewrote the software. And that's John Maynard Keynes. You've heard the line at some point that "in the long run, we're all dead." And this is the full quote, and it's worth reading. Because, in a nutshell, it tells you everything about why this was new code, why this is a new software for running the economy. "The long run is a misleading guide to current affairs. In the long run, we're all dead. Economists set themselves too easy, too useless a task, if in tempestuous seasons, they can only tell us when the storm is long past that the ocean will be flat." So he cared about the short run. Well, why? Because this is how he thought about deep recessions. Deep recessions are called depressions for a reason. Because, in a sense, you're depressed, or your investment expectations are depressed. If you've experienced very good times for two years, and then you have two bad days, you don't rewrite the script. But if you've had two good years and then you have a bad year, you begin to think differently about the possibilities for the future. And if you basically drag that out, that short term starts to become longer, everybody's investment expectations get depressed. So if you've been in a long recession for five years, you're a capitalist, let's open a factory. No. Why not? Because nobody's buying anything. But if you think that way, and you think that way, and you think that way, you all sit on your money rather than investing it, what happens? You bring about the very collapse in investment you're trying to avoid. At base, it's primarily a psychological trick. That was the essence of what Keynes was trying to do. So the whole thing about spending, government, all the rest of, it's turning the expectations in the short run in a different direction so that investment goes up. That's it. It's totally different. Now, there's a guy called Kalecki, or Kah-lat-ski. Most of you have never heard of him. He wrote this thing. This thing is a seven page critique of his 383 page book, essentially. And he says there's a big problem with this. I'm a huge fan. Don't get me wrong. Full employment and all that sort of stuff, fantastic, particularly after the Great Depression. The commies are a real threat. We want to save capitalism. Even I do, and I'm a lefty. Great. Knock yourself out. Good. but There's a problem. And what's the problem? Well, if you run full employment as a policy goal forever, you're going to have a problem. Well, how? Everybody will be happy. People will be consuming. We'll have high wages. It'll be nirvana. What are you talking about? How do you pay for high wages? Um, employers pay them. Right, so how do they get the money to do it? Well, they make more sales. They do it out of profits. And if you run permanently full employment, then basically the average wage over time is going to go up. And if it's running full employment, it's hard to get labor, because you basically have everybody employed. Then the reservation wage at the bottom and the median wage is all going to move up over time. Now, unless profits are constantly moving ahead, the only way firms can get away with this is to do what? Jack up prices. But if you're jumping up prices in order to pay wages, what's happening? What did we call that in the '70s? Inflation. He predicted it in 1943. And he also said something fascinating. And he said, once you do this, capital investment, they no longer have the whip hand. They can't discipline labor. Because they'll strike. They'll do sit-downs. And what else happened in the 1970s? Huge industrial unrest. So this guy basically predicts the bug in the software. Or rather, it's a feature rather than a bug, to use the term. So by the 1970s, this is Britain in 1979, the famous winter of discontent. This is Australia. You don't think of Australia as being affected by much, but unemployment on the one side, inflation on the other. That's Gough Whitlam holding on to the raft of the economy being buffeted by the waves. And this is Kalecki's problem-- labor can move costlessly from job to job and can strike at will. Business can only restore profits by raising prices. That eats into wages, provokes more strikes. The result is inflation and a collapse in investment. Because you know what? You're pissed with the situation. You are the investor class. You're losing money. Inflation's eating at profits. Labor's eating at profits. You can't make a buck. What are you going to do? This is what else Kalecki predicted. You're going to fund a market friendly revolution. You're going to change the way that people think about the economy. You're going to appeal to the self-interest of consumers and individuals rather than as workers and members of unions. You're going to discipline organized labor. You're going to do the PATCO Strike in 1982 and break organized labor in the United States. You're going to globalize supply chains. Hey, try striking now. Because if you do, I'm off. I'll go first to Texas, and then I'll go to China. So your ability to demand a wage increase just goes to zero. And at that point in time, that wonderful stagnation in wages for 60% of the economy started. Funny that, isn't it? You deregulate finance to increase capital mobility so that you can move your money around but labor stays in the one place. You hand policy over the technocrats who are charged with one goal and only one goal-- fight inflation, even if it's not there. And give them medals when they do. And then globalize production. Because when you do that, you're creating supply chains with incredibly thin profit margins for everybody in the supply chain, very cheap labor, massive returns back to the parent company. Why is Apple so damn profitable? That's why. Now, what does this do to this notion of a regime? Well, think about the regime that we built between 1940 and 1970. What did it look like? It was a debtor's paradise. Did anybody here take out a mortgage in the late '60s or in the 1970s? Right, what happened to your mortgage? Half of it disappeared. Inflation ate it away. You had a fixed rate at 7% and inflation went to 12. Every year that happened, somebody else was paying your mortgage. You know who was eating it? The bank. So who was actually paying for the bank? The guy who owned equity in the bank, the investor class, these girls at the front, the ones who are funding that market friendly political revolution goes, while this is awesome for you, it's horrible for them. So you get sustained inflation. Oddly, labor's share of national income hits an all time high. Of course, they're constantly pushing, right? Corporate profits are at an all time low. Unions are strong. Inequality's low. Markets are national-- this is crucial. We'll get back to this-- and not international. They're not unbounded. Finance in particular is in its post-New Deal regulatory box with a lock on it and you can't do all the stuff you could do. Central banks were check cashing agencies for the Treasury. They took orders. They were dependent central banks. And parliaments actually had power. 30 years later, after that big market friendly rewriting of the software, what do we have? Secular disinflation. Since the financial crisis, global central banks have chucked the equivalent of $13 trillion into the global money supply and there's no inflation anywhere. Funny that, isn't it? Comparable share of income, as we know from Thomas Piketty and also yesterday from Branko Milanovic, is at an all time high. The wage here is at an all time low. Unions are weak to the point of being unconscious, if not dead. If you do a graph of strike activity since the 1970s, it does this. And that's true everywhere. There just aren't any. It doesn't work anymore. Inequality-- very, very high. Markets are global. Why? Because then labor can't piss these people off. It's very simple. Finance is strong. Central banks are strong. This is why we care about Janet Yellen. Janet Yellen runs the economy, as far as most people are concerned. How did that happen? And parliaments, Congress, are not just weak, they're venal. They're self-destructive. They're hated institutions. Very different world. So here's the problem with the current regime and why that produces both left and right trumpets. This is the key slide. Think about a world in which you've got very low interest rates, very low inflation, if not deflation, systemic. You cannot get inflation up. If you can't get inflation up and you have no way of forcing your employer to give you a pay raise, other than if you just magically get massively full employment, you get wage stagnation and all the returns go to the top. This is all these graphs on inequality, the whole nine yards, right? In that world, how have people, in the United States in particular, but also in other countries, not so much Ireland and places like that, but in some countries, how have they managed to maintain their standard of living? What did they do? Credit cards. Yes, credit card nation. They borrowed. They levered up. So you lever up on the expectation that there's a life cycle of consumption and you'll get into debt, but your wages will go up and then you pay back the debt. But the wages never went up. So you just revolve. You just keep more and more debt going on. So if you actually look at debt across the income distributions, it's actually true that most debt is held by rich people, but the punishing effects of debt are held by people at the bottom who simply can't pay it. Hence you get payday lenders, predatory interest rates, loan sharks, all the rest of it, all the nice bits of finance. Now, enter deflation, something really interesting happens. The real value of debt goes up. If prices are going down and you have a fixed contract to get a certain amount of money, that money will buy more. So if you're a creditor, you want your money back. But if you're on the other side of the trade and you haven't had a wage rise in 30 years, you can't pay. Now who's the loser? Who's the loser in this situation? Who are the political parties that are meant to protect that part of the income distribution, that part of the population? It's the center left. And what happened in the 1980s, and particularly in the 1990s and 2000s, was those parties, the SPD in Germany, New Labour in Britain, the New Democrats here, basically give up on them. I don't like unions anymore. I don't like those bottom people, the poor people. They don't show up to vote anyway. I need resources to fight my electoral campaign. I need you lot. I need people who are going to vote, people with assets, people who have done well. So everybody starts moving up and the bottom 20% just get dumped. And then we can tell ourselves stories about how it's all going to magically adjust, and these communities will be reborn as tech hubs. No, they won't. There's no investment. You wouldn't go there. When's the last time you went to Cleveland? Right, you don't. As simple as that. You don't. Everybody who leave Brown, where are you going to go? You're going to go to New York. You might go to LA. You're going to go to DC. You're not going to Cleveland. You're not going to Baltimore. You're not going to any of these places. So what are you left with? Well, the traditional left parties abandoned their core constituencies. Who pops up in their shadow after the financial crisis in a moment to stress? Think about Greece-- Syriza. Think about Spain-- Podemos. Think about Scotland and the SNP. These are populist movements. These are nationalist in the sense that they want to regain control of the national economy. They want to shield it from globalization. The one thing many of them have in common, both left and right in Europe, they all want out of the euro. Because they see that as the cause of many of their ills. But if you look at the vote sure of these parties, they are collapsing. The SPD got 19% in Baden-Wuerttemburg in its last election. I mean, that's just getting absolutely kicked in the face. What happened to Labour last time in Britain? They were meant to win the election. They got walloped. Basically, the working classes voted for UKIP, the right wing racist party. And in Scotland, because they had a left wing alternative, they didn't vote for the racist party. They voted for the SNP, because there was a genuine left alternative. So in that part of the world, what you see is the death of the center left. And when the center left see the new left coming up, they try and strangle them in the bathtub. That's why Greece and Tsipras was absolutely held under the water. The first criticisms of Tsipras the minute he took the job? The German Social Democrats right out of the gate. So what is it happens when Corbyn takes over Labour? All the New Labourites? Massive character assassination. He's an anti-semite. He's a racist, all this sort of stuff going on. Really interesting politics. Now, go to the other side here. Who are the winners here, enter deflation? Well, it's the opposite of your story in the 1970s. So who is it this time? Can't pay, won't pay, will vote for a trumpet. So what you have is a kind of debtor's revolt against the world that we've built over the past 30 years, which is a creditor's paradise. So what you see is a left wing expression and a right wing expression, a racist expression and a non-racist expression of fundamental discontent with the way the rewards of the system have been skewed over the past 30 years. And what you see is then the rise of populist right wing nationalists parties, particularly on this side. It's all about re-nationalizing markets, anti-austerity coalizations, anti-globalization on both the left and the right, particularly in Europe, and anti-trade, anti-euro. So if you take the website of the National Front and Trump and Syriza. And I'm not yanking it. You can do this at home, folks, if you can read Greek and things like that. But no, they actually have an English page, right? But if you look at that and filter out all the National Front stuff about overt racism and immigration, just don't click on the immigration link, right? Just look at their stuff on the economy. They're remarkably similar. It's really amazing when you do that. So why is this happening? This has been much critiqued, but it's still true. Branko's got a reply in The Financial Times today, a re-formulaiton of this. But this is the global income distribution. It's the elephant chart. It's the elephant in the room, quite literally. So here's where people are in the global income distribution. Here is the poorest person in the world, literally. And here is the richest person in the world. So what's been happening? Well, basically, if you are in Chad, you've had massive income growth, but you went from $0.40 a day to $3. So let's not get too excited. If you're up here, you're China. And that's where most of the gains have been. So you take China, you take East Asia. It's been doing really well. That's high growth. Right here, where it starts to go down, 67 percentile, thereabouts. Actually, it's 59% percentile. That's the poorest person in the United States. That's the American middle class, defined median salary of the middle class. Haven't been doing so well, have you? And then the people like me? I've been getting a bit of the upside. But really, all the gains have gone to the super rich. So if that's the way the gains have been distributed, you borrow this to there. That's not just Trump support. You do that for any country, you'll find out that's the left wing support too. It's that section of society that can flip either left or right, if there's a left wing alternative. It's just in a lot of places, there aren't Bernie was in many ways the left wing alternative, but he was roundly defeated. And it's all about this. Piketty has another reason for why this happens, the famous R is greater than G. Really easy to think about this. I have a condo in Boston. I bought it at the right time. It's a really nice building. I now have princelings driving Lamborghinis around the garages and all that. While at least they're Maseratis, right? Trust me, I drive a Volkswagen. We moved out. We're down in Providence. Love it. It's great. Keep the place in Boston. Why? It's going up at about 6% to 7% a year real. So just holding it, I mean, I'm not earning this. I'm not doing. I'm not improving it. Just, that's it. The returns that asset are 6%, 7% a year. What's the rate of growth in the economy? 2%. So if you have wages, you get that. If you have assets, you get that. Welcome to the inequality generator. So this is baked into the cake. Now, you can critique R, G, all the rest of it, but the fact is, that's the way the world looks. Now, is Trumpism here to stay in such a scenario? Well, it depends upon the diagnosis. Now, this is one Rosa and I spoke about briefly. And she sent me some really helpful links, and I looked through them, and I thought about them. And if it's all racism, if you basically say, these people are irredeemables in a bucket of irredeemables. They're all racist, right? If he doesn't win the election, what do you do? Do you burn them? Right? I mean, what exactly do you do you do? You just say to a third of the electorate, no, I'm sorry, you're racist. We just can't deal with you. Sod off, right? Because that's not exactly good public policy. Now, what you can do, in an ideal world, is you can look to countries that have actually done a much better job of this, etc. And we can become Canada. It's not going to happen, is it? You just know it's not going to happen. Building inclusive institutions that genuinely respect multiculturalism, plural identities, gender, etc. it's bloody hard, even under the best circumstances. And trying to do that as a public policy reaction to a perceived set of racists, I'm not sure how that works. You can reduce threat perceptions from outsiders to insiders. So basically, you can stop being scared of the people you're scared of. So statistically, the following is true. You have more chance of being attacked by a shark on land then you haven't been attacked by a Muslim terrorist in the United States. It's impossibly long odds. But the perception is completely different. And people act upon perceptions. So how do you detune the perceptions? That's another really tough public policy problem, particularly when you have an ideologically biased media, who have a whole agenda in promoting those types of diversions. You can always burn immigration and deport people. Well, Trump wants to 11 million, 11 and 1/2 million. The last person who did 11 million deportations was Joseph Stalin. It's funny how we don't make that kind of analogy. But just in case you're feeling smug about yourself if you're a Democrat, Obama has deported 3 million over his tenure over the past eight years. So if Trump comes in and hits six, he's actually just doubling what Obama's already done. It's no wonder the undocumented in this country feel insecure. And of course, after that, I don't know what to do. Now, again, if it's mainly economics, can more be done? Because in principle, you can do. Redistribution and capital expenditures are back on the agenda. We knew that both Clinton and Trump want to spend on infrastructure, and God knows the country needs it. One third of all bridges are deemed unsafe by the American Society of Engineers. We can definitely do better. We can borrow at negative interest rates for 25 years. Why would you not build everything you need for the next 50 years? So you know that that can be done, and it probably will be done, regardless of which one of them wins. But here is the weird one. Both of them-- and this is where I fault Bernie as well for this. We're going to bring the good jobs. No, you're not. That's simply not going to happen. Because you don't make stuff in factories the way we used to 30 years ago. There are no Garys anywhere. The people who are the equivalent to Gary are working 19 hours a in a Foxconn thing, which is the size of a small city with absolutely terrible rights and all of it. So do you really want to try and bring that back to the United States? And technically, capital substitutes for labor at the margin in manufacturing processes. You need less and less labor overtime. So even the Germans, who are fantastic engineers and exporters, they have a shortage of skilled engineers, but the absolute number of people employed in that sector, in the export and engineering sector, is falling over time. Because you substitute for it. So it's not just the poor and the unskilled that are going to be robotized out of a job. It's actually the highly skilled is just as vulnerable. So how are you going to bring the jobs back? There's another way you can do it. And you could basically do the "get corporates and the rich people to pay taxes." Well, the problem with getting rich people to pay taxes? They're also powerful and they don't like that and they have all the money. So it's very hard to do that, particularly when your Congress is bought and paid for by the same people. So you can fine Apple 13 billion. And then in retaliation, the Americans will fine Deutsche Bank 14 billion. What happens? And then of course, there's the whole issue of technological disruption. Now, this is the one I've been hinting at, robotics, all the rest of it. And that whole thing about job insecurity driving all of these fears. I'm going to show you a slide. It's amazing. Watch this. This is from a conference that happened last week. Guy I know who was there picked it up on and tweeted it out. The digital disruption has already happened. World's largest taxi company owns no taxis. Largest accommodation provider has no real estate. Largest phone companies have no telecoms infrastructure. The most valuable retailer has no inventory. Most popular media owner creates no content. Fastest growing banks have no actual money. World's largest movie house owns no cinemas. And the larger software vendors don't write the apps. We're already there. Now, what does it mean to bring back the good jobs in that kind of world? It's gone. It's different. So how does this play out? Because you do have global Trumpism. And there is a left version. There is a right version. I'm guessing most people in this room would be more comfortable with the left version than the right version. You don't strike me as overly racist, but you know, you never know your audience. Europe an even deeper problem with this, though. And this is why I'm more pessimistic on Europe than I actually am on the United States. I think Trump could be a flash in the pan here for various reasons I'll go into. But I think Europe's really screwed. And it actually has to do with something that the trumpets of the left and right in Europe get, which is that the euro is a disaster. And here's why. The way they used to talk about Europe as a joke was that it was the Protestants in the north and Catholics in the south. And the other one was the olive oil-butter line. So you knew what country you were in. If you were putting on butter on bread, you were in the north and olive oil was in the south. There's a great New Yorker cartoon from years ago, where two older guys are sitting in a restaurant, and the waiter comes up and puts something on. And the caption is, "remember when they used to give us butter?" Just that cultural change. But there was the olive oil-butter line, that are actually now maps onto something very interesting, which is basically who exports to the rest of the world and earns money and who doesn't. So what you've got, basically, in short form is the Germans moved all their parts suppliers into Eastern Europe. They did a globalization but only within Eastern Europe. And when you get to Eastern Europe, you get to a place like Romania, you find that you've got very highly skilled workers, really, really good engineers, great mathematics education. It goes back to the Communist era and the whole notion of independence that they had then, all that sort of stuff, so technical schools etc. So you're getting people who can do all the stuff you can do in Germany for a third of the price. So if you drive a Mercedes in the United States, there's a very good chance that the transmission was actually built and assembled in Romania, then shipped over here and bolted together. And it's a German car. So think about what that means-- technological disruption, supplies chains, etc. So if you're Eastern Europe or you're Germany, you're selling to the Chinese and Americans, you're making out like a bandit. So if you look at the surplus of these countries, their export surplus is huge. Now, here's the problem. You look at France, and you look at Spain, and you look at Italy, most of Italy at least, they can't play that game, because they're not big export countries. They're large consumption economies. Now, if they had their own money, if somebody is running a surplus, then something else logically has to be running a deficit. And if they had their own money, they could essentially devalue or whatever. You can do lots of things to protect yourself. But you're all sharing the same currency. And they've also signed this set of agreements in 2012 called the Fiscal Compact. Which is insanity. Which basically bans fiscal policy in the eurozone. So what this means is that there's an identity in the national accounts between external surpluses and internal deficits. Basically, if you're running a big surplus, somebody else has to run a deficit. But if you don't allow them to run the deficit, the only thing they can do is permanently constrict their economy. So you're asking, basically, the French, and the Spanish, and the Italians to run permanent austerity budgets so that the Germans, the Poles, and the Romanians can make money hand over fist selling to the Americans and the Chinese. Do you think that's going to piss off the National Front? Do you think that might actually, if it continues for several years, really push them over the edge? And they show no signs of peddling that one back. So at the end of this month, the director general of economic and social affairs for the European Commission, a very powerful technocrat called Marco Buti, is coming to Brown to give a talk. Well, not to give a talk, basically for me to interview him. And I'm going to ask him this. Because this is what I see as the long term problem. And if he doesn't do something about this, it's game over for these guys. So Europe is a particular problem. So it's a long term scenario too. Here's the positive story. You'd probably heard of secular stagnation. This is [INAUDIBLE] is the latest version of this. There's too little demand in the world, too many people are saving. Consequently, interest rates etc. are very, very low. Yeah, I mean, really, China, the whole of Asia saves. There's a huge saving surplus in Asia. Now the Europeans, because they're running an export surplus, and it's actually exporting [INAUDIBLE], so they're saving as well. So the only bit of the planet that isn't saving is the United States. What happens if the United States starts saving? We're also saving at once. You can't save all at once. It's the paradox of thrift. You would actually crash the economy. So it's good that we actually can't control ourselves, otherwise the whole thing would grind to a halt. But the basic story and this one is, OK, let's say that that's true, but it doesn't necessarily mean it's bad. Think about what happened with the last jobs report. Think about the long term trend of employment. We finally heard some wage growth. Project our at 2%, just 2% economic growth, but with practically negative interest rates and very, very low inflation, that compounds over time. That's not a horrible story. It's a bit like the 1950s, only scaled down a bit. It's kind of secular stability. Boring. Finance doesn't get to play its tricks. Commodity prices are low. Inflation's low. You can survive that. And if you do, and you're smart, and you do infrastructure spending, you get the boost from all that sort of stuff. You can defeat Trumpism here. I'm not so sure about Europe, because they're not together. They've got the euro problems, etc. But Trumpism is a blip. Here's the other one-- Boris. There's a class of politicians now which can only be described as buffoons, opportunistic idiots. And they will do anything and say anything. And he's one of them. And I genuinely believe that Trump is one of them. And I genuinely believe that a lot of the right wing variants are them. But you know what? The left wings can be pretty opportunist as well. Let's be pretty honest about this. So what's the negative story? Well, you know as I said, the 1970s was protected by this guy in the '40s, and he said this is going to happen, and it's going to be unsustainable. They're going to take it all apart and put it together again. Well, maybe we're at the point now that the thing that we built is unraveling, not just in terms of the collapse of center left party support, center right party support, that basically it's economically unsustainable to run this super competitive, insanely intense, disaggregated global network of production on a consumption based which is levered up the wazoo because people have been borrowing to make up for real income gains they don't have. And that's actually hit the skids. And we don't know what to do. So everyone looks to the Federal Reserve. What's the Fed going to do? Are they going to raise rates? They're going to raise them a quarter point. They're not going to raise them. What does that matter? It's a quarter of a point. I mean, this is utterly ridiculous. We're kind of bumbling forward. Let's do QE. Why not? We'll try it. Let's see if that works. Is it doing anything? Well, whatever, we'll just keep going, right? So there's a kind of bumbling and stumbling in policy just now. That's when these guys become powerful. Because if it looks like the people who run the world don't know what they're doing, then that's when these fools get their chance. And there's lots of fools out there waiting for a chance. You could see a real retreat from economic integration. We are seeing a transformation of party politics. Check that one. There's a real chance the EU could fragment along the exporter-consumer line. And all these parties, left and right, want a re-nationalization of politics, back to the national control. And in the right wing version, that's the discourse of the nation, patrie, the people, for France. The left wing version is a kind of class-oriented one. It's more internationalist. Is basically about us versus the global plutocrats, but it's still about local. It's still about the nation, control. Globalization is bad, etc, etc. And if these guys get a critical mass right across the world, if the trumpets are blowing loud enough, all bets are off as to where we go. So that's my take on global Trumpism. This is why I think Trump is part of a much bigger thing that's been 30 if not 70 years in the making. And I could be totally wrong. And that's how you learn. So let's have a talk. There you go. [APPLAUSE] You've done something miraculous, which is to depersonalize this campaign moment and talk about real trends in an academic way, which we appreciate. And I have a feeling that Mark can probably take his own questions. I think I can. I've done this before. I think I've done this before. It's on you. Who's first? I want to put a twist on the positive story. Are you making it more positive or more negative? More negative. Hey, you must be on the left! So if look at the Bill Clinton years, as he leaves office, we have the Dotcom Bubble burst. There's a minor recession. But then there's a consistent argument, obviously, on the left that the policies of the Clinton administration then led to the collapse that we just experienced. And there's obviously a degree of truth to that, but there's more to it, right? So under Obama, we've had this stabilization going. You just said we have a lot of good pieces in place. So then what happens in the instance where Trump actually gets elected, and then we have this undoing of the policies that we've been trying to cobble together for the last few years. Then what? So if Trump gets elected, I don't think a lot actually happens. Because the genius of the Constitution is that the president cannot introduce legislation. So he can hum, he can haw, he can jump up and down. He can throw his toys out of the pram. He can do whatever he wants. But he cannot actually write a law. Only Congress can. So just follow this through. So let's say the Republicans manage to take the House and the Senate and they get Trump. So what is it that everybody agrees needs to be done? Now, they'll do the shittiest kind of infrastructure investment. They'll build a giant, stupid wall to stop something that doesn't exist called Mexican immigration. I mean, literally, it doesn't exist. The flows are going the other way. We're at the point we were in 1961, and we want to build a wall to keep them out. Dude, they're not there. They're just not there. But imagine that as a massive fiscal expenditure. That'll happen. We'll build up our nice, shiny military. That'll definitely happen. So there'll be lots and lots of spending. What else will they do? Will they really do trade protection? See, because about 30% if not 40% of the firms in China that are exporting to the US are people like Apple. They're American firms. So Trump knows where his bread's buttered. Are you really telling me he's going to put tariffs up against the iPhone, and piss everyone off, including the CEO of Apple? I don't think so. So that's not going to happen. He can't introduce legislation. The only thing he's going to do is make life really, really uncomfortable and scary for people who are undocumented, or immigrants, or minorities, or anything other than the politically mainstream right or authoritarian. So there's a real political cost. Don't get me wrong. And I think the deportations could double if not triple. And that's horrible. But in terms of what he's actually going to be able to do? He's going to do another round of tax cuts, absolutely. And most of them will go to the top. But that's de rigeur. That's what we do. That's what we've been doing for 30 years. So you don't think that'll have a nasty undoing even of the [INAUDIBLE] stability we've just started to put together? Well, I wouldn't say [INAUDIBLE]. I think one of the most successful policies in recent years, believe it or not, has been Dodd-Frank. And the reason Dodd-Frank's been successful is the following. So let's say, for example, I'm Goldman Sachs, the vampire squid, to give it its name. And I'm really worried that the next president, if she comes in, is actually serious about more financial reform. Now, what Dodd-Frank has actually done is death by 2,200 pages. So if I go straight up against Jamie Dimon, or one of these big guys, they'll take $1 billion out of the pocket, set the lobbyists on me, and I'll be lucky if I'm elected dogcatcher of southern Arkansas by the end of it, right? You basically have to be Elizabeth Warren, tough and smart, to take these people on. And most congressmen are not. So who's got skin in the game to take these people on in a frontal assault? So you don't. You bury them in 2,200 rules. You ask escrow their bonuses. You make them raise more capital. You lower the leverage internally. You make everybody higher compliance officers. Hey, kids, if you want a job in the financial sector now, they're hiring compliance officers like bejeezus. Because everybody has to have the give of them for every trade that they're going to do. And by the way, the trades don't make any money any more because they've lowered the leverage. So the whole sector is shrinking. The profitability of the business model is falling. So all it's been incredibly successful in that way. Now, that's not what we think of in terms of success. But the long term thing is, you made finance safer. The economy is still growing. You still have positive-- I mean, the immigration thing's problematic because we actually need immigrants to continue positive population growth, but put that to one side. We're actually solvent. Forget all the stuff about the debt. We can float 25, 30 year, 50 year at negative rates. Nobody's worried about the state of the federal debt. So there's a lot of structural stuff there that's actually quite good. And I don't see Trump being able to undo that. Trump cannot undo the demand for my condo in Boston from Chinese investors. Because Chinese investors are incredibly worried about property rights at home and they want to have property rights here. That is totally Trump-independent. So I'm less worried about that. It's more that the politics that go with it than anything else. So I have a question on the technical disruption side. I live in San Francisco, arguably the center of a lot of the disruption. And technocrats in San Francisco, for the past year or two, have really gotten into this idea of guaranteed basic income, or mincome, as a possible solution to this. And to. me, it seems, at best, a band-aid, and at worst, the beginning of the dismantling of the social welfare state. And I wondered if you had any of opinions about the feasibility or impact of a mincome policy. So this is one of these ideas that have been-- Can I actually add to that? Sure. Because I've spent the last 18 months in the Bay Area too. And at least the kind of community, the intellectual community around Stanford, has this thing of "this is really great that we actually don't have enough work for labor. Because none of us should work anyway. We should just take 10% off of the top 1%, distribute it, and everybody gets to do whatever they want with their time." It's not a terrible solution, if you could actually make it happen, right? Yeah. And so why should any of us work anyway? If it's going to be a sharing economy, if everybody's going to be Uber and Air BnB? I'm really curious about this question and what you think about that. Because it's radical and it's anti-capitalist, but it could work. Oh no. I totally agree, but the problem's getting your hands on the cash, right? So my favorite example for this that I like to give in talks where I bump into Republican audiences, which is usually when I talk to financial conferences and things, is to say, "so how many of you voted for Mitt Romney?" And quite a few hands are going up. "OK, why?" And I don't mean this as a partisan thing. I didn't mean it as a fairness thing. What was Mitt Romney's effective tax rate? 9%. Because he only pays capital gains at 15%. And he basically has tax shelters and incorporations in Delaware and Arizona and the Cayman Islands and all the rest of it. And he basically pays about an $0.08 to $0.09 on the dollar. I pay $0.33. If you add up all my state and local, I'm paying German rates of tax, but I'm getting-- what would I call it? Third world public services. So I can't vote for that. That's just unfair. So there's a fairness question. But it hasn't really become a political topic. Because if that becomes the issue, then you can make an argument for that type of radical redistribution, which is essentially "pay your goddamn taxes." And given that you've got most of the money, don't tell me you pay most of the taxes. You do in volume terms, but you're cheating on the margin. You owe a hell of a lot more. So there's a wonderful book called Treasure Islands. And the estimate in that is if you go to all the tax havens where all the Mitts in the world have all their cash stored, and this is just those bits. There's other places, like art, warehousing, and all that sort of stuff you can hide wealth. $29 trillion. I'll say that again-- $29 trillion. That's a lot redistribution you could do. And all of that is basically money that people have avoided tax on. So if the Community Chest agreement is, "you made it here, you pay your taxes," well, we're making it everywhere and we're not paying any taxes. Hence Poland, Ireland and all that sort of stuff. So you can see the beginning of movement on this, particular on the corporate side. That's there. But let's get to the heart of the matter. Because this is really it. Why should we work? I often think that economists forget that the most basic thing you learn in economics is the labor-leisure trade off. As we get richer as a society, we're meant to work less. We're not meant to be more insecure, working for crappier waves more and more hours. So why is that happening? Well, it's actually about the property rights behind it. So let's go to San Francisco for a minute. Uber is fantastic. I think Uber is absolutely brilliant. I love it. I love the fact that when you need to get to the airport, they actually show up. I love the fact that it doesn't smell like nine people who've been murdered in the back of this car before I get in it, which is your average city taxi. And I love the fact that all even if these guys are basically ripping off the drivers, a much larger proportion of what they're actually earning goes to them than rather it goes straight to medallion holder who holds the license that's basically a money pump from basically poor immigrants who are earning an equivalent of less than minimum wage in tips. So I love it. It's great. Let's say Uber gets driverless cars sorted out. You'll eliminate 8 million jobs in the United States like that. Now, unless you're going to give them some kind of compensation, a basic income or anything like that, what exactly do you do? Now, this is where it gets more into the ethics of capitalism, because essentially we have a system that says you need to work. Everybody needs to work. But what if you don't need them? And this is a way bigger problem. Because all the returns go to the guys at Uber. All the returns go to the guys at Whatsapp, whoever gets robotics sorted it, all the returns goes to them. That 1% is going to become basically an enormous chunk of national wealth. It's going to go to increasingly fewer people. Now, what we tend to do in those situations is we bust up the firms. So go back to the 19th century. Go back to the early 20th century. Anti-trust. Even in the '70s, Bell, telecoms, the whole lot. When it gets too concentrated, when the returns are going all one way, we tend to step in and actually break up the firms, redistribute the property rights, whatever. That's what you really need to do. You need to democratize the returns to robots. If you do that, then it's sustainable. Because I wouldn't care if you replace me with a robot if I got to go fishing instead. Right? That would be fine. And There's still a lot of things-- forget the hype-- that robots simply can't do. What's the fastest growing job in the United States? Elder care nurse. Would you trust a robot to lift your nanna a bit? Not going to happen, is it? Not in a long time. So there's still a lot of actual human contact jobs which really can't be technologically disrupted. But there's a hell of a lot that can be, and they tend to be the people who are already in that slice of the cake. They're pissed off, both the left and right parties. So you're raising exactly what the right issue-- why do we need to work? So it's more than basic income. It's actually about we can produce-- we can produce a super mega surplus for the planet with 10% of the population working. China can literally make everything that we need. Why are we bothering? Why does every country in the world need to make cars? Why do we need to have so many different types, if ultimately you're just going to have a few self-driving models that will take you from here to there, and you can call them up on your phone? So this is way bigger than just those issues. So they're exactly the right issues. I don't have an answer, but that's definitely what the question needs to be-- why do we need to work? I ask myself that every morning. Usually, when I've been out the night before. "Why do I need to work?" Next? Are we all done? Yeah, one question regarding China. China's economy is now slowing down. It has less growth. How does this affect your overall story and the future as you see it? I mean, I don't pretend to be a China expert, but I look at it this way. The guy who used to run Pemco, what's his name again? The big bond trader? Bill Gross, Bill Gross had a lovely phrase about China. He called it "faith-based investing." Because you don't know what you're doing, really. I mean, they could be ripping you off. Do you believe the GDP figures? Well, if you don't believe the GDP figures, do you believe the banking figures? Does anybody actually know what's in the banks? No, but it keeps going. It keeps going. Somebody's making money. Somebody's making stuff. It's ending up in the Wal-mart. The system continues. So this is a very, very different system. What's interesting about China for me just now is the sheer amount of capital flight. So Jason Charmin recently sent me a report. I haven't had a chance to look at it, but he told me about it. So there was this piece of research that was done by the Bank of China a couple years ago. And it was just this fantastic economic study. And it was so beautifully done that they wanted to give it an award. The only thing was that they couldn't publicize it because the findings were so explosive. But somebody didn't get the memo. So they gave it an internal award and posted it on the Bank of China website for one minute and 38 seconds. Just long enough for somebody to find it and copy it. Here's what it said-- 11,000 members of the party in the top echelons have expatriated 100 billion US dollars and run off with it over the past 15 years. That's the numbers. Holy shit! That kind of explains why condo's going up. Now, in order to stop that, the government correctly says "dude, you do that anymore, we're done." So you have a massive corruption crackdown. Here's the problem with the corruption crackdown. Corruption is property rights guarantees in a system where you don't have independent courts. That's how it works. This is Buddy Cianci land, right? Basically, you didn't go to the court. You went to Buddy. Buddy sorted it out. Buddy's the Party. Now, the Party's your insurance policy. The Party is your partner in crime at the local level, and now the Party's being purged. Which means, as an investor, you don't have courts, you don't have a protector, you don't have recourse. Where do you want your money to be? Right here. So perversely, until they absolutely clean up the entire system, which is an "if you ever get there," you're actually creating the incentives to de-stabilize it further. So that could be what we're seeing as part of the slowdown. This here's the wonderful thing about the United States. And it's the old Mel Brooks line on this one. "It's good to be the King." Because the United States is a barbell economy. Have you ever picked up a barbell in a gym? The reason you can lift a lot of weight it's because it's perfectly balanced on both sides. And the United States is the only barbell economy. When things are going well everywhere, people come here and borrow dollars and put them outside, because you get a higher return. When things go to hell in a hand basket there, you liquidate everything, turn it into dollars, and bring back home, and my condo goes up either way. So I don't worry-- I worry about China for lots of reasons, but I don't worry about it for this, in the sense that it will just trundle along and blah, blah, blah. The long term story on this one is it accelerates it, because China saves. So you are in a global savings glut. That's feeding into basically insufficient aggregate demand at a global level. It's also leading into basically a lack of inflation in the system, which, is keeping long term rates down. So it's all pushing in that one direction. I don't see-- even if China had a very serious hard landing and political problems etc, economically it's significant but it's really about the size of two Germanys. So if two Germanys blew up, would that derail the entire global economy? Eh, jain, as the Germans say. Yes and no. So. Just to continue to push the discussion, I really think it's worth underlining that any response to this that isn't just violent revolution is going to have to be a revolution of ideas in a [INAUDIBLE] way. An d revolution of ways of thinking about freedom, thinking about work, thinking about the relationship between-- because you're not going to get-- one way of summarizing what you've said is that you're not going to get the high growth virtuous Adam Smith preferred version of the economy, where honest hard work, you come to it, everything is rewarded if you're just going to put in the effort-- you're not going to get that anymore. So the question is, what do you replace that with? Do you replace that with changing the nature of what it means to be virtuous in markets, and that that might mean that some of us take more leisure and that means that we share more? Or are you going to get the boots and the-- Well, again, it comes down to what we do with properly rights. So let's go back to Uber or Airbnb is another example. So Airbnb rents out more hotel space than all the hotels put together, which is incredible. Now, what they've done is they've actually created options, in a financial sense, on every piece of real estate in the world. And it's up to you whether you cash in the options. So you can use them to basically monetize your living space. That's amazing. And it's not a bad deal for you. But where do most of the returns go? Back to the guy who calls the website, who basically has the brand. So you're creating a world in which you've got financial optionality over everything. So cars, houses, I mean, anything that you've got as an asset but you don't use all the time, essentially you can rent it out on the web. My favorite example for this, when I asked Branko Milanovic-- we were talking about this last night-- I said, what's the weirdest thing you've ever seen that you get options on, optionalities on the web. And he said "lingerie." You can rent lingerie on the web, which I just find really weird and disgusting. But apparently you can. Think about it. If you're buying Aubade or Chantelle, that shit costs a lot of money. It spends most of its life in the drawer. Why not rent it out, I guess? You know, you can do that. What about disease? You can wash it. I don't know. I don't do this. I'm just saying. So basically, we can create options over everything. But the people who are striking the options, the returns are all going back to the people at the top, who are doing these firms. So we've got to decide what we do with this. Either you democratize the technology, in which case everybody who's got it keeps most of the returns and a small residual of anything goes back to the owners. Or you let the owners take the lot. And if you do that in an already winner-takes-all world, that gets ugly very, very quick. And I think it really comes down to that. Now, I'll give you an example of how this can work. So I've got a mate called Brett. He's an Australian. And he runs GE's cloud from his house here in Providence. Shh. Don't tell anyone. He's a super tech computer guy, right? And he shows up at my house one day with a three terabyte hard drive and a six pack. And I'm like, OK, what are we going to do? And he says, that little old Mac you've got, that little computer there, can I do stuff with it? And I was like, OK. What are you going to do? He plugs in his hard drive. He gave me 1,500 movies. That's nice. OK. I ask him where he got them. 1,500 movies, all HD, perfect copies, the whole lot. He says, do you mind if I turn this into a Plex server? What? Yeah, go ahead. Anybody ever heard of a Plex server? Anybody know what a Plex server is? Right, this is incredible. I'm sitting in an LA airport with an iPod on a Wi-Fi connection. I can go back to my home computer, the one that he's just been pratting around with, and press an app, and I can pick up watching any one of those 1,500 movies wherever I want at exactly the point I left off. And I can do that will all sorts of media. Now, think about if you went into Best Buy and you said, I want this system. That would have cost you thousands of dollars. Plex is free. Anybody can get it. it's the simplest thing in the world. Just go to the appstore, get Plex, download it onto your computer, start archiving all of your movies. It turns it all into digital files with this wonderful interface. And then you can do the most amazing stuff. Now, why is that not monetized? Why isn't their a firm called Plex which is allowing when to do this that has the monopoly rights on it? Because the guy who wrote it went "here, take it. it's free and everybody can use it." And there are so many consumption goods now that are like that, and increasingly so. So what's happening is the "I can make money off the option that I'm writing." "I'm exercising the option you're writing on your house." That's becoming less common. What's actually becoming common is just stuff's free. So think for example, Air BnB-- couchsurfing. No money is exchanged. And you can actually get a room, a bed, the whole sort of thing. So there is a positive aspect to the sharing economy. It's all a question of how much we want to share versus how much we want to give options to the guy who's got the [? PIN. ?] That's really what it comes down to. [INAUDIBLE] Oh, sorry. I just had a quick follow-up to that. I think regulation can really influence that as well. You mentioned Uber earlier. In Austin, the city in Texas, recently decided to prohibit Uber from operating in their city. As an alternative, a group of people living in Austin created an open source free application for finding rideshare Uber-like rides, where there is no 30% to Uber. All of the money goes to the driver. And that's the direct result of regulation that caused that to be democratized. Yeah, and that's exactly democratizing property rights. It's not about expropriation. You don't have to take anything away from these guys, you can just build alternative platforms. And then people migrate to those platforms because everybody's winning. So you can totally do that. And that's actually a really positive side. One book that goes into this, the only book I know that goes into this is Paul Mason's book, Postcapitalism. It's a very good book, actually. He's a British journalist/economist. He used to be the chief economics correspondent for one of the main news channels, Channel 4. And he wrote this book called Postcapitalism. And it's all about exactly how the sharing economy might be the only thing that can save us, because ultimately, we do not need people to work, but we have an ethic that says if you don't work, you're worthless. So how do you square that problem? That's what he's trying to solve. Monetary policy is less and less effective. Tweaking interest rates [INAUDIBLE] and quantitative easing doesn't really work much anymore. What are the alternatives? How do we stimulate growth and what are the other tools and what are the other options. Go back to that thing I said about starting in the '70s you have this market-friendly revolution and you basically disempower Congress, parliaments, and you don't want politicians to run things, because they'll generate inflation. You want people like Greenspan to basically run the economy for you. [INAUDIBLE] Why? I mean, can we just stop and think about this for a minute? Why is a technocratic appointee, who has nothing more than two tools-- raising and lowering the price of money, buy and sell assets. That's it. Why are the charged with and given the responsibility for producing growth, which is an organic outcome of the personal decisions of millions of individuals who have nothing to do with the central bank? I think we've lost the plot. First of all, it's unfair to charge these institutions with these things. They are missions that they cannot fulfill with the tools they've got. You could give them more tools. That would be one way of doing it. But another way would be to actually look at Congress, which is the fiscal arm. Because there's more than just monetary policy. There is also fiscal policy. And say, where have you been for the past 25 years? Oh, that's right. You were too busy cutting taxes, and then writing ridiculous laws that didn't matter. Can you stop doing that? Could we maybe do something like we did in the '50s, when we built the entire highway network of this country? Could we maybe do something about making JFK less of a national embarrassment? There's lots of things we could be doing. And it can be done if Congress decides to do it. So do we need more monetary policy? No, we need them all to stop doing what they do. It's just a waste of time. Or get better tools that are more effective, and work jointly with fiscal authorities. But we've given up on fiscal. We just think it's a bad idea. "Politicians can't run things. Why would you want them to do that?" Nobody's saying they run things, by basically, if the roads in Providence are the norm for the richest country in the world, God help us. I'm thinking-- Behind first, Kevin. I'll get to you in a second. He had his hand up first. This may be an unfair question but-- There's only unfair answers coming. No, no, no. All the information that you've provided in that past hour, how much of that do you think Donald Trump knows? Oh, good question. He doesn't have to not know any of it. Does that make him accidental? Well, it makes most politicians accidental. Here's my favorite accidental politician-- Harry Truman. So Harry Truman is literally the accident of history. A four times failed haberdasher with a domineering mother-in-law he was absolutely petrified of, but a tremendous poker player, a machine politician who was put in there by totally corrupt practices, who ended up saving the New Deal. Now, did he know everything he needed to know? No, he just knew, "this is where I need to be. This is the stuff I need to pay attention to. And I'm going to let George Marshall deal with the details." And that was pretty much what he did. Trump is just a version of that. Same as Ronald Reagan was, if you want another example. In fact, I actually get really worried. This is one of the things that actually worries me about both of the Clinton. It also worried me about Jimmy Carter. Well, I'm not old enough to worry about him, but you know what I mean. That when politicians think they know a lot, they start to do things that they don't really understand. And sometimes, it's better knowing the limits of your ignorance. Now, you can't accuse Trump of that, right? But knowing the limits of your ignorance is actually a really, really healthy thing in a governor, I think. So I don't worry about that. Then Kevin. I was thinking, well, two things about the global Trumpism. One, the relationship of, in particular, the political democracy and the economy and the other issue about diversity and how that can be. I tend to tarry in leftist politics. If it's devoid of any class analysis, it can be sometimes problematic and lead to a reaction. But the democracy, you have Bernie Sanders or Elizabeth Warren going in against the TPP and pointing out the instance of a Canadian company suing the Americans, or [? Uruguay. ?] So in other words, it undermines democracy, not only our own, but of others. And Trump saying this is turning the country into a cooperation of some sort. And with the European Union, the democratic deficit and the central bank having pretty much a chokehold over democratically elected governments. So that kind of contradiction. And then left, at some point, some wanted a democratization of the European institutions, and others saying, no, that's not possible. It's all technocratic, right? It's all technocratic. It's capital control. We have-- We just go with that. Do something otherwise, that it's a fool's errand to try to democratize it. And when it comes to the-- Just one second. Kevin, is there a question coming? Well, no, just if you can elaborate on the relationship between political democracy and its limitations. You're doing it. You're doing a great job. I mean, you're actually describing the very thing you want me to describe. I mean, these are all great and germane examples of it. It surrounds us. I mean, that's basically it. The simplest way of thinking about it is, markets allocate through cash, and democrats allocate through votes. And they're our orthogonal principles. And the way that we tie the two principals together is through taxation. But that only works if everybody pays their taxes. So if you're not, and you're skimping on it, you're going to end up with a deficit. That means you're going to pile up debt because you don't really want to deal with the fact that you're not paying enough taxes. So you generate debtors, which means you generate creditors, which means you generate these dynamics. So that's the basic confrontation. It always have been. It's just that back in the '40s and '50s, people paid their taxes. It was different world. And the follow-up, the other issue about diversity and the reaction, the racist reaction in part, but somehow because there is that idea of the [INAUDIBLE] Republicans. There's some racism there, and neoliberal, at least before Trump, that capital should have its free reign throughout the world But the Democrats as well, capital should have free reign around the world. But we need diversity. But if that free reign leads to income polarization, and in a good part of the population, including white males, their life expectancy going down, do they really feel-- the Democrats feel like, OK, you can have all this income polarization as along as the top equally has its share of women, and African-Americans and so forth. But you can get a reaction to others who feel like, wait a minute. I mean, this plays into the right wing thinking. It's not an American phenomenon. I mean, you can find examples of this in France, etc. I mean, France is actually very weird on this one. To me, the truly offensive one is actually, think about this-- French cops are walking up to women on beaches and ordering them to take their clothes off. I mean, that's just insane. I mean, really? That's micro-policing of the worst possible type. But let's take an issue. So here's an issue that I think I understand what's going on. So the whole struggle that was there that seems to have abated a little bit over gender-neutral bathrooms. Now, why is it that Obama's Justice Department is spending time on bathrooms? Well, because there's a bigger issue at stake behind this. It's symbolic of something else, which is, you can't allow states to start saying who's a person and who's not a person. That's utterly ridiculous. And it's just weird that this comes to a head. Because it's really about voters' rights. It's really about identity politics. And it's about, basically, rights of self-respect, and you're an autonomous person and you can damn well pee where you want to pee, right? And that's awesome, right? But think about how it plays in the heartland, to use that term. So let me get this straight. What is it these crazy people in Washington are concerned with now? Bathrooms? Who gets the pee in bathrooms? Are you kidding me? So of course you can play this both ways. You can make the most empathetic, reasonable, and legitimate, let's say identity issue, of representation, democracy, etc sound ridiculous. That's part of politics. There's nothing new in this whatsoever. I mean, one of the ones that I say when my wife and I are chatting away and we start snapping at each other, I'll say things like, "what do you want next, the right to vote?" Right, you know? But that, back in the day, that was a real-- you're not going to give women the vote. What are you thinking of? that's unthinkable! Right? So at any moment in time, issues of personhood, diversity, control, etc, can be made to seem ridiculous, regardless of whether they are or not. And that's part and parcel. There's nothing new in this. It's just another version of struggles that have been going on for a very long time. It just happens to be about bathrooms. So for a global Trumpism, it seems to me that it's actually more like a Western Trumpism. Oh yeah. Because we don't really see that in East Asia, because we don't really have a lot of those radical speaking people in populist movements. Do you think that's-- what do you think is the reason behind East Asia not experiencing a similar kind of movement, even though Japan and Korea have an obsession for the past 20 years. No, no, absolutely. Great question. So Japan and Korea, I mean, Korea's had a tough time through competition and productivity and stuff. I mean, there's not really been a recession in the way that Japan has been. Japan's a fascinating case, because it's totally unique. You've got the oldest population in the world, and if you give them money, they buy government bonds. It's brilliant. And then, when they eventually die at the age of 305, they leave them to their children, because they actually think they're an intergenerational asset. So what that means is there's a deflationary glide path. I saw somebody draw for Japan once. And I was like, here's the capital stock of the country, and here's time. And eventually, they're just going to eat the entire capital stock of the country. And then everyone will die at the age of 305. But it will be a very long, slow glide path. And given that they are the world's worst at immigration, so the economy is going to shrink, it's a very weird place. So you can kind of explain Japan sui generis. But I think the bigger point is this-- the East Asian economies were traditionally hierarchical, authoritarian, quite patriarchal, very strong political parties with deep roots in the civil society and civil society organizations. It's very hard to get that kind of populist crap going. Because the populists beware themselves creatures of the state. So think about Marcos in the Philippines. You have a new populist. What's that? You have a populist. Yeah, and you have a new populist running in the Philippines right now. And Duterte is exactly this. Exactly. But even in Japan, think about the way that the liberal party, the LDP, was kicked in a touch 15 years ago, and came back with a much more aggressive nationalist rhetoric. So you see fringes of this coming up, but it is different in kind. This is totally a Western story, absolutely. I just happened to call it "global Trumpism because was in an interview in Greece and I was lazy. And then somebody went #globaltrumpism and there you go. It's a thing. You're stuck with it. So that's that, but great question. That was really good. Mark, make this the last question. OK. Last one? I've had this gentleman before. Anybody else want to come in, just in case? So he gets the last one? Or I've got it. No! Go on, go on, go on, go on then. Go on then. So scholars don't often run for political office. Mhm. But you're going to be the next campaigner for a senate seat from Rhode Island. Give us four or five-- From that power base. Four or five planks in your platform that you think would be both winnable and sensible. Right, first one, everybody pays their taxes. No exemptions, no inclusions, and I'll even consider cutting rates if we can actually increase the take. Everybody pays-- no exceptions. Back in the 1970s, corporates paid 20% of total taxes. Today, they pay 2% in real terms. It's stashed abroad. It's hidden. It's transfer priced. It's a double Irish Dutch sandwich, all this sort of stuff. Nonsense. Enough. Basta! We're done with it. So that's number one-- everybody pays their taxes. Number two, we really need to think about whether we need people to work. Because if you're about to basically add robots into a mix of already high inequality and low pay, you're asking for trouble. And it's a bit like basically nationalizing health care. At the end of the day, everybody saves money because everybody isn't showing up to the emergency room. The costs, the disruptive costs, of doing this stuff without any real regard for what actually happens to the casualties, forget it. You need massive insurance on this, and you have to think really creatively about it. And the third one is-- and this is the one we never talk about, is we really need to be serious-- and this could be a massive public investment program. And it's the one we should really do-- something to try and abate the effects of global warming. So anybody who, from this point on, says it's a hoax, it's caused by the Chinese government or whatever, you put them in a bag, you tie the bag up with a stick, and you beat them. That's it. If anybody says it, get in the bag. Done. That's it. So that would be platform number three. And then, if you raise the tax revenues and spend on infrastructure which would actually abate global warming, it would mean the Boston Harbor wouldn't actually rise by five feet, which means that my condo, at the end of its 30 year mortgage, which is being paid off by a Chinese investor, would have all come to me, and I'd make out like a bandit. So ultimately, it's self-serving. Join me in thanking Mark for a [? stimulating evening. ?] [APPLAUSE]

Channel: Watson Institute for International and Public Affairs

Views: 489,196

Keywords: Watson Institute, Watson International Institute, Brown University, Brown u, Brown, Public Affairs

Id: Bkm2Vfj42FY

Length: 86min 3sec (5163 seconds)

Published: Thu Sep 29 2016