0:00

Hey Pitchfork listeners, Goldie here

0:02

and my how quickly things

0:04

can change. A couple years

0:06

ago when we talked with

0:08

today's guest Mark Blythe, the

0:11

United Kingdom was in the

0:13

midst of a conservative government

0:15

who was trotting out old

0:18

trickle-down policies again. Well we

0:20

here in the US were

0:22

proudly in the middle of

0:24

the Biden administration experimenting with

0:26

middle-out economics. And now,

0:28

just two years later,

0:31

there's a labor government

0:33

back in the UK. Well,

0:35

we here in the US are

0:37

back to the Trumpist regime. So

0:39

we thought it was a good

0:42

time to re-air our conversation with

0:44

Mark Blythe about why won't trickle

0:46

down die. We hope you enjoy,

0:48

or at least learn a little

0:50

something. The

0:53

rising inequality and growing

0:55

political instability that we

0:57

see today are the

1:00

direct result of decades

1:02

of bad economic theory. The

1:04

last five decades of

1:07

trickle-down economics haven't worked.

1:09

But what's the alternative?

1:12

Middle-out economics is the

1:14

answer. Because the middle

1:16

class is the source of

1:19

growth, not its consequence. That's

1:21

right. with Nick Hanauer,

1:24

a podcast about how

1:26

to build the economy

1:28

from the middle out.

1:31

Welcome to the show.

1:33

I'm Nick Hanauer, founder

1:35

of Civic Ventures. I'm

1:38

David Goldstein, senior

1:40

fellow at Civic

1:43

Ventures. Apparently,

1:48

Nick, you're not satisfied just

1:51

being a bomb thrower here

1:53

in the United States. You're

1:55

off in the UK throwing

1:57

bombs in the editorial pages,

1:59

too, I see. I am.

2:01

I've been in the UK

2:03

less than a week and

2:06

already antagonizing my friends, Eric

2:08

Binehacher, and I have a

2:10

piece in the Guardian slash

2:12

observer criticizing the new government

2:14

here, the trust government, for

2:16

the criminal stupidity of this

2:18

trickle-down economic agenda they have

2:20

just unveiled. Yeah, well that

2:23

sounds like you're a very

2:25

bad guest. What's the reaction

2:27

there to a couple of

2:29

yanks making fun of their

2:31

new prime minister? You know,

2:33

Goldie, the good news is

2:35

that we were part of

2:38

a giant chorus of criticism.

2:40

Five years ago, seven years

2:42

ago, ten years ago, our

2:44

criticism would have been lonely

2:46

and ridiculed today from every

2:48

corner. people are saying roughly

2:50

the same thing, which is

2:52

this economic agenda is useless,

2:55

silly, and counterproductive and won't

2:57

achieve any of the objectives

2:59

that they believe it will.

3:01

So it's great to be

3:03

for once part of that

3:05

chorus of criticism. And, you

3:07

know, hopefully some of these

3:10

idiots will listen and learn.

3:12

You know, the pound is

3:14

nearing. parody with the dollar.

3:16

It's an absolute catastrophe for

3:18

the country here. Very good

3:20

to be in an American

3:22

with dollars right now, I

3:24

will tell you. But the

3:27

consensus is this was idiotic.

3:29

Right. And of course, you

3:31

know, low pound would be

3:33

good for exports if the

3:35

UK still had anything to

3:37

export. That's right. And of

3:39

course they could have chosen

3:41

to invest in the capacity

3:44

to export, but not. So

3:46

a lot of economic problems

3:48

in the UK, even worse.

3:50

than in the US, and

3:52

you're not the only one

3:54

who's noticed that. That's right.

3:56

Our guest today, the mesmerizing

3:59

Mark Blythe, is a, these

4:01

are. Professor is director of

4:03

the William R. Rhodes Center

4:05

for International Economics and Finance

4:07

at Brown University, and a

4:09

political scientist whose research focuses

4:11

on in particular how uncertainty

4:13

and randomness impact complex systems,

4:16

particularly economic systems. With that,

4:18

let's talk to Mark and

4:20

get his views. The

4:27

short version, my name is Mark

4:29

Blythe. I'm a political economist. I

4:31

teach and work at Brown University.

4:33

And I've most recently published a book

4:35

called Diminishing Returns, which is about

4:37

underlying growth models of capitalism and where

4:39

all the growth went. But Mark, you

4:42

also recently published a book called

4:44

Angronomics. Let's start out and just give

4:46

us a summary of angronomics. Sure, so

4:48

we divide it up, it starts

4:50

off this way, it's about anger. We

4:53

got interested in anger in politics,

4:55

Eric, my co-author and I, when we

4:57

went to of all things a Watford

4:59

Everton match. Now if you want

5:01

to see the bottom of the barrels,

5:04

bottom of the barrel for soccer, that's

5:06

pretty much it. And what we

5:08

noticed there standing amongst the really hardcore

5:10

Watford fans was that the real

5:13

fans don't spend any time shouting at

5:15

the opposition teams, they shout at each

5:17

other. They're kind of identity regulators,

5:19

they're kind of collective action troops. They

5:22

make sure that everyone's in line.

5:24

And we started to think about what

5:26

are the functional roles of anger in

5:28

politics, because of course we've been

5:30

through the Brexit debates, we've been through

5:33

the Brexit debates, we've been through Trump,

5:35

the rise of populism globally. And

5:37

a common theme seemed to be everybody's

5:39

angry all the time. So we

5:41

started to think about black. matter and

5:44

the events of 2020, clearly there's a

5:46

moral wrong. It needs to be

5:48

right. That's what animates the populace. That's

5:50

what animates the coalition that gets

5:52

behind that. And if you think about

5:55

another one. tribal identity, right? So whether

5:57

it's Watford fans or whether it's

5:59

Maga rallies, there's an element of this.

6:01

Now we don't draw a bright line

6:04

between the two of them, synthetically,

6:06

we use them as an analytic, and

6:08

what I mean by that is,

6:10

if you think about the people who

6:12

went to the White Capitol building on

6:15

January the 6th, they were morally

6:17

outraged too. You may disagree with those

6:19

morals, but that was a motivator for

6:21

their anger. and micro angrenomics. Macro

6:23

angrenomics is when you have giant financial

6:26

shocks and you basically write a

6:28

put option on the taxpayer at the

6:30

bottom end of the income distribution so

6:32

that the assets and incomes of

6:34

the top 20% get preserved, people kind

6:37

of notice that and it fragileizes

6:39

faith in your existing institutions. The micro

6:41

side of it. as best seen in

6:43

labor markets and is really about

6:46

less about inequality and more about precariousness.

6:48

If you don't have a feeling of

6:50

control over your lives, you can

6:52

double the national minimum wage in the

6:55

United States, but if everyone's still

6:57

working just in time contracts with no

6:59

rights and no rights and no rights

7:01

and no way to claim their

7:03

share of productivity in the future, then

7:06

they're still living a precarious existence

7:08

and that all the social psychology shows

7:10

you is what really drags people down

7:12

and makes them angry. and giving

7:14

a very political economy account of why

7:17

we have this angry politics. That's fascinating.

7:19

I mean, if I may say

7:21

so, you know, what in our research,

7:23

you know, we came to the

7:25

same conclusions is that the kind of

7:28

inequality that America has experienced. And most

7:30

of the West is experienced over

7:32

the last 40, 50 years. Of course,

7:34

it's worst in England and the United

7:37

States, really, in the developed world,

7:39

is that it is effectively shredded the

7:41

reciprocity norms that make social cohesion

7:43

and democracy possible. Yeah, that's exactly right.

7:45

You know, if you build an economy

7:48

that systematically makes things tougher for

7:50

the bottom nine deciles. every single year

7:52

for 40 or 50 years, it

7:54

should not surprise you that at some

7:56

point they want to burn the whole

7:59

damn thing down, right? Which is

8:01

where we are. Yeah I think that's

8:03

exactly right. I mean I'm reminded of

8:05

the great story about the Brexit

8:07

debates when the remain campaign went up

8:10

to Sunderland, I went to the

8:12

Nissan factory and given that 90% of

8:14

the exports go to the European Union

8:16

the home team thought they were

8:19

on home ground but they started to

8:21

get crap from the people who worked

8:23

there and one of the people

8:25

on the stand said you know lads

8:28

you'll have to remember there'll be

8:30

a tremendous loss of GDP if we

8:32

do this and one of them shouted

8:34

back your GDP. Right, if all

8:36

the returns are going to one part

8:39

of the population to shareholders, if

8:41

every time I sign a contract my

8:43

bathroom break gets worse, why should I

8:45

actually have faith in this project?

8:47

No, absolutely. It is absolutely true. So

8:50

tell us about your new book, too.

8:52

Essentially, it's this idea of growth

8:54

models. Now, this has been around for

8:56

a long time in kind of

8:58

post-Kanesian macro. You're kind of disaggregating GDP.

9:01

The simplest way to think about it

9:03

is what bits of underlying GVDA

9:05

do you need to tickle to get

9:07

GDP growth? But what we wanted

9:09

to do that was to put this

9:12

in a more international context because the

9:14

sources of growth are no longer

9:16

if they ever have been entirely domestic.

9:18

exchange rate and consume more than it's

9:21

ever going to valorize with real

9:23

exports simply because of the kindness of

9:25

strangers wanting to buy their financial

9:27

assets. Once that goes, you're in trouble.

9:29

Similarly, if you're a country like Ireland,

9:32

50% of GDP comes out of

9:34

Dublin. How should we think about that,

9:36

particularly when two inversions from two farmer

9:38

companies can double GDP or double

9:40

GMP overnight? So what are the international

9:43

sources of growth? which support this

9:45

and impede change in those growth models.

9:47

In a financialized economy, is economics real?

9:49

I mean, what numbers... I'm having

9:52

a... crisis of faith in economics over

9:54

recent weeks because I as I

9:56

told Nick on a recent podcast where

9:58

I told somebody I'm I'm falling into

10:01

the nobody knows anything about anything

10:03

school of economics right what's real here

10:05

I think what's real here in the

10:07

current moment let's get away from

10:09

my book and just talk about you

10:12

know what it is let's take

10:14

the example United Kingdom so what you've

10:16

done is you've taken your shock absorbersbers

10:18

your welfare state and in 2010,

10:20

2011, you weaponised the Greek crisis as

10:23

an excuse to take one of

10:25

the most residualised welfare states in the

10:27

world and turn it into basically the

10:29

worst one in the OECD to

10:31

ever claim welfare. Despite that fact, you

10:34

then live a propaganda life as a

10:36

political party where there's this claims

10:38

that all of these foreigners are flooding

10:40

the United Kingdom to go and

10:42

live on this welfare state, which is

10:45

the worst one in the OECD, despite

10:47

any evidence to the contrary. Then

10:49

you get involved... the Brexit fantasies and

10:51

you basically rip that up. Now, if

10:54

you'd actually had a kind of

10:56

a real plan for an alternate growth

10:58

model that would have been really

11:00

invested in and pushed, then perhaps, you

11:02

know, that might have in some sense

11:05

what, but this has just been

11:07

a kind of fantasy disaster. And now

11:09

on top of that coming out

11:11

of COVID, we had the same response

11:13

as everyone else, which is basically to

11:16

make sure that this doesn't become

11:18

a cratering depression, they've now decided to

11:20

go in a kind of Thatcherite rant

11:22

to back to the 1980 back

11:25

to the 1980. tribute band. So what's

11:27

real in this is kind of

11:29

the fantasy politics and the fantasy economics,

11:31

but the economics itself reasserts itself because

11:34

at the end of the day

11:36

why is the pound tanking? Because people

11:38

who hold sterling assets look at

11:40

this and go what is going on?

11:42

I'm not sure I want to hold

11:45

this anymore. So I think the

11:47

reality is still there. It's just that

11:49

for several years, if not a whole

11:51

generation, politicians have been living in

11:53

Alala fantasy land and have only been

11:56

talking to each other. have been

11:58

pursuing policies which markets have tolerated and

12:00

they've now got to a point where

12:02

there's just no... the case. Yeah,

12:04

well markets tolerate a lot of these

12:07

policies because many of the policies advantage

12:09

the owners of capital. Oh yeah,

12:11

totally. Yeah, you know. But now you'll

12:13

get into a point where it

12:15

clearly doesn't. Yeah, yeah, and the trickle-down

12:18

stuff coming out of the trust government

12:20

is it's like a Saturday night

12:22

live skit. Yeah, it's like, it's just

12:24

like literally the retreds from like...

12:26

1985 or something like that. It's just,

12:29

it's just astonishing that given what we

12:31

know about the effectiveness of these

12:33

policies, that somebody could actually believe that

12:35

they could deliver the goods. It's just,

12:38

yeah, boggles the mind. Oh, Biden

12:40

was completely correct and, you know, the

12:42

work that you've done has shown

12:44

this and lots of people have done

12:46

it. And, you know, it simply doesn't

12:49

work. It's not trickle down, it's

12:51

trickle up. Yeah. So, you know, I

12:53

think there's two ways of thinking

12:55

about this. The first one is, they

12:58

know that they're dead. They're going to

13:00

be out for a generation. So

13:02

they're basically trying to steal everything for

13:04

them and their mates on the British

13:07

welfare state even more. a bit

13:09

like what Martin Wolf said about their

13:11

project in the Financial Times. Once

13:13

you've done Thatcher, you can't do it

13:15

again. You only get to basically liberalise

13:18

your banking system once. Once you're

13:20

there, you can't do it again. And

13:22

it's the same thing. Once Cameron and

13:24

Osborne clobbered the welfare state half

13:26

to death, there's nothing left to cut.

13:29

And the reason that you'll see

13:31

this is, as the economy gets steadily

13:33

worse, as it has to do with

13:35

this policy mix, more and more

13:37

people are going to be thrown to

13:40

rely on these institutions, which they

13:42

think are there, that actually aren't in

13:44

an incredible state of dysfunction. So, you

13:46

know, I do worry about, you

13:48

know, the socio-political unrest that could arise

13:51

in Britain, as they basically figure out

13:53

that they're being paying high taxes

13:55

for years. The welfare state isn't there

13:57

to support them. The idea that

13:59

housing wealth is going to be there

14:02

forever forever and it's always... secure evaporates

14:04

and a combination of a supply

14:06

shock on gas plus rising rates plus

14:08

a massive import bill that's increasing

14:10

cause of devaluation hits households all at

14:13

once. The idea that tax cuts, it's

14:15

kind of, it's a bit like

14:17

this, the idea that if you put

14:19

all those things together. You're looking at

14:22

supply shocks, particularly in the European

14:24

inflation stuff, right? It's really just supply

14:26

shocks. And so why do you

14:28

raise interest rates? Well, I don't know.

14:31

All right, so think about it. You're

14:33

making people poorer, particularly if they

14:35

pay more for their credit, to solve

14:37

an oil and gas supply problem. It's

14:40

not exactly joined up thinking, and

14:42

this is why even the Germans now

14:44

are basically thinking about price caps

14:46

and targeted interventions, whatever, right? What is

14:48

it the Brits are doing, tax cuts?

14:51

It has nothing to do with

14:53

it. And the bankers bonus thing, that

14:55

was the worst example of Brexit

14:57

gas lighting I've ever seen. Yeah, it's

14:59

just, would you explain that to our

15:02

listeners, like that particular provision? Yeah,

15:04

sure. Basically, after the financial crisis, Gordon

15:06

Brown put in a cap on bankers'

15:08

bonuses. And at first everyone went,

15:10

oh, that's terrible, we'll all move our

15:13

jobs. And actually, a couple of

15:15

heads funds did move to Switzerland, then

15:17

they found out it was really boring

15:19

and just as expensive, and then

15:21

they moved back. And then eventually what

15:24

they did was the altered the salary

15:26

component to compensate for the cap

15:28

on the bonus. So what's happened is

15:30

trust is just coming in and

15:32

said, hey, bankers, bankers, you're awesome. all

15:35

the bonus you want and everyone went

15:37

great that'll earn me a couple

15:39

of more grand but what's the point

15:41

when public services are falling apart

15:43

yeah and that's literally that was the

15:46

most commented comment in the financial times

15:48

from people who work in the

15:50

city I think if there is a

15:52

silver lining to this cloud it is

15:55

at least it's my impression that

15:57

the consistency and volume of the criticism

15:59

is something that you would not

16:01

have seen 10 or 20 years ago.

16:04

Totally agree. Everybody is like, what? You

16:06

can't believe this. right like nobody

16:08

believes this anymore stop and 20 years

16:10

ago people would have been like

16:12

well okay you know tax for the

16:15

rich great growth they're all the job

16:17

creators blah blah blah blah blah

16:19

blah so I mean we are making

16:21

some slow progress but it is just

16:24

yeah I mean I'm not sure

16:26

you're making not much progress with the

16:28

core of the Republican coalition in

16:30

the United States no no no no

16:32

no but everyone else I think that's

16:35

absolutely true and in terms of

16:37

progress there isn't there isn't a better

16:39

example than the Biden administration, which I

16:41

think is surprise the hell out

16:43

of virtually everyone, except maybe for them.

16:46

Although I think I think they've

16:48

even surprised themselves about the depth and

16:50

breadth and ambition of rebuilding the economy

16:52

from the middle out. If you

16:54

look at the spectrum of what they

16:57

have accomplished and the nature of

16:59

these accomplishments, it really is breathtaking and

17:01

something I would not have. predicted myself.

17:03

I just, my call prior to

17:05

this was with a person I will

17:08

not name, but who is an economist,

17:10

the top economist, that one of

17:12

the most important departments in the government,

17:14

and we were just chatting about

17:16

how astonishing all this progress has been.

17:19

You would have thought that the trust

17:21

people would have maybe would have

17:23

taken a look at that, but no.

17:25

I just wanted to get away

17:27

from politics for a moment and in

17:30

backed economics as if you can separate

17:32

the two. One of the things,

17:34

I don't know if it was in

17:37

your book or in one of the

17:39

interviews I listened to, but yet

17:41

you hit on one of my little

17:43

pet peeves which has to do

17:45

with certainty in the economy because you

17:48

you always hear from business owners from

17:50

the Chamber of Commerce here how

17:52

important certainty is to their businesses and

17:54

yet the entire neoliberal era has been

17:57

one of taking certainty away from

17:59

working people. How? much a role is

18:01

the sense of uncertainty playing in

18:03

both our current economic crises and our

18:05

political crises. I think that one feeds

18:08

the other. So here's what I mean

18:10

by that. Jacob Hacker at Yale has

18:12

been working on us for a long

18:14

time and ages ago he did a

18:17

book that really sort of opened up

18:19

this agenda called The Great Risk Shift.

18:21

And the basic idea behind this is,

18:23

well, you know, what used to be...

18:26

insurance by public and quasi public institutions.

18:28

For example, collective bargaining agreements, higher replacement

18:30

rates and longer duration on an employment

18:32

insurance, etc. has essentially become first residualized

18:35

in the first wave of neoliberalism, and

18:37

then basically abolished in a time of

18:39

just-in-time contracts, multiple subcontracting, franchising, and the

18:41

rise of very much precarious labour contracts.

18:43

So there's been this, we're going to

18:45

take the risk that in hears in

18:47

capital, and we're actually going to transfer

18:49

it all to labour. Labor doesn't... get

18:52

any of the upside we get to

18:54

take if you will all of the

18:56

extra social surplus generated by shoving the

18:58

risk on someone else and I think

19:00

that's basically created that feeling of precarity

19:02

etc that's there so if you think

19:04

about it through a lens of certainty

19:06

rather than uncertainty what we've done is

19:08

to make the lives of others incredibly uncertain

19:10

and that's emotionally draining and very very stressful

19:13

so you know that that's one way to

19:15

think about it's a good way to think

19:17

about what's happened Yeah, that's so it's

19:20

so true. You know, one bit

19:22

of data that I cannot

19:24

remember specifically,

19:26

but just generally that

19:29

so supports this thesis

19:31

is JP Morgan, of all

19:33

things, data on the variability

19:35

of income for lower

19:38

wage workers. And, you know,

19:40

it's one thing to say

19:42

somebody makes $30,000 a year,

19:45

whatever it is. If on

19:47

a monthly basis, it's highly

19:49

variable, it's just impossible to

19:52

run your life, right? No,

19:54

absolutely. Yeah, if in one

19:57

month, you make a thousand

19:59

dollars. That won't cover your rent

20:01

and everything else despite the fact that

20:03

the next month you may earn three.

20:06

Well, this explains why payday loans and

20:08

food banks have become part of the

20:10

private welfare state. Because you've got such

20:12

income volatility, not such uncertainty over employment,

20:14

that you end up being trapped in

20:16

these, again, private institutions, which have taken

20:19

the place of the public institutions and

20:21

public contracts that used to ensure workers

20:23

against this. So we really have just

20:25

dumped the risk on them and said,

20:27

you deal with it, you could go

20:30

get a loan at 40% on your

20:32

own paycheck, on your next paycheck, it's

20:34

your fault for being poor. Yeah, correct.

20:36

Mark, tell us about what you think

20:38

we should do. What's the specific area

20:40

because there's so much to do? I

20:43

mean, where would one start? One thing

20:45

I was heartened to see, I mean,

20:47

the problem in the UK in part

20:49

is obviously the Conservative Party, there's a,

20:51

if you think about it in a

20:54

weird way, every 50 years they blow

20:56

up the country. I mean, if you

20:58

go back to 1925 and going back

21:00

on gold and causing the Great Depression,

21:02

check, you could go to 57 and

21:04

Anthony Eden, East of Suez, check, right?

21:07

You could call Thatcher the crisis that

21:09

got lucky because of Falklands and the

21:11

turnaround in the global economy. But you

21:13

know, every sort of generation they just

21:15

basically decide to just blow the thing

21:18

up and we're in the midst of

21:20

that. The problem with this is the

21:22

Labour Party then comes in and cleans

21:24

things things up. And rather than being

21:26

a kind of crusading force that picks

21:29

up the mantle and says, why do

21:31

we allow these people to do this

21:33

time and time again? They go, we

21:35

promise to be a little bit more

21:37

fiscally responsible, etc. So they come in

21:39

and they clean stuff up. But one

21:42

thing I've been heartened to see in

21:44

the conference is a discussion at last

21:46

of a southern wealth fund. And this

21:48

is something that we discussed at the

21:50

end of angry nomics. That we've squandered,

21:53

unfortunately, the early 2000s and the negative

21:55

yielding debt that meant we could have

21:57

refinance debt and issued debt at a

21:59

negative real rate. Inflation has now taken

22:01

care of this, but if you think

22:03

the yields on the yields on renewable

22:06

investments around 6%... inflation drops to four,

22:08

you do targeted loans on green sector

22:10

investment through a sovereign wealth fund acting

22:12

as a kind of public corporation, you

22:14

can begin to move the needle substantially

22:17

on decarbonization and you can do it

22:19

in such a way that it doesn't

22:21

lead to extrafiscal stress on the official

22:23

budget. And you see the way the

22:25

Germans are doing this, it's a variant

22:27

of that with kind of off-budget expenditures

22:30

etc. And there's this growing recognition that

22:32

we need to invest, we need to

22:34

decarbonize and all of these things can...

22:36

together in a virtuous circle. What we

22:38

have on the other side of the

22:41

table are basically long carbon assets that

22:43

are fighting against the inevitability of their

22:45

demise who fund the opposition. And that's

22:47

very much how I see like where

22:49

these battle lines are being drawn. Right.

22:51

Think about it this way, a very

22:54

simple one. If you need to actually

22:56

switch from like central heating and central

22:58

air systems and very sort of electricity

23:00

intensive things, right? And you want to

23:02

go to heat pumps. You've literally got

23:05

to put a heat pump in every

23:07

house. Now that makes the demand for

23:09

age wax engineers, which is a skill

23:11

job that pays well, go through the

23:13

roof and stay there for about 30

23:15

years. Yeah, right. So there is literally

23:18

no downside in investing in those skills

23:20

and rolling out that tech because at

23:22

the end we all benefit. Yeah, absolutely.

23:24

And there are a hundred more examples

23:26

just like that. Yeah, totally. Which is

23:29

what the trust. government should be focusing

23:31

on. No, they're focusing on tax cuts.

23:33

And as somebody who's in the process,

23:35

I just got a $22,000 bid to

23:37

do exactly that, to convert my old

23:39

oil furnace into a heat pump. And

23:42

the Biden administration with the Inflation Reduction

23:44

Act, it is promising an $8,000 tax

23:46

credit. Tax rebate on that. And that

23:48

makes perfect sense. These types of massive

23:50

investments in decarbonizing the economy are the

23:53

debt downsides purely political or is there

23:55

any economic downside to doing it? Of

23:57

course there are. I mean transitions are

23:59

hard. No single country let alone a

24:01

planet has tried to transit its entire

24:03

energy system. But the cost of not

24:06

doing it are... you lose everything. So

24:08

when I look at that balance sheet,

24:10

you know, you hear this often is

24:12

like, well, we really need to decarbonize,

24:14

but can we afford it? And I'm

24:17

like, honestly, you can't print a new

24:19

planet, but you can't print money. If

24:21

the worst thing is going to happen

24:23

to you is you're going to have

24:25

above term inflation. You're going to, nobody

24:27

dies of inflation usually. People will die

24:30

of climate change. So I think that,

24:32

you know, that needs to be put

24:34

in a put in a perspective. It's

24:36

not that you can't find them in

24:38

places like Europe and the US, it's

24:41

just that you don't have the refining

24:43

capacity. The refining capacity is all in

24:45

China. So if you want basically refined

24:47

beryllium and all the rest of it,

24:49

you need to be nice to China.

24:51

At a time that you're not being

24:54

nice to China and China's not being

24:56

nice to you. So there are real

24:58

geopolitical risks involved in all the stuff

25:00

that needs to be smoothed over. or

25:02

not but if you don't watch your

25:05

plan be for getting your hands on

25:07

this stuff so yeah no one's saying

25:09

it's easy it could be but but

25:11

it takes it takes time to build

25:13

capacity simple as that seven years for

25:15

a mine ten years for a refinery

25:18

right so it takes time and we

25:20

don't have a lot of it so

25:22

you know none of this is easy

25:24

but it's a hundred percent necessary so

25:26

it's just you know to me to

25:29

me the real action is if you

25:31

look at the the republican side and

25:33

you get a little bit of this

25:35

through the the the other black door

25:37

that is the policy advisers to uh...

25:40

to trust in downing street a lot

25:42

of this comes out of the u.s

25:44

carbon coalition and they're basically fighting the

25:46

loss of all of their assets and

25:48

they want to delay that loss as

25:50

long as possible. So, you know, that

25:53

to me is one of the critical

25:55

battle lines. If you look at the

25:57

way the GOP are behaving just now,

25:59

the whole war on woke capitalism, the

26:01

politicization of ESG, going after finance groups,

26:04

etc. for basically... having political agendas. This

26:06

is exactly the same playbook, if you

26:08

will, this critical race theory applied to

26:10

the economy. And it's a purely defensive

26:12

tactic, a small screen, a politicization. There's

26:14

nothing positive about it. Yeah, I could

26:17

not agree more. Although I do want

26:19

to, I do have to put in

26:21

a plug here for my colleague Eric

26:23

Binehacher and Done Farmer's work on the

26:25

cost of the energy transition. basically, you

26:28

know, the faster we go, the cheaper

26:30

it gets. Yeah, absolutely. Because, because, you

26:32

know, scale. You got less crap to

26:34

clean up. That's basically it. Yeah, that's

26:36

it. There's the three variables right there.

26:38

Time, amount of crap, how much stuff

26:41

you need to do it. Go. Also,

26:43

the point is just that the technology

26:45

gets gets cheaper the faster you do

26:47

it. Yeah, it'll get cheaper faster faster.

26:49

So, yeah, absolutely. Their main argument being

26:52

that a fast transition is actually. less

26:54

expensive than a slow transition because the

26:56

technology will get cheaper. There is a

26:58

caveat on that though and it's worth

27:00

acknowledging. Brett Christopher's, I don't know if

27:02

you know this guy, he wrote this

27:05

brilliant book on Britain basically as a

27:07

society generated by rents a couple of

27:09

years ago. He has a new book

27:11

coming out with Random House called Our

27:13

Lives in their portfolios. It's about asset

27:16

managers owning real assets. He lives in

27:18

Sweden, super smart guy. He is a

27:20

piece that takes that and says, hang

27:22

on a minute though lads, you are

27:24

forgetting something, which is profit. If at

27:26

the end of the day you can

27:29

make renewables so cheap that actually putting

27:31

them out at scale means you don't

27:33

need any money, then you need a

27:35

system other than capitalist profitability to actually

27:37

make it happen. There's actually a downside

27:40

to making things so cheap so quick.

27:42

Nobody wants to go near it because

27:44

they won't make any money. And that

27:46

is actually a constraint we're not thinking

27:48

enough about. careful when you start saying

27:50

that people will call you a socialist.

27:53

Yeah. So, so one of the questions

27:55

we love to ask in our podcast

27:57

is the. What is it, Goldie? The

27:59

benevolent dictator question. Yes. Yeah. So if

28:01

you were put in charge of, ordinarily

28:04

I would say the American economy, but

28:06

King of the world. Yeah, if you

28:08

were King of the world, what would

28:10

you do? That's right. No, no political

28:12

constraints. No, no. Yeah, you can print

28:14

all the money you want. So I

28:17

think, let's focus on the transition because

28:19

I think it is genuinely the most

28:21

important thing over the next 20 to

28:23

30 years. So how do you get

28:25

this to work? Currently there's sort of

28:28

three visions on the table. So the

28:30

first one is basically we're going to

28:32

get the private sector and we're going

28:34

to kind of nudge them with nudge

28:36

strategies and incentives to doing more stuff.

28:38

And there's a little bit of that,

28:41

but a lot of it has ended

28:43

up as green washing and basically ESG

28:45

box ticking. Yeah it hasn't turned on

28:47

the taps right and it's not because

28:49

people aren't trying I mean if you

28:52

look at blended finance contracts and all

28:54

the rest of it you're really it

28:56

turns really good it's just why are

28:58

they not going into it answered because

29:00

it's easier to do other stuff you're

29:02

familiar with I guess right then you

29:05

got a second version of this as

29:07

well they're not going to do it

29:09

so the state should do it so

29:11

they should build all the assets and

29:13

run them given the fact and also

29:16

giving up on the states on the

29:18

pirate sector is much bigger balance sheet

29:20

than the vast majority of states excluding

29:22

possibly the US and a handful of

29:24

others strikes me as not the best

29:26

idea. So what you've got to get

29:29

is like in between that a system

29:31

whereby you're not just incentivizing finance, you're

29:33

channeling that finance usefully into decarbonization in

29:35

such a way that you're not just

29:37

giving them a free option on the

29:40

future. that they've got to have skin

29:42

in the game as well, but they're

29:44

incentivised in such a way that they

29:46

know that they have to do it.

29:48

And that means taking a firm stance

29:50

on carbon assets, that means phasing things

29:53

out, that means giving up on the

29:55

fantasy of ever... a carbon tax because

29:57

to impose it at the right level

29:59

it would have to be so high

30:01

you would force sectors out of business

30:04

and the lobbying that would go on

30:06

would ensure that would never happen. It's

30:08

been a 40 year destruction. So I

30:10

would focus basically on developing state capacity

30:12

that would allow us to channel finance

30:15

more effectively into the transition, keeping private

30:17

finance as a partner because you need

30:19

the expertise in the size of their

30:21

balance sheet but making sure that we're

30:23

all on the same page. One place

30:25

that's done this quite well so far

30:28

as definitely small. example I know but

30:30

in Denmark they have a climate law

30:32

the it doesn't matter who wins the

30:34

election everybody's agreed to the targets ex

30:36

ante there's no backing out you don't

30:39

get to flip back on to carbon

30:41

no matter what and I think those

30:43

types of agreements both at the governmental

30:45

level and also in the financial world

30:47

are a made would be a major

30:49

step forward as to get us where

30:52

we need to go we can't just

30:54

rely on nudges they don't work and

30:56

we can't just hope that the giant

30:58

big new green deal is going to

31:00

happen because it's probably not so we

31:03

need to work in between space. Well,

31:05

that's not, you're not being much of

31:07

a dictator there. Yeah, I just don't

31:09

really have it in me. See, the

31:11

thing about it is, so I'm Scottish,

31:13

right, which means that, you know, we're

31:16

not born optimist, you probably notice. But

31:18

the other side of it is, I'm

31:20

a Scottish Catholic, and a Scottish Catholic,

31:22

it's kind of where most Scottish Catholics

31:24

come from, in the 1870s, and that's

31:27

exactly where my mother's side of the

31:29

family came from. But we're actually the

31:31

Scottish Catholics, where the 6% that they

31:33

didn't manage to throw into the on

31:35

the world that says don't be a

31:37

dictator because if you do some other

31:40

dictators going to come along and try

31:42

and kill you. So I prefer to

31:44

do this sort of come on lads

31:46

let's all go to the pub strategy

31:48

rather than you will all drink Guinness

31:51

at 12 o'clock strategy I don't think

31:53

that really works. That's fantastic. So one

31:55

final question why do you do this

31:57

work? I did honestly I mean if

31:59

you switched the cameras on you'll know

32:01

that I'm sitting in a recording studio

32:04

surrounded by instruments. to do this work.

32:06

I was basically meant to be a

32:08

professional musician. But then I realized something

32:10

that's true about life in general. There's

32:12

no shortage of talent. Only opportunity. And

32:15

there's always someone who's better than you.

32:17

So I gave that up after trying

32:19

it in New York for a while

32:21

and I finished my PhD and I

32:23

discovered that I'm good at this. I'm

32:25

not the best. Other people are better

32:28

than me and different things and all

32:30

the rest of it. But I figure

32:32

I can contribute I can contribute. And

32:34

I want her to actually have a

32:36

future. So if we're not focusing on

32:39

this stuff, if we're talking about trivia,

32:41

if we're doing the politics of distraction,

32:43

you're putting my 11-year-old's future and everyone

32:45

else in her generation in deep, deep

32:47

risk. And that is unacceptable. Perfect answer.

32:49

And I got to say, Mark, I

32:52

think there's a much greater shortage of

32:54

talent in economics than there is in

32:56

music. So much more opportunity there. It's

32:58

a much less competitive field. So in

33:00

defense, actually, I mean, I'll go back

33:03

to this for a minute though. I

33:05

think generational change is a very important

33:07

thing. As Neil's, one said, society evolves

33:09

one funeral at a time. And if

33:11

you go talk to like, you know,

33:13

economists under 40 trained in the top

33:16

years departments. And you said, what do

33:18

you think of trust? they would all

33:20

be on the floor laughing as well.

33:22

They don't believe any of this stuff

33:24

either. There has been tremendous change in

33:27

the discipline already, but it's just that

33:29

it takes a little bit of time

33:31

for that to filter in a public

33:33

consciousness. I think what we're still rebelling

33:35

against is an economics that took hold

33:37

30 years ago that most practicing economists

33:40

under 40 no longer believe. Yeah. Sadly.

33:42

The politicians still do. They still believe

33:44

it. Yeah. Well, they believe fairy stories

33:46

and folk songs. I mean, they get

33:48

the distilled version that speaks to their

33:51

priors. And that's always the problem. One

33:53

thing, Mark, at the very top when

33:55

we asked for your slate, you described

33:57

yourself not as an economist, but a

33:59

political economist. Is that becoming more the

34:01

norm in the fear? Well, for me,

34:04

I have an economics title because I

34:06

run an economic center, but my PhD

34:08

is actually in political science. But what

34:10

I've always done from my earliest book

34:12

onwards is I'm really fascinated by economics,

34:15

not just as a way of explaining

34:17

the world, but as a thing in

34:19

the world. And someone who's written a

34:21

really good book about this recently is

34:23

Elizabeth Berman, the sociologist, who wrote this

34:25

great book on how economics became the

34:28

language of US public policy, how we

34:30

gave up on fairness and basically fetishized

34:32

efficiency. And this is what I've always

34:34

been interested in because if you think

34:36

about economics less as a lens for

34:39

seeing the world and more as a

34:41

language of power, whoever gets to define

34:43

what is efficiency has tremendous power for

34:45

certain the agenda. Whoever gets to say

34:47

that something is economically illiterate, that's an

34:50

incredible retort. You're arguing from this position

34:52

of authority, which may or may not

34:54

have any foundations, but nonetheless it's an

34:56

incredibly powerful political device. And that's definitely

34:58

what we saw in the 80s and

35:00

in the 90s and all sorts of

35:03

forms. And we're living with those consequences

35:05

now. So for me, I've always studied

35:07

economics, but mainly as a thing in

35:09

the world, rather than the thing to

35:11

understand the world, although I think it's

35:14

useful. in that case too. Up to

35:16

limits. Yeah, so interesting. I couldn't agree

35:18

with you more. Economics is how we

35:20

rationalize, who gets what, and why. Yeah,

35:22

exactly. It's ultimately distribution. I'll think about

35:24

it this way, right? When you had

35:27

sort of the old-school macro, what Martin

35:29

was pushing the frontier out, and if

35:31

you worried about distribution at all, it

35:33

was a secondary concern. Now if you

35:35

go to the big econ meetings, the

35:38

largest single section of panels is on

35:40

inequality. Yeah. The world does change. Yeah,

35:42

it does. Well Mark, thank you so

35:44

much for being with us. I hope

35:46

you will join us again sometime. I

35:48

would be happy to. Yeah, just absolutely

35:51

fascinating conversation. And so nice to meet

35:53

you. Yeah, I really enjoyed it. It

35:55

was a great conversation. I enjoyed meeting

35:57

you guys. All the best. Mark

36:00

sounds like a fellow traveler Nick.

36:02

What do you think? Yeah, he's

36:05

super fun hilarious and smart guy.

36:07

Thank goodness. He didn't become a

36:09

musician. I'll just say that. I

36:12

don't know. You've never heard him

36:14

play. And indeed, listeners, I want

36:17

you to know that when we

36:19

connected with Mark this morning, he

36:21

is indeed in a music studio.

36:24

with instruments piled around him. It's

36:26

the first time we've ever interviewed

36:28

a guest who was in a

36:31

music studio when they were talking

36:33

to us. But you know, obviously

36:36

an incredibly smart and thoughtful guy

36:38

and definitely is thinking about economics

36:40

in very much the same way

36:43

that we are and I think

36:45

I think we can confidently assert

36:48

is a big believer in our

36:50

middle out economic approach and agenda.

36:52

Right and also I think at

36:55

a deeper level our approach you

36:57

know from the very beginning of

36:59

this podcast from the very first

37:02

episode we have talked about how

37:04

important narrative is not just in

37:07

describing the economy but in changing

37:09

it that how we talk about

37:11

the economy really changes the way

37:14

the economy works and can work

37:16

in the future because it gives

37:18

us permission to run the economy

37:21

differently and I think that's a

37:23

a really a major theme of

37:26

marks writing has been and as

37:28

he told us this approach looking

37:30

trying to understand the economy is

37:33

this thing separate from just something

37:35

that tells us what policies to

37:37

do how high how low to

37:40

raise the taxes interest you know

37:42

set interest rates and so forth

37:45

and we couldn't agree with him

37:47

more on that. Yeah, absolutely. And

37:49

just a circle back. I want

37:52

to encourage everybody to read Nick's

37:54

op-ed in The Guardian. We will

37:57

put a link in the show

37:59

notes. Pitch

38:04

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