Episode 81 – The World of Angrynomics with Mark Blyth

Macro N Cheese Episode 81
The World of Angrynomics with Mark Blyth

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Mark Blyth [intro/music] (00:02):

So the problem is, you know, our political system refuses to adapt to the world that we’re in. It’s not a lack of ideas. It’s a lack of political courage. The minute financial markets or corporate America poop their pants because of any sideways shot, what happens?

The fed comes along and finds $2 trillion in the back of the sofa in the Fed’s ready room and just throws it at ’em. Every time there’s a defense bill It comes in 70 billion over. Nobody ever says “PayGo PayGo, who’s gonna pay for that aircraft carrier,” right? It just happens.

Geoff Ginter [intro/music] (00:34):

Now let’s see if we can avoid the apocalypse altogether. Here’s another episode of Macro N Cheese with your host, Steve Grumbine.

Steve Grumbine (01:34):

Alright. And this is Steve with Macro N Cheese. Got Mark Blyth coming back with me here. That’s a second interview with Mark. We’re going to be talking about his new book, Angrynomics in which he’s a coauthor with Eric Lonergan. And one of the things that I want to touch on here real quick is that we’re seeing a lot of austerity based measures pushed out on the American people right now.

And there’s nobody that’s more of a leading voice on anti-austerity measures than Mark Blyth. Mark is the William R Rhodes 57 professor of international economics at the Watson Institute for international and public affairs at Brown university. He is the author of Austerity: the History of a Dangerous Idea and the coauthor, as I just said, of Angrynomics with Eric Lonergan. He contributes to several podcasts and talks on YouTube and his talks are viewed by millions. So welcome to the show, Mark, how are you today, sir?

Blyth (02:32):

I’m doing fine. How are you?

Grumbine (02:32):

I’ve read your book now two times and with minor blips in there, I have been absolutely fascinated with it. It captures what I consider to be the state of the world, not just the US it has a true global perspective in terms of the chapters of capitalism and where we are today. Can you kind of just lay out the background or the foreground or the backstory for Angrynomics?

Blyth (03:01):

Okay. I’ll give you this version of it. So Eric and I met when I was in the research for austerity and we met at these finance conferences cause I wanted to meet the bond market vigilantes. I wanted to meet the people that would crush hospitals and destroy health services, just to maintain their portfolios. And to get into those conferences, it’s quite hard, because they used to, when they had conferences…

This is something that was pre-pandemic. They would charge five grand for a seat. So the only way you could get in is if you were one of the speakers. So I got myself into doing the speaking at these things, and then I met them. And then I discovered that they’re not exactly as advertised. In fact, some of them are more left wing than I am, and they completely understand what’s going on because they’re very smart people who deal in billions of dollars.

And we decided we needed to write a book together. The problem is finding the time. So eventually I went over to London for a week and we sat with a couple of iPhones, and we recorded a conversation. And we had done reading prior to that on certain topics. We wanted to talk about aging and the economy, technology and the economy, stress and the economy.

And through the conversation we started to notice that anger was something that was coming up. So once we basically had the book down in very rough form, we went back and started Eric in particular to really look at anger as a phenomenon. And what we found was that it’s kind of one of those things that everybody assumes they know because they recognize it, but they don’t really think about it.

And the literature on anger, which is all over the place, everything from philosophy to neuroscience and back, basically it doesn’t really kind of typologize it, right? What is this type of anger? What is that type of anger? And we started to put that as a frame up front in terms of the political economy story we were looking at. So when you look at a Trump rally, you’re looking at a lot of angry people, but what are they angry about? What are signaling, right?

When you look at, let’s say a, you know, a climate justice person, right? Extinction Rebellion, they’re furious as well, but it’s a different type of fury… or is it? When we think about anger in our private lives, what does that signal? It usually signals stress. And what does that have to do with the more precarious nature of our economic existences these days?

So we started to try and put it all together. And I ended up with this notion of public of the private anger as one distinction. And then what we call this sort of the righteous, anger of the desire to be heard from people who feel themselves ignored or abandoned. And the other one is the weaponization of this tribal energy, which is weaponized by politicians.

Grumbine (05:29):

So in the UK, it seems like in the Eurozone, these things play out very differently than the U S and you guys made some really stark comparisons, but if you go back, I think in the very beginning, you started out with capitalism 1.0, in tying to this Angrynomics, in terms of dealing with the tribes and these various forms of anger. Can you take us through the various levels as you laid it out there? Not only for the anger, but tie it to the reset 1.0, 2.0 3.0, et cetera.

Blyth (06:07):

Yeah, sure. So this is an analogy that we came up with. I’d actually been using it in talks for a while, trying to talk about how capitalism basically has different variants over time. So think of them basically as a computer, the hardware of a computer it’s CPU and it’s memory and all that sort of stuff, equivalent of things like labor markets, product markets, capital markets.

So a very simple distinction in the United States is the world’s biggest capital markets. Germany. When you control for size of the economy, has some of the smallest Germany has a labor market. America is a labor market. They’re vastly different things governed by vastly different rules. So what’s the relevance of this observation. Well, historically there’s been three variants of capitalism capitalism, 1.0, as we called it, it wasn’t sort of the capitalism of the gold standard globalization 1.0.

And the way that that was governed was the free flow of goods and the free flow of money. And actually the three floor of people. What are the adjustment mechanism? Hence waves of migration in the late 19th century. The problem with this is that the ideas governing the software. If you will, on top of the hardware, basically said, the state should get this far away from the economy as possible, the original, lazy failed doctrine. And it shouldn’t interfere with money, the Sunday money box period.

And the problem with this was that whenever you go into kind of a deflationary environment, which is going to happen, and it will stand up because everybody’s trying to export and you’d rather export and import. So you’re going to push prices down is the wages are going to come under pressure. And if you put wages under enough pressure, guess what people get really, really angry.

So the fatal flaw in the gold standard was you need the price of labor, the main mechanism of adjustment. And when that went to law, you get an outpouring of anger, the reset for this after the great depression and world war two, when the kind of Keynesian welfare States domestically a new configuration of the hardware, and then the software that government were Kinsey and macroeconomic ideas under a much modified gold standard, the Bretton Woods system.

So think of this as kind of a rebuilding of the hardware and an entirely recording of the software for a different type of capitalism. This type of capitalism has a different set of bugs in the software that were identified by collect, skip back in 1943, he said that essentially, you’re going to have under conditions of sustainable employment. All of the bargaining power goes towards labor management, loses the right to monitor at that point in time, they began to realize that the deal that they’ve got is a bit of a focus, the in bargain, because if you continue to have full employment, then we just have to rise.

If wages rise above productivity, you’re going to end up with inflation. If you have inflation, your ability to hit your investment target is going to be on their mind. So if I’m investing over a 10 year horizon and I expect to get 5%, the tongue of inflation goes up to 10%. I might as well take the money around the back of the house bottleneck. And that was the situation that carpet will find itself in by the 1970s. So the bugs in the software in this case basically crush the system and the inflationary crisis, the 1970s, then this 3.03 point, it was one point or with a few airbags.

So if you will, the new liberal version of globalization, so open up integrate privatized liberalized global X. And when you do this, you massively increase the autonomous, the capital away from labor. It’s the opposite of the priority. And the big hardware mode of the period is the rise of independent central bucks because the policy target shifts from gardening full employment, to making sure that we have price stability coming off of the inflationary, hung over the suddenness.

Now this was remarkably successful and globally successful in the sense that the world’s largest poverty reduction program of all time has been Chinese industrialization on globalization and the rise of 800 million people from $2 a day defense up to basically global middle class standards. The problem with this is that when you take a very simple example, 600 million people and dump them at the global labor pool, that’s definitely going to push down wages and the core.

So once again, you have that kind of quasi gold-standard standup deflationary effect or incomes, particularly on those that are vulnerable to import competition from China. So the result of this is the whole wing of the manufacturing areas of the United States and the other OECD countries, and the beginnings of the kind of left behind story that we get of the Wisconsins and the Michigans, the rise of the course of their studies, the move into asset management and big financial sector, which generates wealth and incomes for the top percentiles at the same time, as wages are stagnating or falling in real terms for the majority of the population.

And that guess what produces a whole set of anger. And that was the hunger that was unleashed in Brexit. That was the anger that was at least under Trump. And that was the anger that drove populism around the world.

Grumbine (10:49):

When you’re looking at the angry faces, if you will, of today, right here, right now with the Trump phenomenon or disaster, depending on how you want to say this, clearly there is a huge swath of people that feel unheard, that feel exed out. And you kind of pointed to this in the book, kind of, you really nailed on this a lot, and that is the concept of tribes and nationalism coming out of this and bad actors playing on that natural anger that resides within people talk about the nationalism, if you will, and the outcome.

Blyth (11:26):

So it seems to be that the default reset, if you will, for frustrations over the economy is nationalism. And you see this in Britain [inaudible], but the whole notion of Brexit is take back control that somehow the EU is taking control for them. And if only we had more control over our lives for the nation acted together, then things would be better. And then there’s a whole host of sort of nostalgia and racial overtones and plus it, and not as well doesn’t have to be, but tends to be.

So the nation, if you will, is the notch from the repository of democracy. So you have national parliaments, national life doesn’t just, but increasingly under three point, Oh, what did we have? We had economic decisions that were made on a global basis that affected you locally. And it created the sense of powerlessness on the one hand that investment decisions made for corporations on the other side of the planet, were affecting you, but not someone else, that someone else was always making off with the cash.

So to return to the United States, if you go back to the Clinton campaign, to the extent that they even bothered with Michigan and Wisconsin, rather than assuming that they just hide them in the bag, it was wandering around saying, everything’s great we’ve recovered from the financial crisis. We’re back to full employment. Everything’s fabulous. We’re celebrating Obama’s legacy.

And if you spent any time in Milwaukee or spent any time in Flint or any of these places, you’re walking around completely broken cities, completely broken health systems, completely broken education systems. You’ve got Republican legislatures that go tax cut after tax cut, or creating austerity dynamics that are a downwards spiral. And this has been going on for over a decade.

With allied legislation being pushed through and all of the rest of it. So there’s a huge disconnect between the message that the Democrats are pushing out and the lived experience of the people in these areas. And basically say, we don’t believe you anymore. This is the whole distrust of elites, etc. Now, Trump comes in and one of the most interesting things, and we quote it in the book, is he looks at these people and says, I understand exactly what you’re talking about. China’s taking all your jobs, your corporations have lied to you. I hear you, very interesting, and I am your voice.

Grumbine (13:30):

Ah ha.

Blyth (13:30):

So that coalition was just sitting there waiting to be picked up. And this is true in so many countries. Now what’s interesting, of course is the way that this immediately is weaponized, because without missing a beat, he then turns around, goes down to Arizona, goes down to Texas, goes down to Southern border States and starts calling Mexicans rapists and murderers and the whole lot, and brings up kind of national protection border discourse into the whole thing.

Now, what we’ve seen of course, are the rise of white lives matter, as a much, much more hard tinged version of kind of, how can I put it, a Nixon Southern strategy on speed, essentially, basically being publicly racist. And when you think about his snub recently, refusing to go to the Memorial service…

Grumbine (14:11):

John Lewis.

Blyth (14:12):

… for John Lewis, right? I mean, no president would do that, right? That is basically a racial dog whistle snub, right there. You not part of my constituency, so it doesn’t have to be weaponized that way by the right. But unfortunately it tends to be. Now, why is this? Because the left are cosmopolitans, because the left live in cities, because the left work in industries like software and entertainment and education and all these things, and the left basically are rich.

And they’ve been doing well, or at least their elected representatives have. So if you think about, you know, who backs the democratic party, it’s tech, it’s tech and wall street are the main backers. So again, those people feel no affinity towards this constituency, says, no but we get it. We understand what’s going on. We’re totally with you. And they’ll look at us and go, no, you’re not. You live in Brooklyn. You don’t have out to do with me.

Grumbine (15:01):

Oh, right. You know, it’s funny. Trump just came out, I guess it was yesterday, peeling back, the affordable housing telling white suburbanites, hey your dream is fulfilled. We’re not going to let them build poor people houses around you any more.

Blyth (15:15):

Yeah, exactly. That’s it. Yeah. Right. You have a housing crisis. Right? You have an eviction crisis. You’re turbo charging the eviction crisis. And your signal is, don’t worry, we won’t build any affordable housing anywhere near nice middle class people.

Grumbine (15:32):

Mehrsa Baradaran says, lets be fair, them were dog whistles, you’re just out there, just straight up yelling it now.

Blyth (15:36):

Yeah.

Blyth (15:36):

That’s exactly right. That’s exactly right. No, I mean, any pretense at all, that sort of the racist component of this coalition, is only one part of it, is harder and harder to maintain, simply because the way that it’s weaponized by Trump is sort of overtly racist at this point.

Grumbine (15:52):

Right? Yeah, exactly.

Blyth (15:55):

Which is a shame because I mean, at the end of the day, I mean the point of Angrynomics, and if we want to go back into this, and move off of this, is that, you know, Trump’s a symptom, right. He’s not a cause. So he’s important, particularly if he does things like try and cancel the election, right. But he’s simply someone that walked into the room and found the coalition and weaponized it.

Salvini did the same thing in Italy. Le Pen almost did the same thing in France, Boris Johnson split the Tory party in half doing the same thing over Brexit. Right. We’ve seen this in multiple things. What’s been driving this. It’s been basically the inequalities and fragilities generated by version 3.0, the huge crash that was there in 2008, the reset from which was endless liquidity from the Central Banks, the corporate balance sheets were repaired, but people’s private sector balance sheets were never repaired. Instead, it was basically socialism for the rich, and austerity for the poor.

And after a while, that wore so thin, that you begin to get the populist uprising. Centre parties, because they were authors of this bullshit. Were unable to respond to it. And it was basically the radical right and the radical… radical, well, not so radical, it was the extremes of the right and the left as they are just now, to try to respond to it. At first, it seemed that there was a kind of left populism and you still see vestiges of this, other vestiges, you still see this in Ireland, and you still see it with Sinn Féin.

You see it with Podemos being in government in Spain and the passing of the world’s first relatively comprehensive UBI. So there’s a left wing version, right? And they’re still there, Bernie voters are there, but at the same time, what seems to be the majority and trend in this one, is a right wing nationalism with a heavy ethnographic component.

Grumbine (17:30):

You know, Eric brought up a great point in the book, and I want to hit on this, because this is one of the tropes. I don’t even know if it’s a trope. It’s just an assumption, that we all make in terms of inequality and wages not keeping up, and things not getting better. He made the point that, the reason why neoliberalism has been able to basically do what it’s done, is because it hasn’t been terrible for everyone.

Blyth (17:51):

Right?

Grumbine (17:51):

In fact, it’s hard to make the case that even with bad insurance, etc, that the medical profession hasn’t gotten better over 20 years…

Blyth (17:59):

Yep.

Grumbine (17:59):

And you kind of came back and you made the point that there was a nuance here. And as I read through this, I realized that, you know, we sometimes oversimplify this narrative, to, just simply inequality.

Blyth (18:09):

Right.

Grumbine (18:10):

But that doesn’t really explain it all. Can you talk about the balance of inequality in terms of it being a political tool, and the reality that we’re facing, what they’ve actually done to be successful, to make it so pernicious?

Blyth (18:26):

Well, let me qualify. Who do you mean by they?

Grumbine (18:29):

Well, when I say they, it is more of a fictitious they, or a theoretical they, the ideological bent, that has put this thing out there, that we are all benefiting from neoliberalism, that inequality is horrible.

Blyth (18:45):

Right, OK.

Grumbine (18:45):

It’s the narratives, it’s more of the false narratives or the incomplete. I shouldn’t say false. They’re not false. The incomplete narratives.

Blyth (18:52):

Yeah.

Grumbine (18:52):

And you guys kind of pulled that all together, in my opinion.

Blyth (18:55):

Yeah. I mean, so Eric makes the point that basically, if we miss measure inflation, if there is actually higher inflation than we think, then we just don’t look nearly as bad. There’ a piece out of Bank Underground, which is the research branch of the bank of England, that basically says, has the labor share really fallen, it has in the United States.

But actually, when you readjust for certain things like housing or house ownership and wealth extraction from assets, maybe it’s not as bad as you think. Right? So a lot of this has to do with, well, you know, what are you outraged about? Are you outraged about ,if you take the Piketty-Saez line, looking at tax returns and other work on wealth, the top 1% now own nearly 30% of everything.

Or are you outraged about the fact that it’s absolutely true that medical quality, of quality of going to the doctor, over the past 40 years, has gotten infinitely better, but your access of getting to the doctor has actually gotten worse, right, now, again, how does this all work out in terms of support or not for neo-liberalism. If you live in a reasonably prosperous part of the United States, you look around, it doesn’t really look like there’s a crisis, right? Have you been able to send your kid to a college that charges $50,000 a year and survive? There’s not much of a crisis.

Grumbine (20:07):

Right?

Blyth (20:08):

But if you’re in the top 20%, and you’ve basically been saving for your adult, working life, with equities, performing at around 6% a year compounded, you will die with more assets than you can spend. So for about the top 20% of people, it’s not just been okay, it’s been really good. The question is, will happens to that 30% of the bottom of society, for whom it’s being really, really bad, and where are their voices and who are their champions, and that’s where populous politics gets bought out.

Blyth (20:37):

It’s often pointed out to me. It’s like, yeah, that sounds good. But you’ve got to admit that, like Trump, basically most Trump voters are actually rich. And it’s like, yeah, well he is the guy who runs the Republican party, right? It’s not as if Republicans were going to be going, Oh, Trump’s leader.

I’ll just vote for the Democrats, right? No, of course they’re going to pile on, on this one because the system, as it exists is good for them too. His rhetoric brought a whole different set of actors into it, that tipped, to the victory for him. Whether he can do that, this time remains to be seen,

Grumbine (21:07):

Right? You raised some other points in there just now, as you talked about people that have been saving for a long time, and y’all made the point very poignantly, about the fact that a lot of these older voters, they’ve sucked the GDP, if you will, out of the rest of the economy.

Blyth (21:26):

Oh yeah.

Grumbine (21:26):

And then they sit there at the end of the days, looking down at everyone else. And this is a huge deal right now. This is a blocker for all forms of change.

Blyth (21:35):

Oh, absolutely.

Grumbine (21:36):

You’re not just talking about productivity issues in the modern society where . . .

Blyth (21:41):

No, we’re talking about old people.

Grumbine (21:42):

That’s right.

Blyth (21:45):

Not just the economy. So I just opened up my Twitter feed here and I’ve got on July 27th, I posted, “Ah the boomers. They took it all and then said, let them eat avocados.” And it’s a little chart that calculates wealth by generations of real estate, equities, pension entitlements, other, right? So basically, the silent generation and earlier, right.

You know, the greatest generations, the ones that fought world war II, defeat fascism, saved up, big stuff, right? They had 26 trillion. Their children, the baby boomers, who basically are Trump and Biden and all of their spawn, right? 65 trillion, my generation generation X, we only got 22 trillion. And your generation commonly has 6 trillion. So basically the boomers have 10 times as much wealth as you guys, even though millennials now outnumber them.

Now it used to be the case that you would say, yeah, but that’s explicable with the life cycle, right? So millennials are born asset poor. They take on debt, they earn through their lifetime, they become net savers. They start to invest, the boomers die off, that transfers back, it’s just going to swap out over time. The point we make in the book is, it’s highly un-likely, that it’s going to play out this way.

Number one, millennials, carry, more debt than any other generation, because of student debt and other debts. Basically you have the equivalent of a house with no actual corresponding asset. So you’re spending a huge amount of money. Just paying back debts. You’re not getting maried. You’re not having kids. You can’t save up for a deposit. You can’t afford to live anywhere that you want anywhere. Right?

All of the wealth that the boomers have got is actually concentrated in the top 20% of boomers. So the top 20% of boomers will die with five to 6 million in assets, and then pass that on to their kids.

Blyth (23:24):

But only their kids, which is a tiny sliver of the population. This is what Piketty calls, the new patrimonial-ism, right? That you’re going to get, intra generational inequality. You will literally have a rentier generation that lives off the income that they can get, the wealth, that generates an income for them. And at the bottom, you’ve got nothing.

So, you know, this is what, we are bringing this into the book. They say, you know, we don’t think about the effects of aging on the economy. One of them is very straight forward. Old people don’t buy that many fridges. They’ve already bought the one nice one, and never going to buy another one. You cannot have an increasing rate of consumption growth and an aging economy. Ask Japan. Right?

But the more subtle ones are these dynamics, basically there are intergenerational transfers going on, right? If you want to pay everything for Medicare and Medicaid for old people, and those old people have longterm, co-morbidities particularly now with Covid being around, right?

Blyth (24:17):

How are you going to pay for it? You’ll pay for the insurance, right? Well, you also pay through public subsidies, etc., to Medicaid, etc., etc.. Alright, how are you going to do that? Well, it used to be the case without blowing holes in the deficit, which we no longer care about.

Then you would basically tax future generations. I mean, if you think about it, the one and a half trillion in student loan debt, is basically being used elsewhere in the system to plug holes for all people. Why? Because they vote more. They vote twice as much as millennials.

Grumbine (24:44):

It’s scary. And it’s funny. I want to bring this up to you. I am one of those, class of birth people, that was born in the sixties too. I’m only two years younger than you. I was born in 69. So I’m an X-er as well.

Blyth (24:56):

But you sound so much younger. You must have lived a virtuous life.

Grumbine (25:01):

Now I’m just a metal head.

Blyth (25:04):

[Laughter ] So in other words, you’re deaf, okay, I got it.

Grumbine (25:06):

[Laughter] Exactly.

Blyth (25:09):

Totally makes sense. What’s your favorite metal band?

Grumbine (25:11):

Well, it used to be Metallica. I grew up when they had zits and everything, and go see them, and you could hang out and high five them and get one of their little…

Blyth (25:18):

Wow.

Grumbine (25:18):

…costume skull rings and stuff like that. But I’ve graduated into a whole lot of other stuff. Now. I like more experimental math type bands like Meshuggah, and then I trend over to Tool and…

Blyth (25:32):

Wow.

Grumbine (25:32):

Some of the longer form music that’s complicated and probably not easy listening for anyone other than myself.

Blyth (25:39):

Yes, I was going to say, I’ll stick with Motorhead. We’re good, anyway …

Grumbine (25:41):

Motorhead too, Lemmy was an incredible..

Blyth (25:45):

Lemmy was the alpha and omega of hard rock, that’s all there is to it.

Grumbine (25:48):

He is great. If you ever get a chance, there’s a song called “Murder One” by Metallica. That’s a, kind of like a celebration of Lemmy’s life. So definitely check that out.

Blyth (25:58):

Ahh nice, Okay. Anyway. Let’s get back to work.

Grumbine (26:01):

Yes, sir.

Intermission [music] (26:12):

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Grumbine (27:01):

So, one of the other things that I thought was really important here, as you were talking through the various economists, the three angry economists kind of parable.

Blyth (27:11):

Ah ha.

Grumbine (27:11):

You had brought up, Carl, I shouldn’t tip my hand on that one, but you had Carl, you had John and then you had Michael.

Blyth (27:19):

Yeah.

Grumbine (27:20):

And I’m just curious, if you could just kind of look at those three, and then come to today and tell us who might the parable of today be? Who would we put in that spot?

Blyth (27:33):

Uh, none. Um, um, no, I can’t, literally there’s nobody. We don’t produce people like that anymore. We produce people who are either, there are people that have got good, big ideas, but then pretty sketchy on the details. And then there are people that are only details and can’t see past the details. So I don’t think there’s a capitalism 4.0 theorist out there, now there is bits of it. Right.

You could take the work that’s been done. You know, Chris Delo had a wonderful line the other day in one of his blog posts where he says, I can’t walk out my door without tripping over an expert on UBI. Right? So clearly there is, you know, a lot of energy put into that space. There’s the whole MMT stuff, right? Absolutely.

You know, Stephanie Kelton and the rest, who basically are doing a great service with blowing up the deficit myth and the austerity myth. But also, you know, there’ve been wonderfully helped by events, in the sense that if you had said to me, 12 months ago, Hey Mark, what do you think the odds are of Boris Johnson? When he takes over the Tory party, and going through with Brexit, doing helicopter money and blowing out the British deficit by 30%, I feel like you have been drinking my friend.

Grumbine (28:42):

[Laughter]

Blyth (28:43):

That’s not how the world works. And yet that’s what’s happened. Right? So in a sense, you know, MMT’s whole thing is essentially the governments do not tax then spend, they spend then tax. And given the world that we live in, which is a low inflation, low interest rate environment, they could do a lot more, a hell of a lot more than they have hitherto lead you to believe.

And the reason that they’ve not allowed you to believe that, is because the interests that benefit most from the system, those are the very top with the corporate elite and financially, etc. Don’t really want that world to come to pass. So, you know, the base of this, it’s not just a technical question, can governments spend more, its a political questions, should governments spend more? And that’s where the interesting stuff gets.

Blyth (29:24):

So, you know, the thing at the moment is, Eric and I say this? I think in the book, I think, I think I say it at one point, I say it enough times in other places, the problem is not good ideas, a lack of good ideas. You can put together a whole suite of good ideas. If you want a great example, a compendium of good ideas, get Martin Sandbu on your show, financial times journalist, super smart guy.

And he’s firmly within the kind of like center-left leaning, technocratic, neoliberal, questioning crowd, right? And the backend of his book is just the encyclopedia of sensible center-left policy proposals, which if you enacted three quarters of them, would transform capitalism. It’s not a shortage of ideas. Absolutely not. It’s a shortage of political courage to try those ideas.

Blyth (30:13):

And when you basically look at the United States, you’ve got Trump who talks a kind of economic populous game while he used to, before he just went full blown racist. And then you have Biden whose strategy is like, I will not talk because I might expose the fact that like, I’m going to just blup [inaudible] and it’ll be done. Right.

Grumbine (30:32):

[Laughter]

Blyth (30:32):

I mean, my biggest fear for the election, quite frankly, is that halfway through the second debate Biden just stops, looks at the roof and goes, “Are we in France? I like France, I’ve always enjoyed France.” Then he looks panicked. Then just goes, sorry, what were we saying? And then its just game over, right? That’s it. Right.

You know, so when you have two aging decrepit boomers, you know, anything can happen. So the problem, as you know, our political systems refuse to adapt to the world that we’re in. It’s not a lack of ideas. It’s a lack of political courage.

Grumbine (31:04):

It’s very important that you said that because prior to us going live, you had raised some issues about, you know, what tribe am I? And basically, where do I fit in? And the populous left in the U S is actually quite small.

Blyth (31:17):

Yes

Grumbine (31:17):

And if you look at who actually votes on top of that, you already raised the point that boomers vote and vote big. And they traditionally are conservative because they’ve got interests to protect

Blyth (31:28):

That’s right. They have accumulated those 66 trillion in assets and you’re not having them, you ungrateful young communist bastard.

Grumbine (31:37):

[Laughter] That’s about a right, that’s exactly right too. But that brings up a great point. And this is an area where I think you and Kelton are on much alignment. As she often talks about the fact that it’s not money, that we lack it’s political courage and votes, votes in general. So I think you both have acknowledged the fact that, in reality, we’re in the minority.

Blyth (32:00):

Yes.

Grumbine (32:00):

And I think that one of the things that I like, there’s some adjacency here. You’re not an MMT, so to speak champion, but at the same time,

Blyth (32:09):

I’m not a fully fledged member of the club, but I’m certainly a fellow traveler.

Grumbine (32:13):

Absolutely.

Blyth (32:14):

If they start rounding up MMTers, I’ll probably end up in the van with them. Right.

Grumbine (32:20):

I was going to say, there’s very few points of contention that I see in terms of we’re fighting for the same thing. We’re trying to get to the same piece of plumbing at the end of the faucet.

Blyth (32:31):

Yep.

Grumbine (32:31):

And so I consider you to be very much a huge ally. And I know that there’s some differences within academia and quite frankly, the horrors of the establishment academia, block-out voices of so many heterodox thinkers, completely blocks them out of the picture, and to see so many voices such as yourself and Kelton and Mariana Mazzucato and others giving some attention, if you will

Blyth (32:58):

Right. I mean, you know how we’re able to do this, right? It’s because we’re not actually part of the same professional reward structure.

Grumbine (33:04):

Talk about that.

Blyth (33:06):

So basically the way that you get rewarded in academia, is by making contributions to the core of your discipline, right? There’s a brilliant dissertation, which will become a book shortly by a woman called [name inaudible] that talks about this. And she’s got a wonderful piece, which is hopefully coming out soon, called “How to build a super model”.

And it’s essentially how something called DSGE macro, which is a very sort of stripped down, the macro model used by central bankers and other forecasters, which assumes essentially that the economy is an individual, and it moves through time, and it’s sexless, and it’s ageless, and it’s tasteless. And what does it do if you raise interest rates? And, what do you do if you give it a trade shock, right?

And that type of modeling became dominant, because it was so tractable and it solved so many problems. And what it did was, it kind of took the big war of the eighties between the conservative macro people who were doing real business cycles, which is what this came out of, and the Keynesians, right? What was left of the Keynesians, the new Keynesians, and the new Keynesians came along and went yeah, this is a really useful model.

I can use this and I can make my points. And then everybody went, Oh, great. So this methodological thing became the way to do it. So the market of moving up in the journals, then just becomes, can you use this technique and new ways. Now, pretty much all disciplines are like this. They have their fads and fashions and political science at the moment, there’s very much experiments, if you were doing experiments, you were cool, and if you’re doing old stuff, you were just useless, right?

So that’s the way, that you get rewarded. And across all disciplines, not unique to economics. Now, what does this have to do with someone like Mazzucato? Well, Mazzucato is an economist who worked in a policy school. Counted also as a professor of public policy. I have an economist title, but then that’s because I run a center, and my prior title was political economy, which is much more accurate, and my PHD is in political science.

So we’re all kind of fishing off a very strange pier, which is why we’re not in the same professional rewards structure, which is why we can say crazy things, which they would think are crazy. A lot of it, basically academic disciplines are in the fucodian sense of the word, very disciplining. And if you go with that and you’re good at it, you can have a really brilliant life, basically adding incrementally to a Corpus of knowledge, which may or may not be useful, rather than actually, like shouting into the wilderness, like John, the Baptist.

Grumbine (35:27):

It brings up a great point though, when we’re talking about, it’s not enough to have a good idea, you got to have numbers, you’ve got to have votes. You got to have the Overton window, so to speak.

Blyth (35:38):

Yeah.

Grumbine (35:38):

Swing your way. And so you guys, in my opinion, and our work as activists supporting your work, is to in fact, smash that Overton window, and really open up some space for people to feel safe in a political sense.

Blyth (35:54):

Right.

Grumbine (35:54):

To dream big and to take things in a new direction.

Blyth (35:57):

Well, this is why Stephanie’s book is very important. Because when we did the podcast together, one of the points I made was, you know, that thing that’s in New York, that whirrs round, and scares everyone to death, called the national debt clock. You can just as well call it the national savings bond clock, or the national assets clock, because, nobody ever forces anyone to buy a treasury bill. They buy it because it is basically cash for rich people, right?

Grumbine (36:19):

Right.

Blyth (36:20):

Cash for poor people is cash. What does that mean? It means it’s kind of a smaller value, unit of account, unit of exchange. That’s your law. And it’s very liquid, which means that you can exchange for lots of different things. Fab. What are bonds? Bonds are exactly the same thing only they’re guranteed by the government.

And you get a positive interest rate them, usually. So that’s rich people’s money, right. Now, if people are voluntarily buying rich people’s money, and bonds, auctions, the U S government, and pretty much any [inaudible] sovereign, never fail. Then that tells you that they think these things are assets.

Grumbine (36:53):

That’s right.

Blyth (36:53):

So, you know, we paid them as debts, but they are actual assets, and what Stephanie’s work and other people’s work is doing is to basically say guys, when you think about this as a kind of plumbing problem, right? How does the plumbing work? It just doesn’t work the way that they tell you. Now stage two, is to then say, okay, now that we’ve kind of like, covered the deficit myth, what then is the real situation?

Why can’t we do these things? Right? One of the examples I gave, it was a piece that that I wrote, it was performance figures back in March or April. For, FI foreign policy.com. I said, you know, you can understand the frustration of Bernie supporters, because one of the main things is cancellation of student loans.

And that’s $1.7 trillion I think at this point. Everyone says unaffordable, unrealistic, blah, blah, blah. The minute financial markets or corporate America poop their pants because of any sideways shock, what happens? The fed comes along and find $2 trillion round the back of the sofa, in the fed ready room, and just throws it up. Every time there’s a defense bill, it comes in seventy billion over. Nobody ever says, PayGo PayGo, who’s going to pay for that aircraft carrier, right. It just happens. Right.

Grumbine (38:03):

Yep.

Blyth (38:03):

So, you know, I think that like, what they’re doing is they’re opening up that Overton window in a way that we never thought was possible. But like I say, what’s also happening, is they’re really being helped by events, because right across the world, any notion of like, you know, you have to watch out for the deficit, [pffft] that’s gone, right . otally gone. Now, you know, is that in the long term, going to be a problem, will there be inflation? These are legitimate questions, but in the middle of a pandemic, it shows what you can do. And if we can do it, then why can’t we do it in more normal times,

Grumbine (38:32):

Right? Yeah, absolutely. And it’s interesting, you know, you see millions upon millions of people losing their jobs, losing their job-provided healthcare, and this plays on the stressors, those micro stressors you guys talked about, I guess it was in dialogue, number four…

Blyth (38:48):

[Agreement]

Grumbine (38:48):

…where you kind of broke down these things that are not necessarily economic in nature. They’re really the behaviors of people. And this is why economic models fail and so forth, because they don’t take into consideration, the fact that you can’t really gauge risk. I think you said, Keynes basically said, there’s no way of judging this, period. And you people hate not having certainty in their lives.

Blyth (39:11):

So yeah. Listen, one of the things that would go into, basically the back end of the book, just to give people a heads up, Oh, by the way, I’ve got three cartoons, which I’m going to be posting soon. You can get them off my Twitter feed. There’s gonna be a website for it, etc. That basically summarized the book, this Angrynomics overview.

And then there’s macro Angrynomics, which was zero 1.0 or 2.0 or 3.0, and we’ve just finished the cartoon now for micro Angrynomics, which is all about stress in the workplace and in the wider economy. And the basic sort of story that we tell is that humans hate uncertainty. We hate it so much,we deny it. If you’re a Catholic, it’s called dogma.

If you’re an economist, it’s called risk. And it’s pretty much the same thing. It’s basically taking the, known uncertainty of the world, that you really cannot predict what’s coming next and pretending that you can. And the example, we give in the book, is to say, but this isn’t unique to priests or economist.

Why do you think you have birthday parties? Why do you think you have bah mitzvahs? Why do you think we have graduation events? Why do you think we have structured funeral rituals? Because all of these things are attempts that humans have to basically build more certainty and predictability in the world. What is it that’s been happening for the past 30 years? At least as far as the economy is concerned, both for labor and for capital, there’s been an incredible, dispersal in the return.

What does that mean in plain English? That the inequality that you see in wages is none other than the inequality in profits, it’s none other than the, the inequalities and returns the skills within firms, right? And because of all this, and because of technological change, what’s demanded of us is to embrace risk, by what they actually mean is embrace uncertainty. And we hate that, and it gets us in terms of our physiology.

Part of this is tied into the obesity crisis, and gets us in terms of our overall sort of mental health, the mental health crisis, right? So there’s huge ways in which what we are expected to absorb, to be the shock absorbers, of this increasingly uncertain economy, the precaria, the whole nine yards, the notion of digital platform, economy, etc., Just-In-Time supplies, zero hours contracts, it’s incredibly stressful. And what does that do? That feeds a lot of anger.

Grumbine (41:15):

You also talk about, we’ve often said on the show about savings are a demand leakage on the economy. And you think people have a natural desire to save. And the older people are saving because they have more assets than they know what to do with.

Blyth (41:30):

[Agreement]

Grumbine (41:30):

They have no uncertainty. Their life is on autopilot, for here until whenever.

Blyth (41:35):

The way I think about it is they have a bond like income. So they’ve gotten guaranteed payments, right? At a fixed interest rate, coming out at certain periods, you guys, because you’re not, you’re as old as me, you’re an old shit, right? But for younger people, what they have is, they have equity. Right, so basically the have huge fluctuations and uncertainty,

Grumbine (41:53):

When the government is not spending at the bottom, you all talked about the trickle up, the concept of the fact that, Hey, it never trickled down. It always trickled up.

Blyth (42:03):

Yeah. It increasingly rockets up.

Grumbine (42:05):

Absolutely. The hockey stick of income, inequality or wealth inequality is just ridiculous. But you think to yourself, if they’re not spending at the bottom and we don’t have enough money to buy a refrigerator, like the rich person that bought the really nice refrigerator.

Blyth (42:20):

Yes.

Grumbine (42:20):

That they’re never going to buy another refrigerator. That hurts all of us…

Blyth (42:24):

Yes.

Grumbine (42:24):

…except for those who are on auto pilot.

Blyth (42:26):

So, I just wrote a paper about it, which I’d be happy to send you.

Grumbine (42:31):

Great.

Blyth (42:31):

…with somebody who used to be a Goldman Sachs tax person, I know interesting people. And basically what we came up with, is that there really is now two separate economies, right, in the United States. There’s one which is based upon income, drawn from assets, which basically are protected by the federal reserve. They will not be allowed to fall.

And then there’s income generated by wages, which basically, has pretty much zero protections, and you’re just meant to absorb the shock. And what started as a series of kind of insurance puts by the fed, starting in 1999 with this hedge fund called long term capital management, going through 911, going through the 2004 downtown, going through the housing crisis, are bigger and bigger interventions by the central banks.

And what that means is, if, I know every time there’s going to be a bump in the road, asset prices are going to be protected. I will just load up with as many assets that generate income as I can, because I know they’ll never fall in value. But if you’re part of the 80% of the economy that doesn’t really have those assets, you’re kind of stuffed.

Grumbine (43:32):

Yeah, you are. And for me, I see so many regular people, I call them just regular Jane and Joe America. And I imagine this is not just an American phenomenon though. As you say, in the book, people in Europe don’t have to worry about cancer. They don’t have to worry about these things because their healthcare is paid for.

Blyth (43:50):

Exactly. It’s a huge thing. Now here’s the interesting question. Even though they have free healthcare, in many countries they are just as angry as Americans. So it’s not just about that. Right? But that certainly relieves one. If you could say to Americans, you can have a cancer diagnosis and it won’t bankrupt your family. That would go some way to reducing some people’s anger.

Grumbine (44:10):

Yes.

Grumbine (44:11):

It’s interesting because Europe and the UK in particular, they have their traditions, they have their tea time. They have their different rituals that are predictable, that reduce the uncertainty, as you say. And globalization has shattered so many of those traditions and they’re holding on for dear life. And there’s another form of that anger, which plays into that nationalism.

But you look at what’s happening here in the United States, and it’s even worse than that because, folks like myself who have an education, we’ve got these huge bills coming due, for our student debt. And then on top of it, we’ve got the uncertainty where there’s constant layoffs, and they hire you back at a couple dollars an hour, less than you were making before.

Blyth (44:54):

Absolutely.

Grumbine (44:54):

And less benefits and less anything. And this pandemic has clearly blown the lid off of, a lot of the mysteries and the myths that we had lived by. But nonetheless, there’s still not the political will to change it.

Blyth (45:09):

Yeah.

Grumbine (45:10):

I think coming to close this thing out, how do you see political will being manifested? How do we change that dynamic? Is it in education? Is it in the streets? What do you think is the answer to changing that political dynamic? Is it just death of the boomers? I hate to say it. What do we got here?

Blyth (45:29):

I actually think the last one is probably true, that it is generational, right? The boomers didn’t just accumulate 10 times as many assets, over the lifetime, as millennials have to this point. Even if millennials double what they have, they would still have 50% less than the boomers ever accumulated. The problem is they basically created the climate crisis, and they singularly refuse to do a damn thing about it.

So, the only thing that really matters, at the end of the day, is the survival of the species. Now, you know, even if we go to six degrees, yeah. I mean, half the planet’s population will move or die. It will be catastrophic. Will it be the end of the species? Probably not, but it’s not a world I particularly look forward to. And we did have a window of opportunity to do something about it, but we just basically refused to do it.

Why? Because the generation in charge refuses to admit that its even real in some cases. And as they begin to lose influence, you notice in opinion polls, Americans now believe that it’s true. And they would like to do something about it, but that’s never been enough. There’s a wonderful book by a political scientist called Martin Gilens. Is he really a sociologist? I’m not entirely sure, called “Affluence and influence”.

And basically I know there’s a whole bunch of work that comes out from this. And what he does, is he looks at US data and he says, right, here’s what people say they want, when it goes from the Johnson administration right up to the Bush administration. Here’s what people say they want. Now, here’s what Congress legislates. And then when you basically do a little bit of statistics, to basically correlate the two of them, what you find is that basically Congress legislates for the preferences of the top 20%.

And it doesn’t matter if it’s Republican or Democrat. And in fact, the most pro-poor administration after the Johnson administration, was the Bush administration, in terms of basically, the preferences of the 80% and the 20% being aligned. So this is structural. This is baked into the cake. And as the generation running this, they basically can’t see past their own life experiences.

So how do you get past this? I think it needs a generational shift. I think it’s underway, whether it’s fast enough to basically avert a climate catastrophe. That’s an open question. If Trump wins again, basically you’ve blown it. I mean, it’s not just for him. It’s planet wide, because he will withdrawal from Paris. This will license incredibly bad behavior by other sort of authoritarian States, and the entire global compact such as it is, will unravel. So, the stakes here have never been bigger.

Grumbine (48:00):

Wow, well with that, I’m going to thank you Mark for joining me today. It’s always a pleasure to talk to you. And I really like the fact that I see some convergence in the heterodox area. It’s really nice to see us kind of finding common ground, and I really appreciate your book. It was fantastic. And with that, I look forward to talking to you again in the future, sir.

Blyth (48:21):

Absolutely. Send me the link when it’s up, we’ll put it out.

Grumbine (48:21):

You got it, man. Thank you so much. This is Steve Grumbine with Macro N Cheese, Mark Blyth. Thank y’all. Have a great day everyone, we’re out of here.

Announcer [music] (48:36):

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