Episode 134 – Infrastructure with Robert Hockett

Macro N Cheese – Episode 134
Infrastructure with Robert Hockett
August 21, 2021

 

[00:00:03.410] – Robert Hockett [intro/music]

But insofar as Republicans only care about economic performance, then it seems to me we can certainly point that out. We could say, well, since you guys are all obsessed with China now, how are you going to compete with China to be a factory for the world if your entire labor force or potential labor force is living on sidewalks? That’s not productive.

[00:00:25.350] – Robert Hockett [intro/music]

We have to remind ourselves constantly that renewing production, renewing manufacturing now has to mean also renewing the modes by which we power production, the modes by which we actually transform or convert energy of one kind into energy of another kind.

[00:01:34.290] – Geoff Ginger [intro/music]

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

[00:01:42.070] – Steve Grumbine

Alright, folks, this is Steve with Macro N Cheese. Today we have Robert Hockett joining us again. And we’re going to talk about the big I. No, it’s not Steve Grumbine. Yes, I am big. And yes, I am I but the big word is infrastructure and infrastructure is the hot button. It’s been a hot button for a long time. And it should have been a hot button many, many moons ago because our nation literally was built during the Industrial Revolution and Roosevelt’s time as he spent money into the economy.

And so a lot of the stuff that we’re living on, these things go back 100 years some of them. And the plumbing is still made out of clay and lead. We’ve got bridges falling apart across the country. We’ve got levies given way, a la Louisiana. We’ve got dams. We’ve got the electric grid. We’ve got all kinds of stuff going on in this country that was built long ago.

We didn’t invest in maintenance. And now here we are staring down the barrel of a crumbling society and the infrastructure that sustains it. So I asked Bob to come on because Bob has a nice view of what’s going on in the space. And we’ve got competing issues with the Senate and with Congress. We’ve got the overriding narrative that came out of COVID with all the spending that they did.

And now the inflation fear porn is gripping the nation once again. So with that, let me bring on my guest to help provide clarity to this meshuggah here and see what we can get our arms and mind wrapped around what is infrastructure and what is the hold back from actually doing a really robust Green New Deal sustainable infrastructure project. So with that Bob, welcome, sir.

[00:03:34.040] – Robert Hockett

Hey, brother. So good to be on with you again. I can’t think of anybody I’d rather talk about this stuff at length with than you.

[00:03:39.930] – Grumbine

You are such a flatterer, but I love ya. I’ll take it.

[00:03:42.630] – Hockett

Only with truth.

[00:03:44.570] – Grumbine

Well, let me just say you are the expert on this. I’m really glad to have the vine with you, because you always bring the truth. And one of the things that I like also about bringing you in, even though it sometimes seems contrary to me, is that you are an optimist. And at least even if we end up not agreeing on some of the motives, I think we always find common ground in the solutions. And I’m really eager to hear your story because I know that everybody’s confused.

[00:04:14.720] – Hockett

Aha. Yeah. So you want me to give like a kind of a quick overview of how things are looking to me right now, and then we can pick up particulars so we can go into more depth on?

[00:04:23.300] – Grumbine

Why don’t we start with just defining what infrastructure even means? Cause I think that that word is just such a catch-all right, now, and I’m not sure anybody really gets what we’re trying to achieve or what is trying to be achieved. I know what I’ve tried to achieve, but what is being achieved by the bills that are out there?

[00:04:39.630] – Hockett

Yeah, that’s a great idea. So the way I think of it, in general, is I begin by reminding myself of something about infrastructure as a concept that I think is probably helpful for everybody to keep in mind. And that is that whether something is going to count as infrastructure or not is always going to depend on some assumed purpose that we have in mind. Right?

There’s some goal that we’re trying to achieve or some desideratum that we have that we have before us that we’re trying to fulfill, and then infrastructure has to be understood by reference to that. So, for example, if your goal is a society where people are able to transport themselves readily and move from place to place easily and so forth, then, of course, certain kinds of transportation infrastructure are going to be cognizable as or appreciable as infrastructures.

If we’re not concerned about that, if we were a society that value just staying at home and not doing anything, then we probably wouldn’t really think that much about transportation modalities as infrastructure. So the first thing you keep in mind, and again, is what’s the social goal or public goal that we have in mind.

After noting that, it’s probably worth noting that a lot of public policy discussion these days seems to be about social productivity. Right? To what extent are we adding to the material wealth of our society? To what extent are we improving our material well-being, society-wise, and we can think of productivity along those lines. Right? To what extent are we producing better material lives for ourselves?

And if we think of it that way, and if we think then in terms of social production and not just social reproduction but social production, then infrastructure should be understood relative to that. Right? Now, if we were thinking of production in turn, in a kind of 19th or early 20th century way, or we’re thinking of factories that are belching smoke in the sky and spitting out model T’s or spitting out washing machines or what have you.

And that’s all we thought of production as being, then we would probably tend to think of infrastructure as basically anything that facilitates those forms of production that it is not in the individual interest of any private sector producer to supply for the economy as a whole. In other words, infrastructure is going to be roughly equivalent to the notion of a public good, and it’s also going to be understood as a public good that is appreciable as good relative to a particular dominant mode of production or productive activity at a given time. Right?

So I think this is part of the reason that Republican types or those who call themselves Republicans who are members of the party that calls itself Republican, seem to be focused on the so-called hard infrastructure because they seem to have an old, tiny view of what production is just like they have an old tiny view of what the role of women and men should be and what the role of the races should be and all that kind of thing.

So they seem to have in their minds pictures of factories and of stores and all that kind of stuff that was maybe familiar in the 1950s. And then they think, okay, so what is infrastructural relative to those sorts of modalities of material life and production and, well, I guess that’s like power sources and transportation grids or networks, maybe waste processing facilities and the like, and all of that’s fine, because, of course, production does still include those particular modalities of production; and hence infrastructure should be understood to include those so-called hard infrastructures of the kind that used to be the primary forms of infrastructure back when those were the primary modes of productive activity.

But it’s also worth noting, it seems to me, in addition to that, that we also have other modes of productive activity now, and we have other things that count as production, and we have other kinds of wealth that count as well for material well being now that we didn’t tend to attach so much importance to or even appreciate the possibilities for back into the 1930s or 1940s.

And insofar as that’s the case, then there are going to be things that count as infrastructure now, in addition to those so-called hard infrastructures that might not have counted as infrastructure back in the 1930s, or in the 19th century or whatever, which is where most Republicans seem to be living, as far as their heads are concerned. Give you one quick example, Steve.

So if we were still a primarily agricultural economy, let’s say, let’s say it’s like 1850, and agriculture still accounts for 80 plus percent of all productive activity. Well, then, education as a kind of mode of infrastructure, as a public good that facilitates productivity economy-wide wouldn’t have been viewed as infrastructure if we thought of it as education of the kind that we have today.

It would have been more like very simple vocational education, like education as to how to work a plow or how to water crops or how to build a barn or whatever. And those are the forms of education that are pretty easily learned, even from your parents or your grandparents or from your community at home. And so you might not need a network of publicly provided schools that tool people up to be able to participate productively and universally in the society’s productive activity as it stands in that particular time.

But of course, nowadays, where agriculture is a much smaller piece of the total productive life of the nation, and the ways in which we add value are much more variegated, and in many ways much more sophisticated or require a great deal more, let’s say sophistication, of various kinds, education has to be understood differently, too.

And hence, so does that form of infrastructure that we call education infrastructure, and some of that’s going to be so-called soft infrastructure. In other words, it’s not just a matter of school buildings now, as it might have been, say in the 1930s, it is that, but it’s more than that as well. So maybe that’s the best way to understand it.

Think of it as public goods, which, as you know, the public good is just even the Orthodox economists at least in theory understand this, that there are some things that if we invest in them, yield benefits that can’t be captured by individual private sector investors, and hence if we rely on private sector investors alone to supply them, they’re going to be chronically undersupplied.

And so we act publicly to supply them. That’s a public good. If we think of infrastructure then as public goods understood with the notion of good here understood by reference to dominant modes of productive activity at given periods of history, given particular times of society’s life through time.

[00:11:30.480] – Grumbine

Understood. Okay. So that is an expansive yet I thoroughly understand, especially in this age of the Internet, and IT infrastructure that didn’t exist in the past. I suppose there’s even a Public Commons for that as well. It’d be nice to see anyway. So, let me ask you, there’s several bills going on right now, and there’s a lot of chatter about this proposed infrastructure plan, and I know Biden had originally asked for a significantly larger amount.

I think Bernie came back and said, “Whoa, whoa, whoa, no, no, no, we need way more than that.” And so you’ve got the high-end bill. You got the low-end bill. I think it’s like $1 trillion. And then you got the idea of some sort of reconciliation here that is going on. So can you lay out the game board here for the political sphere?

[00:12:20.980] – Hockett

Yeah, sure. So one way to characterize what’s going on right now, I think, is that you’ve got one faction in Congress, primarily Republicans, but with some Democrats who seem to incline in the same direction, even if they’re not wholly there, who inclined to thinking of infrastructure in very old tiny terms in the way that we were talking about before. Right?

In other words, they seem to assume or carry with them a mental picture of a productive economy in which production basically means having lots of Walmart stores that sell Chinese products, let’s say, maybe having lots of fast-food restaurants, maybe having a little bit of automotive production or aerospace production or the like, basically the factory type stuff, even though, again, we’re not really nearly as industrial as we once were and will probably be becoming again.

But you have these very premodern, pre-contemporary understandings of what the productive sectors of the economy are and what they look like, and their views of what counts, quote, unquote as “infrastructure” are calibrated to that picture in turn. Right?

And so they don’t think in terms of the so-called soft infrastructure because they don’t think in terms of the soft modes of production, which is sort of misled they call soft. But just for the sake of argument or just to avoid an unnecessary distraction, we can just keep calling them soft for the moment.

[00:13:52.580] – Grumbine

Sure.

[00:13:52.580] – Hockett

So that basically boils down to or translates into very traditional forms of infrastructure, things that would have counted as infrastructure, even during the Eisenhower era, alright, so highways, railway networks, roads, bridges, perhaps air corridors through which airlines travel, and airline delivery services like UPS planes travel, power grids, traditional sources of energy, mining, burning shit in order to produce power, to do whatever we want to do. 

All that stuff, much of which is still legitimately infrastructural in character, and hence not objectionable as such, even though some of it we want to phase our way out of into more modern forms. But that’s basically it. So it’s kind of like in the same way that there’s social views seem to be trapped in the 1950s like it’s McCarthy era America or something, so do their economic views and hence sort of their views as to what counts as infrastructure.

On the other hand, you’ve got other folks in Congress, especially the Progressives, but also some of the hitherto or the heretofore moderate types who are at least provisionally being persuaded right now by the Bernie folk who are recognizing that our economy is about more than that, even if it does include all of that, and therefore understand that infrastructure has to be more inclusive as well.

And so they want to include the so-called softer or more modern contemporary forms of infrastructure in any sort of infrastructure spending or infrastructural investments as well. And so what seems to be happening now is you’ve got basically an effort underway to get bipartisan agreement or bipartisan passage of infrastructure spending with respect to those forms of infrastructure that everybody agrees are infrastructural.

And that means, of course, insofar as the Bernie folks recognize that, yeah, there are still some elements of the Eisenhower era economy with us now. We do still drive. We do still have railway transport. We do still have water transport. We do still burn shit and probably will for a little while longer in order to produce.

So, yeah, we’ll spend some on those forms of infrastructure that the Republicans are cool with, and we’ll join with them in passing legislation to do that, but then in separate legislation that the Republicans won’t sign on to, we’ll try to get as much of the so-called softer infrastructural spending and investment in there as well.

And then what all of the angst is about right now is how many Democrats can we keep in that fold so as at least to be able to pass through budget reconciliation another 3.5 trillion or so of the so-called softer forms of infrastructure. Now there’s that, for one thing. But now another separate debate that is nevertheless linking up with this one that I think you and I are going to have a lot of fun talking about is the matter of financing.

How do you pay for it question? Right. That plays a role in all of this, although it’s also, in a sense, distinguishable matter as well. What I mean to say by that is that my guess is that a lot of Republicans, even if there weren’t a pay for a question, or even if they agreed with Dick Cheney that Reagan showed that budgets don’t matter, they would probably still object to because they just don’t want a world in which there is soft productivity or soft infrastructure.

But what happens now, on the other hand, they’re reinforced, I think, in their objections to that form of infrastructure spending in so far as they believe that there is a how do you pay for a problem as well. Now, I don’t know that they really believe that there is one. Some of them maybe just cynically use the how do you pay for a question is just a putatively second ground on which to object, but they don’t really believe that, but some of them might actually believe it.

I just don’t know. I very seldom try to get into the heads of some of these crazy reactionaries because I fear that that would be like to participate in a form of mental illness. And I’m not really interested in that. But I am kind of intrigued by some of the people who call themselves Democrats who are in this camp because I wonder to what extent they’re misguided themselves, and to what extent they’re instead simply pandering to less educated members of their constituencies, whom they could actually better informed about how public finance actually works.

So looking at you, Joe Manchin, Kyrsten Sinema, those people, along with a few of the so-called moderate Republicans like Mitt Romney, are often talking about the deficit question as an additional concern that bears upon what they’re in favor of and what they’re inclined to oppose where infrastructure goes. And I just don’t know to what extent they actually buy into that nonsense, and to what extent they’re merely pandering again to particular constituencies who might determine whether they get reelected.

[00:19:02.640] – Grumbine

Right. Let me jump in there real quick. So going back, the first point. I want to hit on two things. One is what is reconciliation for people that hear the word that don’t necessarily know what it is. And number two, I’d like to understand better what Yarmuth’s position here is in advocating, amongst the others and understanding of the pay for questions.

Since, unlike any other politician I’ve ever heard, even if he ends up being the most center, right, standard business Democrat of them all, here’s a guy who said “The Deficit Myth” by name, Stephanie Kelton by name and gave at least an intermediate level description of MMT, which to me, I could hear a choir of angels singing as Yarmuth was doing his thing on C-Span. So the first one, let’s define reconciliation. Second one is how is Yarmuth playing with this?

[00:20:01.060] – Hockett

Yeah. So on reconciliation, this is essentially one of an excessively small number of carve-outs from the usual filibuster rule. So, as a lot of your listeners are going to know, we have this highly strange institution within the Senate called the filibuster pursuant to which you have to get at least 60 votes in order to get a particular question even before the Senate to be debated.

In other words, even in order to get past the gateway into the Senate to debate a bill and then vote on it to see whether it’s going to pass or not, you have to pass this 60 vote threshold. Now, originally the point of the filibuster. Well, there are a couple of points. There’s the idealized version. And then there’s the truth. Right?

The idealized version is that some things, some measures that Congress might be considering might be just so profoundly threatening and so profoundly dangerous that we want to enable some members of the Senate to take a really strong principled stand and block debate on the subject because they just feel that strongly about it. And one way to make sure that they really felt that strongly about it was to say, well, you literally have to stay there and stand on the Senate floor and be talking the whole time.

You have to do the Jimmy Stewart thing in Mr. Smith Goes to Washington. That was the idealized picture of it. And indeed, it tended to be used only rarely. Right? Because it was considered an extreme measure. You really had to feel strongly about something.

[00:21:37.640] – Grumbine

Right.

[00:21:38.370] – Hockett

. . . in order to . . . in both your prerogative to exercise the filibuster as a member of the Senate. Now, the truth, of course, which doesn’t totally contradict this idealized version, it just adds an important layer to it, was that the thing that most people felt that strongly about was whether or not white people should be allowed to vote and have civil rights.

It basically meant that if you were somebody from a Jim Crow state and you were really horrified by some pending piece of voting rights legislation that might enable non-white citizens in Alabama to cast votes in federal elections, well, then you could express your profound horror at this existential threat to white supremacy in the Deep South by exercising the filibuster. Right?

It’s not exactly Jimmy  Stewart, but the good news, I suppose, was that even given that additional facet of the filibuster as originally instituted and practiced, it was a comparative rarity that it was actually invoked and used. Right? But what’s happened in recent decades, it has just come to be used in a sort of a routine manner. Right?

So basically, anything that the majority wants to do, especially if the majority is a Democratic majority, the minority, the Republican minority, will exercise the filibuster just to prevent a vote. And what that means is you have this de facto supermajority voting requirement now in the Senate rather than majority voting requirement in the Senate for virtually everything.

Well over the last decade and a half or so, it’s come to be recognized that that’s a little bit dysfunctional. So we ought to carve out at least a few exceptions to it. There ought to be some things where the filibuster can’t be used, right. That just basically aren’t vulnerable to filibuster abuse. Now, the filibuster abuse is so common that it’s really just filibuster use.

And one of those things is budget legislation, right, where you’re basically formulating budget on the theory that basically you have to have a budget because you don’t have a federal government without some kind of spending going on. And so we’ll at least take budget formulation and budget voting out of the line of fire, as it were, of filibuster.

But what that means in turn, then, is that the stuff that figures into budget legislation has to be characterizable as budgetary rather than social policy or whatever. Right. So voting rights might be viewed as being not really budgetary, and therefore you can’t include voting rights legislation in a budget bill and thereby escape vulnerability to filibuster.

So what they’re doing now with the Biden administration, in collaboration with Bernie on the Senate side, and other progressives on the Senate side, on the one hand, and with some of our friends, including AOC on the House side are wanting to do is to include as much as possible of the so-called soft infrastructure spending in a budget reconciliation bill of this kind, which then wouldn’t be subject to the filibuster in the Senate.

So that then you could actually get basically a 50-50 split vote between Republicans and Democrats. And then Vice President Harris would cast the tie-breaking vote, putting it at 51, and then it would pass. And so you get all 3.5 trillion. It seems to me it’s a worthwhile gait, but there are a couple of pitfalls. And one is, of course, the so-called Senate parliamentarian has to

[00:25:04.810] – Grumbine

Fire ’em!

[00:25:04.810] – Hockett

. . . exactly. Has to rule on whether this stuff quote/unquote really is “budgetary.” And then second, you have to worry about can you actually get all of the Dems on board? And that’s where people like Joe Manchin and Kyrsten Sinema, and, of course, your friend Mr. Yarmuth come into the story. Can you keep them on board?

So that’s essentially where we are right now is they quite sensibly, I think, the Dems decide: Okay, look, let’s do the bipartisan thing with respect to the infrastructure that even Republicans will agree with because then we can show that, yeah, we’d like to be bipartisan when it’s possible when the other side is actually reasonable and prepared to talk and compromise or horse trade or whatever, then we’ll do that.

And so here’s a victory. It shows our good faith about being bipartisan on the one hand, and then anything else that we can’t get that agreement on, let’s see if we can’t realistically formulate it as or characterize it as budgetary, in which case, then we can get it into a reconciliation bill and then pass it through a simple majority vote, thereby avoiding vulnerability to the filibuster on the Senate side.

[00:26:10.660] – Grumbine

I guess jumping back, the Yarmuth piece notwithstanding, sometimes I think, and I’m guilty of this. Let me just say it upfront. That because it makes so much sense to me as a lefty to do X, Y, and Z, our little teeny cocoon of people that you see on online debate forgets that huge, silent majority of people that are still living in the duck and cover era . . .

[00:26:40.450] – Hockett

Ah ha

[00:26:40.450] – Grumbine

. . . and they vote. And the people that are full of bright ideas and excitement, they tend to be a little bit more cynical and don’t show up all the time.

[00:26:52.120] – Hockett

Yeah. Yeah.

[00:26:52.830] – Grumbine

And so for me, there’s two sides of my brain. One side is the activist screaming, “Never sell out!” And then the other side of my brain is saying, “I don’t know if you guys noticed or not, but we have an incredibly large amount of fools that voted for Donald Trump.”

[00:27:10.640] – Hockett

Yeah.

[00:27:11.200] – Grumbine

And we have a lot of fools, quite frankly, that supported someone other than Bernie Sanders.

[00:27:19.500] – Hockett

Um-hum.

[00:27:19.500] – Grumbine

So that constitutes, let’s say, 75% of American voters.

[00:27:24.640] – Hockett

Um-hum.

[00:27:24.640] – Grumbine

I didn’t say Americans. I said American voters.

[00:27:27.750] – Hockett

Exactly.

[00:27:28.760] – Grumbine

People that show up to the God blessed polls and vote . . .

[00:27:32.600] – Hockett

Ah ha

[00:27:32.600] – Grumbine

75% that are hateful of progress. And then let me peel it back one more layer. And that is that as much as I like the emotional and romantic idea of revolution and see a need for some form of revolution, even going back to Bernie Sanders political revolution, we have it in our song for this podcast.

[00:27:55.380] – Hockett

Ah ha.

[00:27:55.380] – Grumbine

Even with that, you look at all the huge crowds outside and those huge crowds, make no mistake about it, they were huge. They were demonstrative. They were powerful. But ultimately we’re still up against a lot of people that don’t even go to things like that. Have never cracked open Twitter. Don’t know what left Twitter looks like.

Don’t know what Econ Twitter looks like. And they’re happy to listen to Rachel “Mad Cow” (Maddow) basically screaming and ranting about standard establishment things. And that’s the beginning and the ending of their understanding of the world. And so you’re talking about these robust infrastructure plans with traditional Eisenhower-style constructs. I can imagine that it’s hard for progressives because it’s hard for me, as I say this . . .

[00:28:41.250] – Hockett

Um-hum.

[00:28:41.250] – Grumbine

. . . to recognize that no matter how powerful we feel, we are still very much a minority.

[00:28:48.045] – Hockett

Um-hum.

[00:28:48.540] – Grumbine

And with all the things that are against us, the media is against us. We have five companies that control all the media in the world pretty much. And so anything that we’re talking about, if we get 10,000 people to listen, “Whoo Whoo!” Feels good on the numbers, but then you look out in the real world, it’s like “Somebody say something about 350,000,000 people in the United States.?” We ain’t even scratching the surface.

[00:29:13.280] – Hockett

Yeah, exactly.

[00:29:15.380] – Grumbine

And so with that in mind, I’m seeing this as much of a check on myself as it is for the people that listen. We’re in legislation here. This is not activism. Although activism can help shape the energy behind legislation, it’s still legislation.

[00:29:33.070] – Hockett

Um-hum.

[00:29:33.070] – Grumbine

So with that in mind, what is a reasonable expectation for a progressive who is skeptical of the Democratic Party and who is downright loathing of the Republican Party, but is looking at this and saying, I see folks getting ready to sell up.

[00:29:49.800] – Hockett

I think that’s a characteristically acute and accordingly characteristically difficult question.

[00:29:56.270] – Grumbine

That’s why I ask is why you.

[00:29:58.810] – Hockett

Which is why you asked it. Which is why it’s characteristic. But I’ll give it my best shot here. And that is I think if we back up a little bit to throw things into perspective, we should remind ourselves that even 3.5 trillion, which is the magnitude of what they’re hoping to accomplish through reconciliation, is modest. Right? Bernie, as you know, would love to see 6.5 trillion more.

And I don’t think that that’s even close to being unreasonable. And so given that, I think we should take some heart and maintain some courage of our convictions that in demanding or seeking the full 3.5, we’ve already, in a sense, compromised, right? We’re already quote, unquote “settling,” but at least it’s not peanuts.

And it’s something that’s worth settling for if we can get it but can’t get more. Right. But once we have the courage of that particular set of convictions, once we remind ourselves of that fact that we’re in a certain sense already settling, and that we’re in a certain sense already being reasonable more than reasonable, even in settling for 3.5, now we should be able, then, with greater confidence, to advocate this, even to the people who are expressing misgivings like Joe and the others.

We should, in a certain sense, I think, provide them cover by making sure that the narrative is right here. So, as you know, and as you’ve seen when Manchin sends his letter of concern to Fed Chair Powell, as he did this week, that, well, “You know, with inflation numbers rising and with people returning to work and the economy picking up again, I’m concerned that this 3.5 trillion might be too much.

I’m concerned that we might be going over the edge with inflation.” We have to answer that. First of all, I don’t even know whether Joe believes that, right, Joe Manchin, but either way, let’s say he doesn’t believe it, but he figures he has to appear to be concerned because constituents are going to be expecting that of him.

Then, we have to make sure that the constituents understand what the real story is here, which is that the inflation spikes that we’ve seen recently, first of all, are pretty small. But second of all, setting that to one side, they are supply-side determined right now, right? It’s all a matter of artificially constricted supply, owing largely to the mucking up of supply chains during the pandemic but also owing to the long-term deindustrialization of the United States economy – the long-term outsourcing of production from the American economy to other economies worldwide.

And what that means, in turn, is it insofar as this 3.5 trillion, or whatever the number of trillions ends up being, is legitimately directed to growing the productive capacity of the American economy, it’s not only not going to be inflationary, it’s going to be counter inflationary. In other words, the inflation numbers that we’re seeing right now, instead of being characterized as cautionary notes, reasons to be careful about spending anything more, they should be viewed as giving us reason to spend even more than is currently in contemplation.

Again, provided that we’re not just spending it on potato chips. And so the fact is, we’re on a cusp right now. I think the country is just about ready to hear arguments of this sort, and there are various indicators of that. Right. So for one thing, as you’ve noticed, and as you and I have talked about before, the phrase industrial policy is no longer archaic. Right.

It’s been dusted off and people are throwing the sprays around. And while some people have in mind by it stupid things, other people have in mind by it smart things. But even quite apart from what particular people have in mind about it using the term right now, quite apart from that, just the fact that it’s on the agenda again, that basically public consciousness now includes a new linguistic item that used to be a commonplace, industrial policy.

[00:34:08.510] – Grumbine

Eugene V. Debs policy.

[00:34:09.840] – Hockett

Yeah, exactly. That is an indicator that, in a sense, the country is once again thinking about production. Right. As our friend Marx would have reminded us ages ago and could still remind everybody today, ultimately, that’s what an economy is. Right?

It’s about production and distribution the production of surplus and then the spread of the surplus across the population so that people can enjoy the fruits of their labor. Right. And somehow one way of looking at neoliberalism, one characterization of that whole neoliberal period, Clintonomics and the like was that suddenly we had economics without production.

[00:34:47.630] – Grumbine

Oh, yeah.

[00:34:48.090] – Hockett

This wasn’t about production anymore, which is really weird. It’s a bit like talking about coffee without caffeine. Like, why the fuck would you want coffee without caffeine? In what sense are you really talking about an economy if you’re not talking about productive activity if you’re not talking about production?

Well, now that we’re sort of rediscovering that fact that there’s this thing called production, we are situating ourselves to talk much more intelligently about inflation because insofar as inflation is a relation between money on the one hand and goods and services on the other, if what you’re talking about spending money on is improving productive capacity and hence the quanta of goods and services that money purchases, then you’re not talking about inflationary danger.

In fact, you’re talking about kind of the opposite if anything that’s inflation-relevant. And I think we have to get over the line on this right? Basically, what I’m getting around to saying here is that we’re finally at the cusp of being able to say that in a manner that people can understand, whereas maybe even a year or two ago, that case was harder to make, although, as you know, I’ve been trying to make it forever.

But it’s getting to the point where it doesn’t fall on just deaf ears anymore. You’re hearing this kind of thing pretty commonly said now by members of the Biden administration, which I have to say is a total freak out for me because I was so used to these very same types being no less obtuse about this than Republicans are.

But in any event, I think we can give people like Manchin and Sinema, and Yarmuth some cover if we can refocus the attention even of their constituents on this core proposition – that an economy is basically about production and then the distribution of the proceeds of production. And once you do that, you can actually start to talk intelligently about what is an actual inflationary danger and what is not.

And then that should enable that Joe to be able to say, look, if any of you people are worried about spending because you’re worried about inflation, worry not. That’s Larry Summers’s illness. It doesn’t have to be yours. I think that’s one thing we can try to do. Now maybe that is a reflection of my absurd optimism again because maybe it’s crazy for me to think that Joe Manchin voters are going to get this, but it’s not clear to me that that is crazy to think that they can get this.

It’s pretty basic stuff when you get right down to it. You don’t have to take upper-level graduate school courses and economics to sort of understand the basics; that what we’re talking about here is production and productive capacity, and hence the economy’s capacity to absorb a larger money supply, as distinguished from simply having people bid up the price of inherently short supply goods and services by flooding the system with money when there’s no supply-side correlate to that in the form of greater production.

[00:37:37.300] – Grumbine

What is specifically in bill number one, the one that’s the bipartisan portion?

[00:37:44.540] – Hockett

Yeah. So that one is largely about 1.2 trillion worth of more traditional sorts of infrastructure spending. Right.

[00:37:53.500] – Grumbine

It’s just the roads, just the bridges, things like that?

[00:37:56.720] – Hockett

The closest thing to anything modern that you find in there is there is some support for spreading broadband capacity more widely. Some Republicans seem finally to have discovered that there’s something called the Internet. Right. And that it might be good for Appalachia if people could actually use laptops.

[00:38:15.590] – Grumbine

Even the poors.

[00:38:16.670] – Hockett

Even the poor might find some remunerative use for laptops if there was rural broadband and they didn’t have to move into Charlottesville in order to have access to the Web, you know.

[00:38:27.870] – Grumbine

Give them the Web and keep them out of the neighborhood.

[00:38:31.080] – Hockett

Yeah, right.

[00:38:32.070] – Grumbine

My God.

[00:38:33.030] – Hockett

Yeah. There goes the neighborhood or there would go the neighborhood.

[00:38:36.060] – Grumbine

Isn’t that what Trump said back . . . He said something about your white picket fences and keep them folks over there back in the city.

[00:38:43.240] – Hockett

Exactly. Yeah. You don’t even have to find hidden meanings and things like that.

[00:38:50.080] – Grumbine

So basically, the Democrats and Republicans have come to believe that the best way to keep the poors in the mountains is to give them Internet.

[00:38:58.460] – Hockett

So they can access the free Internet porn or something. And they won’t go to the public library for it. In fact, maybe you can even shut down the public library if everybody has Internet. But because we know that they don’t read books anymore. That’s like the one concession, one of the only concessions, certainly the most conspicuous concession to modernity in the first bill is the broadband piece of it.

But most of it is very traditional infrastructural stuff, which is fine. Again, as we talked about before, we need that, too. And these are exactly the forms of infrastructure that the American Society of Civil Engineers have been issuing report cards to every few years for a long time now. And as you know, ever since really the crash of ‘08, there’s been periodic attention to these regularly updated report cards on the state of American infrastructure that civil engineers put out.

They’ve been giving the country’s overall infrastructure a grade of at best, C minus and usually more like B plus for well over a decade now. And it’s only been getting worse right over that time period. So that stuff does need replenishment or upgrading. And so that’s fine. If anything, I think 1.2 trillion is a bit too low even for traditional forms of infrastructure. So. Fine. Have at it, man. More power to you guys for that. Thanks.

[00:40:23.370] – Grumbine

How is it structured, if you don’t mind me asking? Is this subsidies to the states? Is this we’re going to come in and do it? How does this get executed?

[00:40:33.180] – Hockett

It’s kind of a mix of things. A lot of it is left open in the legislation itself, Steve, where they’ll just say, okay, we’re appropriating this much for this particular set of purposes, and we’re appropriating that much for that particular set of purposes. And then how it actually gets spent and what specific projects it actually gets spent on will kind of vary. The first say will presumably be had by the relevant cabinet-level agencies. Right.

Our friend Petey at the Department of Transportation will be sort of overseeing a big chunk of the expenditure because a lot of it is on transport infrastructure. Some of that might be used to fund Army Corps of Engineers projects. Let’s hope that’s the case because the public sector entities do a much more efficient job of this in general than the private sector entities do.

[00:41:25.160] – Grumbine

Agree.

[00:41:25.820] – Hockett

But some of it will also be paid over to private sector contractors and the like. Some of it will be provided to states in the form of block grants or partial grants or matching funds type grants.

[00:41:50.370] – Intermission

You are listening to Macro N Cheese, a podcast brought to you by Real Progressives, a nonprofit organization dedicated to teaching the masses about MMT or Modern Monetary Theory. Please help our efforts and become a monthly donor at PayPal or Patreon, like and follow our pages on Facebook and YouTube, and follow us on Periscope, Twitter, and Instagram.

[00:42:38.420] – Grumbine

Can you stop right there just for a second? So within the matching funds and within the block grants to the states, one of the things that noticed, I worked at the Department of Transportation in Pennsylvania, and I can’t remember what the act was, but there was an act that took the federal money that was put out for roadway and bridge upgrades and what they called encumbered those dollars. Those dollars had to be spent in this way. They could not be spent in some other way.

[00:43:07.520] – Hockett

Yeah.

[00:43:07.520] – Grumbine

And they had to provide proof. It was very rigorous. I remember going through those processes as we worked through the budget, and I knew that the state of Pennsylvania was some 600 million in deficit, and this is only a couple of years back. So pandemic and everything, I imagine they have still somewhat of a significant budget shortfall. The reason why I’m bringing this up is the CAFR reports for each of the States. There’s quite a few States out there that are not whole and not well.

[00:43:39.410] – Hockett

Yeah. Yeah.

[00:43:39.950] – Grumbine

And so a lot of progressives thinking they’re going to fund things at the state level and not understand and shame on anyone that ever put this forward without considering the CAFR reports. Because if you look at Europe where they’re on the Euro, those countries that are Euro adopters, you see the Northern European States doing fantastic. They’re all net exporters. Germany is running rough shod over the whole gang. And then you got the poor saps down south like Spain and Italy and Greece who are really hurting.

[00:44:11.460] – Hockett

Yeah.

[00:44:11.460] – Grumbine

And you see that similar dynamic play out here in the United States only slightly differently.

[00:44:17.451] – Hockett

Um-hum.

[00:44:17.460] – Grumbine

With that in mind, states in the red going belly up, you give him a block grant to fix infrastructure. That’s great. But I am curious, is there any mechanism for states that are really hurting, helping them out with less public private partnership and more public ownership? Because I know the fiscal positions of these states is radically swinging in different ways.

[00:44:40.140] – Hockett

Yeah, that’s a really great question, Steve. It has a number of facets that are worth keeping in mind or considering. So maybe a good way to begin is to note that in theory, the United States is really meant to be what the European Monetary Union could be if it were also a fiscal union. Right. So we have a Euro in the United States. It’s called the dollar, and Mississippi uses the same dollar as Pennsylvania and New York use.

And in theory, that could be a problem because, of course, one way of looking at the Euro in Europe is to say that it is an undervalued currency if you are Germany. In other words, it artificially lowers the cost of your exports if you’re Germany, and it artificially increases the cost of your exports, if your Greece. Right.

In other words, a Drachma would be valued lower on the global currency markets than the Euro is, and a Deutschmark would be valued higher. And then corresponding to that, of course, is if you can borrow from Germany a lot cheaper, if you are Greece, if you’re borrowing in Euro, then you could borrow if you were borrowing Deutschmarks with Drachma.

And so, in effect, what the European Monetary Union does is it encourages a continuing growing degree of indebtedness on the part of the Southern economies and a growing degree of predator status on the part of the Northern economies, basically by artificially enabling exports from Germany and disabling exports from say Greece.

We would have the same problem in the US with Mississippi using the dollar on the one hand and New York using the dollar on the other, except that we have a fiscal union that basically compensates for the dysfunction that would otherwise be in place with the monetary union. And the way that works is that, in theory, a Mississippian gets $2 in federal grant money back for every one dollar of money that she or he pays into the federal coffers in the federal tax system. Right.

Whereas New Yorkers get a dollar back for every $2 they put in. Right. So effectively, there’s a cross subsidy going on where New York, Pennsylvania, some of the other somewhat better do states are, in effect, subsidizing the states that have more lower value added economies that are primarily, let’s say, subsistence agricultural economies and the like.

I don’t want to overstate that or I don’t want to overpay the backwardness of Mississippi, but you see what I’m getting at here. So another way to think of this is that basically the Euro zone is a transfer union, too. It’s just the transfers take the form of lending, which has to be paid back, whereas here it takes the form of just grants, right?

New York doesn’t lend to Mississippi. New York simply subsidizes Mississippi. And we’ve decided that that’s okay. That’s part of the cost of having the continent spanning Republic. Now that’s the theory, at least, right. And that’s essentially what Alexander Hamilton wanted to put into place. And until Europe gets its own Alexander Hamilton, it’s going to be stuck in this kind of weird, nether world that it’s been in ever since the Euro was adopted.

But now, even though the theory makes the American system look more functional than the European, the practice is a little bit different in some ways, at least. And I think what you were noting before highlights one of those particular ways. So maybe a way to characterize this is to say that there still are reactionary elements in our society that continue to live in this weird fantasy whereby the States of the Union are sovereign entities, like the United States is more like the United Nations than the United States.

And so Mississippi is its own little country. Arkansas is a country. New York is a country full of liberals. California is a country full of crazy whack job lefties. But these are all countries. And you’re really insulting the dignity of these countries if you attach too much conditionality to federal funds that are sent to the states.

And there’s this constant oscillation in the federal courts between people who call themselves Federalists but who are actually anti-Federalists if we use the terminology of the founding era, on the one hand, and people who are nationalists, which is kind of what Federalists were back in the 18th century, on the other hand.

And so you’ll get these periods of time during which the courts are perfectly friendly to conditions that are attached to federal funds that go to the states. And then you’ll also lay back to periods where the courts, in these kind of weird fits of so called federalism, starts smacking down the federal government for attaching too many conditions, saying that this is threatening state sovereignty and insulting the dignity of the states as though there were any dignity in being a Jim Crow state.

You know, I mean, there’s no dignity at all at that. George Wallace is one of the most undignified characters in all of . . .  I was going to say of human history, but I guess I’ll say American history. But leaving that to one side at any given time in our history, how our fiscal transfer union is working is going to vary a bit with the mood of the federal courts, where the so called federalism question is concerned.

And in general, it gets crazier when you’ve got more reactionary types on the courts who are basically defending the so called dignity of states, and it’s more sensible and sane when you have less of that nonsense. Right. So I think that’s a big picture way of looking at all of this. What I think it means in a somewhat smaller picture way for present purposes is to say that in general, I think at this point, at least, the more careful the conditionalities are constructed, probably the better, because we do have a fairly specific federal need right now.

Let’s call it national need right now, which is to improve the productive capacity of the entire country. And the more subject we leave federal funds that are sent to the states to the whims of local big shots who are basically just engaging in, let’s say, cronyism or patronage type behavior, the more likely it is that we don’t actually accomplish the end that we’re trying to accomplish with these federal expenditures and instead just help to entrench local elites and power by enabling to dispense federal money that’s not even theirs to buy favors from rich people in their jurisdictions, which probably isn’t going to redound to the benefit of the poor white folk or the people of color in those particular areas.

[00:51:21.180] – Grumbine

Is there a housing provision in this? Because as you watch Black Rock buy up all the houses across the country, you would think housing as a right and housing our homeless or unhomed might be a good use of infrastructure spending. All you got to do is take a quick trip to Nancy Pelosi’s backyard to see Tent City.

[00:51:42.260] – Hockett

Yeah, yeah.

[00:51:42.800] – Grumbine

It seems like a viable piece of infrastructure, but I don’t read about it anywhere else. I don’t see it anywhere. Is this not in scope, or is that part of the larger scope or is it nobody’s even thinking about it?

[00:51:53.420] – Hockett

I think it’s definitely part of the larger scope, Steve. I think in other words, you’ll see plenty of that in the 3.5 trillion package, but not in the 1.2 trillion package. And that’s again, because sort of, as you suspected, the Republicans, on the one hand, and the more reactionary elements of the Democratic caucus on the other hand, this is probably almost axiomatic.

If a policy can be construed as either infrastructural policy or social policy, then the reactionaries are going to fixate on the social policy characterization, and therefore, or on that basis, call it out of bounds and leave it out, not withstanding the fact that it’s also infrastructural right. So if we were really going to be sophisticated about this, we would recognize that any particular policy has social implications, has productive or economic implications, has mental health implications as human wellbeing implications, has any number of implications.

And Republicans in general would prefer, it seems, only to spend money on stuff that has none of those implications except for Eisenhower America implications. And so if it can be construed as or plausibly viewed as being social policy, then even though it could also be construed as being production policy, the Republicans are going to ignore the production side of it if there’s a social side of it.

Whereas I think a lot of Democrats, or at least the progressive ones, are kind of the opposite. What they’ll say is, “Look, even if the primary reason to do this is sort of social policy, if there’s like even the slightest bit of production policy asset in this, or there’s even a slight production policy aspect to this, we’ll fixate on that right now in order to justify it even to Republican types.

So I think what that spells for housing type matters is that they’re just going to be viewed as like too “social” quote, unquote for the 1.2 trillion package, not withstanding the fact that they are fully every bit as infrastructural as education spending is, for example. I mean how can you have a productive population if people don’t know where they’re going to live tomorrow?

How can people be productive if they’re worried about where their next meal is going to come from? And that’s not even to mention how are they going to be productive if they’re literally living on sidewalks? Right. So, again, I think in a way, this also highlights this other point that we were talking about before, which is that if we begin to attend to the productivity implications of any given policy question, I think we’ll begin to notice that an awful lot more has relevance to production and productivity and hence to inflation than we have hitherto realized, at least in recent decades, right, that a growing homeless population is a growing segment of the population that is not being able to be productive, to live up to its productive potential.

And whereas as human beings, we should care more about the human tragedy of homelessness. But in so far as Republicans don’t give a toss about that kind of thing and only care about economic performance or at least purport to care about economic performance, then it seems to me we can certainly point that out. We can say, well, since you guys are all obsessed with China now, how are you going to compete with China to be the factory for the world if your entire labor force or potential labor force is living on sidewalks?

That’s not productive. Right? So what if people actually had homes? And what if they had schools where they could learn and develop cognitive capacities and so forth and be encouraged to become creative and inventive? And then when they become adults, we’re actually able to collaborate together in inventing new things, inventing better ways of living and better forms of health and longevity and health span, improving innovations in medical life and productive innovations in productive life and so forth.

What if you actually had 350,000,000 people who are like that, rather than only 200 million people who are like that and 150,000,000 who are living on sidewalks begging for alms, right?  In other words, even if you’re like a total heartless Henry Ford, who we know is a Nazi sympathizer, even Henry Ford would presumably rather see somebody working on the assembly line building yet more Model T’s than just begging for alms, right?

And then if you add to that the fact that it’s just profoundly unjust, profound abomination against humanity itself and against the miracle that every human being is to allow circumstances of that kind to persist well, that just basically makes it all more compelling to think of infrastructure in that kind of broader way and to spend massively on it insofar as there’s insufficient private investment of this kind, which there always is going to be.

Private investment will never be adequate to meet these public needs. There’s just not a profit in it if you’re a private sector company. If we’re going to have an economy that’s built on that incentive system, which we shouldn’t have, but insofar as we have that, then you should recognize that as a Republican, you should recognize that since we built everything off the profit motive, people aren’t going to do stuff that isn’t profitable. And infrastructure is not privately profitable. It’s only publicly profitable.

[00:57:19.660] – Grumbine

With that in mind, let me ask you, once the government spends that first dollar into existence on these infrastructure bills, this is going to create a huge amount of blue collar jobs.

[00:57:33.800] – Hockett

Um-hum.

[00:57:33.800] – Grumbine

My question to you is, are these sustainable infrastructure works? I mean are we looking at new ways of doing those very same Eisenhower level things or building any sustainability, any future proofing of these new pieces with the blue collar work that’s going to increase everyone’s well being, because that’s huge in and of itself. But we are staring down the barrel of a existential climate crisis, and infrastructure could go a long way in how it’s designed to helping us guard against that.

[00:58:07.220] – Hockett

Yes and no, I think. Steve. So the yes part of the answer is that the 1.2 trillion that it looks as though will end up getting through that both Republicans and Dems will sign on in sufficient numbers as to get passage through both the House and the Senate. The sense of which there’s a yes that can be answered to your question in connection with that one is that this is viewed as a long term ten year investment at the least, right.

Like the expenditures are occurring over a ten year period. And so what seems to be contemplated is a long term topping up mission, the long term restoration and then improvement project that goes on for at least a decade. And that’s probably anticipated by those who are pushing this that as we reach that tenth year, that this might end up being renewed, that more of this kind of spending will be authorized and we’ll build on what we’ve done over the previous ten years.

And furthermore, that the wider knock on effects economy wide will be such as to bring about more industrial development that is sort of associated with the infrastructure spending, maybe more concrete production, more asphalt production, more steel production, and so forth that’s associated with the infrastructure investment, which will then bring on even more blue collar jobs, so that this could very well end up being a longer term sustainable employment program, as it were, even if it’s not direct employment; and even if that’s not the primary object that’s being pointed to in justifying it.

The sense of which the answer is no, I think, is that because the focus is on these more traditional forms of infrastructure and because the future really lies with new, non-traditional forms of infrastructure, I think that the efficacy of this as an employment program, at least if we measure it in terms of how big a portion of total employment might it affect or help is, I think, going to be limited over time, right, unless, indeed, it is supplemented over time with a gradually broadening conception of what counts as infrastructure.

And that’s then where the $3.5 trillion reconciliation bill plan comes into the story, because now we’re talking about forms of infrastructure that are more forthrightly future looking or future-oriented, right? Now one final point may be worth noting this connection, Steven, is that there’s a kind of complementary imperative, complementary with an E rather than an I here . . .

[01:00:42.950] – Grumbine

Yes.

[01:00:42.950] – Hockett

. . . that Biden seems to get. And, you know, me, even one year ago, right this day, I would never have guessed that Biden would ever get this. But he’s seeming now to sort of get this complimentary component here is that there does seem to be a kind of appreciation for the fact that the old outsourcing modalities of production, the old outsourcing of domestic supply of critical inputs to producers abroad just won’t do anymore, right, that a certain kind of productive nationalism seems to be gaining traction, too. And like a lot of things with the double edged sword the danger that is, I think, inherent in this change of perspective is that we become Xenophobic or

[01:01:32.350] – Grumbine

Yep.

[01:01:32.350] – Hockett

Old warrior types again. You see it already, even among Dems, all this demonization of China, which I think is bound to be counterproductive if we go down that road. If we limit it to recognition that will now, wait a minute, a critical input to virtually all manufacturing now is microchips, microprocessors

[01:01:52.240] – Grumbine

Yes, semiconductors.

[01:01:52.880] – Hockett

Semiconductors are to contemporary production a bit like what petroleum was to 1970s production.

[01:01:59.960] – Grumbine

Yep.

[01:01:59.960] – Hockett

And unlike petroleum, it’s not inherently stuck underneath Saudi Arabian sands. And just leave to one side the fact that it destroys the environment. But your supply of micro processors or microchips is something that you can actually control. You don’t dig the shit out of the ground. You don’t like plunge holes in the ground and pump it up.

You make the chip, and the overwhelmingly greater part of the global supply comes out of either China or Taiwan. And those supplies were immensely disrupted, as you know, by the Pandemic and furthermore, the United States used to be a globally dominant producer of this stuff until the 1980s. And there’s no reason we couldn’t do that again.

And there’s no reason we can’t furthermore see to it that the new productive facilities that produce adequate supplies of these things are themselves located in every region of the country. Right. So that people can get good, high paying jobs at them, including in regions where currently there are very few opportunities for good living wage employment.

And Biden, on the one hand, is kind of recognizes this, and he’s even specifically earmarked microprocessor supply chains and production. But on the other hand, when it comes to dedicating funds to boosting that productivity, it’s embarrassing how little has thus far been set aside for specifically this purpose.

And so I think I can’t imagine a more helpful, both symbolically and just practically helpful measure for the Biden administration to take then to come out this Monday, let’s say, two days from today and say, “We hereby ask Congress for $3 trillion specifically in order to build micro processing manufacturing capacity in the following 20 States.”

[01:03:54.120] – Grumbine

Yeah, yeah.

[01:03:56.350] – Hockett

And put them in the south if you have to. Right. Get jobs for the poor whites working in microprocessing manufacturing. And even though a lot of these folks voted for Trump and hence sort of don’t deserve anything, but hell, I mean, one of them, I think, are just confused and scared, and you might actually find them thinking, God, this Joe Biden guy isn’t so bad after all. This doesn’t look very socialist to me.

It looks like we’re actually just producing something that the economy needs in order to produce other stuff, right, and in order to become an exporting powerhouse again. And at the very least, a lower importing jurisdiction, right, where we’re more on target, where we’re more self-sufficient then we allowed ourselves to be and that we allowed ourselves to deteriorate out of being over those 40 benighted years of Reaganomics, Clintonomics, Bushonomics and Obamanomics.

[01:04:47.130] – Grumbine

I got to jump in for a second. First of all, you stole my thunder. I was going to ask you about global supply chains. It just cracked me up how you just rolled right into it. We were vibing there. The second one is for all the people out there on the left that are listening to this that know how much I fought against Joe Biden and how disgusted I was with Joe Biden, let me just say for the record, Joe Biden is no socialist. So rest easy right where you’re at. That guy ain’t one of us.

[01:05:12.470] – Hockett

Yes. So lucky.

[01:05:15.690] – Grumbine

One of the things that I think is absolutely of interest here is, in fact, in the MMT spaces, in particular Warren Mosler will tell you that exports are cost and that imports are a real benefit. And when you’re taking the real resource because the pieces of paper mean nothing, when you have those real resources, though, leaving the country and going somewhere now you’ve lost those real resources and you’ve kept the production pollution in your country. So there’s a thing where the United States could simply deficit spend on the people and take away this problem in many ways.

[01:05:51.740] – Hockett

Ah hah.

[01:05:51.740] – Grumbine

But the supply chain breakdown during this pandemic should have been a beacon to all. And this leads me to that final point. What happens when the US is no longer the world reserve currency? They’re going to bring production back to the United States.

[01:06:07.440] – Hockett

You know these people should ask themselves, like, who’s actually benefiting by the dollar being overvalued by virtue of its reserve currency status? And this has always been the story for at least five or 600 years. Right. Going back even just 100 years ago, going back to the early 1920, the Progressives in the UK were saying, look, the fact that the pound sterling is the global reserve currency is really fucking up the British economy because all of our manufacturing capacity has gone over to Germany.

It’s gone to Japan because Japan was already getting quite industrialized by the 20’s. They were basically no longer the workshop of the world in the way that we were in the late 19th century. And that means we have more and more people who are being dis-employed by manufacturing industries, more and more people who are able to find jobs only in the service sectors if they could find them at all, which are lower paying. And so the British economy is slumping.

The British economy is doing very poorly, as it was in the 1920s when the US was roaring. And so you have people saying, look, let’s basically decouple the pound sterling from gold. Let’s let the pound sterling float. The central bank, the Bank of England can intervene in currency markets to see to it that the value of the pound doesn’t fluctuate too wildly or too volatile.

It can kind of smooth and the price changes, so to speak, or the exchange rate changes, which we call a dirty float. But let it be a float nevertheless. And who argued against that? It wasn’t lefties. It wasn’t progressives say, “Oh, man, what about when we lose power to Germany?” It was the fucking bankers, right?

[01:07:46.580] – Grumbine

Yes!

[01:07:46.580] – Hockett

It was London, right? These were the reactionaries. Right. What’s really ironic today is when you hear Lefties basically talking the language of or talking the talk . . .

[01:07:58.760] – Grumbine

Yeah.

[01:07:59.300] – Hockett

of the bankers of the financial sector. It’s the financial sector that wants . . . And again you go back to 16th century Spain. There’s always been a fundamental antagonism between the financial sector, on the one hand and the productive sector on the other. Right. At the very beginning of an economy is becoming productive, the financial sector can work in sort of tandem with it because it functions essentially kind of mobilized capital to help finance more production and to help finance the kind of growth and the scale of production.

But once you reach a certain threshold point where companies that are massively productive are able to generate sufficient returns that they can finance themselves basically with retained earnings, and they don’t really depend on the financial sector anymore for capital raising purposes, then the financial sector becomes effectively parasitic. And, of course, our friends Bill Black or Michael Hudson have written eloquently on this.

The financial sector now becomes a parasite existing on the host of production. And that includes then when it comes to the point where finance can benefit more by seeing production be located elsewhere, where labor can be underpaid and converted to slave labor status. And so at that point, the financial industry ceases to be a compliment to domestic production and has a compliment to domestic wealth creation.

It becomes the antagonist of that, and it becomes an agent of again, global enslavement, you might say. And the US has been at that point, probably since the 1960s, at latest. I mean, to some extent, that was the story, even of 1930s, because, of course, as the dollar began to displace the pound sterling in the twenties as primary global currency.

[01:09:40.020] – Grumbine

Sure.

[01:09:40.020] – Hockett

Now US bankers were thrilled with that. And so were very pissed off, of course, when Roosevelt took us off the gold standard at 33.

[01:09:47.270] – Grumbine

Oh, yeah.

[01:09:48.500] – Hockett

So why should you want dollar hegemony? The other thing is, of course, even if you wanted it, even if you viewed it as a good thing, it’s a bit naive to think that that’s going to happen because it’s not like China wants to do what we did and see its currency overvalued and suddenly lose its capacity to be an exporter, which is precisely what would happen if the world just suddenly flipped from the dollar to the renminbi. The Chinese don’t want that anymore than the US bankers want that. They’re kind of happy with having undervalued currency, which they still have.

[01:10:19.280] – Grumbine

So I do appreciate the time you’ve taken with me, as always, Bob.

[01:10:23.810] – Hockett

Oh, sure.

[01:10:24.500] – Grumbine

As we’re going into the final stretch, one of the things that also gets in the cracks and crevices of my mind on this is the left genuinely says that they want to bring manufacturing back. They want local production. And I get it because the local production allows for less travel. You’re not importing everything through different shipping lanes.

One of the things there is economies of scale, and there’s a lot of things that when you start bringing it home as opposed to being a procurer of international goods and services, now you’re dealing with not only inefficiencies and duplication right now, we don’t mind destroying Ecuador’s rainforest or someone else’s ecosystem as we plunder and take the real resources.

But when you start bringing production back to the States where we’re going to get those real resources from, we start unearthing all kinds of chemicals back into the environment that have long since been buried, I’m wondering, is there any mitigation here as we bring production back? What do we do with our waste? What do we do to protect our lands and our water sources?

[01:11:38.380] – Hockett

Yeah. That’s another again characteristically difficult question in some ways. I think maybe there are two things that I’m keen to or eager to highlight or remind us all of here. One has to do with that, right? One has to do with just because we’re going to be boosting manufacturing again or bringing back manufacturing and becoming a productive economy again doesn’t mean that we should accept the byproducts of all of that that used to be common when industrialization and industrial production meant what it meant, say, in the 1950s or 60s, right?

When the US became a manufacturing powerhouse, it did it largely with coal, as China is still doing now. And that’s, of course, the British Industrial Revolution was initially powered by coal, and it gradually moved more and more to petroleum and natural gas. But again, it’s all still just burning shit. Right? And it’s kind of embarrassing that just like our cave dwelling ancestors hundreds of thousands of years ago, we’re basically just still making smoke in order to make production, which is just ridiculous.

It shouldn’t be that way anymore. It seems to me that we have to remind ourselves then constantly that renewing production, renewing manufacturing and the like now has to mean also renewing the modes by which we power production, the modes by which we actually transform or convert energy of one kind into energy of another kind.

We have to do it in ways that are not actually rendering the planet uninhabitable, if anything, by doing the opposite by manufacturing equipment that itself is environmentally friendly and the like. So that’s the first thing. We can’t lose sight of the fact that that has to be part of what we’re doing when we renew manufacturing, that we’re also renewing the modalities through which we manufacture.

The second is we don’t want to bring back a world in which the American working class enjoys Union paying jobs while the rest of the world is a struggling proletariat that is basically starving or living hand to mouth. The Chinese as much as a competitor, so to speak of ours as they might be now economically speaking, it seems to be are to be celebrated and to be congratulated by all human beings in having brought literally hundreds and hundreds of millions of people out of poverty, out of food insecurity, out of health insecurity.

This is a massive accomplishment that seems to have no parallel in all of human history, even in per capita terms. Right. And when we talk about competing or realizing that China is competing with us and ceasing to give away the game but becoming vigorous competitors with them ourselves again, we shouldn’t be thinking of that as, okay, let’s drive half a billion Chinese back into peasant agriculture.

First of all, that’s not going to happen. Nobody’s going to allow it. China’s not going to allow it. But second of all, we shouldn’t even wish that. We should ultimately keep in mind, and now I’m going to start channeling your and mine Marxian sympathies here. We should keep in mind that the entire human race, the entire human species, is a laboring species. Right? We are a creative and productive species.

We’re not born to lie around on couches, scratching ourselves, watching television. We have an urge to create. We have an urge to produce. We have an urge to live reasonably comfortable lives while producing while creating. This is what we are as humans. And it seems to be it ought to be in the interest of all of us as human beings to bring about a world system wherein every human being can live that right, enjoys the exercise of that specific right.

We shouldn’t be thinking, in other words, of available jobs as zero sum or of available opportunities to be productive in a manner that one can live on as being zero sum. It’s not like, okay, only 20% get to have jobs. And so now it’s just going to be a struggle between countries as to who gets the greater part of that 20% of jobs while everybody else just gets welfare checks or something.

We should be looking for a world in which everybody is able to be productive and to enjoy the fruits of their production. And as modes of technology improved to the point where you can basically produce enough to subsist on with, say, one hour of work a week, we should enable everybody to do that then. Right? In other words, if there’s six robots that are soon able to satisfy every single demand, then all seven billion people on the earth should have equal prorata ownership shares of those six robots.

[01:16:22.540] – Grumbine

Love it. Love it.

[01:16:22.540] – Hockett

Yeah, right? And that’s effectively all that communism was supposed to be in the first place. Right. It’s just that you just recognize that look, the more productive the modes of production become, the less need there is for labor. And the upshot of that shouldn’t be that you then have, like, 20% of the population laboring, and the rest are just starving.

[01:16:43.880] – Grumbine

Or on the UBI.

[01:16:45.410] – Hockett

Or on UBI. Yeah, exactly. The upshot should be that everybody gets their just share of the proceeds of production via getting their just share of the opportunity to produce. And if you can produce more with less, which is what technology enables, then people won’t have to work as much. But that doesn’t mean that they should be impoverished, right? So, in effect, what we’re really confronted with, I think, is a kind of organization theory question, right? How should we organize

[01:17:13.760] – Grumbine

Yes!

[01:17:13.760] – Hockett

If we think of the planet, if we think of the human species as a productive species rather than just a country as a productive country or productive economy, how should we organize human productive activity globally such that nobody has to work more than a human being ought to have to work. And everybody can work as much as a human being would have to work in order to sustain him or herself materially.

And then on top of that, enjoy the fruits of life that is beyond subsistence life; but life that is creative life, life that is, in effect, artistic life. That’s what we ought to be striving for, it seems to me. And there is a danger, right? Just because we’re rediscovering the need to be a productive country again, and so we’re rediscovering the need for industrial policy and we’re rediscovering that globalization as controlled by capitalists was a bad idea doesn’t mean that we should now go back to 1870 because that wasn’t a picnic either.

[01:18:13.620] – Grumbine

It was not.

[01:18:15.560] – Hockett

Not if you were a woman, not if you were black and not if you were like 80% of the white male population.

[01:18:20.210] – Grumbine

Or if you’re a twelve year old.

[01:18:21.490] – Hockett

Or a twelve year old who might die next year of tooth decay because tooth decay is actually life threatening. No antibiotics, you know.

[01:18:29.390] – Grumbine

Right.

[01:18:32.280] – Hockett

So. Yeah.

[01:18:33.030] – Grumbine

Alright. Well, Bob, I have a million more questions, but suffice it to say on this front, I really appreciate you taking the time to do this. What’s coming up for you? Anything interesting? Is there anything that we might be seeing from you? Anything to follow up with?

[01:18:47.240] – Hockett

Yeah. I’ve been doing a lot of legislative work lately that is relevant to what we’ve been talking about at the federal level, although some at the state level too. So I think I might have some kind of exciting news for you fairly soon, Steve. And maybe what I’ll do is probably in the coming several weeks or so, I’ll have some news to report and I will shoot you a note privately, and then you can decide whether you’d like to devote a show to it and talk about it on the show or not.

[01:19:15.720] – Grumbine

Of course, I would.

[01:19:16.530] – Hockett

Kind of go from there, but yeah, a lot. As you know, there’s a sort of recess at the moment, but there’s a lot of big doings on the way in Congress at the end of the month, and some of it bears upon what we’ve been talking about today, and some of it bears upon subjects that are sort of adjacent to what we’ve been talking about today. So I think we’ll have a sequel, in effect, if you want it to today’s discussion

[01:19:40.880] – Grumbine

I do.

[01:19:40.880] – Hockett

To sort of talk about.

[01:19:42.540] – Grumbine

Let me book it now.

[01:19:43.470] – Hockett

Yeah, we can just about book now. I think what we really are talking about either end of August or early September, in all likelihood. So maybe that would keep everybody’s appetite whetted.

[01:19:55.350] – Grumbine

Absolutely. Thank you so much for joining me today. Folks, this is Steve Grumbine. Bob Hockett. Macro N Cheese, and we’re out of here.

[01:20:10.790] – Ending Credits

Macro N Cheese is produced by Andy Kennedy, descriptive writing by Virginia Cotts, and promotional artwork by Mindy Donham. Macro N Cheese is publicly funded by Real Progressives Patreon account. If you would like to donate to Macro and Cheese, please visit Patreon.com/RealProgressives.