Martin Wolf, chief economics commentator at the Financial Times, joins Nick and Goldy to discuss his new book, “The Crisis of Democratic Capitalism.” They explore the important-yet-fragile connection between capitalism and democracy, particularly in the context of rising inequality and political instability. Wolf articulates how the perceived success of democratic capitalism has begun to falter under the onslaught of economic policies favoring the wealthy and eroding the middle class. Ultimately, Wolf advocates for stronger social safety nets to ensure that democratic systems, as well as working and middle-class families, can thrive in an era dominated by economic upheaval.
Martin Wolf is the chief economics commentator at the Financial Times, known for his incisive analyses and authoritative perspectives on global economics and policy. With a distinguished career spanning several decades, Wolf has shaped public discourse on economic matters through his insightful columns and books. His latest book, “The Crisis of Democratic Capitalism,” details how and why the marriage between democracy and capitalism is coming undone and what can be done to reverse this terrifying dynamic.
Twitter: @martinwolf_
Further reading: The Crisis of Democratic Capitalism
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Nick Hanauer:
The rising inequality and growing political instability that we see today are the direct result of decades of bad economic theory.
Speaker 2:
It’s time to build our economy from the bottom up and from the middle out, not the top down.
Nick Hanauer:
Middle out economics is the answer.
Speaker 2:
Because Wall Street didn’t build this country. Great middle class built this country.
Nick Hanauer:
The more the middle class thrives, the better the economy is for everyone, even rich people like me.
Speaker 3:
This is Pitchfork Economics with Nick Hanauer, a podcast about how to build the economy from the middle out. Welcome to the show.
Speaker 4:
It’s election season, Nick. And so I am constantly in crisis mode and fearful of our democracy, fearful about our economy, which led me to a book I read a couple of months ago now called The Crisis of Democratic Capitalism.
Nick Hanauer:
Indeed, it’s a marvelous book written by a marvelous guy who is like, what can you even say about Martin Wolf? I mean, he’s one of the most influential and respected commentators on economics in the world. He’s been at the Financial Times in England for I think, was it 30 years or something like that. And his new book, The Crisis of Democratic Capitalism, really is a wonderful expose on the relationship between capitalism and democracy and effectively today’s disintegration. And it’s super fun to talk to him about this, of course, because you and I have been talking about this connection for a long time.
The essence of middle out economics is the idea that you can’t have a functioning democracy without a thriving middle class. In a world in which the economy enriches the few and impoverishes everyone else who needs democracy, right? You don’t need a democracy for that. And I think the demise of the middle class explains most of the political polarization that we find in the United States and to a certain extent around the world. So anyway, I’m super excited to get to talk to Martin and hear his thoughts about our current situation.
Martin Wolf:
My name is Martin Wolf. I’m the chief economics commentator of the Financial Times and have held this job for very nearly 30 years. So I’m a very long serving economics commentator. I write on every aspect of economics and very much political economy. And my most recent book is called The Crisis of Democratic Capitalism.
Nick Hanauer:
So let’s start out by talking about why you titled the book The Crisis of Democratic Capitalism, because what’s interesting, and there are many things interesting about your book, but in particular it’s the relationship between economics and democracy.
Martin Wolf:
Yes, this is certainly the thing that motivated me. Well, my idea I suppose, was that we have become used to the idea, or we had become used to the idea that the best societies in the world were democracies with market economies, which we tend to call for shorthand, capitalism. And this synthesis, the symbiosis of this political system with this economic system had come to scene, particularly after the fall of the Soviet Union and the great rivalry with socialism of the 20th century as clearly the triumphant winner.
It started being interesting this because it was pretty obvious that the systems were beginning to come apart, that the capitalist side wasn’t doing too well, noticeably with the huge financial crisis earlier in this century, but also with growing anxiety in significant parts of the population about how well they were doing, about inequality, about stagnant real wages and so forth. And at the same time, politics was beginning to show similar fraying at the seams with the rise of anti-system populism, profound anti-elitist sentiment on pretty well all sides of the political system. So we could no longer feel either that democracy and capitalism were working together or that either of them was doing particularly well on its own. And it’s that situation that led me to explore where we are and where we might be going in this book.
Nick Hanauer:
What factors make the marriage between capitalism and democracy precarious?
Martin Wolf:
I think that it’s probably because both systems are to some degree precarious. And one of the things that I concluded in thinking about this is that though this has been a very successful system on many dimensions, in my view, it’s really very recent. This doesn’t look like being a natural way, or at least it’s certainly not a frequent way of organizing human societies. Politics generally in organized societies since the agrarian revolution have tended to be highly hierarchical with kings at the top, emperors at the top, members of the landed classes around them, sometimes priests as well, owning and controlling basically everything and the vast majority of people being serfs. So that was the political order of most of what we would think of as sophisticated societies and economics was essentially agrarian too. It was the serfs at the bottom of the political pyramid were also all the people who did all the work, much of the fruits of their labor were extracted from them.
There was activity in cities that served the interests mostly of the rich, not that many people lived in them relative to the agrarian population. And they had a very limited economic existences. Basically, they lived on the border of subsistence. That was the way things were. And then out of this emerged capitalism actually first and then democracy. And I argue in my book that they are complementary opposites. Once capitalism got going, it unleashed pressures and forces that demanded and ultimately successfully though with many bumps on the way, a political reckoning and a political adjustment that gave power to the people at large. And it’s this synthesis, but a fragile synthesis that we came to see as the real sign of successful modernity.
Speaker 4:
That was true in the West, but it wasn’t really true in East, in Russia, in Asia that the unleashing of market capitalism didn’t actually result naturally in the development of democracies.
Martin Wolf:
Well, the answer to that is of course, until relatively recently, and by relatively recently, I mean really the last 30 years or so, though there are more complex stories which we can come to in a moment about Germany, for example, and how Germany relates to say the Korean model. But until relatively recently, these were very poor despotisms. So Russia at the beginning of the 20th century was a pretty classic example of the sort of society I described earlier. So was China, possibly even more so. And then of course there were the countries that had been taken over by empires, which almost ineluctably were in a similar state. Now, the interesting question as you ask, which is really a recent question, is is it possible to unleash the drivers of capitalism, the the individualistic market-oriented system we are used to without having any impact on the political system.
So it remains essentially highly authoritarian and centralized. I think it’s fair to say I don’t think there’s really any exception that when this capitalism occurred in traditional feudal, aristocratic societies, they did force pretty profound transformations and really to some significant degree, they allowed the middle classes at least to play a very substantial role in society. That was even true in the German Empire in the late 19th and 20th centuries. And Russia, of course, crumbled under the pressures of these transformations along of course with the First World War, which is very significant. It’s really only recently that we began to see countries which have adopted what I think of as a new form of totalitarianism or authoritarianism, particularly party-based authoritarianism of the Chinese kind trying to develop through capitalism, which of course the Soviet Union never did except very, very briefly in the twenties, and that didn’t amount to much and to sustain their political system.
And it’s one of the really fascinating questions, whether in the long run the Chinese have developed a new way of doing things, and it’s something I discussed in my book. But if you look at the other cases, you look at Korea, you look at Taiwan, which clearly started out with authoritarian forced capitalist development, very like Germany in the late 19th century, they moved through upheavals to relatively credible democratic systems. And there aren’t today any really highly developed countries which aren’t democracies.
Nick Hanauer:
Yeah. So where did we start to go wrong? What happened?
Martin Wolf:
I think that is the most difficult question of all. And when I approached this, and I still believe it’s a crucial part, a central element was in the way our economies were allowed or encouraged to develop. But as I’ve thought about it more, I think it’s clear that this also led to profound social and cultural transformations, which added to the tension as it were. So the core here, I think, is that from about the eighties, two or three things happened simultaneously.
First, we moved to a more free-market-oriented way of trying to do capitalism, and that gave enormous influence and power to the people running big business and to the people who made vast fortunes in the forms of capitalism that then emerged. The second is that we had huge technological upheavals, which led to rapid deindustrialization, rapid rises in productivity, which corroded and eroded the lives of the working class and created enormous monopoly profits in the new tech sector. And third, this was further turbocharged by the rise of the developing world, which was a profound transformation above all the rise of this gigantic superpower China and these things together transformed economic life.
Nick Hanauer:
Martin, our perspective has been largely that a lot of the problem that we face today is really a consequence of academic economics. That this very narrow, and you can call it neoliberal or neoclassical or trickle-down view about economic cause and effect, that in particular here in the United States led policymakers from both parties, both Democrat and Republican, to see economic cause and effect in a very particular way and enact policy in a very particular way. And that was just wrong. It was just empirically untrue that if you cut taxes for rich people, you would have more economic growth and an equal amount of tax receipts, for example.
There were just these things that people believed, and I feel very strongly about this and feel like I can say I know this for a fact because I have been in this business for a long time and have had many, many, many direct conversations with the policymakers that I’m speaking about, and they were just absolutely convinced that all this stuff was true because they had learned it in college or somebody had told them that it was true. Do you think that’s a fair criticism?
Martin Wolf:
I have a rather different perspective, which I think is a bit richer, but that might be rather arrogant.
Nick Hanauer:
No, no, no.
Martin Wolf:
And I’ll explain how I think about what has happened. I do think there are some areas of policy where theory was pretty clearly influential, but for example, the idea you put forward that tax cuts would pay for themselves or would necessarily lead to benefits for everybody in the society was not as it were universally shared, to put it mildly, among the economists I knew. I always believed that supply-side economics was obviously ludicrous as put forward by Laffer and others in the early eighties. I could see an argument for cutting marginal taxes in the UK, which started off at close to 90%-
Nick Hanauer:
Yeah, yeah. Of course.
Martin Wolf:
But that’s where we started, remember that. So I didn’t [inaudible 00:15:24]-
Nick Hanauer:
And that was clearly ludicrous too.
Martin Wolf:
And so I didn’t ever believe that those theories, and I never believed in the theories of efficient markets, the Eugene Farmer view of the world because like anybody who’d been taught by Keynesians, I thought that we knew very, very well that markets had inherent capacity to go quite seriously wrong. After all, we had experience in the past.
So those elements struck me as pretty crazy and they led to some pretty bad policy. But once we really discussed what happened, I think it gets more complicated and I’ll just pull out two aspects of this very complicated story which are interesting to me. The first is about international trade. So I went at the trade side of this very much influenced by empirical work, not theory and the empirical work, which I think had proved absolutely convincingly because I was a development economist in my early career, not doing what I do now, that countries that opened their economies in a sensible and wise way to trade had managed to grow far faster, I’m talking about developing countries, than all the others. And of course there was the right way of doing it. There was the question of how you do industrial policy in that context, but this had become pretty well the view of all serious development economists working on trade and development in the seventies.
And that very much influenced, for example, my view of what India should do, which is where I’d worked in the seventies. That was my background. And I would say in my defense that when India did open up its economy, it doubled its growth rate pretty well clearly and has done so for the last 30 years. So that was I think a success. And of course there’s an even bigger case, which is China and China’s opening was pretty incredible, of course, again, within industrial policy.
The second thing that I think is crucial to understand what’s hope happening, which is not really about theory, it’s about empirics and empirics in a very precise way. What I hadn’t fully taken on board until it happened is that our social order, the one that I was thinking about, the democratic capitalism I was familiar with, and the compromises that are put it together, was very much linked to the rise of an adjustment to the presence of the organized working class, which was predominantly the industrial working class in both Europe and America. Now, one of the most powerful things that has happened, and I’ve already mentioned it in the last 40 or 50 years, is the decline of the working class. Now, part of that is due to trade, but if you start looking at it very carefully, and I do in my book, it’s very much not predominantly due to trade.
Is due to the fact that what’s happening to manufacturing. And it’s true in countries with huge surpluses in trade, like Germany for example. What’s happening is manufacturing in my view, is going through the process we previously saw with agriculture, namely productivity growth is so fast that we can produce as much manufacturers as we need to consume with far fewer workers. And in the process, of course, we’re getting rid of a lot of firms that are disappearing, they’re being concentrated and so forth in relatively few plants. And my view very strongly is we’re moving to a world over the next 30 years or so, it’s being accelerated now I think by new technology, where there won’t be anybody working in a factory. Now that’s not just a very profound economic change driven by fundamental technological developments, but it’s also a profound social change. It undermines the status, power, and influence of the organized working class. It shattered trade unions.
And that’s again happened even in countries where trade unions are protected and treasured, not America. So I could go through many other areas. There’s skilled biased technological change, the huge increase in the demand for the products of universities, and therefore the huge expansion of the number of people going to universities, which has created a whole new class which is deeply at odds with the old working class. And I think that too is a very powerful element in explaining the class reconstruction of our current parties, which is unthinkable 30, 40 years ago. So all I would say is I don’t disagree with you. There have been very profound intellectual errors, particularly in the areas about taxes and therefore about redistribution of which we failed dismally and about allowing finance to run riot across our economies. But I think there are other more complicated forces that we also have to recognize that are at work.
Speaker 4:
If trade overall, as you argue, has increased efficiency and prosperity in the aggregate, but at the same time, the policies in the US and the UK, really the Anglo-American economies, it’s ended up devastating the industrial working class leading to this crisis of capitalism that we have right now. Were the trade policies actually successful if it ends up destroying our democracy?
Martin Wolf:
I should add, by the way, very similar developments. It’s not in any way unique to us, have occurred as very obviously in France, which has about as small industrial sector as we have now. And the decline in the industrial sector as a source of employment though from higher levels has occurred in every high income country. It’s occurred in Germany, it’s occurred in Japan, it’s occurred in Italy of course. So this is not unique to us, and I think that my view is that there is no trade policy that I can imagine that would’ve stopped this. Yes, it is true that if we could have got Germany, Japan, and particularly China to balance their trade instead of running trade surplus as they did for long periods our industrial sectors would be somewhat bigger. But we are talking about a few percentage points of the labor force. So to take the UK case, let’s take a really dramatic case. The share of industry in employment has fallen from in 1960, about 45% to about 15%.
Maybe, I don’t know the exact figures, five percentage points of that are due to our chronic deficit, but the rest is due simply to the fact that all those workers that we had making cars, making steel, doing those sorts of things are just not needed anymore. We can produce the same amount of stuff with vastly smaller labor forces. And so I think that technology created the industrial working class. It was a profound revolution which created it, and technology in some very profound sense has destroyed it, and that makes it a much more difficult challenge to deal with. And I tried to discuss that at length than, for example, Trump’s view that if only you stop all imports, the industrial working class will suddenly reemerge. I’m absolutely confident it won’t.
Nick Hanauer:
We should just say that we’re in violent agreement with you, the basic thesis of your book, and we’ve discussed this on our podcast before. What I’d love to talk about more with you is solutions. So first, I don’t mean to put you on the spot, but you are one of the world’s foremost thinkers on economics, and you’ve been in the game for a very long time. My first question is, given what you know today, what would you tell your 30-year-old self? If you could go back in time and you had more power than you probably did when you were 30, what would you have done differently? What would you have told your colleagues to do differently? Could we have avoided some of this mess?
Martin Wolf:
Yes, I think that’s a really good question. And I think my answer to myself would be that we couldn’t have avoided the challenges we face entirely. Obviously, I could tell my 30-year-old self that life will be much easier politically and socially if we decided to do everything we could to prevent China from developing. That created opportunities for us but it also created Adjustment shocks, which we handled sensationally badly, and maybe we should have done everything we could to run a fortress. I’m afraid this is where-
Nick Hanauer:
But that is-
Martin Wolf:
That’s not what I would’ve ever recommended.
Nick Hanauer:
In American parlance, we’d have called that a dick move.
Martin Wolf:
Well, it’s probably what Mr. Trump, if you’d been president in 1980, would’ve recommended. Now the question is, I would’ve said if we are moving into this new period of profound adjustment to one really deindustrialization in a profound way and the second, the progressive disappearance of the industrial and know-how monopolies of the Western world, if that’s going to happen, what do we do? And I would’ve said one, putting a lot of resources into trying to develop new sources of employment, which could have been in the service sector and maybe in some areas of industry would be really important.
Second, locations matter, and if particular places, as happened in Britain and in America, are losing their major source of employment because factories are going, then we have to put in really considerable resources to help people with the adjustment and to try and create new sources of employment. And I will be perfectly happy to have had, as it were, regional development organizations, regional development banks, designed to achieve that, the sort of intervention that happened so famously in the New Deal and about so many of them.
So instead of saying, well, goodbye, you’ve had it, go and move somewhere else, you actually have policies to deal with these massive adjustment shocks. Third, and here I’m on the European side, I think it is important to cushion people’s incomes. The people who do this, the country that does this best is a very small one, Denmark, but Denmark has this brilliant idea. It involves a lot of taxes, that’s fine. The rich pay more taxes. That seems to be very clear they’re the winners from all this. We don’t need this vast number of billionaires. But what the Danes do is what they call flex security. What that means is they sustain people’s incomes, but they allow economic change to happen. They don’t preserve jobs, they preserve people’s income and they spend a very large amount of time and money on retraining people, upskilling people, intervening to really make an effort to ensure people get back into work.
And it’s been remarkably successful, admittedly in a small country, but it’s been remarkably successful. So you have forward-looking efforts at trying to facilitate people through these adjustment changes. And then finally, it’s very, very important to make sure, because education becomes increasingly important over time, that you do everything you can to give really as much of the labor force as you possibly can, the sort of education that gives them a chance to move from one job to another, to upskill themselves during their own lifetimes so they don’t feel completely abandoned when the factory in their place disappears. So I would say that a more active but also more generous welfare state, if I look at the countries that have done relatively well in keeping their societies together is the necessary condition for being able to manage what are just these profound transformations we’re seeing.
Speaker 4:
So is there no crisis of democratic capitalism in the social democracies?
Martin Wolf:
I would say there has been, because above all, the financial crisis was global and it created huge problems. I think if I look at Sweden for example, it’s very interesting case, and this is something I do discuss in my book, I do think in those cases there was another shock which they handled very, very badly, which was an absolutely extraordinarily rapid demographic transformation due to simply colossal levels of immigration. And I think we were very sloppy in thinking about, and I do discuss this in my book at some length what uncontrolled mass immigration, particularly from countries which we’re providing people who with totally different backgrounds and skills and resources to cope, what that effect that would have. And it’s very clear, I don’t think it’s the only reason, but it’s very clear that that has caused immense social and political upheaval, and we were very, very naive about that in my view. And it’s the one thing on which my own view has changed quite considerably over the last 30 years.
Nick Hanauer:
And that’s in essence an exogenous variable that is separate from the economic policies that undergirded those societies.
Martin Wolf:
It’s exogenous except important exception that in many societies, the people who wanted these immigration, Britain is a good example, were the employers because they wanted cheap labor and was the most direct way they wanted cheap labor. And I know very well that’s true in the US ’cause I did a column 20 years ago about who is in favor of undocumented labor, undocumented immigrants, and we know very well who they are and they weren’t on the left. So I think we mismanaged this because we really thought rather like trade that we didn’t need to think of the consequence of extraordinarily large flow, in this case of people. Remember in the case of Europe, we moved from being a net people exporting region to being a net people importing region with immense speed only in the last 40 years.
Speaker 4:
But without that, populations would be declining all across Europe, and that presents a different challenge to capitalism.
Martin Wolf:
Indeed. I happen to believe we do need immigration, we need long-term immigration. I’ve just argued a week ago for temporary immigration as well. We clearly need policies that deal with the fact of demographic decline, and I don’t think we’re going to reverse that, but so far we’ve done it in extraordinarily unconsidered way and that has had consequences. My argument in my book is that we clearly can’t stop immigration. That will be impossible and absurd, but we do have to have a policy towards it, and most of our societies really haven’t had one.
Nick Hanauer:
Yeah, for sure. Let’s keep you on the spot and move-
Speaker 4:
I think he answered the benevolent dictator question.
Nick Hanauer:
No, we are going to grind him harder.
Speaker 4:
Okay.
Nick Hanauer:
So what should we do? I asked you the question, what would you have told your 30-year-old self, but now what should we do today, if Martin Wolf was in charge and you were relatively unconstrained politically, tell us what we should do.
Martin Wolf:
Well, I suppose my immediate response was, well, I wouldn’t start from here, which isn’t, I think much help. First we have to recognize that we have objectively some pretty difficult problems, but I would say first we have to complete the basic welfare safety net, which is predominantly lacking in the United States. So I would, comprehensive health insurance for example, would seem pretty obvious to me because it would at least reduce the fear and anxiety that seems to me such an important feature of American life and which seems to explain so much of what, at least in my mind, is going on. I think that the basic thrust, though I wouldn’t disagree with the details of Biden-onomics, industrial policy using subsidies in particular much better than tariffs to promote development in sectors where we know the world is going to have demand. Everything to do with clean energy is a pretty obvious example.
I think it’s been really remarkably successful in promoting investment and employment, much more successful than I expected. It obviously has some byproduct problems, but I think a view towards a more active industrial policy, a policy that promotes innovation, creates new jobs is very important. I think active regional policies, which I’ve already discussed, is absolutely crucial. People won’t move. Maybe they should, but they won’t. They feel stuck for a whole raft of reasons. One of the reasons is our populations are older and we know very well that older people won’t move in the way that young people will do. So if parts of the country suffer terribly from economic collapse because the basis of their economy isn’t working, then you have to find ways of getting resources into those areas. And not with subsidies forever, but trying to encourage new industries to set up creating new jobs and new employment.
I would, as I said, look very, very closely at what we’re doing about a lifetime, what my wife, who’s the next one of these calls, lifetime learning, what are we doing to get people who lose their jobs in their thirties or forties seriously trying to do to re-skill them for new jobs which are emerging? What are we doing with our high schools to ensure people emerge with the capacity to get jobs, which are different from what they hoped for that their fathers and mothers had? We really have to take education very, very seriously, innovation, regional policy, and a proper welfare net. And I’m personally in favor of higher taxes on the wealthy because they really don’t need quite as much as they are earning. I’m in favor of higher estate duties, higher land taxes, taxes on things that can’t be evaded like that. I discussed that at length.
I think the American tax system is a huge tax avoidance machine as far as I can see, and that should surely be changed. It’s much worse than in most continental countries. It would give the government the resources to do things. At the moment, as you know, the social security, Medicare and the military basically exhaust almost all of the federal budget that can’t continue to operate. You have to create degrees of freedom by creating a new compact between society and the states. My basic point is you can’t, and this is of course, puts me in your context in the wild left, you can’t run a modern society successfully without a reasonably competent and active state. And the US has turned its back on that idea in far too many areas. And I think health will come when people accept that this needs to be reversed. And if it’s reinforced, if that tendency is reinforced, it seems likely under a possible Trump administration, I think the US could be terrible [inaudible 00:37:35].
Nick Hanauer:
Well, I think we definitely agree with that sentiment. Well, we’re going to call that we always ask the benevolent dictator question. And that question you have just answered, and we ask one final question is why do you do this work?
Martin Wolf:
I suppose I got involved in economics, so let’s say three stages to this. I decided to read economics at Oxford and then do a graduate degree, starting with a very different subject for the simple reason that my dominant interest was in politics. And I was interested in politics because in essence, I was a child of refugees from Hitler who was lucky enough to be born in Britain after the war, and my parents survived. But Britain was living under the shadow of an enormous war and the Great Depression. So politics just seems to me and has always seemed to me incredibly important. And I decided that you really couldn’t understand politics without understanding, because so many political questions are also economic questions. So we’ve been discussing that and that’s what this book is about. So that’s the first reason.
That led me to do economics and then go to the World Bank to work on development because I thought development is one of the great challenges of our time, and I enjoyed it enormously. But after that, I decided I don’t like a big organization. I don’t want to be an academic because I didn’t want to do the sort of academic economics in a way you described. So I then joined a think tank. That didn’t work, and completely out of the blue, the FT came along because I’d written some articles and letters for them and said, “Would you like to come and write for the FT?” And I thought, well, that’s a platform that is a place from which I can write more or less what I think their values are very similar to mine and rather unusually for a financial paper, rather strangely. But that’s the reality.
And that will be a platform from which I can express my views because my real aim, I suppose, very, very ambitious way is because what I happen to be good at is to try and make the world a slightly better place by pointing out what it is good and what is terrible, and trying to learn from the former and rejecting the latter. And that happens to interest me and excite me, and I think it’s important. And keeps me alive.
Nick Hanauer:
That’s a fantastic answer.
Speaker 4:
That is an answer I can totally identify with.
Nick Hanauer:
Well, Martin, thank you so much for being with us and for doing all of the work that you do to try to make the world a little bit better. We’re appreciative that you came to talk to us today and for what you do.
Speaker 4:
And hopefully we can avert the worst consequences of this crisis.
Nick Hanauer:
Yes, yes.
Martin Wolf:
I do. I hope so. I do hope so.
Nick Hanauer:
One of the most interesting parts of that conversation to me was the way in which he articulated the difference between the surge in immigration from the economics. A lot of societies are in crisis today, Sweden being a great example. I thought that was really interesting, is that the crisis of immigration in Sweden, which has destabilized that country to a certain extent, is very much different from the crisis that neoliberalism brought in the United States and around the world, but that the two things are linked but different, and although it was really funny to be reminded that the reason we have undocumented workers to a certain extent is that the big employers love it. They want cheap labor.
Speaker 4:
Well, historically, the reason we have undocumented immigrants is because we started requiring documentation.
Nick Hanauer:
Yeah, okay, technicality, but yeah.
Speaker 4:
I mean the history of the US is one-
Nick Hanauer:
Immigration, obviously.
Speaker 4:
Mass immigration throughout most of our history. That’s what built this nation, and we had a policy where we wanted cheap immigrant labor. I mean, that is what drove… Well, whether it was enslaved or not, whether they came here on their own or on slave ships, it was cheap immigrant labor that built our economy throughout most of our history. So that’s always benefited the owners of capital.
Nick Hanauer:
I mean, I guess in summary, I do think that it is just objectively true that there is an essential but incredibly fragile relationship between markets and democracy.
Speaker 4:
I think what’s absolutely true, and it’s interesting ’cause we talked about this a bit, is that he points out historically what a brief period in human history this is, that democracy is weird. We’ve never had this type of social organization before throughout our long history. And I think what is true is that there is no example of a democracy, of a democratic republic, a modern democracy without a market economy. There are no democracies without market economies. And if you’re some righty, who wants to point to Scandinavia and say somehow those social democracies aren’t market economies, I mean, you can tell yourself that all you want. It’s not true. Those are very successful, highly competitive market economies. So there’s no example. What we do have right now are examples of market economies without democracies.
Speaker 3:
Correct.
Speaker 4:
And we have that throughout the world, and we’ve had it for a long time, and we’re going in that direction in members of the Euro community. I mean, you look at Hungary and Poland with their illiberal democracies, how they’re becoming less democratic. Clearly, China is a market economy without any democracy whatsoever. Russia has a market economy, but it has this kleptocratic dictatorship going on. It’s not really a democracy. We know that. And this is what Trump, I know we’re not a podcast about politics, but clearly what he’s trying to impose here. He admires what he sees in Hungary and China and Russia.
So it’s something that people need to keep in mind. Again, going all the way back, this is Pitchfork Economics, going all the way back a decade to that pitchforks is coming piece in Politico that you wrote, Nick, that there is no example of this radical inequality lasting for very long without the result being a revolution or a police state. And that’s what this crisis is. It’s not a crisis of democracy on its own. It’s a crisis of democratic capitalism in that capitalism is failing democracy, and the solution is more democracy. Really we need-
Nick Hanauer:
Definitely not more capitalism.
Speaker 4:
Right. Well, we need a highly regulated and steeply, progressively taxed economy that provides the type of stability that people demand and people expect from democratic capitalism, if that’s what you want to call it. And in some ways, it’s a depressing book because this crisis is real and it’s hard to see our way through it. But as he says, we know what we need to do. And if you’d like to read more from Martin, of course we will have links in the show note. Again, the book is The Crisis of Democratic Capitalism. You can feel free to buy it at that big online monopolist if that’s how you choose or from your local independent bookstore.
Speaker 3:
Pitchfork Economics is produced by Civic Ventures. If you like the show, make sure to follow rate and review us wherever you get your podcasts. Find us on other platforms like Twitter, Facebook, Instagram, and Threads at Pitchfork Economics. Nick’s on Twitter and Facebook as well @Nick Hanauer. For more content from us, you can subscribe to our weekly newsletter, The Pitch over on Substack. And for links to everything we just mentioned, plus transcripts and more, visit our website pitchforkeconomics.com. As always, from our team at Civic Ventures, thanks for listening. See you next week.