Our global system is fragile because we made decisions that made it that way. Where did we go wrong? This week, New York Times columnist Thomas Friedman joins Nick and Goldy to suggest that greed and unfettered globalization are to blame for our vulnerable system, and to discuss what we need to do to get back on track.
Thomas Friedman is a New York Times columnist, the author of six bestselling books, and a three-time Pulitzer Prize winner.
Twitter: @tomfriedman
Further reading:
How We Broke the World: https://www.nytimes.com/2020/05/30/opinion/sunday/coronavirus-globalization.html
America, We Break It, It’s Gone: https://www.nytimes.com/2020/06/02/opinion/trump-george-floyd-america.html
Let’s Change Our Motto to ‘Out of Many, We’: https://www.nytimes.com/2020/06/09/opinion/trump-united-states.html
Website: https://pitchforkeconomics.com/
Twitter: @PitchforkEcon
Instagram: @pitchforkeconomics
Nick’s twitter: @NickHanauer
Speaker 1:
I think it’s the way in which we approached globalization in many ways that was problematic. We optimized it, not for the benefit of people generally, but for the bank accounts of a few multinational corporations particularly.
Speaker 2:
The market can be a huge and powerful force. It’s not as big as mother nature, but father greed can really rivaled her. I’m afraid we’ll go down as not the greatest generation, but the greediest generation.
Speaker 3:
From the offices of Civic Ventures in downtown Seattle, this is Pitchfork Economics with Nick Hanauer. One American capitalist desperate attempt to save us from ourselves.
Nick Hanauer:
I’m Nick Hanauer, founder of Civic Ventures.
David Goldstein:
I’m David Goldstein, senior fellow Civic Ventures.
Nick Hanauer:
Today on Pitchfork Economics we get to talk to a super interesting person, the writer and commentator of Thomas Friedman about the fragility of society today, and the way in which sort of greed in globalization has created that fragility.
David Goldstein:
And that fits in well Nick with a lot of what we’ve been writing and talking and thinking about over the past couple of years which is how the past few decades of neo-liberal policy and drastically rising inequality has made not just our economy more fragile and American families more fragile, but our democracy more fragile. Tom has been in dialogue a lot with Erik Beinhocker at the Institute for New Economic Thinking around new economic ideas, and Tom and Eric and I had a really super fun chat a few weeks ago and out of that chat came a piece that he wrote called, How We Broke the World that explored some of these issues, which I thought was pretty good.
It’ll be really interesting to discuss how his view of the world intersects with our own. I think we’re more sharply critical of market fundamentalism in neo-liberalism than he is, but in any case, very, very smart person and it should be really interesting to hear his perspective.
Nick Hanauer:
For those of you who don’t know, Thomas Friedman is a longtime columnist for the New York Times. He is a three time Pulitzer Prize winner and the author of the Lexus and the Olive Tree, The World Is Flat. Most recently. Thank You for Being Late and other books.
Thomas Friedman:
My name is Thomas Friedman, I’m the foreign affairs columnist for the New York Times and the author most recently, Thank You for Being Late, an optimist guide to thriving in the age of acceleration.
Nick Hanauer:
You’re still optimistic these days?
Thomas Friedman:
With enough drugs, yeah.
David Goldstein:
Well Tom, thank you so much for joining us and we wanted to focus this conversation around your recent piece in the New York Times on how we broke the world and the ideas contained therein. And by the way, thank you for the shout out to me. But just sort of relate the thesis of that piece which we thought was really interesting and compelling.
Thomas Friedman:
Well, I woke up one day and just started thinking about what I’ve been doing for the last 20 years, and the thought popped into my head that pandemics are us. I’ve been covering different kinds of pandemics for the last 20 years, a geopolitical pandemic called 9/11, a financial pandemic called 2008, a biological pandemic called COVID-19 and a looming atmosphere pandemic called climate change. I sat down with myself and said, “What’s going on? Why is that every seven years we have this global shaking event.?”
Eventually, as I thought about it and talked to some people, I concluded that it’s because of three things in particular have come together. One is that globalization has gotten more tight, more broad, and more deep than ever before. In other words, more people from more places are connected with more speed than ever before. The world is really tighter and more greased. At the same time, we’ve been removing buffers all over the place. Buffers can be everything from ecological buffers as we invade wildlife areas we didn’t invade before with urban settlement. They can be editing buffers. We go from the New York Times to get our news from Facebook or Twitter straight without an editing buffer.
We have financial buffers. We went to just in time inventory. So nothing is stocked now, everything’s just comes to you just in time. And we removed financial buffers. We’ve now got computers trading with computers in milliseconds. The third thing that was going on is people were still people, still doing crazy stuff that they always do. But now when someone does crazy stuff, their craziness can be transmitted at a speed that we’ve never seen before. Therefore the world becomes a less stable and more prone to pandemic kind of place.
David Goldstein:
Yeah, absolutely. You point to greed and globalization as major factors in creating this fragility. So one of the things that we wanted to explore was, let’s start with globalization. Because I think you and I would agree, I certainly wouldn’t either argue for an isolationist world, correct?
Thomas Friedman:
Absolutely.
David Goldstein:
There’s some very obvious benefits to an interconnected world, but I think it’s the way in which we approached globalization in many ways that was problematic. We optimized it, not for the benefit of people generally, but for the bank accounts of a few multinational corporations, particularly.
Thomas Friedman:
Globalization is everything and its opposite. So it can be incredibly democratizing. Wow. Maybe a bunch of kids just took down Trump’s rally by using TikTok, but it can also be incredibly authoritarians. Suddenly Facebook decides what we all read. It can be incredibly particularizing. There’s a woman selling pottery in Peruna who can reach an audience here in Bethesda and it can be incredibly homogenizing. She now has a McDonald’s on two corners of her little town in Peru.
So globalization goes both ways. It’s everything and it’s opposite. So it all depends what values we bring to it and how we shape it. So that’s why if you look at The Lexus and the Olive Tree, first time I wrote about globalization, a book I wrote in 1999, and then The World is Flat, which came out in 2005. In both books I’d long sections on the backlash against globalization. I dare say, I may have even invented that term. You know what I mean? So I was always aware of this and I found the globalization debate kind of got stupid because I got conflated with, because I wrote about it. Somehow being the profit of it.
I was just trying to understand, so I could explain to the world and what was going on. I make no apologies for believing that if we governed it the right way, shaped it the right way, it could be enormously beneficial. More people have come out of poverty faster in India, in China, thanks to globalization than anytime in the history of the world. At the same time where people in the developed world probably lost their middle class jobs faster because we didn’t have the surge protectors around globalization when we suddenly plugged into China and India.
So there are governance issues and you don’t want to throw the baby out with the bath water, but there’s no excuse for not thinking about it and governing it the right way and that’s really been my perspective on it.
David Goldstein:
So let me ask you a question because I’m old enough to remember when we were told that globalization was going to make us more resilient, particularly the economy, because ah, the whole world, isn’t going to go into recession at the same time. If things go down in Europe, maybe they’ll be up in China or the U S will help buffer it out. And as it turns out, we are more fragile than we’ve ever been before. Is that due to globalization or due to the peculiar way we’ve implemented globalization?
Thomas Friedman:
Yeah. It’s a very good question and I wrestled with that in this piece and I may even do a book out of it, and try to go deeper, but it’s surely the way in large part, the way we’ve handled it. So let’s go through each of these four incidents because they all are slightly different, but they have certain overarching commonalities. In each case we had a warning heart attack and then we had a full blown coronary. So in the late 90s, we had a man named Ramzi Yousef who tried to blow up the World Trade Center. It was 1997. He was Islamic radical, and then we had the full coronary with Osama bin Laden.
To me what that was about was the Arab world losing its pluralism, its biodiversity basically, and becoming more of a monoculture. This was a product of Saudi Arabia and Iran both turning right in 1979 and also coming into possession of an enormous amount of oil wealth at the same time. Together their competition for supremacy in the Muslim world really changed the face of Islam and made it much more of a monoculture than a polyculture. Let’s remember Islam was at its most powerful in the middle ages in [inaudible 00:10:21] when it was the world’s greatest polyculture.
Monocultures in nature and enormously susceptible to disease. I would argue that monocultures in politics are enormously susceptible to diseased ideas. So that was a case where the cultural and religious offers what I would call a gender pluralism, religious pluralism, political pluralism and education pluralism, which we’re already weak in that part of the world, really got leeched out and bin Laden was one of the products of that. Remember we had Mahdi in Sudan in the 1800s I believe, but he didn’t have a globalized world to transmit his radicalism to New York City and to the Pentagon.
In the late ’90s we had warning heart attack. That was a hedge fund called Long-Term Capital Management. It managed to amass a trillion dollars in leverage because we had removed the buffer of transparency. So every individual bank that was a counterparty to a Long-Term Capital Management’s trades knew about their exposure but they had no clue how much total exposure LTCM had built up. And that loss of that buffer of transparency almost brought the Wall Street down, the Fed had to step in and several other global banks. And then of course, we got the full coronary in 2008. Again, a loss of buffers in that case, just the common sense of who should get a mortgage and who shouldn’t, and how mortgages should be rated and how they shouldn’t.
So again, you see the same features there. Of course with the pandemic, we had SARS in 2002, it was the warning heart attack. In that case, the warning heart attack was that we had invaded wildlife ecosystems with development. What we’d done when we did that was we eliminated the biodiversity buffer. We were going into ecosystems, killing the apex predators in them, leaving behind only the generalized species that can live in destroyed ecosystems. These are called bats, rats and primates, basically. These bats, rats and primates co-evolve with these viruses in the wild and then we extract them from the wild bringing them into wet markets in Wuhan or other places. They either bite a human or bite a mammal that humans bite into and suddenly you’ve got zoonotic disease jumping from the wild into humans. That’s what SARS was all about. It was the warning heart attack and of course COVID-19 is the full coronary.
David Goldstein:
We hope.
Thomas Friedman:
Exactly. I would argue that we’re living right now with the warning heart attacks all over on climate change. They’re called New Orleans and Houston and the Arctic reaching record temperatures and the danger about ignoring this warning heart attack is that with climate change, there is no peak. Climate change does not peak like a pandemic and there’s no herd immunity. Once the Arctic ice cap is melted we will have to live with the implications of a different sea level rise and an earth that no longer reflects the rays of the sun.
Once the Amazon flips from a rainforest to a Savannah, we will have to live with that forever. There’s no herd immunity to climate change. There’s just endless pounding on the herd. The one thing there is though with climate change, the difference from COVID-19 is that we actually know that cure right now. The cure is a hiding in plain sight. It’s called reducing CO2 emissions and protecting ecosystems that actually protect us. So the big challenge is whether politicians will rise to this.
Nick Hanauer:
We sort of as professionals, but I think all thoughtful citizens in the world today are groping around, maybe it’s scapegoating. Maybe we’re all just trying to find somebody, in the worst incidents we’re all trying to find someone or some thing to blame, but in the best instance, we are all reflecting in the best way that we know how on where we went wrong. If you’re not reflecting on that today, then you’re not paying attention. Our podcast, Pitchfork Economics is devoted to exploring where economics and economic theory and economic policy went wrong.
But we’re particularly interested in the way in which economic theory and practice and narrative co-evolves with culture. The other thing you point to in your piece is greed. Because the through line on all of this stuff, whether it was the global financial meltdown of 2008, or like a lot of these things it’s sort of this short-sightedness and greed around structuring the society where we reap all of the benefits possible in the near term for the powerful and kind of hope for the best for everybody else and the longterm consequences of it.
Thomas Friedman:
Well then the invisible hand will take care of it.
Nick Hanauer:
Right.
David Goldstein:
It’s right there in the econ 101 books, we just let the market handle it and everything will work out for the best.
Nick Hanauer:
The corollary of that being that anything we do to try to control these forces in reasonable ways will create more harm than good. So to the extent that we try to control globalization, that we try to ensure that people have jobs, that we try to tax people enough so that the government has the capacity to, for instance, deal with a pandemic, that will all inevitably create more harm than help. So that’s really interesting to us is how neoclassical economics and homo economicus, this view that people are selfish and that if we’re just all really selfish the market will work well and it’ll all be great, and governments you get out of the way and any intrusion in these processes and the intrusion and globalization will be harmful. All of these things I think. When I think about what really went wrong, it was letting that set of ideas dominate our culture, our politics and our policy.
Thomas Friedman:
I’m a student of you and Eric [inaudible 00:16:47] so I have an enormous respect for your work. So I wrestle with this, I’m probably slightly more to the center than you guys, but I’m certainly not over there on the right. Because I do believe in the power of markets to again, if shaped the right way to give us the speed scope and scale that we need. For instance, when I think about, I’m the one who coined the term green new deal back in 2000 when Obama was elected. For me the idea was, when you face a problem for instance, like climate change. There’s only one thing that can give us the speed scope and scale we need, and that’s the market, but we’ve got to shape the market to produce the outcomes that we want.
That’s where I totally agree with you guys. The notion that the market is just this benign thing that will produce the outcomes we want. No, but if you shape the market with the right incentives around producing green technologies, around reducing carbon emissions, the market can be a huge and powerful force. It’s not as big as mother nature, but father greed can really rival her sometimes. But if you just say, “Well, we’re just going to let the market rip.” Well, then you combine that with our generation, which I’m afraid we’ll go down as not the greatest generation, but the greediest generation. The most heedless generation of thinking about the future, that’s a really bad combination.
So to me, Nick, I’m a little more agnostic about markets only in the sense that I think they can be shaped the right way, but I totally share your view, that taking the view that markets are in and of themselves going to always produce the right solution. Well, we’ve seen that simply not the case. As the world became more market friendly as a product of globalization, the kind of income gaps that can be produced when you let the market run a muck have now become a global problem. That’s why we need to step back and really step back from market fundamentalism and talk instead about how do we shape markets with the kind of human values that produce the kind of elevating outcomes that we need and want.
Nick Hanauer:
So obviously we agree on that point, as we like to say, markets are self-organizing, but they’re not self-regulating and you need government to regulate markets. The problem with globalization of course, is that there is no super national organization that can effectively regulate an international global market that can tax and regulate multinational corporations. There’s nothing in our global system that is sufficient to adequately regulate the modern economy.
I would also take issue with the idea on climate change that, I think it’s too late for markets to deal with climate change. I look back at the new deal that wasn’t incentivizing the market to address the great depression, that was government stepping in and just experimenting, trying to fix things until they got some things right, they got some things wrong. And then eventually of course, the spending of World War II brought it to an end.
I think we’re at a point, it is such a crisis where government has to step in and say, “Screw the market.” We don’t have time for the market. We can actually replace the grid over the next 10 years. If we wanted to, if we decided to, we could take all the carbon out of the grid. It’ll be an enormous expense and a lot of people who own oil stocks will lose money, but we could do it if we chose to do it. And the market can’t, maybe 40 years ago we could have incentivized the market through taxes and credits and so forth, but it’s too late for that now, we don’t have 40 years.
Thomas Friedman:
Well, that’s certainly a view. I disagree with it though. I think California has proven that if you incentivize builders around efficiency, or if you enact mileage standards of a rising scale, you can get a lot of change. But where I would agree with you is that we need to be much more radical in the incentivizing we’re doing. One of the things I learned because wrote a book on this Hot, Flat, and Crowded back in 2008, is that whenever we went to Detroit and said, “Okay, we’re going to impose kind of regulations as you and I are talking about now.” You got to put catalytic converters in your cars. What did they say? “Oh my God, that’s the end of Western civilization.”
If you make us put catalytic converters in our cars, Lee Iacocca backed that, that would be the end of Detroit. They said crazy stuff. It turns out when we demanded they do it, they do it faster and cheaper than they ever anticipated. So I still believe in that process, where I agree with you is we’ve just been way too timid in imposing these kinds of demands regulations, racist to the top. If we did, I think we’d get the same outcome, but I think we’d get it faster and we’d get it more profitably and with more people aligned. Because you and I agree on all of this, but unfortunately there are Americans who don’t.
A friend of mine likes to say he loves Obamacare because it means that all the climate deniers will live long enough to see how wrong they were. I don’t really want to be around for that. You know what I mean? I just really think that we need to be much more radical-
Nick Hanauer:
I agree there.
Thomas Friedman:
In incentivizing the market and bringing people along because I do agree we have exactly enough time starting now. The Trump four years were just a terrible detour. We’re going to take two years just to unwind the crazy stuff he did to get us back on track. So time is short, but I’m still a believer that innovation can make a difference.
David Goldstein:
So Tom you’re a wise man, and we love to put the benevolent dictator question to our guests. Which is if you were in charge of the world, I realize we’re putting you on the spot, but what are the high points of what you would do?
Thomas Friedman:
Well, it’s a very good question. One is, I would absolutely guarantee a minimum income for every person on the planet. Again, we get to wish, it’s global, right?
David Goldstein:
Sure.
Thomas Friedman:
I would guarantee minimum income, some kind of minimum access to either telemedicine or actual medicine because we’re talking about the whole planet. I would radically incentivize a green revolution. I would basically declare that we are not going to engage in a moon race to see who can be the first to reach the moon. We’re going to have an earth race to see who could invent and scale the green technologies fastest so men and women can live here sustainably on earth. Those would be I think my three starting things.
David Goldstein:
Those are not bad starting things. Well, Tom, thank you so much for spending this 30 minutes with us. We really deeply appreciate you taking the time and we look forward to seeing and reading you in the New York Times in the very near future.
Nick Hanauer:
Given a choice between voting for Trump, for dictator of voting for you, you have my vote.
Thomas Friedman:
I wish I had steeper competition.
Nick Hanauer:
Okay. Take care.
Thomas Friedman:
[inaudible 00:24:47] guys.
Nick Hanauer:
Bye-bye.
Thomas Friedman:
Bye-bye.
Nick Hanauer:
So Goldie, what did you think?
David Goldstein:
I think we’re in general agreement that a lot of the predicaments we’re in right now are due to decades of greed and globalization, specifically the mismanagement of globalization. I agree that a lot of the problems we’re seeing today on multiple fronts from the economy to democracy, to the pandemic, to climate change, this has been decades in the making.
Nick Hanauer:
I think, I’m not even sure if we disagree with Tom, but I think our view is sort of I would say a sharper and more pointed critique aimed at neoclassical economics because a lot of the pathologies that Tom identifies, certainly in his article, How We Broke the World, greed and globalization, so on and so forth are sort of co-evolved or were created by a lot of the neoclassical economic assumptions. I think I would agree wholeheartedly is that there is no herd immunity to greed, and the corollary of that being that we can’t take America’s existence for granted and that many other empires have fallen.
I read a piece the other day about the American character and how we were born in revolution and we don’t like to be told what to do. Anytime you try to impose standards on Americans, we fight back and so on and so forth. That may indeed be the American character, but there is no guarantee that the new circumstances within which America finds itself in are friendly to that character. There may be circumstances within which that unwillingness to compromise or to cooperate come in handy, but there are other circumstances within which that character will get you killed and will destroy your country or your enterprise.
I fear that the problem in America isn’t our institutions or our politics or our policy. I fear that the problem is us. The problem may be Americans that we have persuaded ourselves and sort of inculcated the set of values in our society that may lead us to extinction in the same way that other idiosyncrasies have caused other cultures or countries to collapse.
Time will tell of course, but as we’ve talked about a lot on the pod, the thing that produces prosperity in human societies isn’t competition, it’s cooperation. It is probably likely that the thing that will lead to success for countries in an increasingly globalized and an increasingly technological world is the capacity to cooperate.
David Goldstein:
Well, I’d like to reach back to our conversation on the previous episode with Rutger Bregman and say that I actually have a bit more faith in the American people because they’re just people, and it’s in our nature to be cooperative and pro-social et cetera. My fear is not the American people but the American institutions. Let’s be honest, Nick, let’s be clear if Hillary Clinton was president for all of her flaws, the Democrats were in control, we would have had a CDC that was prepared for this, that would have acted quickly. It would have been based on science, we would have had an entirely different response, just the use of the bully pulpit, the moral leadership on what to do in the face of a pandemic. It would have been completely different from what we’ve seen under Donald Trump.
We have Donald Trump as president, not because of majority of American voters wanted Donald Trump, but because we have this arcane institutional structure that has given us a minority led government through the Electoral College, through the Senate, which overrepresent small rural states and through laws and norms that allow for gerrymandering at both the legislative and congressional level that gives Republicans this outsized majority that is not reflective of their standing with the American people, with voters.
Nick Hanauer:
I think it’s just something to reckon with and in the meantime, it’s not really constructive to be pessimistic and to feel like we can’t fix this. We have to work hard to fix it and to try to persuade all Americans that working together is a good thing, not a bad thing and that greed isn’t a sign of a good character, it’s a sign of bad character. There’s a very distinct difference between working hard and being sociopath. There’s a lot to be gained by thinking through these things in a different way.
David Goldstein:
And as pessimistic as I sound sometimes I’ll stand by my assertion that there is no shame in tilting at windmills.
Nick Hanauer:
There you go.
David Goldstein:
On the next episode of Pitchfork Economics we’ll be talking with Joelle Gamble about how economic assumptions uphold racist systems.
Speaker 3:
Pitchfork Economics is produced by Civic Ventures. If you like the show, make sure to subscribe, rate and review us wherever you get your podcasts. Find us on Twitter and Facebook at Civic Action and Nick Hanauer. Follow our writing on medium at @civicskunkworks and peek behind the podcast scenes on Instagram @pitchforkeconomics. As always from our team at Civic Ventures thanks for listening. See you next week.