They are building more and more fragility in the system, and the bailouts are becoming bigger and bigger,  to a point where business as a whole is able to run an unsustainable moral hazard extortion game against central banks. Mark Blyth joins Paul Jay on podcast.

Paul Jay

Hi, I’m Paul Jay, and welcome to podcast. Mark Blyth is a political economist at Brown University. He has a P.H.D in political science from Columbia University. He researches the causes of stability and change in the economy and why people continue to believe stupid economic ideas despite buckets of evidence to the contrary. That’s obviously a bio that was sent to me by Mark and his publicist, but I love the lines so I’m leaving it. ‘Stupid economic ideas despite bucket of ideas of evidence to the contrary’. Of course I guess one could say that about almost every field of study. He’s the co-author of the recent book ‘AngryNomics’, Mark said in a speech in Berlin in 2015 while accepting an award for his book, ‘Austerity The History of a Dangerous Idea’, “Well, we have done over the past 30 years is to build a creditor’s paradise of positive real interest rates, low inflation, open markets, beaten down unions and a retreating state, all policed by unelected economic officials and central banks that have only one target to keep such a creditor’s paradise going in such a world. Why would you ever get a pay rise? Indeed. Is it any wonder that inequality is everywhere an issue now?” Joining us is Mark Blyth. Thanks for joining us, Mark.

Mark Blyth

Thanks for reminding me of how good that prose was.

Paul Jay

 So has the pandemic and the massive stimulus coming from the Fed and other central banks in any way changed their mission of defending a creditor’s paradise?

Mark Blyth

That’s a really interesting question. So I’m going to answer two ways. I’m going to say no and yes. So I am going to give you the no answer first? Right.  So the no answer:  what’s been happening since basically the rescue of Long-Term Capital Management, basically we back in the day in 1999, is a series of adverse successive of what you might call put options in financial markets are financed by the Fed, most famous one being the Greenspan put.

So what does this actually mean? It means any time that markets are about to book losses. We don’t allow that. We cut rates. This has a perverse effect because when you cut the rates, what it does is encourage corporates and households, particularly corporates, to take on more debt. The issue, more bonds. That creates more liquidity in the system, which makes it more and more fragile, which means that the next time I had to bump in the road, the system’s bigger and needs to be bailed again.

So Greenspan put, which basically until Greenspan exited was then replaced by the huge one of the global financial crisis with Bernanke, with basically asset purchases and QE and all that fabulous stuff. And then Covid comes along and we do exactly the same thing. All this time, we’ve basically promised to buy every falling knife, every financial asset up to an including ETF s. And we’ve basically managed to put a floor 

Paul Jay

Just just just for people that don’t know exchange traded funds.

Mark Blyth

These are the synthetic products offered to the public by Blackrock, what do you call them again.

Paul Jay

 BlackRock. Asset management companies. BlackRock. Vanguard and.

Mark Blyth

Vanguard, that’s the one I’m thinking of.  The point is along comes the new Fed. in this crisis, a new Fed does exactly what the old Fed does and basically puts a floor underneath asset prices, which basically says people with financial assets will not book losses. Meanwhile, in the real economy, you’ve got massive unemployment on basically a crisis where occasionally, if you’re lucky, you might get a check for twelve hundred bucks. So that’s the answer, no, it hasn’t changed at all. 

But has it seems in another way, though, there is increasing recognition that this has got to end, that you can’t keep doing this because if you keep doing this, you’re building more and more fragility in the system every time and the bailouts are becoming bigger and bigger, essentially. But to a point where business as a whole is able to run a kind of moral hazard extortion game against that, against the US by using asset markets, against central banks. They are aware of it, they just don’t know how to get out of it.

So just to be clear, the next to zero interest rates encourages such massive debt that everything becomes fragile and these companies that are sitting on massive debt and no, no doubt that most of that debt or a lot of it was used to buy their own shares back just to create enormous fees for executives, bonuses and for the shareholders that really hold the majority of the shares. But it also makes them fragile. So when the economy tanks during a pandemic, they’re in dire straits and then in comes the Fed buys up all that debt, stabilizes them. And it’s only in the last few days that they actually put a regulation that they couldn’t keep on buying their own stock with the money that was just handed to them for the last month or two, they could continue to do that. It’s really crazy.

Mark Blyth

Absolutely. That’s exactly it. And a very simple way to think about this change overall and I’ve just written this into a new paper, is we used to live in a world where by we cared about aggregate demand, a very old fashioned  concept. At least we did in the sense that we cared about wages and wage growth because wage growth was seen to power consumption and that was going to lead to growth in the economy overall. But we kind of morphed into a regime that nobody really noticed, whereby we don’t care about that anymore.

In fact, that was always a cost to be minimized. What we care about now is asset prices on the maintenance of high asset prices, which supposedly produces a trickle down into the rest of the economy, which then produces growth. Only it doesn’t .I mean 16 percent of American households own 80 percent of the stock. So the idea that this is going to trickle down to most people is why we have this huge disconnect between the performance and the financial markets in the rest of the economy.

Paul Jay

In an Angrynomics, you talk about there’s a need for a massive cash transfer from the state to strengthen consumption. But this is pre Covid. It’s not politically possible to have this kind of a direct payment, but Covid seems to have made it politically possible because even though a lot more the money is going to defend the bottoming out of assets, certainly some money is going in, extending unemployment insurance, adding to the how much states get paid for unemployment. I know one like, for example, the max unemployment in Maryland is four hundred and thirty bucks, but for a number of weeks you can get another six hundred from the Fed. So you wind up with a grand a week. Now, that’s only if you were making the max. Most people are probably, you know, getting half of that in the unemployment. But that that being said, it’s now not politically controversial to do that, at least not yet. Although one can imagine it’s not going to be that long till we hear the screaming about austerity again. Again.

Mark Blyth

Yes and no on this one. And here here’s why. So if you’d say to me, six months to go here, I’ve got to make a bet with you, Mark. Boris Johnson is going to face an economic crisis and the conservative government of Boris Johnson, “Brexit Boris” , is going to basically do helicopter money, straight direct deposits to households at 80 percent of the wages for an indefinite period. I would want half an ounce of what you were smoking because there was no way that would happen.

And here’s the thing. That’s exactly what’s happened, not just in Britain, but basically throughout the whole sort of European economic space. That’s the model they went for. So in a way, we’ve definitely busted through some shibboleths about what we can do and what we can’t do. Another one that we are we talk about in the book, pretty technical, but we think that’s very important, is  dual interest rates, which Philip Lane, the chief economist at the European Central Bank, has basically said this is how we’re going to incentivize decarbonisation by basically giving a negative borrowing rate on projects that we want to see the private sector go into, and then raise the deposit rate for savings at the same time. Does not mean the central banks want to book some losses, yes.

But we don’t care because we are a central bank. So they’ve really changed a lot  of the parameters. That’s definitely there.  Now does this mean that the austerians are gone for good? Well, think about it this way. It’s gonna be a very brave one that tells Italy, who went through 10 years of damage prior to Covid and is now reeling after the Covid shock and the shutdown in tourism and everything else, is probably sitting  with about 20 percent unemployment.

So after enduring double digit unemployment for 10 years. Are you going to tell the Italians that their top priority now is tightening their belts, that they need to get rid of that  budget deficit?

Paul Jay

Well, they said they said that to the Greeks.

Mark Blyth


But I think that they learned from that one, Greece is small enough you can push it, around. It’s an within the error zone on the balance sheets. It used to be two percent of eurozone GDP is now one point six percent because of what they did to it.  Italy is the third largest bond market in the world. And unless you basically keep that solvent through purchases from the ECB, it’s going to go bang. And if it goes bang, that would be devastating for the eurozone as a whole.

So this time around, I don’t think they’re going to push it quite as hard as they did last time.

Paul Jay

The situation in the United States might be different. Yeah, well, I never I never thought austerity had much to do with the size of the debt. I think most of the austerity nuts in the U.S. would understood that the debt was more than manageable.

And we can see now they don’t really give a damn about this level of debt. And even more. It was really about disciplining the working class. They needed workers to be willing. And I should take it back to be scared. They needed workers to live in fear. And, you know, you lived in Baltimore. I was looking at your academic resume and you were there, what, ten, eleven years? I lived there for eight years.

I mean, Johns Hopkins and the big institutions there. They need people to work for minimum wage, doing cleaning surgical rooms and such.

And you can already hear Republicans talking about the need for who’s going to pay for all this. I think that I think they’re going to bring back austerity in the US because they need to put a jolt into the working class who are now getting checks. And they’re very worried, I think, about what it does that the lower wage levels, because right now there’s people getting checks that are more than they made when they were working.

Mark Blyth

So there was Tom Edgell had a really interesting piece in The Times last week about how basically America became a low wage economy. And there’s a question now as to how much farther you can push that model, because ultimately you, cannot run an economy of this size with basically the purchases of luxury goods of 10 percent of the population, the savings rate of the rich is simply too high. And if the consumption rate of the poor exceeds their own wages and they’re permanently struggling with Payday loans and debt and foreclosure and rental problems and everything, then the entire economy has become too fragile for it to survive and in that mode.

So what we’ve begun to see quite interestingly, and. a  little story on this is Wal-Mart. So did you ever did you ever see the website People of Wal-Mart?  It was basically poverty porn. Right. It was it was kind of disgusting. It was like, oh, look, all these freaks and all the rest of it. But what happened was Wal-Mart was paying so little and sponging so much off of recent local welfare returns and not paying people, et cetera. Their stores became impossible to shop in. They literally became kind of disheveled. And the people who were working there were borderline employable, et cetera, et cetera. So they basically boosted the wages quite dramatically two years ago. Target followed suit. A whole bunch of other firms have been doing this. And it’s not inconceivable that you could actually see minimum wage and these employees in these positions move to about fifteen an hour. So there’s a recognition, even if the Republicans don’t get it amongst business themselves, that ultimately their customers need to be paid and somebody has to do the paying and perhaps the low wage model is really hit the buffers. And this crisis has shown that to be the case. So, you know, there may be a more optimistic take on that. In terms of scare mongering about the debt. I actually always thought about in this way. The people who scaremonger the most about the debt are the Peterson Foundation ,because they had common cause and they had all these people going to encompass terrorizing people and they’ll never be any Social Security also. So I thought, well, why does this billionaire guy from the Nixon administration care so much about this?

Because the national debt is actually national savings, right? If you go on the debt clock, you should actually look up and say, wow, look at all those savings bonds that people are buying, because that’s what you’re looking at, right? It’s the public sector debt as the private sector savings. What is it that these guys are really worried about? And then it sort of snapped, it’s like, oh, shit, it’s just a wealth tax. The one thing they really worry about is actually passing a net wealth tax, because then it really have to pay some cash. So what better than terrorizing everyone about the deficit to keep their minds off the fact that they’re running off with all the dosh.

Paul Jay

 You’ve used this phrase and other people as well. Socialism for the rich. Capitalism for the poor.

Is it time to flip that equation? We know we live in a mixed economy, but. But the question is mixed economy for whom. And right now, it’s a mixed economy for the very top percentile of income earners, asset holders, and particularly for the finance sector. They have no problem with a mixed economy that bails them out every time either their speculation tanks or in this case, the economy has to be closed down. Whatever it throws big finance into  crisis, the quote unquote mixed economy, the public sector comes and bails them out.

Is this model of capitalism done? Is it now clear that not only can they not deal with coming pandemics and they had plenty of warning this was coming? I mean, this movie Contagion from what, 1991  is almost exactly what just happened. They’ve had they had they do these had these models. They did experiments. But of course they didn’t take any action. But even more than that, this they can’t deal with the climate crisis.

And it’s it’s beyond obvious now, that politics as usual, the economy as usual, is not going to deal with climate and the elites, especially those in the finance sector. They simply can’t. They know they have an imperative the day to day return on their investments, on income. And, you know, going back to these asset managers, we’re talking about BlackRock, Vanguard, State Street.

They they can’t do other than try to get as much return for their investors as they can.

And the concentration of ownership has gotten ridiculous between BlackRock, Vanguard and State Street. They essentially control the voting of 90 percent of the S&P 500.

And not only do they own most of the arms manufacturers and nuclear war manufacturers and fossil fuel and go on and go on, they own most of  the media, they own 93 percent of The New York Times. The system is what’s the word? The shit has hit the fan and maybe in this pandemic moment. Are people ready to really have a serious conversation about what’s next?

Mark Blyth

Yeah, but unfortunately, we seem to be having a not so serious conversation about freedom and the right to wear a mask. Right. So, you know, those bigger issues are certainly on the back burner at this point. I mean, returning to the book, that part of the reason we wrote the book was precisely because there’s a huge amount of anger out there, not just in the United States, but across the world. And this feeling of a kind of disconnected elite that basically gets politics run for its interests while everybody else is holding the bag is one that seems to be pervasive across the world, is not confined to the United States.

But the United States is definitely the extreme case of all these dynamics. There’s no doubt about that. But the funny thing is, I mean, even with the financial markets, the people who are doing the most work on decarbonisation arguably are basically the research departments of the central banks. Now, what they really want to do, but they can’t do it because then they would be exposed had been political instruments rather than the neutral technocrats that they pretend to be, is essentially, to, if you will demarcate and to assess that they will buy an asset that they won’t buy.

And what they would love to do is to not buy carbon related assets, that would send a huge signal way beyond sort of ESG environmental social goal concerns, about what assets you want in your portfolio and which ones you don’t. There’s also been in terms of the asset managers, I mean, even within these firms, there’s increasing pressure on them to divest from those types of firms. And a lot of them actually have been doing that. Plus, you’ve also got the other effect of the pandemic, the complete collapse of oil prices, which looks like it’s going to be structural.

I mean, I forgot to  look up today what exactly is the market capitalization of Shell? But apparently they’ve lost 22 billion. I’m ballparking, they’re probably about a 100 to 120 billion. That’s huge.

Paul Jay

What do you think of the proposal some people have made, you know, economist Robert Pollin and others, now’s a good time for the government to buy up by the fossil fuel companies and then start to phase them out.

Mark Blyth

Yeah, I think that’s an excellent idea. Another one you could do. This is a really good opportunity to basically get strong minority shareholders on the boards, replace the boards . But they are they’re basically vulnerable. So, you know, in a way,  has this model of capitalism reached the end of the road? I think it has. But, you know, the way forward is not clear because particularly in the U.S. we are so divided amongst ourselves, the ability to have a focus and conversation on those really big issues is is extremely difficult.

And it very much suits the people in charge that there is that way. If we are squabbling about masks, then nobody has to book losses from decarbonisation.

Paul Jay

You’re very well-known political economist and I’m guessing you know lots of people on Wall Street.

What the hell is in their minds? They they know the climate science is legitimate. They know the economic system is,  I don’t know if smoke and mirrors is quite the right phrase, but it’s kind of close. Without government support, the financial sector would have collapsed at least twice and maybe more. Yet   if Trump wasn’t in such deep shit, they’d be OK if he was re-elected.

Mark Blyth

Well, again, this goes both to the politics, I did a The New York Times oped at the end of last year, a very short one that basically said, look, here’s the deal with the Democrats. Why is it that the somewhere like Bernie or somewhere like Warren is so problematic is because of the issue of a wealth tax. They will actually make them pay a wealth tax.  There’s a huge Democratic mainstream Democrat constituency on Wall Street. They’re the principal funders of the Democrats, along with the tech sector.

And, you know, they hate Trump’s racism. They hate his divisiveness. They hate his vulgarity, his stand on international institutions. But at the end of the day, they make he makes their portfolios go up 20 percent. Bernie has got a wealth tax on them. So at the end of the day, they can’t have Biden. They won’t have anyone. And that was pretty clear in the way that was going to work out even at the end of last year.

So, you know, this is these are the preferences, that matter, in terms of determining politics. Now, again, on a micro level, you’re right. I do know quite a few people and they are deeply concerned. They understand that there is no planet B, and for the smatter ones, what they’re basically saying is we need to get past denialism. The problem with the carbon majors is what they should have done and I think actually they were trying to do is the following.

They know the writing’s on the wall for their business model. They’ve got to stop doing it. So how do you basically get out of this. Well you’re still going to need energy forums? On the other side of the transaction, you’re still going to need people who actually understand hold on power grids and all the rest of it. So it’s perfectly possible for them to do it, in a sense, a big tobacco strategy, that as you would take them to court and they would basically pay lots and lots of fines and some of that money would go towards the transition, et cetera, et cetera.

And then this sort of payment for the smokescreen that they’ve done, the denialism, etc., allows them to exit gracefully and then get onto the other side. In other words, they need a bridging strategy to get out of the crap they are in. This is in general how lots of companies think about this. I saw a presentation from Volkswagen  a while ago. And what they were talking about was, you know, what we could do in the electric space and this is how we’re going to do it. And there is a slide in the presentation at the end, where they basically say, here’s the thing. If we go down this road, if we basically give up on diesel, if we agree to all of our plans, bubble, the rest of it. What happens if nobody buys it, or what happens if, you know, some other risk comes up? We are taking on a huge amount of risk. We need a bridging strategy.

We need the government to back this up in some way, not so that we don’t book losses, but so that we’ve got reasonable insurance. And I think what’s happening is that everybody who’s on that side of the fence basically says, I’d like to get in there, too. But the costs of getting there are huge. I need insurance and states are singularly failing to get up there to provide the insurance, to get from point A to point B, and that’s   a large part of the problem. 

It’s kind of obvious, clear what you’re saying, and when you look at I should say, it’s obvious, but it’s clear.

You look at Black Rock. They had a lot of verbiage and just before the pandemic hit, about how now they’re going to put climate as an important part of their investing strategy and they’re going to start withdrawing from coal and so on and so on. But it was really smoke and mirrors because they were not going to divest in a way that they would not get out of their index funds, which is essentially invest in everything in the S&P 500, which includes coal.

And the only thing they were going to get out of was in their elective funds, where they actually pick and choose what they’re going to invest in. They wouldn’t invest in any company with more than 20 percent revenue from coal. So I dug into where they’re actually investing. And most of the big investments they have in coal are with energy companies whose revenue does not exceed the 20 percent benchmark because they have so much investments in other stuff.

And BlackRock will continue buying what essentially are the bigger coal producers.

So it winds up being a bunch of B.S. and without government intervention, saying divest from coal, divest from fossil fuel.

Here’s the transition strategy. But then you’re getting into the area of what is essentially a planned economy. And they hate the idea of that. So as much as they’re talking about government needs to step in, they’re the ones financing the politicians that are screaming about government intervention.

Mark Blyth

I think that’s exactly the case. But, you know, they have an interesting dilemma because they can block. They can delay. But they don’t solve the problem by fundamentally facing which began. So, you know, with the price collapse and oil markets is that they could just be left with stranded assets. Either they embrace the challenge and try and work out some form of insurance so they get point A to point B or eventually all those assets are worthless.

You can have 20 percent of coal, but it’s basically you literally can’t take this out of the ground anymore. No, there’s no demand for it. Britain has an excellent deal. And then when the United Kingdom, during the pandemic, hasn’t burned any coal for, I think three months. They can basically do all off renewables. Other such investment on renewables and they can do renewables and gas and continue to build up renewables. So once you get to this sort of like per unit per kilowatt pricing that we’re seeing now with renewables, it’s just a question of time till this stuff is just dead. 

There’s some stuff you paradoxically do need this for. This is an interesting one. The spines of windmills, the particular steel that you need for that can only be made with coking coal. So, ironically, one of the worst forms of coal is exactly what you need to make the steel to make windmills. And so far, nobody’s found a substitution for that. So, you know, it’s like slightly old, what’s the last thing that’s gonna go? Probably airlines. It’s very hard. Well, they’re gone now anyway. But if we ever go back to travel. Right. Jet fuel is pretty efficient. ??? aren’t. That’s a big problem. How are we going to stop the world flying? Well, we’ve done it now. Maybe that’s a marker on the ground. But, you know, all of these companies essentially are facing the same dilemma. The either face up to the challenge and address it or ultimately that assets are bust.

And the inherent logic of the companies that on their own, they can’t they won’t 

In a sense, it sort of is a bit like saying, do you know a mom and pop store? What? What’s your climate change strategy? Oh, well. Adopt. Die. I don’t know you so well. These are much bigger. These are institutional investors. Absolutely. They know how to make money by juggling bits of paper around. What’s their transition strategy? That’s why we have governments that meant to do this stuff. Some are better than others.

Paul Jay

Well, I have very low expectations of a Biden presidency. And I personally never thought Trump would win this election. And now I even think it more.  Barring something incredibly weird and dramatic, there will be a Biden presidency. He claims, he said this in an exchange with Bernie Sander,. he wants to have the most progressive administration since Roosevelt. And I think that’s probably rhetoric coming from Biden.

But whatever let’s say he let’s say. So what would that mean? Let let let’s let me paint you a scenario. The people on the streets continue. Biden gets elected and everybody hits the streets again.That has been in the streets and maybe more, demanding real reform, saying we’re not going back to the Obama years that set the table for Trump in the first place. Do not let your finance and economic policies be run by people you grab out of  Wall Street. And here are our demands. And this is a unique moment and we’re running out of time with climate. And here’s what we should do. And then they come to you and they say, OK, how would we how should we frame this?

Mark Blyth

So you mean basically how would I do it? Yeah. Yeah. Well, that’s part of the reason why we wrote the back end of Angrynomics. 

Paul Jay

But in the book you’re presupposing the politics pre Covid. And then we’re in a different moment now, so maybe there’s more possible now than what you thought then? Yeah, I think it’s more possible rather than less possible. But at the same time, I mean, let me just push back a little bit on your scenario. There is a web site called something like American Tribes. I forget exactly what it’s called. You find it easy enough. And basically, it’s a data harvesting operation.

But what’s very interesting, because what it does is it says, what tribe are you? So you can put an answers to a whole series of political questions and economic questions. And it basically puts you in a category. So I put myself into and I thought, well, this is weird because I’m coming out of the Cold War liberal, which really isn’t the case. And I thought, let me let me go about it. So I went on and I basically put in exactly the type of things that would be the person who would be on the streets in your analogy. And it turns out that that’s about 14 percent of the U.S. population. The vast majority of people do not express. And this is on a sample of three million. Right. There are not many people who deeply care about this stuff that you and I actually care about. Believe it or not. Which is a very sobering thought.

Paul Jay

Well, let me push back on that a little bit. I think there’s hundreds of thousands, probably millions of workers who never imagined they would be poor, unemployed, that their kids may never go to university, that are shocked by the moment they’re in. And I’d love to see some polling. I don’t know if there even was polling of this type in the 1930s when Roosevelt brings in the New Deal. Everyone talks about the big mass movement pushing Roosevelt left and this and that.

From what I can tell, it actually wasn’t all that big. 

Paul Jay

Yeah, I think you’re right.

There were you know, it wasn’t that there weren’t massive not a million people hit the streets, maybe 100000 went in. And even that only a few times.

I think Roosevelt was pushed there, I think because he actually himself saw that the choice was going to be the New Deal or fascism and represented a section of the elites that would rather the New Deal than Hitlerite fascism. So I don’t know if it matters only 14 percent agree with this right now. That 14 percent certainly could become more relatively quickly and maybe give some spine to what is now a minority in the elites that actually want to think long term.

But the way this pandemic is going, this depression is going to go on for a few years here, that we’re in such a different territory. I mean, it could go to the right.

But I think at the moment at least, Trump is so fucked up that it’s not quickly going to go to the right.

There really is an opening here. But the movement certainly needs to get more conscious and have broader demands than it has now.

Mark Blyth

Yeah, I agree with all that. But I worry about something which is, and I get I get shit for worrying about this from people, but I’m going to worry about it anyway. Which is imagine, the following a margin in the 1930s, the people who wanted to reform the system said, what did they do in the eighteen sixties?

Because that’s how long a goal or how far we are from the New Deal and the economy that we have. No what is composed of how it’s structured, who owns what, etc.. It’s massively different from what was there in the 1930s and 1940s and even later. And also it’s become through right wing engineering for the past 40 years. Toxic to talk about the New Deal is a positive thing among some sections of the population. So whenever I hear what I hear the urgency of decarbonisation, I like that because then it’s talking about the thing itself. When I talk about a green new deal, I just hear half the American public switching off some play by the messaging that’s on that one. So I you know, I tend and say that the U.S. has to sort of let go back on reform itself. So what do we do in the 1930s? Right. Let’s have a new WPA. This is not the days when you basically take 100000 unemployed, 25 year old white boys and put them in the desert and tell them to build a dam.

That’s just not what we’re going to do anymore. So, you know, I want to be back a little bit on exactly, you know, our imagination here of the capacities of what we should be trying to aim for. Which is why in the book, we tried to go a very different way.

Paul Jay

Well, I mean, I don’t agree. But I can’t prove anything because it’s new, territory. But it’s new territory. Right.

I think when you get millions of people unemployed and these payments end, And then what?

They’re not going to end the payments. They’re just not. Because what they found out  is the end of the day in a world of negative real interest rates and absolutely no inflation and the general level of prices. And you have the denominate of currency. You can base the global reserve asset. You can print. And if you have to print for two years to fund unemployment, you’ll do it. Alternatively, what you’ll get with BIden administration is some kind of soft version of a job a job guarantee. That will soak up those labor markets and return for fifteen, sixteen bucks an hour. And then you can actually do the things that we need to do, starting with our D plus infrastructure and all the rest of it.

Paul Jay

So a job guarantee, meaning giving money to the private sector to hire people rather than a direct federal hire like the WPA, 

Direct federal hiring but doing it in such a way that you basically you work in a local community level to figure out what projects actually need to be done. Now, you know, we’ve spent 40 years hollowing out and breaking the administrative state. The Supreme Court has basically given yet another decision that weakens the ability of independent agencies to do this type of work. So it’s not clear to me that the United States has the capacity and its institutions to actually do this, even if it wanted to.

But I think that’s where it will go. The United States isn’t just going to go  after three months or another three months. That’s right. That said, no more unemployment, even though this thought eight percent unemployment. That’s just not going to happen because they know the costs. They know the country would explode.

Paul Jay

Yeah, you’re probably right, but. Most people can’t even live on this kind of subsidy anyway. 

Mark Blyth

That’s dreadful. Absolutely. I totally get it. It’s ridiculous. We turn this country into a low wage economy that cares about asset prices for the top 20 percent. That’s absolutely the reality of it. There’s no doubt whether that model is bust.

Paul Jay

Well, you’re more realistic, perhaps, than I am.

But I’m absolutely convinced that some of us had better talk about this vision, whether it’s that possible or not.

I’m concerned that there’s such, other than the most progressive sectors,  even Sanders, for that matter, rarely talked about public ownership. You know, if you compare what Sanders advocated in Europe, it would have been, you know, sort of centrist social Democratic proposals.

But I interviewed him once and I asked, you know, isn’t the issue. I said especially when it comes to the finance sector. Don’t you need public banking at a scale that you stop the blackmail and tell finance,  if they want to go speculate, go ahead. But we’ve got a public banking system. And if you go down the toilet, we don’t need to protect you. So even if you don’t use the term Green New Deal or whatever, do we not need to start talking about public banking as a public utility at a scale beyond just retail postal, banking?

Mark Blyth

But the thing is, we actually are. I mean, it’s already it’s happening, but a very different form in a different space that is basically central bank money. The Chinese are starting this. And isn’t that the Fed is the Fed has already got internal research on this.  Effectively, they want to bypass the banking system for the payment system, so that your wages, your rent, all the rest of it can basically  . . .  you’re paid in dollars. Why not have a dollar on account at the Fed? And then why not basically treat that as an electronic account? 

  Take transit, don’t act and turn that into a payment system. But there’s no reason why you can’t do that these days. And if you effectively bypass, because you create a public bank, a skill which is essentially the Federal Reserve does the payments.

Paul Jay

But how long will they do that without being afraid of this issue of the disciplining of the working class, which they’re very concerned about? People are going to demand a guaranteed wage at a decent level. And that’s that is going to change what the low end of the wage scale is. 

Mark Blyth


And the way that you see this in other countries, I mean, essentially when you raise those wages, a lot of those jobs disappear because ultimately you can substitute capital for labor. So you don’t see hand car washes in Scandinavia. They’re all automated. But what do you do while you then? Do you tolerate high unemployment? And those groups that would have had those low paid jobs? No, that’s when you have a public option or unemployment or you have better work or training, I mean, these things have to move as part of a piece.

And as far as sort of, you know, the ruling class want more labor discipline, I think that pretty much got them disciplined, as disciplined as they could be. And there’s not many exit options out there. So and there’s no countervailing power in the form of unions. So, you know, I don’t think they’re worried about the eminent workers revolt. I think actually what they’re worried about is the stability of their own investments. And then when assets, as I said a few years ago, and it got a little bit of a buzzer of this, the Hamptons is not defensible position, at the end of the day it’s not. 

So at the end of the day, you either start to really seriously think about how to raise those minimum and increase consumption and the middle classes without resorting to ever more private credit. And you’ve also got to think about massively delivering the parts of the financial system that are not banks. I mean, all the corporate debt, for example, is being held by bloody pension funds. So, you know, there are problems all the way through the system. And the smarter parts of Wall Street and other high echelons of society actually understand this.

Paul Jay

Yeah, but understanding it and wanting to do anything about it. And also the smarter echelons are not necessarily the dominant echelons.

But I’ll tell you, you know, before the Iraq war, because I think you’re presupposing a rationality that I don’t see, because you go back to the climate crisis.

If there is rationality in this system, in these leads, in the dominant echelons of the finance and so on, they would have done something by now because we’re we may already be at a time, but we’re certainly on the precipice of being out of time, you know, before the Iraq war. You know, I was doing interviews with people and we knew about it. And it just made no sense. There was no rational reason to actually invade Iraq.

All the repercussions, including strengthening their mortal enemy, Iran and so on.

And I really thought they wouldn’t do it. And. And they did because it wasn’t rational. But they did it. I mean, Hitler strategy was not rational.

I saw this really interesting analysis of this. He compared the size of the German economy to the Anglo American alliance. In fact, the German and Japanese economies compared to the Anglo American alliance by 1941 it was clear the war was over. Hitler could not win, but it wasn’t rational like these guys. They are so immersed, especially Wall Street now, in this orgy of wealth they’ve been swimming in, they they can’t see past it. And so I don’t think we can assume there’s going to be any rationality here.

Mark Blyth

When you’ve got people like Ray Dalio from Bridge Wall or basically tumbling into an economic historian on the fly and writing books about how inequality is unsustainable, then, you know, he’s not doing it because he needs the book sales. They know they’re nervous. They understand that they can all move to New Zealand. New Zealand is going to want to close the border. They’ve got to come to some kind of accommodation with the people that are their fellow citizens, rather than treating them as a social problem to be managed and it costs to be minimized.

So I’m actually more hopeful that particularly in this pandemic, more there’s more. And then this moment of the reawakening of the American civil rights movement that basically the people who have the most to lose realize that they have the most to lose.

Paul Jay

Well, if I’m right, the people’s movement, these are not contradictory propositions, because what I think needs to happen is a popular front and it’s cross ratial and it’s also cross-class because I know there are in within the elites, people who do see it. I just think they themselves are quite marginalized right now. But a popular front, that includes the kind of people you’re talking about. But I think the vision does has to go beyond the kind of just reforms that are palatable.

And if we don’t start strengthening in this mixed economy, the social side of the public owned side, because it’s there has to be public ownership to counter this incredible private concentration of ownership. I don’t know what else counters that regulation sure doesn’t. 

Mark Blyth

That’s why we want to citizen’s wealth fund. The idea that governments, particularly when you’ve residualized  the capacity, you’ve called everybody who works for them a loser, or you pay terribly. And you just push everybody down and down for, you know, for four years. Now, would you please go to run large, complex industries that you know nothing about? I think there’s an absolutely terrible idea. I just don’t think it’s a good idea.

But there’s another way in which you can have public ownership and have a stake in it, which is every time there’s a financial crisis or a pandemic and we know that they’re coming almost every decade, what happens is the government’s cost of capital goes negative because everybody wants to buy safe assets known as bonds known as that terrible thing called the debt. And they dump all the equities and the firms because they don’t believe the valuations anymore because there’s going to be a bloody recession.

So why doesn’t the government issue that debt issue more of that? Because they want more of a safe asset. Then buy all those equities. Don’t give them to the Fed, who then gives them back off to use the private sector. That’s to put them in a big passive fund. Build your own Blackrock, but then make it a public one and then make sure that the equity at a time from now aren’t going to a tiny sliver of the population. Make sure that they’re paid to the 80 percent that don’t have any assets and those assets are held in trust for them. And that way you get the benefits of ownership. You are able to work in terms of setting the investment priorities for these companies without actually having to sit on the boards and try and run things you don’t really know how to do. And we got the upside of ownership in the long term. Returns to equity was just six percent a year compounded.

So this to me is how you do that in a modern, highly diversified digital economy.

Paul Jay

Why not just by controlling interest of BlackRock?

Mark Blyth

Because then you’ve got to take on the liabilities at the same time. Wanted to think. Well, either way, you’re expanding public ownership.

Paul Jay

But I, I think if it’s this big passive fund, without us actually asserting a public interest mandate and you don’t deal with the climate stuff, 

 You  can have one fund, a fully passive, then you can have another fund that is basically using dual interest rates with the central bank. You massively incentivize the private sector to invest in the stuff. We need them to invest in a decarbonisation. There’s no reason these things aren’t complementary. If I give you a negative two percent loan to basically go build all the stuff that we need to do a Green transition , then I’m literally paying you to borrow the money.

Why would you not take.

Paul Jay

Of course you you would. But then you need a government that’s committed enough to the climate crisis and willing to take on fossil fuel companies if they and the best way to take them on, is buy them. You know, if you have that kind of political will, then that certainly could be one of the tools. Why not?

Mark Blyth

Oh, no, it’s not. It’s not the only thing that matters. I mean, you know, there’s lots of things that could be done. Negative net wealth taxes, closing down tax havens, making sure the Amazon and Google’s  actually paid some tax or alternatively, we sell them our data rather than giving it away for nothing. There’s loads of things that could be done. But as you say, in essence, what I definitely do agree with you, but I put a slightly different spin on it.

The problem these days is just the quality of political capital that we’re dealing with this crap. Right. So I grew up a child of Thatcher. And we were mentioning Roosevelt before. I say what you want about Roosevelt and Churchill. You know, they basically believed what they were saying and they followed through on what they were going to do. Say what you want about Reagan and Thatcher  they followed through on  policies that were called conviction politicians for a reason that it does what it says on and they follow through. What we’ve got now, at best, is a bunch of people who worked in TV or were celebrities who govern by polls. And at worst, what we have is a bunch of naked, racist opportunists. The quality of the leadership that we have across the board is a real problem. It’s just not there. Why? Because we’ve been denigrating the state for four years. And then anybody who stands for public office gets brutalized in the cyber sphere.

Why would you want and why would you expect talent to go in that sector? That’s a huge problem within the world.

Paul Jay

Yeah, I agree. But this is what the finance sector wants because they really do get to choose who gets to run.

Mark Blyth

Yes and yes and no. I mean, not everywhere. I mean, you know, there are different blocks of there are different powerful blocks, social blocks. You want to use that type of language. I mean, in Germany, it’s not finance. It’s never been financed. No, I’m talking the United States.

 But the nice thing about the United States it was too big for any one clique to capture. Sometimes the Texans got to play. Other times it was the Northeast. Sometimes it’s the Californians. And you’re right. The financialization of the economy has basically change that dynamic such that the nexus of power and what really sets the agenda. There’s a great book by a political scientist called Martin Gehlens, Affluence and Influence. And basically what he shows is that even if you go back to the Johnson administration, if you look at what Congress actually legislates and then you look at public opinion, the only time you get pro poor or pro working class policies is when the top 20 percent also showed those preferences.

That basically from the Johnson administration on what Congress has only ever voted the preferences of the top 20 percent. So this is a structural problem that goes way beyond the fact that we started financializing the crap out of everything in the 1990s. We’ve always governed this way. It’s just that in this moment, it’s become particularly fragile and pernicious.

Ok,  thanks very much for joining me. Mark, I hope we get to do this again sooner than later.

I hope so. And I hope that there’s still a world there for us to join in 

Paul Jay

 On that we can agree both in the outcome we hope for and in the doubts we have, that that’s actually going to be true.

Yes, indeed. 

Paul Jay

All right. Thanks, Mark. 

Mark Blyth


Paul Jay

Just thank you for joining me on the Analysis Done News podcast.


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  1. I especially liked Paul drawing the picture of public ownership, the public entity, the demos, as a desperate solution to the capitalist model.

  2. Even Mark mentioned Ray Dalio. I’m telling you Paul, you should reach out and see if he’s open to an interview. He’s obviously an incredibly exceptional person, and quite clearly sympathetic to our cause, but of course because of his prominence, meaning when you’re that wealthy you have a lot to potentially lose and especially in such a hostile and polarized political environment, he has to walk a tight rope with what he can or can’t say publicly. He tried to inject some much needed money into education in his home state but like just about everything else the Republicans sabotaged his efforts. You never know what kind of connection could be made. Perhaps he’d be willing to offer, I’m sure much needed, financial support for your new project here. He’s an expert obviously in finance, but also China. Two rather pertinent topics of this moment. You could interview him about the brewing “cold war” and economic “decoupling,” the US forcing nations to “pick a side.” Thanks Paul. Good luck.

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